– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|Problems exposed, requests, constraints and subjects
|Ap – simplify implementation and build consensus among members.
Quote : Appendix – Detailed proposal on profit allocation
Amount A (RBAag)
51….First, it would permit the isolation of the deemed non-routine profits earned by a business (RBAin). This is important because, by introducing a threshold based on profitability and targeting deemed non-routine profit, the proposed method is designed to materially limit the disruption of the conventional transfer pricing that is applied to routine activities (RBAsr). This would reduce the practical complexity of the proposal and also facilitate the goal of reaching consensus among the members (RBAsm – RLSrl) of the Inclusive Framework (on the basis that no jurisdiction would be required to give up taxing rights over income generated by routine business activity physically located within its jurisdiction) (RBAir).
Regarding the distribution of profits:
As clarified on the RBSju page , the DAGTVA transfer pricing calculation takes into account in the «Amount A» mechanism, not only residual profits, but also profits: standard, routine and intangible, from the moment when they are invoiced, except that these résidual profits will not be returned to the market jurisdiction. They are treated fiscally during the same time of the transaction, this is the advantage of the DAGTVA transactional system where the totality of the taxation is definitively affected for the respective shares in each State where the commercial activity takes place.
And we speak here about the direct taxation which can be levied, as today, without modifying existing local taxation laws.
In the transfer pricing calculation we also see that the indirect taxation applied to the transaction is without indirect double taxation applied to the MNE. VAT is completely neutral with a subsidiary which reimburses a tax paid by its parent company. This amounts to not having indirect taxation on the transaction as we see in the single European market with the VAT excluded on transactions between Members of the European Union, but with a much simpler process to manage.
This is the power of the VAT system automatically applied to cross-border transactions within MNEs!
There is therefore nothing to renegotiate in this area which is the responsibility of each sovereign State, there is no new right to impose the modification of the direct taxation, with the ease of having a majority international agreement accepted in this area and with the probable consent of United States, which has already legislated internally in this domain with the Wayfair Sale Tax .