COMTAX AB COMTAX BASIC MANUAL

Transcription

1 2014 COMTAX AB COMTAX BASIC MANUAL

2 Comtax Basic manual 1 Table of Contents 1. Introduction Understanding the Comtax Basic Country 7 3. Calculation Set up a Calculation Set up a Calculation with intermediary countries Analyse the Capital Gains effect Results View the result Details and Footnotes Change a rate in the Calculation details Change the Shareholding level Reset Calculation Database Relational Tax Rates Study entries in Relational tax rates Read the footnotes in Relational tax rates Corporate Tax Rates Calculate a Progressive tax rate Read the footnotes in Corporate tax rates Change an entry in Corporate tax rates Reset a changed entry in Corporate tax rates Historical Corporate Tax Rates Read the footnotes in Historical corporate tax rates Future Corporate Tax Rates Commentary Database Study topics in Commentary database Tax Calendar Ratefinder Per Country Search for rates Per Country Switch the positions Change the shareholding level for dividends Per Country Sort the columns Per Payment Search for rates Per Payment Switch the country columns 21

3 Comtax Basic manual Calculating from the Per Payment selection Sort the country columns Anti-Avoidance Search for Anti-Avoidance Transfer Pricing Overview Settings Change the Tax Position Change the Payment Export Newsletters Change your password Logout Comtax Glossary 31-34

4 Comtax Basic manual 3 1 Introduction Welcome to Comtax Tax planning for maximum returns The objective of any commercial undertaking is to maximise the returns on its investment. Each company can find technical solutions unique to its industry. One area is, however, common to all: taxation. An international group does business in countries where market potential exists. In all probability the returns from profitable transactions will be payable to a company based in a country other than the one in which they were made. The essence of international tax planning is to investigate opportunities to minimise tax loss from revenue flow. In all likelihood, making payments directly from the country where profitable business takes place to the country where payments are due might not be tax-efficient. An international group has the opportunity to channel funds through its member countries and take maximum benefit from the tax regimes set up by different national governments to meet their own domestic needs. If there are alternative routes through which funds can be channelled each one should be evaluated and a concerted strategy developed. Even if alternatives do not exist, the outcome of a transaction should still be investigated. The objective of international tax planning is to maximise the sum of the after-tax profits from each company in the group. As the number of countries in which a group operates increases, the number of opportunities increases as well, but they are more difficult to find. The tax strategist must assess the effect of the tax legislation of each country in which the group operates in order to find the best solution. He or she must also consider countries in different combinations. The effect of a decision on the overall results of the group must be evaluated. It may be, for example, that an action will increase the after-tax results in one country but causes a greater loss elsewhere, thus lowering the results for the total group. The sheer amount of data involved makes tax planning far from trivial. The complexity of tax legislation, the potential combinations of different countries and the various methods by which payments can be made all conspire to produce a vast amount of data. All the data must be carefully evaluated in order to not overlook any opportunity. Complex though this task is, it can provide significant benefits to companies that succeed in it. How the Comtax Basic can help you Comtax Basic enables you to model the flow of payments through the companies of a multinational group. The results it produces allow you to find the most tax-efficient method of moving funds through the organisation. The basic modelling data is obtained from a database that contains the taxation rules of all the major countries in the world. Comtax AB regularly updates the information in this database. During the modelling, the effect of the tax legislation in each country on the funds being transferred is shown as an index number. In situations where more than one strategy is possible, the tool displays the most effective alternatives to allow you to make your decision. Results can be displayed, printed and exported for reference. Interacting with the Comtax Basic The tool has been designed to allow you to gain the maximum benefit from it in the shortest time. Despite its sophistication, its design ensures that it is easy to learn and to use. A system of menus and special keys allow you to control what the Comtax Basic does. The menus and dialogues in the tool follow the well-established conventions of the Windows environment. When you use Comtax Basic, you can concentrate on the task you are performing, not on the tool you are using to perform it. See also Understanding the Comtax Basic (Section 1.1) 1.1 Understanding the Comtax Basic Understanding the Comtax Basic Countries Since the tax legislation in a country applies at a national level, all references in Basic are made to countries rather than to companies. References to, e.g. Singapore, refer to a company based in Singapore. In Basic, a country can be

