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Tax Planning - Base Erosion and Profit Shifting (BEPS)

“The application of national taxes to income from international business has created complex yet fascinating issues. The co-ordination of national jurisdiction to tax international income has rested formally a network of bileteral treaties, but its practical administration has relied on a community of specialists: business advisers on the one hand and national officials on the other. The rapid growth of transnational corporations has put great pressure on the international tax system, especially due to increasing difficulty of ensuring that the internal transfer prices between related firms in different countries reflect a fair and acceptable allocation of costs and profits. Furthermore, the wide spread use of intermediary companies formed in tax havens has led to complex counter-measures and a constant process of treaty renegotiation and interaction with national law.” Prof. Sol Picciotto

Base erosion and profit shifting (BEPS) refers to tax planning strategies that exploit gaps in the architecture of the international tax system to artificially shift profits to places where there is little or no economic activity or taxation. OECD is at the forefront of efforts to improve international tax co-operation between governments to counter international tax avoidance and evasion.

Base erosion and profit shifting (BEPS) refers to tax planning strategies used by cross border companies that exploit gaps and mismatches in tax rules to avoid paying tax. Working together within OECD/G20 Inclusive Framework on BEPS, over 135 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules, eliminating treaty shopping and ensure a more transparent tax environment.

According to the OECD Tax Centre; "time is up for tax evaders and their advisors that still want to game the rules and continue to hide assets offshore". As the reporting and automatic exchange on offshore financial accounts pursuant to the CRS (=Common Reporting Standard or prevent the identification of the beneficial owners of entities or trusts) becomes a reality in over 100 jurisdictions this year, many taxpayers that held undeclared financial assets offshore have come clean to their tax authorities in recent years.

The most relevent actions are neutralising the tax effects of branch, hybrid mismatch arrangements (BEPS Action 2) and controlled foreign companies rule (BEPS Action 3), interest deductibility rule (BEPS Action 4) and mandatory disclosure (BEPS Action 12).

Given the rapid and ongoing digitalisation of the economy, VAT treatment of cross-border trade is getting more important. Tax-payers must ensure that consumption taxes (VAT/GST) are properly declared and paid on the rapidly growing e-commerce and B2B markets.

Investment into and out of Turkey requires qualified knowledge on entegration of international group structures, tax avoidance, implementation of bileteral prevention of double taxation treaties, profit repatriation, transfer pricing, acquisition of cross border properties, international tax optimisation, and cross border VAT issues.

GRANIT offers to assist in minimising fiscal/financial risks via tax planning