Here is some general guidance for tax directors of multinational organizations, who will have to understand and navigate the potential changes and challenges in the new tax reality.
Most companies will have to re-examine their tax strategies and structures. Communication will be more important than ever, as will the management of tax risk.
Assess the impacts: Companies should review their existing tax transactions and structures immediately to identify potential weaknesses according to the OECD BEPS Action Plan, and take steps to make improvements. The following areas will need close scrutiny: movement of functions, assets and personnel within the group; development of supporting legal, tax and transfer pricing documentation; and preparation of internal controls and working guidelines to mitigate tax risks.
With adequate preparation, multinational corporations will be able to adapt to the new tax landscape created by BEPS without suffering unwarranted disruptions in businessoperations or incurring excessive tax costs during the transition.
Stay informed: Companies should inform themselves about the practices and rules not only of local tax authorities but also of those in other countries, as the ‘level playing field’ principle will prompt countries to try to avoid competitive disadvantage. It is also important to pay attention to the OECD and the EU as BEPS implementation proceeds.
Prepare for questions: As auditors grow stricter, companies can expect to be asked about business and tax activity at any time. It will be important to ensure that board members, C-suite executives and the core tax team are aware of potential questions and challenges from any number of stakeholders — not only regulators but also investors, media and the general public.
Think about reputational risk: Recent history provides ample warnings that companies should ensure their tax decisions take into account potential reputational risks, not simply whether the organization has complied with the tax laws in various jurisdictions.
Develop and maintain sound relationships with tax authorities: Many companies have benefited from open and respectful relationships with local tax authorities. These appropriate relationships should be the norm for all companies and all the countries in which they claim business.