dispute resolution: how to obtain reasonable outcomes tax... · 2013-05-15 · how to obtain...

Dispute Resolution: How to obtain reasonable outcomes

8-9 May 2013

Chair: Mukesh Butani – Taxand India

Panelists:

Chinapat Vissutipat – Taxand Thailand

David Weisner – Citigroup

Gokul Chaudhri – Taxand India

1. Developments on Managing Disputes

2. Administrative & Judicial Litigation: Fresh Rules

3. New Methods to Avoid the Courtroom

4. Strategies for Jurisdictions where Court is Most

Likely

5. Key Court Cases and Learnings for Taxpayers

6. Taxand’s Take

7. Key Contacts & About Taxand

Contents

Developments on Managing Disputes

8-9 May 2013

India

Protracted litigation straining Court infrastructure

Retrospective amendments unsettling settled

positions

Special courts/ bench, e-courts for tax disputes,

international tax & transfer pricing

Introduction of APA

Introduction of Dispute Resolution Panel

Advance Rulings open to challenge

Developments on Managing Disputes 1 Developments on Managing Disputes

3


4

Other key developments in Asia

Targets of tax collection not consistent with

economic reality

Ever increasing data requests even on simple

transactions


5

Thailand

Trend of current tax collection

Deficit government budget

Incremental tax disputes

Administrative level: Tax collectors

Judicial level: tax court and Supreme Court

Alternative tax dispute resolution

Conciliation process in tax court

No tax arbitration methods

No associate judge

Administrative & Judicial Litigation: Fresh Rules

8-9 May 2013

India

Strict rules of evidence

Effectiveness of ADRs (AAR/MAP/APA)

Effectiveness of DRP

Planning, preparation and legal counsels/

firm’s advice

Impact of GAAR


7 2 Administrative & Judicial Litigation: Fresh Rules

Experience in other countries:

Australia – New transfer pricing rules

Australia – Risk rating taxpayers

Korea – “Selling” of APAs




Thailand

Tax assessment: No burden of proof

Burden of proof in court: Shift to taxpayer

Flexible court hearing: Continuing procedures

Conciliation on facts: Not on tax laws

Anti-avoidance rule: TP/TC/TS/CFC/GAAR


New Methods to Avoid Courtroom

8-9 May 2013

New Methods to Avoid the Courtroom 11 3 New Methods to Avoid the Courtroom

Alternative forms of dispute resolution

Arbitration

Conciliation

Mediation

MAP

APA

Settlement

New Methods to Avoid the Courtroom 12 3 New Methods to Avoid the Courtroom

India

Is MAP an option? Reality check:

Roughly 150 – 200 MAPs between India and US only

on TP

Impasse between Indian and US CA for past 12 – 18

months

India’s views on OECD and UN chapter on transfer

pricing has increased the anxiety levels

APA – A smooth beginning so far

Guidelines notified on August 31, 2012

Encouraging response: around 150

pre-filings

3 13

New Methods to Avoid the Courtroom New Methods to Avoid the Courtroom

Country specific experiences

Australia – Franchise issues

Korea – MAP

Thailand

Negotiation: Administrative level

Facts and business knowledge

Settlement to reduce penalty and

surcharge

Avoid wasting time and lawyer’s cost

No way out after tax assessment

Unable to negotiate during tax appeal

Conciliation in tax court: Only facts issue

14 3

New Methods to Avoid the Courtroom New Methods to Avoid the Courtroom

Strategies for Jurisdictions Where Court is Most Likely

8-9 May 2013

Strategies for Jurisdictions where Court is Most Likely

16 4 Strategies for Jurisdictions where Court is Most Likely

Timely expert advice and engaging counsels

Preparing for uncertainty and dispute life cycle

Strategies for mitigating interest and penal

exposure

Keeping management informed – governance

issues

Endeavor for early disposal

Media management

4 Strategies for Jurisdictions where Court is Most Likely

17


India

Evaluation of alternative remedies

Strategy for stay of demand

Avoiding multiple parallel proceedings

Mitigating penalty exposure – robust

documentation and disclosure

Filing caveats

Tribunal to state High Court and Supreme

Court – facts vs substantial question of law

4 Strategies for Jurisdictions where Court is Most Likely

18


Other country experiences

Australia – Choosing a law firm wisely. Law firms

considered “intermediaries”.

Korea – Keeping it simple

4 19



Thailand

Litigation team

Appropriate tax lawyer / tax litigator / tax advisor

Supporting tax team in the courtroom

Tax appeal is not a tax deferral

Pay tax first: To reduce monthly surcharge

Refund tax paid after winning the case: With interest

1% per month (12% per year)

Burden of proof

Documentation with reasonable grounds

Key Court Cases & Learnings for Taxpayers

8-9 May 2013

Key Court Cases & Learnings for Taxpayers 21 5 Key Court Cases & Learnings for Taxpayers

India

Sanofi Pasteur Holding (Andhra Pradesh HC

Ruling)

Nokia Networks OY (Delhi HC Ruling)

LG Electronics (Special Bench Delhi Tribunal

Ruling)

Sanofi Pasteur Holding

Court re- affirms principle of legitimate tax

planning within four corners of law – Vodafone

followed

No unilateral Treaty override

Treaty shopping – sighted as an additional factor

to attract foreign investments

Importance of underlying commercial substance

Impact of GAAR in treaty interpretation

5 22

Key Court Cases & Learnings for Taxpayers Key Court Cases & Learnings for Taxpayers