5 Comtax Basic manual 4 a Source Country, an Ultimate Recipient or an Intermediary Country. A Source Country is the country in which the commercial transactions that start the flow of payments take place. The Ultimate Recipient is the country in which the payments are to be finally received. The Intermediary Country is a country through which the funds are channelled. Up to two Intermediary Countries can be specified for each simulation. Payments between countries can be made in the form of dividends, interest, royalties or fees. You can specify one type of payment in each position. The Basic's tax database contains information about the tax regulations of all the countries available for selection. Calculation The calculation features enables you to model the flow of funds through a series of countries in any particular order and using specific payment types. You can simulate the optimal method of making payments from a Source Country to one Ultimate Recipients by using Intermediary Countries. You can include up to two countries between the Source Country and the Ultimate Recipient. The results of a calculation are presented both in summary and in detail. The initial value of the index is known as the starting figure. It represents the payments made from the Source Country. The final value of the index is known as the end figure. It represents the portion of the starting figure (before tax) that reaches the Ultimate Recipient after tax. The summary of the results is presented in graphical form. It shows the changes in the value of the index at each stage, and the type of payment made. The detailed results show how the changes in the index were derived. The Database The database is the primary source of information about the tax regulations that apply in all the major trading countries of the world. Comtax AB regularly updates the database as part of the software licensing agreement. This ensures that your models reflect as accurately as possible the conditions in which you are operating. The database contains details of the following items for each country: The standard taxation rates Withholding tax on incoming funds Withholding tax on outgoing funds Percentage deductible payment Percentage taxable income Credit of tax Corporate tax rate Statutory tax rates Surtaxes Progressive tax rates Historical corporate tax rates Future corporate tax rates Commentary The withholding tax on incoming funds is the percentage of withholding tax payable in other countries when different types of payment are made to the selected country. The withholding tax on outgoing funds is the rate payable in the selected country when funds are transferred to other countries. Percentage deductible is the percentage of the payment that is deductible as a cost in the selected country when different types of payment are made from that country to one or more other countries in a project. Percentage taxable is the percentage of the income taxable in the selected country. Credit of tax is the type of foreign tax credit applicable to the selected country when different types of payments are received from one or more of the countries in a project. When a matching credit (tax sparing) applies, the appropriate percentage of credit is shown. The corporate tax rate shows the basic rates and surtaxes applicable to the company income in the countries in a project.

6 Comtax Basic manual 5 The commentary is explanatory text about the contents of the database. You can interrogate the database for relevant topics. All information in the database can be printed or exported and modified by the user. Payment Types Comtax Basic allows you to differentiate between different methods of payment, in order to take full advantage of the tax regulations and treaties. Funds can be transferred from one country to another in four ways: Dividends Interest Royalties Fees Dividends Unless you specify otherwise, the tool assumes that dividends are paid from fully owned subsidiaries, and that the payments can be made from all countries to all countries. Interest Interest can arise from the payment of interest on one of two types of loan: Inter-company loans Loans from financial institutions Unless you specify otherwise, the tool assumes that interest payments are possible from all countries to all countries, and that all loans are inter-company loans. Royalties Royalties can be defined as payment in respect of: Patent Trademark Copyright Unless you specify otherwise, the tool assumes that royalty payments are possible from all countries to all countries, and that payments are royalty for patent. Fee Fees can be defined as payments in respect of: Management fee Technical service/assistance fee Unless you specify otherwise, the tool assumes that fee payments are possible from all countries to all countries, and that payments are for management fees. Tax Positions In a Basic model, a company can be in one of two basic positions with regard to tax liability. It may have taxable income, or it may not. If the company has other income in excess of that generated by a proposed transaction, its income is liable to taxation. By contrast, a company would not be liable for tax if it was at break even (neither profit nor loss), if it was currently trading at a loss, or if losses from a previous accounting period had been carried forward. The tool allows you to specify which of these conditions applies to a company. A company's tax position can be specified as: Break even (no tax liability) Taxable income (tax liability) Loss carried forward (no tax liability, 0% corporate tax rate) Loss (no tax liability, 0% corporate tax rate) The tool performs its modelling on the assumption that the tax position of each country is break even unless you specifically choose one of the other options. Adapting the model If you impose no restrictions or conditions other than those necessary for modelling to take place, the tool uses its

7 Comtax Basic manual 6 basic assumptions. In this event the results obtained will always be the most profitable. However, if the company were unable to make the payments suggested by the tool, it would be difficult to implement the recommended strategy. For this reason, you can modify the basic assumptions made by the tool to reflect the particular circumstances of your company, so that realistic results can be obtained. You can make the following changes to the basic project data. Modify the tax rates and other figures in the Calculation Details to meet specific circumstances. When this is made the result will immediately be re-calculated. Select another type of royalty, interest or fee. Modify the tax position to a specific country.

