Lecture: Intercompany Services and Management Fees

Introduction

• Second webinar by the International Business Tax Center at the European University in Rome.
• Focus: Intercompany services and management fees.
• Reasons for topic selection:
  • Ongoing challenges in practice.
  • Lack of detailed guidance from OECD guidelines, Chapter 7.
  • Complexity in multinational business models.
  • Inconsistencies in domestic transfer pricing rules and tax audits.

Webinar Structure

• Case study by Emanuela Santoro (Coca-Cola Hellenic Bottling).
• Contributions from various professors and practitioners.
• Q&A session at the end.

Emanuela Santoro's Presentation

• Focus: Management fees, tax issues from an Italian perspective vs OECD TP guidance.
• Challenges in documenting intercompany services.
  • Lack of Italian guidance.
  • Importance of terminology.
  • Common misconception: Management fees tied solely to tax reasons.
• OECD Guidelines:
  • Benefit test and arm's length pricing essential.
  • Distinction between low value-added services and routine services.
  • Simplified approach for documentation and service charges.
• Italian Perspective:
  • No specific local guidance.
  • Documentation must prove benefit received.
  • Audit challenges owing to lack of documentation.

Andres Moreno's Presentation

• Topic: Withholding tax issues in the absence of DTAs.
• Source state taxing rights for cross-border services.
  • Often based on payer rules.
• Issues with treaty deviations and service qualifications.
  • OECD vs UN model approaches.
  • UN's Article 12A (technical, managerial, consultancy services).
  • Article 12B on automated digital services.

Prof. Sornosa's Presentation

• Topic: Revisiting OECD guidelines, Chapter 7.
• Challenges in proving intercompany service provision.
• Issues with benefit tests and documentation requirements.
• Proposal for simplified approaches and model legislation.

Dario Taietti & Massimo Ferrari

• Focus: Practical tax issues in Brazil, Argentina, and beyond.
• Brazil:
  • Withholding tax challenges, treaty misinterpretations.
  • Local taxes and mitigation strategies.
• Argentina: Delays due to timing differences in tax payments.
• Europe: Similar challenges despite proximity.
• Solutions: Certification from accounting firms, unilateral APAs, and MAPs.

Prof. Schweri's Response

• Brazilian perspective on treaty application and court decisions.
• Solution Proposals:
  • Engaging in mutual agreement procedures (MAPs).
  • Exploring interpretations aligned with international treaty norms.

Conclusions

• Overall Issues:
  • Lack of clarity and consistency in international tax practices.
  • Documentation burden and benefit test challenges.
• Proposed Remedies:
  • Engage in international dialogues and negotiations.
  • Strive for standardized models and mutual agreements.
• Closing remarks from Prof. Fatsini, highlighting the complexity of practical application, and announcing future sessions on international taxation.