Nokia Networks OY

Software payments not taxable as royalty under treaty

Acknowledged distinction between “copyright” & “copyrighted article”

Retrospective amendments cannot be read into treaty

Matter sub-judice before Supreme Court

5 23


LG Electronics

TP adjustment on excessive AMP upheld

Factors – need for proper comparables, FAR profile, business model, business and product life cycle etc

Battle to continue before multiple forums

MNC’s in India need:

to be more cautious while undertaking FAR analysis / selection of comparables

to maintain proper documentation incorporating detailed functional analysis

to review their current arrangements

with AEs on AMP

5 24


Other countries’ experiences:

Australia – TPG case

Australia - Project Wickenby cases continues

Korea - Supreme Court endorses application of

domestic “substance over form” principle to deny

tax treaty benefits

Korea – Look out for cases on management

service fees

5 25


26 5

Thailand

Pizza Hut Inc. (Marketing expense of franchise)

ABB (Subsidy as a deemed dividend)

NEC (Share premium as a subsidy)


27 5 Key Court Cases & Learnings for Taxpayers


Pizza Hut Inc. (Marketing expense of franchise)

Controlling power of franchisor in marketing

collateral

Marketing costs linked to gross sales and paid

by franchisee directly to 3rd party suppliers

Withholding tax on marketing (franchise)

expense

15% on marketing costs paid / Late penalty

and surcharge

28 5 Key Court Cases & Learnings for Taxpayers


VAT on marketing (franchise) expense

7% on marketing costs paid / Late penalty

and surcharge

Tax interpretation by the Supreme Court

Tax avoidance: Substance over form

29 5

ABB (Subsidy as a deemed dividend)


30 5


NEC (Share premium as a subsidy)

NEC Thailand:

67% of total shares owned by NEC Engineering Thailand and 33% owned by NEC Japan

Retained loss with negative NBV of shares

Increase capital of THB 410,000,000

NEC Japan:

1 preference share (par 1,000) with share premium (409,999,000)

Central Tax Court’s view:

Substantial transaction: Subsidy

Taxand’s Take

8-9 May 2013

Taxand’s Take 32 6 Taxand’s Take

Choice of Counsels / law firms for expert advice

and representation

Planning ahead

Efficacy of alternate dispute resolution

mechanisms

Strategise how to approach under APAs

Effective housekeeping – robust documentation

Gearing up for changing tax landscape

Key Contacts Key Contacts & About Taxand 33 7

Mukesh Butani

Taxand India

E. [email protected]

T. +91124 339 5011

David Weisner

Citigroup


T. +852 3961 1232

Chinapat Visuttipat

Taxand Thailand


T. +66 2632 1800

Gokul Chaudhry

Taxand India


T. +91124 339 5040

http://www.taxand.com/events

Understanding and

managing the tax

consequences of cross-

border tax transactions

Considering organisational

(re)structuring options in

full awareness of the tax

implications

Realising tax, supply chain

and overall operational

efficiencies

Interpreting technical tax

provisions

Our Global Service Commitment 34 7 Key Contacts & About Taxand

Lowering effective tax

rates

Addressing and preventing

tax leakages

Ensuring tax compliance

Managing relationships

with tax authorities

Global Coverage Key Contacts & About Taxand 35 7

From 9 to 48 countries in just 7 years

59 ITR awards won since 2009

95% recommended in World Tax 2012

Argentina Ireland Puerto Rico

Australia Italy Romania

Austria Japan Russia

Belgium Korea Singapore

Brazil Luxembourg South Africa

Canada Malaysia Spain

Chile Malta Sweden

China Mauritius Switzerland

Colombia Mexico Thailand

Cyprus Netherlands Turkey

Denmark Norway UK

Finland Pakistan Ukraine

France Panama USA

Germany Peru Venezuela

Greece Philippines

India Poland

Indonesia

Portugal

Dedicated to tax

Independence advantage – conflict free,

un-bureaucratic, best practice

Local knowledge, global view

Partner led from start to finish

Complex problems, customised advice

Passionate about working together

Practical advice, responsively delivered

Why Taxand? 36 7 Key Contacts & About Taxand

ABOUT TAXAND

Taxand provides high quality, integrated tax advice worldwide. Our tax professionals, more than 400 tax partners and

over 2,000 tax advisors in nearly 50 countries - grasp both the fine points of tax and the broader strategic implications,

helping you mitigate risk, manage your tax burden and drive the performance of your business.

We're passionate about tax. We collaborate and share knowledge, capitalising on our expertise to provide you with high

quality, tailored advice that helps relieve the pressures associated with making complex tax decisions.

We're also independent—ensuring that you adhere both to best practice and to tax law and that we remain free from time-

consuming audit-based conflict checks. This enables us to deliver practical advice, responsively.

Taxand is a global organisation of tax advisory firms. Each firm in each country is a separate and independent legal entity responsible for

delivering client services.

© Copyright Taxand Economic Interest Grouping 2013

Registered office: 1B Heienhaff, L-1736 Senningerberg – RCS Luxembourg C68

dispute resolution: how to obtain reasonable outcomes tax... · 2013-05-15 · how to obtain...

Documents