8 Comtax Basic manual 7 2 Country Country The simulations in the System are based on cross-border transactions. Consequently, the information is based on different countries tax legislations. In the System, a country is equal to a company. It deals with cross-border repatriations between subsidiaries and the parent company within a multinational group. As a result, a simulation of the tax effects on a payment between companies resident in the same country cannot be made. When the System starts, it presents all countries available.

9 Comtax Basic manual 8 3 Calculation Calculation One of the basic questions in all international tax planning is whether it is more profitable, in a specific context, to make a direct transaction from for example a subsidiary to a parent company in a company group, or if it would be more profitable to choose to make the transaction through an intermediary country or several countries before the repatriation to the parent company. The most powerful feature in the system is the calculation tool. This function allows you to calculate the transaction ways in order to repatriate dividends, interest, royalties or fees from a subsidiary (Source Country) to its parent company or to another subsidiary in a company group. See also Set up a Calculation (Section 3.1) Set up a Calculation with intermediary countries (Section 3.2) Analyse the Capital Gains effect (Section 3.3) Results (Section 3.4) View the result Details and Footnotes (Section 3.5) Change a rate in the Calculation details (Section 3.6) Change the Shareholding level (Section 3.7) Reset Calculation (Section 3.8) 3.1 Set up a Calculation Set up a Calculation 1. Click the country to be selected as the Source Country. 2. To the right of the Source Country box click on the type of payment to be distributed: Dividend, Interest, Royalty or Fee. 3. Click the country to be selected as the Ultimate Recipient in the transaction. 4. Click Start in the upper part of the screen. Note! Dividend payments are assumed to be made to shareholders holding 100%. This can be changed by inserting another percentage of shareholding by clicking on the percentage in the calculation details. 3.2 Set up a Calculation with intermediary countries Set up a Calculation with intermediary countries 1. Click the country to be selected as the Source Country. 2. Click the type of payment to be evaluated: Dividend, Interest, Royalty or Fee. 3. Click the country to be selected as the Ultimate Recipient. 4. Click the intermediary country position to activate it. Alternatively, click the check box beneath the position. 5. Click the countries to be selected as possible intermediaries. 6. Click the type of payment to be evaluated. 7. Click Start in the upper part of the screen.

10 Comtax Basic manual 9 When the calculation has been executed the results are shown. If available, the 30 best results will be displayed in descending order, starting with the best result. To study the details of the results, click on the number box in front of the specific result. 3.3 Analyse the Capital Gains effect Analyse the Capital Gains effect When you display the details section of a simulation result including a dividend repatriation, you can go on and analyse the effect of the sale of these shares in a capital gains tax analysis. Click the result. toolbar button. The capital gains result will be displayed below the calculation Each shareholding relation in the calculation result gives you a capital gains analysis. The number of capital gains results is due to the number of countries repatriating dividends. The default values for the capital gains analysis are 100% participation and 36 months holding time, both can, however, be changed by clicking the bar chart icon next to the result number. 3.4 Results Results The results of the calculation will be presented as payment structures from the Source Country to the Ultimate Recipient. The 30 top results will be displayed in descending order. The Start Figure is shown under the Source Country and the after tax amount paid from each country is shown between countries. The amount received aftertax in the Ultimate Recipient is shown under the Ultimate Recipient. The percentage described when the Source pays a dividend to the Receiver indicates the level of shareholding. 3.5 View the result Details and Footnotes View the result Details and Footnotes 1. Click the result number you want to study, such as Result No. 1. To find further explanations and footnotes concerning the specific parts of the details: 2. Click the relevant footnote in the Details section and the information will be displayed in a separate window. If active, you can click on the Read more button in the footnote window for further information in the Database. 3.6 Change a rate in the Calculation details Change a rate in the Calculation details The rates on the rows marked by a pen are changeable.

11 Comtax Basic manual Click the figure in the Details section that you want to change. 2. Type the new figure in the pop up window. 3. Click OK and the new figure turns red and the displayed Details will be recalculated accordingly. Note! To reset the figure, click on the new figure and click Reset. The change is lost as soon as the calculation is reset. 3.7 Change the Shareholding level Change the Shareholding level It is possible to change the shareholding level in a calculation when a dividend is involved. 1. Click the figure in the Details section. 2. Type the new figure in the pop up window. 3. Click OK and the new figure turns red and the displayed Details will be recalculated accordingly. 4. The figure for Profit before tax payable willl not be reduced, but the tax rates and tax treatment follow the legislation for the shareholding level. Note! To reset the figure, click on the new figure and click Reset. The change is lost as soon as the calculation is reset. 3.8 Reset Calculation Reset Calculation

12 Comtax Basic manual 11 If a calculation result and details are displayed when clicking the the start view and thus have the option to change your calculation setup. toolbar button you will return to Clicking once more on the button will erase your chosen countries and payments in the setup area.

