– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|Problems exposed, requests, constraints and subjects
|Qe – taxation of a non-resident company and tax treaties.
Quote : 2.5. Pending key questions
Other implementation issues.
40. Any proposal seeking an allocation of taxing rights over a portion of a non-resident enterprise’s business profits in the absence of physical presence, and computed other than in accordance with the arm’s length principle, would require changes to existing tax treaties (RBQie). Different approaches could be envisaged to streamline the implementation of these changes and these options would need to be further assessed as part of the Programme of Work. More fundamentally, however, the re-allocation of taxing rights raises important political considerations. A crucial one is that these changes would need to be implemented simultaneously by all jurisdictions, to ensure a level playing field.
As it is explained in several sections including RBMap and in the DAGTVA calculation of transfer prices but especially in the presentation of the slideshow in reference, we have seen that it was impossible for a company to export a production without having the authorization of both tax authorities of the two jurisdictions involved in the transaction. The DAGTVA process show it is also impossible for a company to depart from the arm’s length principle: the spreadsheet in reference to define the transfer prices, (preferably opened after download by saving the file on your computer with these explanatory pages).
This ‘market and model ’ transaction will serve as a basis control to verify that the transfer price automatically communicated to the tax authorities of State ‘A’, during the sale at destination the subsidiary in State ‘B’, by the digital invoice declaration, will agree with the parameters on the whole transaction between States. This system external to the MNE will automatically regulate the transfer price decided in the secrecy of the MNE’s commercial policies in State ‘A’, but above all and in a simple manner, set out the desirable arm’s length principle by setting a reference market price of the transaction in cell N28 of the Excel file in the tab 6 ‘Transac-base EN – 6‘.
Still in the left column, the notion of transfer pricing is not yet relevant, the State ‘A’ tax authorities will have to judge only the production part sold before comparing it to extraterritorial parameters on which, to comply the free decision of the sovereign foreign States in question, they have no influence. The control by the tax authorities of State ‘B’ having to judge, for their part, only the purchased production part and, perhaps by default, carry out a mutual and cross-check on the regulation of the declared transfer price that can be see in the slideshow in reference slide 16. «
It could be argued that what has just been said only concerns MNEs but it is specified that the transactions between companies presented in the spreadsheet may also not take place within an MNE, which makes the DAGTVA technical device applicable in all the conditions of its internationalization but does not authorize, except with the agreement of the taxation authorities (slide show in reference– slide 14 ) in accordance with Article 7 of OECD conventions, to allow an ultimate consumer to export a product that he has sold. Here we see an economy emerging which perhaps exists marginally in C²C but in a form completely unknown to the fiscal parameters currently applied by the tax authorities.
With regard to modifying existing tax treaties , the DAGTVA technical device does not need a law to levy a tax on a payment, all states already do so, the process might be applied by default. There would be no laws to change or negotiate, the unique thing to do should be to suppress all the existing laws devoted to the taxation in use today. For example, the European VAT Directive can be rewritten in only one half page !