Trésorier/Treasurer magazine - N°94 - Juil/Août/Sept 2016 - (Page 32)

UNDERSTANDING THE TREASURY IMPACT OF BEPS LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°94 - JUL / AUG / SEP 2016 Following publication of the OECD's final Base Erosion and Profit Shifting ("BEPS") Action Plan in late 2015, MNCs around the world are working to understand the implications for their businesses. From increased reporting requirements to the need for more comprehensive transfer pricing documentation - including more robust benchmarking analyses, the implementation of BEPS will impact corporate treasurers in numerous ways. 32 Background The OECD's BEPS project is intended to address the issue of aggressive tax planning by multinational corporations (MNCs), which has become a regular headline grabbing issue in the last few years and which will require MNCs to report comprehensively on their global operations and in greater detail. The OECD's Action Plan incorporates 15 Action items, in guidance only, which were finalised in October 2015. Of the 15 BEPS Action points, the following points can be considered to be the most relevant to a treasury department: Action 2: neutralising the effects of hybrid mismatch arrangements Action 2 develops model treaty provisions and recommendations regarding the design of domestic rules to neutralise the effects of hybrid instruments and entities (e.g. double non-taxation, double deduction, and long-term deferral) and is likely to lead to treasurers to revisit their current intercompany funding arrangements where they fall within the new regulations. Action 4: limiting base erosion involving interest deductions and other financial payments Action 4 outlines a common approach based on best practices for preventing base erosion through the use of interest expense, for example through the use of related-party and third-party debt to achieve excessive interest deductions or to finance the production of exempt or deferred income. This may in turn cause treasury departments to rethink the benefits, of debt funding in jurisdictions with increased limitations. Action 6: preventing the granting of treaty benefits in inappropriate circumstances Action 6 develops model treaty provisions and recommendations regarding the design of domestic rules to prevent treaty abuse which may cause existing intra-group financing to be declined treaty benefit as a result of perceived abuse of treaty benefits, or treaty shopping. Actions 8-10: aligning transfer pricing outcomes with value creation Actions 8 - 10 contain transfer pricing guidance to assure that transfer pricing outcomes are in line with value creation, by requiring that the attribution of value for tax purposes is consistent with economic activity generating that value. This is likely to impact available deductions and the location of taxable profits. Action 13: transfer pricing documentation and country-bycountry reporting Action 13 contains revised guidance on transfer pricing documentation, including the template for Country-byCountry ("CbC") reporting, to enhance global transparency. It is Action 13, particularly CbC reporting that is currently dominating headlines and receiving the greatest amount of focus, despite Action 13 extending far beyond CbC reporting and placing a significant additional burden on tax departments with respect to global local and master file requirements. Implications for corporate treasurers Under the BEPS initiative, treasury teams will be required to collaborate closely with its tax and finance teams on tackling these actions. This will include reviewing the group's current business structure and undertaking necessary risk management assessments in areas including personnel, assets and functions. Should any structural changes be made to the business model in order to minimise tax exposure and business operations risks, treasurers will need to work with their executive team to determine the overall consequences of these changes. For MNCs with an existing in-house bank, it will likely be necessary to review the chosen jurisdiction and processes to see what action is necessary as under the BEPS Actions, especially under Actions 2, 4 and 6. MNCs will need to ask whether

Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°94 - Juil/Août/Sept 2016

Cover
Table of contents
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW Philippe Gelis - Kantox - Fintech and the future of banks
FOCUS
Lost in transformation
Everything has a price – a transfer price
Treasury Survey - an unprecedented picture of treasury activities in Luxembourg
FORUM
The impact of negative rates on Treasury and Risks Management Systems
Towards reporting harmonisation?
Understanding the Treasury impact of BEPS
Impacts of Single Resolution Mechanism and Bail-in for European Banks
Supply chain? Not concerned?
Collateral management and the Corporate Treasury function.
Efficiently Managing Cross-Border Payments in Turbulent Times
CORPORATE FINANCE
How Mid-Market Companies Can Efficiently Manage Enterprise-wide FX Risk as they Grow
Investing surplus cash in repos
A wind of technology changes in the treasury management world
Invoicing can be fun….?
Comment améliorer la performance des fonds de pension européens
15 MINUTES WITH O2Finance
THE FINANCIAL RISK OBSERVATORY
NEWS
LIFE BEYOND NUMBERS

Trésorier/Treasurer magazine - N°94 - Juil/Août/Sept 2016