13 Comtax Basic manual 12 4 Database Database The database covers: Relational tax rates, Corporate tax rates, Historical corporate tax rates, Future corporate tax rates and Commentary. To get access to the Database, click the toolbar button. When you enter the database, all countries will be listed. Click the country you want to study. The database function s menu is displayed beneath the country list in the form of a tree view with book icons for each heading. In front of some of the book icons you will find expand signs. This means that this particular heading contains subheadings. To display the subheadings, click on the expand sign. If you click on it again you will collapse the subheadings back to the main heading. See also Relational Tax Rates (Section 4.1) Corporate Tax Rates (Section 4.2) Historical Corporate Tax Rates (Section 4.3) Future Corporate Tax Rates (Section 4.4) Commentary Database (Section 4.5) 4.1 Relational Tax Rates Relational Tax Rates Relational tax rates database contains the tax rates and other information that apply between countries. The principal country in relation to other countries is called the main country. To study Relational tax rates, click the The components of the Relational tax rates are as follows: toolbar button.

14 Comtax Basic manual 13 Withholding tax on payment to Withholding tax on payments made to the main country from countries specified in the list (relational countries). Withholding tax on payment from Withholding tax on payments made from the main country to countries specified in the list (relational countries). % Deductible To what extent a payment is deductible as a cost when paid from the main country to countries specified in the list (relational countries). % Taxable To what extent a payment is taxable when received in the main country. Tax Credit The (Cr) column shows what credit method (elimination of double taxation) is applicable when the main country receives a payment. The (MCr) column shows the specific rates for Matching Credit or Tax Sparing. The following abbreviations are used in the Tax Credit (Cr) column: NC (No Credit) Foreign tax (withholding tax) and underlying corporate tax are deductible as a cost. OC (Ordinary Credit) Foreign tax is creditable against the tax payable. IC (Indirect Credit) Foreign tax and underlying corporate tax are creditable. WW (Withholding tax against Withholding tax) This could be applicable when using France as an Intermediary Country. Then the withholding tax paid in the previous country is deductible against the withholding tax payable in France. See also Study entries in Relational Tax Rates (Section 4.1.1) Read the footnotes in Relational Tax Rates (Section 4.1.2) Study entries in Relational tax rates Study entries in Relational tax rates 1. Click the toolbar button. 2. Select a country. 3. Select the kind of payment to be studied by clicking the expand sign. 4. Click the relevant part to be studied Read the footnotes in Relational tax rates Read the footnotes in Relational tax rates The rates that need further explanation are marked with a footnote. 1. Click the footnote with the left mouse button and a window with the information will appear. 2. Click OK. 4.2 Corporate Tax Rates Corporate Tax Rates In this function, the corporate income tax rates are presented in different columns. The first column displays the list of countries and the second the statutory tax rates. These are followed by four surtaxes and the last column displays the effective tax rates.

15 Comtax Basic manual 14 To study Corporate tax rates, click the toolbar button. Note! By changing any of the statutory income tax rates or the surtaxes, a new effective income tax rate is calculated. Export the view to save your entries. See also Calculate a Progressive tax rate Read the footnotes in Corporate tax rates (Section 4.2.2) Change an entry in Corporate tax rates (Section 4.2.3) Reset a changed entry in Corporate tax rates (Section 4.2.4) Calculate a Progressive tax rate Calculate a Progressive tax rate The letter P in front of a tax rate indicates that the tax rate is progressive, which means that this particular country applies different tax rates for different levels of income. 1. Click the and a new window will appear. 2. Insert the actual income based on local currency. 3. Click OK. A new effective income tax rate is displayed accordingly Read the footnotes in Corporate tax rates Read the footnotes in Corporate tax rates The rates that need further explanation are marked with a footnote. 1. Click the footnote with the left mouse button and a window with the information will appear. 2. Click OK Change an entry in Corporate tax rates Change an entry in Corporate tax rates 1. Click the rate to highlight it. 2. Enter the new rate. 3. Click OK. 4. The changed tax rate is marked red. For some countries (for example Canada, Germany and the United States), rates can be chosen directly from the table in the footnote.

