18 comment letters – including letters from the governments of India and China — were released today responding to a draft “toolkit” designed to help developing countries address the taxation of offshore indirect transfers of assets, a practice used by some multinational corporations to avoid tax.
The guidance was prepared by “Platform for Collaboration on Tax,” a joint effort of the IMF, UN, OECD, and World Bank Group. The intent is to release final guidance by year end.
In its letter, the government of India states that the toolkit is of immense importance to developing countries. India states, though, that indirect transfers of assets are artificial arrangements that have already become impermissible under tax treaties whenever a county adopts the OECD/G20 base erosion profit shifting (BEPS) minimum standards, which require that tax treaty preambles specify that the treaty cannot be used for abusive behavior. The toolkit should make that clear, the Indian government states.
India also states no distinction should be provided for movable assets that are subject to an indirect transfer.
Both India and China clarified aspects of their tax laws on indirect transfers of assets, which were outlined in the toolkit. The Chinese government also suggested clarifying changes be made to the definition of “onshore direct asset transfers” and other aspects of the document.
In its letter, BIAC expressed the concern that the toolkit seemed to encourage countries to tax offshore indirect transfers of assets rather than encouraging a uniform approach or equitable implementation once that decision is made.
BIAC also argues that changes to source and residence taxation should be debated among countries not resolved through this kind of guidance.
Similar comments were offered by the USCIB, which argued that the toolkit should be withdrawn. The USCIB also said that the toolkit does not lay out a clear rational for taxing indirect transfers
Comments were submitted by the following organizations: Aneri Dani & Associates, BIAC, BEPS Monitoring Group CBI, China State Administration of Taxation, Deloitte, International Chamber of Commerce (ICC), Government of India, International Tax and Investment Center (ITIC), Jubilee USA Network, KPMG, PwC, Repsol, Sergio Guida, Silicon Valley Tax Directors Group (SVTDG), Tax Executives Institute (TEI), Transfer Pricing Economists for Development (TPED), United States Council for International Business (USCIB).