New action plan for taxation of multinational companies(Taxwatch (Tax news in english))
11-08-2010 07:15
Af
Hans-Henrik Nilausen
The Government has published a new action plan to tighten the effort with regard to multinational companies. The plan both covers foreign based as well as Danish based multinational companies.
An analysis has among other shown that approximately 30 % of all foreign and 28 % of all Danish based multinational companies have not paid any corporation income tax at all in the period from 2006-2008.
In the action plan, it is recognized that there can be many reasons, why multinational companies operating in Denmark do not pay any corporate tax. On the other hand great importance is attached to the fact that the reason for not paying tax in Denmark “may be caused by the fact that the company’s internal prices to affiliated parties are fixed in order to secure that there are no profits in Denmark”. Especially companies that continuously over a period of years have realized tax losses and companies with transactions with tax haven countries demand attention according to the plan.
Consequently the Government will present a number of initiatives that have the aim to make the effort in the transfer pricing area more rigorous. The Government is also planning to carry through a “service check” of other areas within the tax legislation that may have importance for the tax payments of multinational companies.
Among other the following areas are mentioned:
- Introduction of demands on special auditor’s report’ for companies that have realized losses over a period of years and that has transactions with tax haven countries.
- Greater openness on multinational companies’ tax situation. According to the present regulations The Danish Tax Authorities may not publish information on concrete companies’ taxable income, tax payments or other tax facts.
- Possible tightening of the rules on carry forward of tax losses. 70 % of the companies that did not pay any tax in the period 2006-2008 did not do that due to carry forward of losses.
- Possible tightening of the tax depreciation rules.
- Further analysis of whether the present rules on deduction for financing costs are good enough.
With regard to the introduction of demands to special auditors reports’ for companies that continuously over a period of years have realized tax losses or companies that have transactions with tax haven countries it is the intention that the company’ transfer pricing set up and the documentation for observing the arms lengths principle must be signed by an auditor. This demand will not be general, but will be a demand The Danish Tax Authorities may pose to specific companies.
The Government also wishes to tighten the application of the rules including The Danish Tax Authorities efforts to secure that the rules are observed. Therefore new focus will be aimed at effort and control including supply of further resources. The Danish Tax Authorities will for instance to a higher degree be able to use external experts.
It is also mentioned in the plan that the Government wishes that Denmark is in front regarding testing of the scope of the rules. Therefore there is no doubt that The Danish Tax Authorities to a higher degree that today will test the scope of the rules with the Tax Tribunal or with the courts.
In the Autumn, the Government will invite to political negotiations regarding a tightening of the rules on taxation of multinational companies. First at that time it will be revealed in more detail what will be changes and tightened. No doubt further tightening of the transfer pricing regulations will be an important element in a potential tightening.
Questions can be addressed to Hans-Henrik Nilausen at hhn@bdo.dk
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