16 Comtax Basic manual 15 The selected Province (Canada), Municipal (German), Canton (Switzerland) or State (United States) is shown after the name of the country. Note! Changes cannot be made in the Effective Income Tax column. Changing the Statutory Income Tax rate or the rates for Surtaxes will change the Effective Income Tax. The changed tax rate will not affect the calculations. See Also Reset a changed entry in Corporate tax rates (Section 4.2.4) Reset a changed entry in Corporate tax rates Reset a changed entry in Corporate tax rates 1. Click the rate and a window with a Reset button will appear. 2. Click Reset. 4.3 Historical Corporate Tax Rates Historical Corporate Tax Rates The corporate tax rates applicable from 2006 and onwards are listed in this function. For each year it is the applicable rates for the month of January that are listed. To study Historical corporate tax rates, click the toolbar button. The first subheading, Effective tax rates overview, displays the historical effective rates from 2006 and onwards in one view. Each heading below the Effective tax rates overview displays one year with all statutory, surtaxes and effective rates visible. The footnotes are also available in this view. Note! The historical rates cannot be changed. See also Read the footnotes in Historical corporate tax rates (Section 4.3.1) Read the footnotes in Historical corporate tax rates Read the footnotes in Historical corporate tax rates The rates that need further explanation are marked with a footnote. 1. Click the footnote with the left mouse button and a window with the information will appear.

17 Comtax Basic manual Click OK. Note! You can open and read the information in the footnotes but the standard rates cannot be changed. 4.4 Future Corporate Tax Rates Future Corporate Tax Rates This function covers approved future corporate tax rates, and displays the rate, effective date and also comments. To study Future corporate tax rates, click the toolbar button. Note! Countries that have announced a proposal for a change in the corporate tax rates are still found in the Commentary database - New tax laws for each country. 4.5 Commentary Database Commentary Database Useful information under relevant topics for analysing the simulations is to be found in the Commentary database. The information is structured in headings and subheadings using a tree-view. To study Commentary database, click the This picture shows some examples of headings and subheadings. toolbar button.

18 Comtax Basic manual Study topics in Commentary database Study topics in Commentary database 1. Click the toolbar button. 2. Select a country. 3. Click the expand sign in front of Commentary in the tree-view to display the different topics. 4. Click on the topic you want to study. An expand sign indicates further information in subheadings.

19 Comtax Basic manual 18 5 Tax Calendar Tax Calendar The Tax Calendar includes the following topics: Tax year, Income tax return deadline, TP-reporting deadline, Deadline to prepare TP-documentation and Deadline to Submit TP-documentation. In the calendar you are able to expand the cells in order to view further details by clicking the plus signs.

20 Comtax Basic manual 19 6 Ratefinder Ratefinder In the Ratefinder function you have the possibility to search and sort the tax rates and figures from the Database in an efficient way. This gives you a very quick and good overview of countries tax rates and figures in relation to each other. Ratefinder is divided in two different main views: Per Country and Per Payment. In Per Country you focus on one country s tax rates and figures for all types of payments in relation to all other countries in one comprehensive view. As an example you may collect all withholding tax rates from one country in relation to all the other countries in one view. You may also change the view and list all the rates to one country from all the other countries. In Per Payment you choose one country and one type of payment at a time in relation to all other countries. This gives a comprehensive view of the transactions from one country to all the other, taking deductibility, corporate tax rates, withholding taxes, credit rules and taxability into account. See also Per Country (Section 6.1) Per Payment (Section 6.2) 6.1 Per Country Per Country The rate finder Per Country contains the tax rates and other transactional information for up to all eight types of payments to and from one country in one view. The principal country in relation to other countries is called the main country. The information search can be made on four different parameters: Withholding tax Withholding tax on payments made to or from the main country in relations to the countries specified in the list. % Deductible To what extent a payment is deductible as a cost when paid from or to the main country in relation to the countries specified in the list. % Taxable To what extent an income is taxable in the relational countries on a payment from the main country. Tax credit The (Cr) column shows what credit methods (elimination of double taxation) that are applicable when the relational countries receive income from the main country. The (MCr) column shows the specific rates for Matching Credit or Tax Sparing. The following abbreviations are used in the Tax Credit (Cr) column: NC (No Credit) Foreign tax (withholding tax) and underlying corporate tax are deductible as a cost. OC (Ordinary Credit) Foreign tax is creditable against the tax payable. IC (Indirect Credit) Foreign tax and underlying corporate tax are creditable. WW (Withholding tax against Withholding tax) This could be applicable when using France as an Intermediary Country. Then the withholding tax paid in the previous country is deductible against the withholding tax payable in France.

