SESSION C ASSESSING THE SPECIFIC RULES INTRODUCTION 17-18 April - PowerPoint PPT Presentation

SESSION C ASSESSING THE SPECIFIC RULES INTRODUCTION 17-18 April 2014 Tokyo, Japan Yiannis Poulopoulos, Rio Tinto

• Schedule for this session – Short introduction of the Guidelines to be discussed (specific rules) – The IMF perspective, Mr Chrsistophe Waerzeggers – A government perspective, Mr Massimo Morarelli – Rapporteur, Ms Fabiola Annacondia – Discussion with the floor – Possible conclusions 2

• Main Rule = Customer location • Cases where the main rule would not give the “right tax result” (criteria) • Need for “Specific rules” 3

Not all legislation work on a dichotomy “Main Rule” vs “Specific • rules” but the Guidelines do not recommend doing so • The aim is consistency in determining appropriate jurisdiction of consumption • The Guidelines do not list supplies on which a specific rule should apply • They provide an evaluation framework for jurisdictions to assess the desirability of a specific rule 4

Guideline 3.5 The taxing rights over internationally traded services or intangibles supplied between businesses may be allocated by reference to a proxy other than customer location as laid down in Guideline 3.2, when both the following conditions are met: a. The allocation of taxing rights by reference to customer location does not lead to an appropriate result when considered under the following criteria: Neutrality  Efficiency of compliance and administration  Certainty and simplicity  Effectiveness  Fairness.  b. A proxy other than customer location would lead to a significantly better result when considered under the same criteria 5

Under Guideline 3.5, a two-step approach is recommended to determine whether a specific rule may be justified: • First step: test whether the Main Rule leads to an appropriate result under the criteria set out under Guideline 3.5. Where this is the case, there is no need for a specific rule. Where analysis suggests that the Main Rule would not lead to an appropriate result, the use of a specific rule might be justified. In such case, a second step is required. • Second step, the proposed specific rule must also be tested against the criteria of Guideline 3.5. The use of a specific rule will be justified only when this analysis suggests that it would lead to a significantly better result than the use of the Main Rule. 6