Tax avoidance continues to attract attention globally with strong support for tax law reform at all levels. This Tax Law IMF Technical Note focuses on some of the key design and drafting considerations of one specific legal instrument (being, a statutory general anti-avoidance rule (GAAR)) which is often considered by authorities to combat unacceptable tax avoidance practices. A GAAR is typically designed to strike down those otherwise lawful practices that are found to be carried out in a manner which undermines the intention of the tax law such as where a taxpayer has misused or abused that law. However, the objective of combating unacceptable tax avoidance can itself make the legal design of a GAAR complex. This is simply because the phrase “tax avoidance” means different things to different people. Whatever the form of a GAAR, it should give effect to a policy that seeks to strike down blatant, artificial or contrived arrangements which are tax driven. However, the GAAR should be designed and applied so as not to inhibit or impede ordinary commercial transactions. This Tax Law IMF Technical Note discusses and explores how drawing a line between those arrangements which should be caught by the GAAR is a matter of degree and can be delicate.
or increase in deductions) as compared to the result under a relevant counterfactual.
To avoid inhibiting or impeding ordinary commercial transactions, the GAAR’s purposetest must be applied objectively and in a considered way . In this regard, after considering the relevant facts, circumstances and evidence, it should be able to be objectively concluded that obtaining the identified tax benefit, of itself, explains why the taxpayer entered into the particular transaction or dealing (scheme). Importantly, the taxpayer’s subjective state of mind, and therefore
, expectations of the future spot exchange rate consistently overestimated the actual future rate in a regime in which the exchange rate was not allowed to float freely.
The paper also investigated the extent to which Mexican issues of domestic debt and of external debt, both denominated in U.S. dollars, were linked. For this purpose, tests were conducted under the hypothesis that the interest rate on a U.S. dollar-denominated domestic asset was “cointegrated” with the yield implicit in the secondary market price for external debt issued by Mexico. On balance, the evidence
. Implementing the Indirect Methods
C. Elements of an Indirect Method
D. General Operational Aspects of the Indirect Method
E. Administrative Issues
F. The Voluntary Disclosure Program and the Indirect Method
IV. INTERNATIONAL TAX MEASURES
B. Place of Effective Management
C. Permanent Establishment (PE)
D. Controlled Foreign Company Rules
E. Indirect Transfer of Immovable Property
V. CHANGES TO TRANSFER PRICING REGU LATIONS
A. Special Rules for Transfer Pricing of Commodities
B. Business Restructuring
C. Business PurposeTest
Tax policy in Ukraine is engaged in two fronts at once. On one front, very significant work has been done over the years on the gradual improvement and updating of the tax system; on the other, it questions essential tenets of the existing system, exploring fundamental changes to it. While serious efforts have been devoted, for example, to the modernization of the international aspects of the income tax, upgrading the regime to OECD standards, there is a strong push from some quarters of the policy debate to do away with the Corporate Profit Tax (CPT) altogether. The central idea is to replace it with a Distributed Profit Tax (DPT), generally referred to in Ukraine as the Exit Capital Tax (ECT). In essence, this system would not tax profits as they accrue to the corporation, deferring the tax to when the corporation distributes dividends to the shareholder.
improvement . The report discusses four transfer pricing topics: commodity pricing, business restructuring, thin capitalization and, more importantly, the adoption of the business purposetest. Some of the issues identified here relate to some imprecise, or one-sided or incomplete definitions. Many would have been corrected with the version of Bill 2524 that was reviewed by this mission. However, it remains to be seen how much of the preliminary Bill remains in the final version approved by Rada.
The most salient issue here is the adoption of the business purposetest for
Limitation on Benefits
Convention on Mutual Administrative Assistance in Tax Matters
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting
Organisation for Economic Co-operation and Development
Offshore Indirect Transfer
Platform for Collaboration on Tax
Ministry of Finance
Ministry of Territorial Administration and Development
Organization for Economic Co-operation and Development
Personal Identification Number
Personal Income Tax
State Committee of the Real Property Cadaster
Social Security Contribution
State Revenue Committee
Technical Assistance Report