Advance tax rulings are a common feature of mature tax systems . The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established rulingpractices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. 1 Increasingly, many non-OECD countries are also offering advance tax rulings.
An advance tax ruling regime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority . However, there are
Advance tax rulings are a common feature of mature tax systems. The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established ruling practices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. Increasingly, many non-OECD countries are also offering advance tax rulings. An advance tax ruling regime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority. However, there are also inherent risks associated with the proliferation of granting confidential advance tax rulings which are not published or otherwise reported. This Tax Law IMF Technical Note focuses on designing an advance tax ruling regime in the nature of private tax rulings.
absence of a rulingpractice tax authorities are constantly asked to take a position in the context of their audit and assessment activities, including in circumstances where the law is uncertain or unsettled. In fact, a rulingpractice may reveal such uncertainties earlier on, allowing early intervention by the lawmaker where necessary or appropriate.
10 See Commission decides selective tax advantages for Fiat in Luxembourg and Starbucks in the Netherlands are illegal under EU state aid rules, IP/15/5880; State aid: Commission concludes Belgian “Excess Profit
and legal framework for spontaneous exchange of information entered into force, allowing for spontaneous exchange of information as of 1 January 2018 (revisions to the Tax Administrative Assistance Act and the Tax Administrative Assistance Ordinance, Convention on Mutual Administrative Assistance in Tax Matters).
Reviewing existing preferential regimes
In the October 2017 Progress Report of the Forum on Harmful Tax Practices, the holding company regime, the auxiliary company regime, the mixed company regime, and the commissionaire rulingpractice were
This Selected Issues paper analyzes key features of corporate taxation in Switzerland. The Swiss corporate tax system includes many aspects of a territorial regime; is highly attractive for multinational companies; and collects non-negligible revenues, but the status quo is not sustainable. The proposed reform would eliminate differences in the tax treatment of foreign and Swiss sourced income. Further, cantons are expected to lower their corporate income tax (CIT) rates, bringing the combined (municipal, cantonal, and federal) tax rate (averaged across cantons) to about 13.9 percent. Costs of lowering the CIT rates would be unequally distributed across cantons, and would be costlier for cantons with a large immobile CIT base.
affiliates in low tax jurisdictions and pay interest to them), and royalties for uses of patents or trademarks.
3 Except that losses on sale of assets can be deducted immediately rather than remaining in the pool.
4 Companies cannot benefit much from using the flexible depreciation rules to circumvent the loss-offset limitations, because they must not exceed the maximum annual rate, even if they took less depreciation in previous years.
5 For example, since 2013 the European Commission has been investigating whether some tax rulingpractices (i
Source: IMF Coordinated Direct Investment Survey (CDIS). Numbers are for 2015.
26. Receiving special tax treatments and exploiting treaty networks of major French FDI partners may explain to some extent aggregate FDI statistics . For example, since 2013 the European Commission has been investigating whether some tax rulingpractices (i.e., potential state aid in the form of reduced effective tax rate for specific companies) in some member states were compliant with EU state aid
Ruud A. de Mooij, Dinar Prihardini, Antje Pflugbeil, and Mr. Emil Stavrev
Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
Ruud De Mooij, Dinar Prihardini, Antje Pflugbeil, Mr. Emil Stavrev, and Mr. Michael Keen
investments, i.e. investment in financial assets that flow into and out of Luxembourg, with limited contribution to its economy.
Figure 3. Average Withholding Tax Rates Agreed in BTTs, 2019
Note: Companies with certain minimum participation and holding period as suggested by Art. 10 para 2 letter a) OECD Model Convention.
Luxembourg’s advance rulingpractice has changed in recent years and the number of advance pricing agreements (APAs) has drastically declined. This practice–aimed at providing tax certainty to MNEs—received ample criticism after
Ernesto Crivelli, Ruud A. de Mooij, and J. E. J. De Vrijer
and the state aid provisions. Tax rulings—while they are per se not necessarily violating state aid rules—can be deemed unlawful if they provide, on a discretionary basis, selective advantages to a specific company or group of companies. Since June 2013, the EC has been investigating the tax rulingpractices of Member States. Examples of cases wherein the EC decided that unlawful state aid existed include Starbucks in the Netherlands (2015), Amazon in Luxembourg (2017), and Apple in Ireland (2016). Developments have been ongoing, with the decisions of the EU General