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Global Tips

The New World Order of Permanent Establishment Risks

By Tom Lickess

Large multinational corporations have in recent years come under increased scrutiny from global taxNWO1461716073_96608  authorities and the public for their cross-border tax dealings. So-called corporate inversions—such as the recently proposed Pfizer-Allergan merger—are making front page news around the world.

These and similar cross-border arrangements that result in favorable tax outcomes for the companies involved typically contain a high level of technical detail. They are also inevitably accompanied by statements from the companies involved that the tax laws in each jurisdiction of operation have been followed to the letter. Popular public sentiment, however, now appears to support the line that such activities are not within “the spirit” of the laws. Fair or not, prevailing public opinion is that any entity that is perceived as not paying its “fair share” of corporate tax is somehow operating on the edges of reasonable expectation.

Influential global bodies such as the Organization for Economic Cooperation and Development (OECD) have also targeted perceived multinational corporate tax avoidance through programs like the Base Erosion and Profit Shifting (BEPS) project. At a basic level, these and related country-specific initiatives target the perceived avoidance of permanent establishment (PE) and egregious transfer pricing practices. The initiatives are directed toward multinationals shifting their tax presence and taxable income to low-tax jurisdictions so that they are not being taxed on profits where economic activity is performed and value created.

Read the full blog article here.