21 Comtax Basic manual 20 See also Search for rates Per Country (Section 6.1.1) Switch the positions (Section 6.1.2) Change the shareholding level for dividends Per Country (Section 6.1.3) Sort the columns (Section 6.1.4) Search for rates Per Country Search for rates Per Country 1. Click the toolbar button. 2. Select your search topic in the dropdown list. 3. Select your main country in the dropdown list and then click the country to be analysed. All types of payments are selected by default. Click the checkmarks in connection to the payments should you want to narrow your search Switch the positions Switch the positions Click the button to switch places of the source country and the receiving countries. Thus the Ratefinder will display the rates and figures when all countries are making a payment to the main country Change the shareholding level for dividends Per Country Change the shareholding level for dividends Per Country When viewing dividends the default shareholding level is 100%. Follow the few steps below to change the default. 1. Type your preferred figure in the shareholding box. 2. Press Enter to confirm. The shareholding level is now changed and the Ratefinder is automatically updated.

22 Comtax Basic manual Sort the columns Sort the columns Click the column heading to sort from the lowest to the highest value. Click once again to sort from highest to the lowest value. 6.2 Per Payment Per Payment The rate finder Per Payment focuses on one type of payment at a time. All rates and figures involved in a transaction between the main country and the countries specified in the list are viewed. Also, clicking on the countries in the list will automatically generate a calculation for the specified countries. See also Search for rates Per Payment (Section 6.2.1) Switch the country columns (Section 6.2.2) Calculating from the Per Payment selection (Section 6.2.3) Sort the country columns (Section 6.2.4) Search for rates Per Payment Search for rates Per Payment 1. Click the toolbar button. 2. Click the Per Payment tab. 3. Select the type of payment by clicking the radio buttons in connection to each payment type (dividend is pre-selected). 4. Select your main country in the dropdown list and then click the country to be analysed Switch the country columns Switch the country columns Click the button to switch places of the source country and the receiving countries. Thus the Ratefinder will display the rates and figures when all countries are making a payment to the main country Calculating from the Per Payment selection

23 Comtax Basic manual 22 Calculating from the Per Payment selection All listed countries are in blue and therefore possible to click. 1. Click the country in the list that you want calculate. 2. A warning appears. If you click Yes any calculation previously made in the project and still displayed in the calculation area will be replaced by the new calculation. 3. A Calculation result and Result details are displayed including the two countries on the row you clicked in the Ratefinder Sort the country columns Sort the country columns Click the column heading to sort from the lowest to the highest value. Click once again to sort from highest to the lowest value.

24 Comtax Basic manual 23 7 Anti-Avoidance Anti-Avoidance With the Anti-Avoidance function you will find a quick country overview to applicable anti-avoidance rules. The Anti-Avoidance function is divided in two different main views: Anti-Avoidance Finder and Transfer Pricing Overview. In the Anti-Avoidance Finder you will reach a list over the applicable anti avoidance rules in your countries. The regulations covered by the list are General Anti-Avoidance Rules (GAAR), Controlled Foreign Company (CFC) Thin Capitalisation and Transfer Pricing. TheTransfer Pricing Overview displays all countries transfer pricing rules in one comprehensive window which enables a quick and effective information search. 7.1 Search for Anti-Avoidance Search for Anti-Avoidance 1. Click the toolbar button. 2. A cross in the grid means that the country does not have any applicable rule. The book icon indicates that the country has such rule. 3. Click on the book icon and you will be forwarded to the relevant section in the Commentary database. 7.2 Transfer Pricing Overview 1. Click the toolbar button. 2. Click the Transfer Pricing Overview tab. The information is put in columns and each heading is also found in the Transfer Pricing section in the Database (Database/ Commentary/ Anti-avoidance/ Transfer pricing).

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26 Comtax Basic manual 25 8 Settings Settings The toolbar button covers two functions: Tax Position and Payment. These settings impact on the calculations made. Tax Position The tax position Break even is default for intermediary companies and Taxable income is default for the Source Country and Ultimate Recipient of the payment. Payment In calculations, the default interest payment is Intercompany Loans. For royalties, it is royalties on Patents. For fees it is Managment Fees. These values can be changed to interest to a Financial Institution and to Trademark or Copyright for Royalties, and to Technical Service for Fees. See also Change the Tax Position (Section 8.1) Change the Payment (Section 8.2) 8.1 Change the Tax Position Change the Tax Position In the System Break even is default. This means when used as Intermediary Countries in the simulation, the companies are assumed not to have any other income in excess of received income. Other tax positions are: Taxable income means that the company has other taxable income in excess of received income. Loss carried forward indicates that the country has enough accumulated losses to offset against the profits for a given period, resulting in a 0 % tax rate. Current loss indicates that the country is in a loss position, resulting in a 0% tax rate. 1. Open the and click the Tax Position tab. 2. Change the tax position individually for each country by clicking the grid under the applicable tax positions. 3. To change the tax position for all countries click the heading of the column 4. Click OK.

