Chand, Vikram
Profit allocation within MNEs in light of the ongoing digital debate on Pillar I a “2020 compromise”? Electrónico / Vikram Chand, Alessandro Turina and Louis Ballivet .-- , 2020
Disponible únicamente en formato electrónico.
Resumen.
The current profit allocation framework, i.e. the arm’s length standard, is mainly based on a facts and circumstances analysis. In particular, depending on the situation, facts and circumstances-related allocation keys are used to allocate profits among various entities within a multinational enterprise (MNE). Nevertheless, there are situations wherein predetermined formulas and/or allocation keys are also used within the standard. The purpose of this article is to show that predetermined approaches will quickly infiltrate the profit allocation framework, although a facts and circumstances analysis and/or allocation keys will continue to be used. The authors support this proposition by analysing the current debate on profit allocation with respect to the digitalization of the economy. They conclude that the use of predetermined approaches is inevitable if the objective is to develop a simplified solution with respect to the profit allocation debate made in the context of Pillar 1 of the digital debate. A simplified solution would be to apply a formulary approach at the MNE group level and an arm’s length principle (ALP) approach at a separate-entity level. More specifically, a predetermined formulary approach in the form of a simplified but modified residual profit split method could be applied at the MNE group level to reallocate residual profits (the so-called Amount A). Simultaneously, a predetermined formula based on the arm’s length approach could be applied at a separate-entity level, that is, to routine distribution and/or marketing activities (the so-called Amount B). This latter approach will be complemented and backed up by a facts and circumstances arm’s length analysis (the so-called Amount C, which, in some respects, would seem to be more of a process, rather than a separate amount).
PRIMER PILAR (OCDE)
ATRIBUCIÓN DE BENEFICIOS
EMPRESAS MULTINACIONALES
ECONOMÍA DIGITAL
Turina, Alessandro
Ballivet, Louise
World Tax Journal v. 12, n. 3, 2020
Profit allocation within MNEs in light of the ongoing digital debate on Pillar I a “2020 compromise”? Electrónico / Vikram Chand, Alessandro Turina and Louis Ballivet .-- , 2020
Disponible únicamente en formato electrónico.
Resumen.
The current profit allocation framework, i.e. the arm’s length standard, is mainly based on a facts and circumstances analysis. In particular, depending on the situation, facts and circumstances-related allocation keys are used to allocate profits among various entities within a multinational enterprise (MNE). Nevertheless, there are situations wherein predetermined formulas and/or allocation keys are also used within the standard. The purpose of this article is to show that predetermined approaches will quickly infiltrate the profit allocation framework, although a facts and circumstances analysis and/or allocation keys will continue to be used. The authors support this proposition by analysing the current debate on profit allocation with respect to the digitalization of the economy. They conclude that the use of predetermined approaches is inevitable if the objective is to develop a simplified solution with respect to the profit allocation debate made in the context of Pillar 1 of the digital debate. A simplified solution would be to apply a formulary approach at the MNE group level and an arm’s length principle (ALP) approach at a separate-entity level. More specifically, a predetermined formulary approach in the form of a simplified but modified residual profit split method could be applied at the MNE group level to reallocate residual profits (the so-called Amount A). Simultaneously, a predetermined formula based on the arm’s length approach could be applied at a separate-entity level, that is, to routine distribution and/or marketing activities (the so-called Amount B). This latter approach will be complemented and backed up by a facts and circumstances arm’s length analysis (the so-called Amount C, which, in some respects, would seem to be more of a process, rather than a separate amount).
PRIMER PILAR (OCDE)
ATRIBUCIÓN DE BENEFICIOS
EMPRESAS MULTINACIONALES
ECONOMÍA DIGITAL
Turina, Alessandro
Ballivet, Louise
World Tax Journal v. 12, n. 3, 2020