Dispute Resolution: How to obtain reasonable outcomes Tax... · 2013-05-15 · How to obtain...
Transcript of Dispute Resolution: How to obtain reasonable outcomes Tax... · 2013-05-15 · How to obtain...
Dispute Resolution: How to obtain reasonable outcomes
8-9 May 2013
Chair: Mukesh Butani – Taxand India
Panelists:
Chinapat Vissutipat – Taxand Thailand
David Weisner – Citigroup
Gokul Chaudhri – Taxand India
1. Developments on Managing Disputes
2. Administrative & Judicial Litigation: Fresh Rules
3. New Methods to Avoid the Courtroom
4. Strategies for Jurisdictions where Court is Most
Likely
5. Key Court Cases and Learnings for Taxpayers
6. Taxand’s Take
7. Key Contacts & About Taxand
Contents
Developments on Managing Disputes
8-9 May 2013
India
Protracted litigation straining Court infrastructure
Retrospective amendments unsettling settled
positions
Special courts/ bench, e-courts for tax disputes,
international tax & transfer pricing
Introduction of APA
Introduction of Dispute Resolution Panel
Advance Rulings open to challenge
Developments on Managing Disputes 1 Developments on Managing Disputes
3
Developments on Managing Disputes 1 Developments on Managing Disputes
4
Other key developments in Asia
Targets of tax collection not consistent with
economic reality
Ever increasing data requests even on simple
transactions
Developments on Managing Disputes 1 Developments on Managing Disputes
5
Thailand
Trend of current tax collection
Deficit government budget
Incremental tax disputes
Administrative level: Tax collectors
Judicial level: tax court and Supreme Court
Alternative tax dispute resolution
Conciliation process in tax court
No tax arbitration methods
No associate judge
Administrative & Judicial Litigation: Fresh Rules
8-9 May 2013
India
Strict rules of evidence
Effectiveness of ADRs (AAR/MAP/APA)
Effectiveness of DRP
Planning, preparation and legal counsels/
firm’s advice
Impact of GAAR
Administrative & Judicial Litigation: Fresh Rules
7 2 Administrative & Judicial Litigation: Fresh Rules
Experience in other countries:
Australia – New transfer pricing rules
Australia – Risk rating taxpayers
Korea – “Selling” of APAs
8 2 Administrative & Judicial Litigation: Fresh Rules
Administrative & Judicial Litigation: Fresh Rules
9 2 Administrative & Judicial Litigation: Fresh Rules
Thailand
Tax assessment: No burden of proof
Burden of proof in court: Shift to taxpayer
Flexible court hearing: Continuing procedures
Conciliation on facts: Not on tax laws
Anti-avoidance rule: TP/TC/TS/CFC/GAAR
Administrative & Judicial Litigation: Fresh Rules
New Methods to Avoid Courtroom
8-9 May 2013
New Methods to Avoid the Courtroom 11 3 New Methods to Avoid the Courtroom
Alternative forms of dispute resolution
Arbitration
Conciliation
Mediation
MAP
APA
Settlement
New Methods to Avoid the Courtroom 12 3 New Methods to Avoid the Courtroom
India
Is MAP an option? Reality check:
Roughly 150 – 200 MAPs between India and US only
on TP
Impasse between Indian and US CA for past 12 – 18
months
India’s views on OECD and UN chapter on transfer
pricing has increased the anxiety levels
APA – A smooth beginning so far
Guidelines notified on August 31, 2012
Encouraging response: around 150
pre-filings
3 13
New Methods to Avoid the Courtroom New Methods to Avoid the Courtroom
Country specific experiences
Australia – Franchise issues
Korea – MAP
Thailand
Negotiation: Administrative level
Facts and business knowledge
Settlement to reduce penalty and
surcharge
Avoid wasting time and lawyer’s cost
No way out after tax assessment
Unable to negotiate during tax appeal
Conciliation in tax court: Only facts issue
14 3
New Methods to Avoid the Courtroom New Methods to Avoid the Courtroom
Strategies for Jurisdictions Where Court is Most Likely
8-9 May 2013
Strategies for Jurisdictions where Court is Most Likely
16 4 Strategies for Jurisdictions where Court is Most Likely
Timely expert advice and engaging counsels
Preparing for uncertainty and dispute life cycle
Strategies for mitigating interest and penal
exposure
Keeping management informed – governance
issues
Endeavor for early disposal
Media management
4 Strategies for Jurisdictions where Court is Most Likely
17
Strategies for Jurisdictions where Court is Most Likely
India
Evaluation of alternative remedies
Strategy for stay of demand
Avoiding multiple parallel proceedings
Mitigating penalty exposure – robust
documentation and disclosure
Filing caveats
Tribunal to state High Court and Supreme
Court – facts vs substantial question of law
4 Strategies for Jurisdictions where Court is Most Likely
18
Strategies for Jurisdictions where Court is Most Likely
Other country experiences
Australia – Choosing a law firm wisely. Law firms
considered “intermediaries”.