27 Comtax Basic manual 26 Note! It is important to acknowledge that the Tax Position Break even of a country is only relevant when it acts as an Intermediary Country in Comtax simulations. 8.2 Change the Payment Change the Payment 1. Open the and click the Payment tab. 2. Click in the grid to change a particular payment. Alternatively, click on the heading for the preferred type of payment to change to this payment for all countries. 3. Click OK.

28 Comtax Basic manual 27 9 Export Export To export calculation results or database information click the button when available. The selected information will be exported to Portable Document Format (pdf) or Excel Format (xls) or Word Format (doc). The file can then be saved or printed.

29 Comtax Basic manual Newsletters Newsletters Click the toolbar button to read about the changes made in the monthly updates.

30 Comtax Basic manual Change your password Change your password 1. Click the toolbar button. 2. Type your new password in the pop up window. 3. Click Save.

31 Comtax Basic manual Logout Logout Any unauthorized user is prohibited to misuse your account if you log out from your account when you have finished your research. This is important when using a public computer. Click the toolbar button.

32 Comtax Basic manual Comtax Glossary A B C D E F G H I J K L M N O P Q R S T U W X Y Z Comtax Glossary A Anti-avoidance 'Term used in the context of measures intended to combat the avoidance of tax. Such measures may be of general application, e.g. in the form of a general anti-avoidance rule, or aimed at specific transactions or situations, e.g. exit tax on emigration, or in a value added tax context. They may be used on unwritten legal principles, legislation, or tax treaties.' (see International Tax Glossary, IBFD). B Break Even A tax position indicating that the company has no taxable income or losses before the transaction. This is the System default. C Calculation The evaluation of possible transaction routes between countries using optional Source Countries and Ultimate Recipients as well as possible Intermediary Countries. The System displays the 30 best results if available. Capital gains A gain on disposal of certain assets, such as assets held by way of investment. CFC legislation An anti-avoidance rule with the purpose to prevent the accumulation of income in tax havens. The effect of CFC legislation is that income of a subsidiary in a tax haven may be taxed in the hands of the shareholder resident in the country with the CFC legislation, if its income is not distributed. Commentary A part of the database in which one can search for specific tax information under relevant topics for a chosen country, available in the country list. Company 'In most countries legal systems, a company is a legal entity separate and distinct from its existence from statute. In a treaty context, a company is commonly defined as a body corporate or any entity that is treated as a body corporate for tax purposes.' Bib ref: OECD Model Article 3. (see International Tax Glossary, IBFD). Corporate Income Tax Tax on the income of companies. Cross-border Transactions between companies located in different countries. Current Loss A tax position similar to 'Loss carried forward' with the exception that the company is not allowed to declare a dividend. However, previous years' profits may be repatriated. D Database Contains all necessary information one needs in international tax planning in order to make simulations. It is divided in three main sections: Relational tax rates, Corporate tax rates and Commentary. The Database is updated regularly. All information is changeable by the user. Default Values The predefined values in the System, but they can be changed to another value if available. For example, patent is

33 Comtax Basic manual 32 the default value for royalties in the System. However, it can be modified to trademark or copyright. Additionally, all tax rates and other numerical information are changeable in the Calculation Details. E Effective Tax Rate The total tax rate after adding a country s statutory tax rates with its eventual surtaxes. I Income Level Used when you want to find the effective rate of a progressive tax rate scale. This is done by putting in the actual income level in the database. The System will then automatically present the new effective tax rate. Indirect Credit Used to grant credit for the corporate tax and the withholding tax paid in the receiving jurisdiction. Intercompany Interest Interest paid on loans within a company group. Interest Financial Institutions Interest paid on loans from a bank outside the group. L Loss Carried Forward Indicates that the country has enough accumulated losses to offset against the profits for the current period, resulting in a 0% tax rate. Consequently, you may declare a dividend. M Management Fee Generally used in the context of a charge for management and/or administrative services provided by a member of a group of companies to other members of the group. (see International Tax Glossary, IBFD) Matching Credit Matching credit, deemed credit and tax sparing are different expressions of the same thing, granting of a credit for a fictitious tax, which means a possibility to credit a tax that has actually not been paid. In the System, we use the expression matching credit. Minority Shareholding Holding less than 100% of the shares in a company. N No Credit (NC) In the receiving country the tax paid in the paying country is considered to be a deductible cost and the received payment is taxed net of foreign tax. O Ordinary Credit (Direct Credit) Grants a credit for foreign tax paid that is withholding taxes by calculating the recipient s income gross (including the withholding taxes) and charging tax on that gross income. The credit is then given against the tax arising on that gross income. P Parent Company A company with a substantial participation (typically a controlling interest) in the share capital of another company. Typically used to refer to the top company in a group of companies (see International Tax Glossary, IBFD). Payment Used when you want to change the default values of payment regarding interest and royalties. The default for

