Hallmarks: |
a summary |
1. |
The main benefit (or a main benefit) reasonably expected from the arrangement is the obtaining of a tax advantage: and also the arrangement involves any of the following features –
- confidentiality undertakings being given which could prevent how arrangement secures tax advantage; or
- fees are tax based or contingent on or refundable by reference to a tax advantage; or
- substantially standardised documents or structure; or
- contrived steps involving acquiring a lossmaking company and using or transferring its losses; or
- converting income into capital or other revenues taxed at a lower rate or exempt from tax; or
- circular transactions resulting in round tripping of funds; or
- deductible cross-border payments between two or more associated enterprises where –
- recipient is resident in a jurisdiction which does not impose any corporate tax or rate of such tax is zero or almost zero; or
- payment benefits from full tax exemption or preferential tax regime in recipient’s tax jurisdiction.
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2. |
Deductible cross-border payments between two or more associated enterprises[1] where –
- recipient not tax resident in any tax jurisdiction; or
- recipient resident in a jurisdiction regarded as non-cooperative by EU or OECD.
[1] The test is based on 25+% or significant influence on management.
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3. |
Deductions are claimed from the same depreciation on an asset in more than one jurisdiction. |
4. |
Relief from double taxation in respect of the same item of income or capital is claimed in more than one jurisdiction. |
5. |
Transfer of assets where there is a material difference in the amount being treated as consideration[2] in the jurisdictions involved.
[2] In the UK it is proposed this will be the amount treated as consideration for tax purposes but other member states may opt for this to be the amount treated as such for accounting purposes.
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6. |
An arrangement –
- which may have the effect of undermining automatic exchange of financial account information[3]; or
- involving non-transparent legal or beneficial ownership chain.
[3] It appears this applies whether or not the person involved – who may be moving assets from a financial account in a territory that exchanges information with others to another territory which does not exchange information - has the purpose of avoiding financial account reporting.
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7. |
An arrangement (concerning transfer pricing) involving –
- use of unilateral safe harbour rules; or
- transfer of hard to value intangibles; or
intragroup cross border transfer of functions, risks or assets if transferor’s EBIT reduces by 50% as a result. |