Substance – Can you be challenged?

Doing business in Europe:

‘Substance’ over ‘form’ in transfer pricing regime

Transfer Pricing fraternity come together to help businesses understand and navigate through disruption and change at the First International Transfer Pricing event organised by Grant Thornton Luxembourg.

LUXEMBOURG - International taxation is undergoing immense shake-up. The already complex world of transfer pricing is literally driving these disruptive changes-both in terms of rules that govern it, and in the heightened scrutiny it now faces. The chief driver of change is the global roll-out of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan.

More than a hundred countries have pledged to implement at least some of the Action Plan elements putting the businesses on a roller-coaster drive. To help companies better pepare and effectively deal with the changes, Grant Thornton Luxembourg, in a unique collaboration with its international tax and transfer pricing teams from France, Germany, Ireland, the Netherlands and Belgium addressed the issue of Substance.

Hosting its first international transfer pricing event, held on 14 December 2018, the experts drew the attention of businesses towards the increasing pressure of the OECD and the EU Commission on aligning the taxable profits of a transaction with value creation making substance a key element for taxpayers.

Moderating the discussion, Jean-Nicolas Bourtembourg, Transfer Pricing Partner of Grant Thornton Luxembourg, highlighted how most notably, from a transfer pricing perspective, it is even more relevant for multi-jurisdictional taxpayers to ensure that their organizational structure is capable of withstanding the scrutiny from tax authorities globally.

The brain storming of the Transfer Pricing experts with the representatives of various companies made it very evident that the absence of clear standards on how economic substance can be understood in the context of BEPS is indeed a matter of grave concern.

Different perspectives, compounded by a lack of experience due to limited guidance; as well as a potentially increasing number of additional sources will most likely create new conflicts in the near future with evident risks of uncertainty and interpretation. Realizing the need of the hour, replete with experienced suggestions and interesting easy-to-understand examples, the Partners of different entities of Grant Thornton explained how businesses could adapt and adopt a sound global policy to weather the brewing substance storm.

Contact:

For more information about our Transfer Pricing Services, please contact Jean-Michel Hamelle or Jean-Nicolas Bourtembourg.