34 Comtax Basic manual 33 interest is intercompany loans, which can be changed to financial institutions. The default for royalties is patent, which can be changed to either trademark or copyright. Pre-tax Profit The start value in the Source Country in a simulation. It defaults to 100. Thereafter, the System calculates what will be left of the 100 pre-tax profits after a transaction ending with the amount received after tax in the Ultimate Recipient. Profit After Tax The amount received after tax in the Ultimate Recipient. R Rename Due to the fact that we work with names of countries in the System, this function allows you to rename the countries, for example, to names of companies. Repatriation Usually used in relation to the transfer of capital or income from foreign investment to the country from which the investment was made (see International Tax Glossary, IBFD). Residence In the case of persons other than individuals there are two common approaches to determining residency, one based on formal criteria, such as the place of incorporation or registration, and the other on substantive criteria, such as the location of the place of management, central management and control, central administration, place of effective management, head office, or principal place of business. Many countries apply both approaches so that, for example a company will be resident if it is either incorporated or effectively managed in the country concerned (see International Tax Glossary, IBFD). S Source Country Refers to the first country in a calculation in the System. Standard Rates Used for reference purposes, covering information regarding all countries in the System. Start Figures Allowing you to start with a higher or a lower figure than the default 100, when calculating. The start figure can be a value before or after corporate income tax. Statutory Tax Rate The normal corporate tax rate in a country, according to the domestic tax law. Subsidiary Company A company in which another company (referred to as the parent company) holds a substantial participation (typically a controlling interest) (see International Tax Glossary, IBFD). Surtax / Surcharge The terms surtax and surcharge tend to be used interchangeably. A surcharge is used to describe an additional levy calculated by reference to the basic amount of tax due. An example is a municipal tax or a state tax in a Federal tax system. T Tax Avoidance Avoidance of tax by lawful means. Tax Credits Most double taxation is avoided by different tax credit rules. Tax credit means in this context that the tax paid in the paying jurisdiction is deducted from the tax payable in the receiving jurisdiction.

35 Comtax Basic manual 34 Tax Evasion Avoidance of tax by unlawful means. Tax Haven A country with a tax system designed to attract tax planning schemes. For a country to be used as a tax haven, the following requirements should be fulfilled: No corporate tax on foreign income No withholding tax on payments to non-residents No exchange control Political and economic stability Suitable infrastructure Tax Position The income and tax-paying situation in the countries. When making a simulation, it is vital to know the tax positions of the companies involved. The System makes a distinction between break even, which is the default value in the System, taxable income, loss carried forward and current loss. Taxable Income The company has taxable income in excess of the received income. Consequently, this company is in a tax paying position. The income could be wholly taxed or exempt, but it also happens that a part of the income is taxed or exempt. In the System, the taxability of income is expressed as a taxable percentage. Technical Service Fee Technical service fees or technical assistance fees may be charged for a wide range of services in areas such as engineering, agriculture, computerization, law, accountancy, etc.). Such fees are commonly separately identified for tax purposes in developing countries where they are typically subject to withholding tax at source if paid to nonresidents. In some countries such fees are only deductible in computing the payer s taxable income in limited circumstances. (see International Tax Glossary, IBFD) Thin Capitalisation Rules Used to prevent equity from being converted into loans and interest from being substituted for dividends; as interest is normally a deductible cost and dividends a non-deductible cost. The thin capitalisation rules work in such a way that when, in the relationship between companies, debts and equity, exceeds a certain ratio, then the interest for loans is not deductible exceeding this ratio or the interest on such loans could be treated as a dividend. The ratio between the debt and the equity varies among the countries using this method, as does the definitions of debt and equity. U Ultimate Recipient The last country in a simulation the System, the parent company. Update The System is updated regularly. This ensures that you to always have the latest information, covering all the changes that take place in the countries in the System. W Withholding Tax Against Withholding Tax (WW) Applicable when using a company established in France as Intermediary Country. In this situation, the withholding tax paid in the previous country is deductible against the withholding tax payable in the Intermediary Country.