The practical impact of the OECD's recommendations and the key issues that should be on your radar as a tax function and head of tax.
It’s now that businesses should be critically appraising their current structures to make sure they are fit for purpose in the post BEPS environment. Heads of tax are facing headaches: divergences in domestic legislation, archaic tax authority dispute resolution mechanisms and an eagerness from tax authorities around the globe to ensure they collect their ‘fair share’ of tax.
This article looks at the practical impact of the OECD's recommendations and the key issues that should be on your radar as a tax function and head of tax. We explore how to address these issues and the risks and opportunities they create. We also look at how the tax role within the business is likely to change and the opportunities that this presents.
The central challenge will be dealing with what will be marked variations in how the 15 actions are interpreted and the timing of implementation in the locations where your business operates.
Divergence is likely to be heightened by the fact that while there are some red lines that need to be consistently applied, the bulk of what’s been announced are recommendations rather than hard rules.
So will the BEPS recommendations bring clarity?
And what about non-OECD states? This patchwork of different local rules will clearly be an administrative challenge and the uncertainty is compounded by what will eventually be multiple compliance arrangements.
It could be a while before we see certainty over how the different actions will be applied in particular territories. Nonetheless, the question is how much change there will be, not least in what the business expects from its head of tax.
So what action needs to be taken?
- The BEPS Action Plan indicates that some operational restructuring and adjustments to transfer pricing may be required by businesses. But given the current uncertainty it would be beneficial to model the different outcomes and develop clear contingency plans rather than taking hasty action now.
- We believe that interest rate deduction is one of the grey areas where your tax teams should model the implications of different levels of deductions, and consider how to deal with the varying outcomes. However, it would be unwise to make wholesale changes before you know what fixed ratio each of the legislatures settles on.
- It’s vital that you identify any risks in how your CbC disclosures will be assessed in each jurisdiction and proactively prepare to defend potential threats.
- It’s important to provide your board and business teams with regular communications about how the BEPS recommendations will affect the business’ strategy and operations.
- Uncertainty over the final direction of BEPS and the wider tax regime will continue. But substance can’t be changed overnight. So it’s important to start planning any necessary relocation or restructuring as soon as you can.
Talk to our specialists about how Grant Thornton can help your organisation prepare for the requirements set out in the OECD's BEPS Action Plan.