International Trade: Tax in a changing global environment

AS THE opportunities for businesses to trade and grow across the world are continuing to evolve, getting your head around the various rules and regulations is no easy task.

Head of tax at Deloitte in Leeds, Andrew Coticelli, says that regulation can be a big challenge when looking overseas and tax is a big part of that.

“There are a number of jurisdictions such as India, where tax needs to be considered even if a UK representative of the business just spends one day in that territory,” he says.

“There is a lot of change to international tax at the moment due to the fact that most jurisdictions’ tax systems aren’t set up to respond to the digital age and the international nature of companies.”

The UK is one of the leading countries supporting the G20’s Base Erosion and Profit Shifting (BEPS) project, being conducted by the Organisation for Economic Co-operation and Development (OECD).

Measures include those that will help ensure the coherence of corporate income taxation at the international level, restore the intended effects and benefits of international standards, ensure better transparency and promote increased certainty. Simply, the BEPS initiative aims to get consistency within the tax framework with the aim of ensuring tax payers are paying the right amount of tax in the appropriate jurisdictions.

One of the first proposals is that countries should enact domestic laws to remove the saving currently available from hybrid mismatches. These are typically arrangements which can give a multinational a tax deduction in one country without taxing equivalent income in another.

Another OECD proposal is that multinationals should prepare enhanced transfer pricing documentation to help tax administrations focus enquiries on areas of higher risk.

Richard Bolton, senior manager in Deloitte’s international tax and transfer pricing team, says that with all the changes happening, Yorkshire businesses really have to think about their business model and structure.

“The BEPS initiative will impact any business that has an overseas investment. This would include foreign businesses investing in the UK or a UK business which has an overseas operation,” he says.

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