Korea – Keeping it simple
4 19
Strategies for Jurisdictions where Court is Most Likely
Strategies for Jurisdictions where Court is Most Likely
Thailand
Litigation team
Appropriate tax lawyer / tax litigator / tax advisor
Supporting tax team in the courtroom
Tax appeal is not a tax deferral
Pay tax first: To reduce monthly surcharge
Refund tax paid after winning the case: With interest
1% per month (12% per year)
Burden of proof
Documentation with reasonable grounds
Key Court Cases & Learnings for Taxpayers
8-9 May 2013
Key Court Cases & Learnings for Taxpayers 21 5 Key Court Cases & Learnings for Taxpayers
India
Sanofi Pasteur Holding (Andhra Pradesh HC
Ruling)
Nokia Networks OY (Delhi HC Ruling)
LG Electronics (Special Bench Delhi Tribunal
Ruling)
Sanofi Pasteur Holding
Court re- affirms principle of legitimate tax
planning within four corners of law – Vodafone
followed
No unilateral Treaty override
Treaty shopping – sighted as an additional factor
to attract foreign investments
Importance of underlying commercial substance
Impact of GAAR in treaty interpretation
5 22
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
Nokia Networks OY
Software payments not taxable as royalty under treaty
Acknowledged distinction between “copyright” & “copyrighted article”
Retrospective amendments cannot be read into treaty
Matter sub-judice before Supreme Court
5 23
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
LG Electronics
TP adjustment on excessive AMP upheld
Factors – need for proper comparables, FAR profile, business model, business and product life cycle etc
Battle to continue before multiple forums
MNC’s in India need:
to be more cautious while undertaking FAR analysis / selection of comparables
to maintain proper documentation incorporating detailed functional analysis
to review their current arrangements
with AEs on AMP
5 24
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
Other countries’ experiences:
Australia – TPG case
Australia - Project Wickenby cases continues
Korea - Supreme Court endorses application of
domestic “substance over form” principle to deny
tax treaty benefits
Korea – Look out for cases on management
service fees
5 25
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
26 5
Thailand
Pizza Hut Inc. (Marketing expense of franchise)
ABB (Subsidy as a deemed dividend)
NEC (Share premium as a subsidy)
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
27 5 Key Court Cases & Learnings for Taxpayers
Key Court Cases & Learnings for Taxpayers
Pizza Hut Inc. (Marketing expense of franchise)
Controlling power of franchisor in marketing
collateral
Marketing costs linked to gross sales and paid
by franchisee directly to 3rd party suppliers
Withholding tax on marketing (franchise)
expense
15% on marketing costs paid / Late penalty
and surcharge
28 5 Key Court Cases & Learnings for Taxpayers
Key Court Cases & Learnings for Taxpayers
VAT on marketing (franchise) expense
7% on marketing costs paid / Late penalty
and surcharge
Tax interpretation by the Supreme Court
Tax avoidance: Substance over form
29 5
ABB (Subsidy as a deemed dividend)
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
30 5
Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers
NEC (Share premium as a subsidy)
NEC Thailand:
67% of total shares owned by NEC Engineering Thailand and 33% owned by NEC Japan
Retained loss with negative NBV of shares
Increase capital of THB 410,000,000
NEC Japan:
1 preference share (par 1,000) with share premium (409,999,000)
Central Tax Court’s view:
Substantial transaction: Subsidy
Taxand’s Take
8-9 May 2013
Taxand’s Take 32 6 Taxand’s Take
Choice of Counsels / law firms for expert advice
and representation
Planning ahead
Efficacy of alternate dispute resolution
mechanisms
Strategise how to approach under APAs
Effective housekeeping – robust documentation
Gearing up for changing tax landscape
Key Contacts Key Contacts & About Taxand 33 7
Mukesh Butani
Taxand India
T. +91124 339 5011
David Weisner
Citigroup
T. +852 3961 1232
Chinapat Visuttipat
Taxand Thailand
T. +66 2632 1800
Gokul Chaudhry
Taxand India
T. +91124 339 5040
Understanding and
managing the tax
consequences of cross-
border tax transactions
Considering organisational
(re)structuring options in
full awareness of the tax
implications
Realising tax, supply chain
and overall operational
efficiencies
Interpreting technical tax
provisions
Our Global Service Commitment 34 7 Key Contacts & About Taxand
Lowering effective tax
rates
Addressing and preventing
tax leakages
Ensuring tax compliance
Managing relationships
with tax authorities
Global Coverage Key Contacts & About Taxand 35 7
From 9 to 48 countries in just 7 years
59 ITR awards won since 2009
95% recommended in World Tax 2012
Argentina Ireland Puerto Rico
Australia Italy Romania
Austria Japan Russia
Belgium Korea Singapore
Brazil Luxembourg South Africa
Canada Malaysia Spain
Chile Malta Sweden
China Mauritius Switzerland
Colombia Mexico Thailand
Cyprus Netherlands Turkey
Denmark Norway UK
Finland Pakistan Ukraine
France Panama USA
Germany Peru Venezuela
Greece Philippines
India Poland
Indonesia
Portugal
Dedicated to tax
Independence advantage – conflict free,
un-bureaucratic, best practice
Local knowledge, global view
Partner led from start to finish
Complex problems, customised advice
Passionate about working together
Practical advice, responsively delivered
Why Taxand? 36 7 Key Contacts & About Taxand
ABOUT TAXAND
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