Corporate tax planning in change

Within the context of the economy's globalisation, the number and the importance of internationally active companies has risen significantly over the last decades. This development will increase further in the coming years. Beside large companies, SMEs are increasingly becoming active internationally.

In globally active companies, business decisions regarding international organisational questions have to be made frequently. This applies, for example, to the decisions regarding international choice of location, the design of transnational legal-, corporate-, and financing structures as well as the determination of intra-corporate transfer pricing. Regarding these decisions, a series of different decision criteria are relevant, amongst others also the tax effects of the individual planning variants.

In contrast to the globalisation of corporate activities, there has hardly been any internationalisation in the field of tax law to date. The taxation of cross-border groups are primarily governed by the national tax laws of the countries in which the companies are domiciled. The resulting complexity of taxation may lead to considerable tax risks, but on the other hand it also opens up extensive tax design possibilities. For this reason, international companies require an international planning of matters concerning taxes.

Caused by the financial crisis and the ensuing burden for public budgets as a result of an unprecedented indebtedness of the states, the taxation of internationally active companies has come into the focus of public interest. The corporations' legally correctly implemented tax planning and the sometimes therefrom resulting low overall tax burden have been branded as unfair and politically incorrect in the course of this discussion. New legal foundations for a "correct" taxation of the corporations were called for. Due to this public pressure, projects which aim to change the corporate tax legislation have been launched on national, but predominantly international level, in recent years. The effects of this new tax regulation will permanently affect and change the corporate tax planning in the coming years.

With the BEPS-project, the OECD / G20 states have set a new tax planning boundary and changed the rules. The unilateral tax legislation, which is linked to international treaties between countries, is being replaced step by step by a multilateral system.

The adjustments and changes are taking place on two different levels. The two levels can be distinguished by or summarized with the terms "transparency" or "substance".

As a strategy against the exploitation of national tax rules, the community of states has agreed on intensified intergovernmental cooperation and disclosure requirements regarding fiscal processes of internationally active companies. This includes the spontaneous ruling-exchange in Action Point 5 and the newly introduced CbC-report in Action Point 13 of the BEPS project.

On a technical level, the so far pursued separation of the economic processes from the profit streams shall be prevented. This is already evident in the title of the BEPS - "Base Erosion and Profit Shifting" - project. The combating of this erosion is a common theme throughout the 15 action points of the BEPS-project. Brought to a formula, one could say that, in future, functions, risks and profits belong together and have to stay together as a unit.

The tax authorities now regard the corporate structure as a global whole and a self-contained system that, thanks to the new transparency, shall be designed with as little contradictions as possible. This structure must be comprehensively documented and justified, which ensues new and broad compliance tasks.

The clarification of the new parameters due to the new legal regulations according to the BEPS-project in the OECD states will be the challenge for corporate tax planning in the near future. Consequently, the previous structures and processes are to be compared with the new rules and to be adjusted if necessary.

The following statement by Pascal Saint-Amans, Director of the Centre for Tax Policy and Administration at the OECD, on the occasion of the "Tax Talk" webinar on 16 June 2016, is representative of the coming changes: "Many thought that the BEPS project would not come. It has come and it is being implemented".