Redefining the concept of PE

Transcription

1 Redefining the concept of PE Moving to one European sales model as an alternative? Margreet Nijhof Giuliana Polacco Folkert Idsinga Kim Tan Jan-Willem Gerritsen

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3 Trends Simplification Virtualization Centralization Digitization 3

4 BEPS action item 7: PE abuse 2012 Public Discussion Draft on Interpretation and Application of Art. 5 BEPS mandate broader: Model change (deadline September 2015) Link digital economy issue Specific BEPS PE issues: commissionaire arrangements specific activity exemptions attribution of profits 4

5 New PE threshold? fully dematerialised digital activity significant digital presence 5

6 Country Initiatives 6

7 One European Sales Model 7

8 ABC Background Global manufacturer of IT industry parts Commissionaire business model in Europe Sales via centralized platforms Call-off stock (consignment) Matrix management structure Centralized shared service center 8

9 Alignment of Business Model and Supply Chain Model 9

10 Key Objectives from a Business Perspective Align legal structure and business model to promote one European sales culture Business savings by achieving standardized process through centralized lean back office with one system Allow front-office to fully focus on customers Savings through simplified legal structure 10

11 Key Objectives from a Corporate Income Tax Perspective Minimize transfer pricing risks new structure Minimize permanent establishment risks (Subpart F new structure) Minimize business restructuring issues Minimize local income tax aspects of corporate restructuring Minimize corporate complexity of restructuring 11

12 Key Objectives from an Indirect Tax Perspective Robust VAT and customs (compliance) model: Minimal compliance issues (e.g., number of VAT registrations); Limiting of number of VAT invoicing flows; Ease of implementation; Decrease risk of non-compliance (and audits). 12

13 Key Objectives from an Indirect Tax Perspective (2) Achieve clear understanding of fixed establishment issues Flexibility in commercial transactions, e.g. use of consignment stock programme in order to retain title to the goods as long as possible; Determine indirect tax model which recognizes TP and CIT constraints (and vice versa). 13

14 Points of attention VAT/customs PE/FE Risks Choice of HQ legal entity US Tax implications Post- Restructuring TP Choice of distribution model Employment Restructuring Issues Corporate Restructuring Issues Business Restructuring Operational changes Anticipating Legislative changes Branch Operations Implications 14

15 Alternatives 15

16 Proposed Business Model Super Hub From commissionaires ( Commissionaires ) to service providers/sales support entities acting for a Super Hub EU Commissionaires become marketing and sales support service providers to Super Hub. The service providers will perform marketing and sales support activities, mainly in their local markets. In other words, the service providers link potential customers to European HQ which will subsequently negotiate pricing and conclude contracts with these customers. 16

17 Proposed Business Model Super Hub (2) Further, the Commissionaires will each maintain their own offices and employees locally. For this alternative to work, it is essential that the service providers will not result in European HQ (Super Hub) having local permanent representatives (PEs). 17

18 Super Hub Acts as LRD 18

19 Points of attention VAT/customs PE/FE Risks Choice of HQ legal entity US Tax implications Post- Restructuring TP Choice of distribution model Employment Restructuring Issues Corporate Restructuring Issues Business Restructuring Operational changes Anticipating Legislative changes Branch Operations Implications 19

20 Proposed Business Model Single European Entity Single European Entity with permanent establishments throughout Europe EU Commissionaires will merge into European HQ. The former Commissionaires will each maintain their own offices and employees locally as a registered branch. As a consequence, European HQ will likely have permanent establishments (PEs) in each applicable jurisdiction. 20

21 Proposed Business Model Single European Entity (2) The employees of the former Commissionaires will perform similar functions and manage similar risks as in the current model (the additional functions related to the LRD model will be performed by European HQ in Germany). 21

22 SEE Acts as a LRD 22

23 Points of attention VAT/customs Post- Restructuring TP Business Restructuring PE/FE Risks Choice of distribution model Operational changes Choice of HQ legal entity Employment Restructuring Issues Anticipating Legislative changes US Tax implications Corporate Restructuring Issues Branch Operations Implications 23

24 Contact Giuliana Polacco Local Partner Milan Tax Margreet Nijhof Local Partner Amsterdam Tax Margreet.Nijhof@bakermckenzie.com Folkert Idsinga Principal Amsterdam Tax Folkert.Idsinga@bakermckenzie.com

25 Contact Jan-Willem Gerritsen Salary Partner Amsterdam Tax Kim Tan Local Partner Amsterdam Corporate (Notary)

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