OXFORD UNIVERSITY CENTRE FOR BUSINESS TAXATION 50 th Anniversary of Corporation Tax. International Issues for UK Corporation Tax

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1 OXFORD UNIVERSITY CENTRE FOR BUSINESS TAXATION 50 th Anniversary of Corporation Tax International Issues for UK Corporation Tax PHILIP BAKER QC Field Court Tax Chambers 3 Field Court, Gray s Inn London WC1R 5EP e mail:

2 OUTLINE OF PRESENTATION How has UK CT changed over the years insofar as it relates to multinationals? What have been the main challenges for the taxation of multinationals? What lessons can we learn from the past 50 years? What are the key challenges for taxing the profit of multinational companies over the next 10 to 20 years?

3 1) How has UK CT changed over the years insofar as it relates to multinationals? % Scope: Worldwide profits of UK resident companies Non resident companies liable if trade through a branch or agency no detailed rules Relief by credit underlying relief if 25% Transfer pricing limited to sales at an undervalue / overvalue

4 1) How has UK CT changed over the years insofar as it relates to multinationals? 1965 No CFC legislation Treasury consent for transfers of residence etc. 71 DTCs in force (many with colonies / former colonies) in Europe only: Austria, Belgium, Cyprus, Denmark, France, Germany, Greece, Ireland, Italy, Malta, Netherlands, Norway, Sweden, Switzerland

5 1) How has UK CT changed over the years insofar as it relates to multinationals? % Scope: Optional territorial regime for some profits of UK resident companies Non resident companies liable if trade through a permanent establishment quasi AOA to quantify Relief by credit or exemption Comprehensive transfer pricing / thin cap legislation and world wide interest cap

6 1) How has UK CT changed over the years insofar as it relates to multinationals? nd generation (EU compliant?) CFC legislation Deferral of tax on some exits (EU compliant?) 117 comprehensive DTCs in force

7 1) How has UK CT changed over the years insofar as it relates to multinationals? What have been some of the milestones? : regular changes relating to DTR and underlying credit 1972: imputation system 1975 UK US DTC renegotiated

8 1) How has UK CT changed over the years insofar as it relates to multinationals?

9 1) How has UK CT changed over the years insofar as it relates to multinationals? 1984 CFC legislation 1986 ACT and DTR after Collard v Mining

10 1) How has UK CT changed over the years insofar as it relates to multinationals? 1987 dual resident companies 1988 residence through incorporation - company migration provisions 1990 semi-abolition of Treasury consent regime 1993 CFCs changed to 75% of UK rate 1994 dual resident companies and the tie-breaker; FIDs 1995 limits on liability of UK reps 1997 DTR limits 1998 new, broader transfer pricing legislation

11 1) How has UK CT changed over the years insofar as it relates to multinationals?

12 1) How has UK CT changed over the years insofar as it relates to multinationals? 1999 APAs, CFC changes 2000 DTR reform mixer cap; CFC changes 2001 DTR changes EUFT; CFC changes 2002 CFC changes 2003 attribution of profits to PEs; CFC changes

13 1) How has UK CT changed over the years insofar as it relates to multinationals? 2004 UK-UK TP 2005 DTR changes; CFC changes; tax arbitrage and hybrid legislation 2007 CFC rules amended after Cadbury- Schweppes 2008 DTR changes; CFC changes 2009 Dividend exemption; Abolition of ADP for CFCs; Abolition of last vestiges of Treasury consent regime

14 1) How has UK CT changed over the years insofar as it relates to multinationals?

15 2) What have been the main challenges for the taxation of multinationals? Determining what profits are properly taxable in the UK CFC introduction and reform Growth of transfer pricing Attribution of profits to PEs

16 2) What have been the main challenges for the taxation of multinationals? Managing the system of double tax relief by credit Particular problems from the imputation system Avoidance of the system / gaming the system Competitiveness

17 2) What have been the main challenges for the taxation of multinationals? Creating a corporate tax system that is compatible with EU law CFC reform Transfer pricing reform Mobility of companies and activities Abandonment of the imputation system Abandonment of worldwide taxation

18 2) What have been the main challenges for the taxation of multinationals? Creating a competitive environment to keep companies / activities in the UK The corporate road map; reduction of tax rates CFC reform Widening our DTC network

19 2) What have been the main challenges for the taxation of multinationals? Combatting tax avoidance

20 3) What lessons can we learn from the past 50 years?

21 3) What lessons can we learn from the past 50 years? There is no perfect or valid way of determining what corporate profits belong in the UK A corporate tax system that is compatible with EU law must be competitive to survive (or we need to accept more restrictions on all EU countries) Government does not drive corporate tax policy; companies do

22 4) What are the key challenges for taxing the profit of multinational companies over the next 10 to 20 years? Trying to develop rational rules for determining what profit belongs in the UK abandoning transfer pricing (without appearing to do so) Developing a tax system that is compatible with EU law (when we don t always know what that law is) Satisfying the demands of the public and NGOs for fairness (when Government doesn t control corporate tax policy)

23 FIELD COURT TAX CHAMBERS 4) What are the key challenges for taxing the profit of multinational companies over the next 10 to 20 years? Revisiting corporate residence as a connecting factor Broadening and completing our network of DTCs (adding countries with divergent views on tax jurisdiction claims) Resolving international tax disputes speedily Responding to international trends Keeping our sanity and sense of humour

24 4) What are the key challenges for taxing the profit of multinational companies over the next 10 to 20 years? Implementing

25 OXFORD UNIVERSITY CENTRE FOR BUSINESS TAXATION 50 th Anniversary of Corporation Tax International Issues for UK Corporation Tax PHILIP BAKER QC Field Court Tax Chambers 3 Field Court, Gray s Inn London WC1R 5EP e mail:

Lithuania Country Profile

Lithuania Country Profile EU Tax Centre June 2017 Key tax factors for efficient cross-border business and investment involving Lithuania EU Member State Yes Double Tax Treaties With: Armenia Austria Azerbaijan