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Strategy and value creation in the board room: is your business model or supply chain future proof in light of the BEPS initiative and indirect tax?

In other words, has the board and the executive management team taken into consideration possible indirect tax effects of the OECD BEPS initiative on a.o. the (operational) business model or supply chain? You better be informed and take the necessary actions now. ERP-system updates (to name one out of many consequences) for indirect tax purposes are not set up overnight. It is a time consuming and challenging exercise. And overall your business should be VAT compliant all time. This also forms part of your risk strategy.

Base Erosion and Profit Shifting, or BEPS. Every country wants to have its “fair share of tax”. In the framework of the BEPS initiative of the OECD actions are taken to combat base erosion and profit shifting to countries where little tax is levied. The BEPS initiative currently resulted in 15 action points under three pillars, i.e. coherence, substance and transparency.

A lot of attention has already been paid in several media to the consequences of the BEPS initiative for transfer pricing and corporate tax on an international level. But do you also know the impact of the BEPS initiative for indirect tax such as VAT?

With only action 1 out of 15 mentioning “VAT”, the link between BEPS and indirect tax is not instantly obvious. However, BEPS (in general, and thus not only the so-called action 1) will have a significant impact on indirect tax and more specifically VAT.

Identifying the indirect tax impact early in the process, can help businesses identifying attention points which should be handled. Indirect tax compliance should be maintained all time.

The indirect tax effects of BEPS are likely to be seen in many business areas, including business model set up, supply chain, ERP systems, customer and supplier relationships, etc. It can be challenging for an indirect tax professional to explain the indirect tax impact of BEPS to non-VAT specialists but I would be pleased to do so. Please visit us at the Kluwer Tax Congress at May 24, 2016.

In short, you will learn more on the indirect tax impact of BEPS and related topics such as a.o.:

  • New international VAT guidelines for determining the place of taxation for cross-border supplies of services, both business-to-business (B2B) and business-to-consumer (B2C). Taxation at destination and VAT collection by reverse charge (B2B) or vendor registration (B2C) is recommended.
  • Collection of VAT on the import of low value goods. Changes to the VAT exemption threshold are being considered.
  • Changes to transfer pricing rules and the definition of permanent establishment to prevent artificial avoidance which may lead to re-evaluating the business strategy and supply chain model. Indirect tax is a core component of the business model and supply chain discussions in order to ensure that compliance is maintained and that any undesirable cost and cash flow implication is identified and possibly mitigated.
  • BEPS sensitive business models and possible alternatives.

Any ideas or comments. I would love to hear from you.

Manuela Dons

mdons@klaw.be
+32 2 708 38 12

Tax

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