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8/11/2019 1.1 - Ahead of Tax 2014 - Redefining the Concept of PE Moving to One European Sales Model as an Alternative - Jan-Willem Gerritsen
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Redefining the concept of PE
Moving to one European sales model as an alternative?
Margreet Nijhof
Giuliana Polacco
Folkert Idsinga
Kim TanJan-Willem Gerritsen
8/11/2019 1.1 - Ahead of Tax 2014 - Redefining the Concept of PE Moving to One European Sales Model as an Alternative - Jan-Willem Gerritsen
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2014 Baker & McKenzie Amsterdam N.V. 2
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2014 Baker & McKenzie Amsterdam N.V.
Trends
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Simplification Virtualization
Centralization Digitization
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2014 Baker & McKenzie Amsterdam N.V.
BEPS action item 7: PE abuse
2012 Public Discussion Draft on Interpretation and
Application of Art. 5
BEPS mandate broader: Model change (deadlineSeptember 2015)
Link digital economy issue
Specific BEPS PE issues:
commissionaire arrangements
specific activity exemptions
attribution of profits
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New PE threshold?
fully dematerialised
digital activity
significant digital
presence
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Country Initiatives
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One European Sales
Model
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ABC Background
Global manufacturer of IT
industry parts
Commissionaire businessmodel in Europe
Sales via centralized platforms
Call-off stock (consignment)
Matrix management structure
Centralized shared service
center
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Alignment of BusinessModel and Supply
Chain Model
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Key Objectives from a BusinessPerspective
Align legal structure and business model to promote
one European sales culture Business savings by achieving standardized process
through centralized lean back office with one system
Allow front-office to fully focus on customers
Savings through simplified legal structure
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Key Objectives from a Corporate IncomeTax Perspective
Minimize transfer pricing risks new structure
Minimize permanent establishment risks (Subpart F new structure)
Minimize business restructuring issues
Minimize local income tax aspects of corporate
restructuring
Minimize corporate complexity of restructuring
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Key Objectives from an Indirect TaxPerspective
Robust VAT and customs (compliance) model:
Minimal compliance issues (e.g., number of VATregistrations);
Limiting of number of VAT invoicing flows;
Ease of implementation;
Decrease risk of non-compliance (and audits).
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Key Objectives from an Indirect TaxPerspective (2)
Achieve clear understanding of fixed establishment
issues Flexibility in commercial transactions, e.g. use of
consignment stock programme in order to retain title to
the goods as long as possible;
Determine indirect tax model which recognizes TP andCIT constraints (and vice versa).
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Points of attention
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VAT/customsPost-
RestructuringTP
BusinessRestructuring
PE/FE RisksChoice of
distributionmodel
Operationalchanges
Choice of HQ
legal entity
EmploymentRestructuring
Issues
AnticipatingLegislative
changes
US Taximplications
CorporateRestructuring
Issues
BranchOperationsImplications
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Alternatives
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Proposed Business ModelSuper Hub
From commissionaires (Commissionaires) to service
providers/sales support entities acting for a Super Hub
EU Commissionaires become marketing and sales
support service providers to Super Hub.
The service providers will perform marketing and sales
support activities, mainly in their local markets. In otherwords, the service providers link potential customers to
European HQ which will subsequently negotiate pricing
and conclude contracts with these customers.
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2014 Baker & McKenzie Amsterdam N.V.
Proposed Business ModelSuper Hub (2)
Further, the Commissionaires will each maintain their
own offices and employees locally. For this alternative to
work, it is essential that the service providers will notresult in European HQ (Super Hub) having local
permanent representatives (PEs).
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2014 Baker & McKenzie Amsterdam N.V.
Super Hub Acts as LRD
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2014 Baker & McKenzie Amsterdam N.V.
Points of attention
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VAT/customsPost-
RestructuringTP
BusinessRestructuring
PE/FE RisksChoice of
distributionmodel
Operationalchanges
Choice of HQ
legal entity
EmploymentRestructuring
Issues
AnticipatingLegislative
changes
US Taximplications
CorporateRestructuring
Issues
BranchOperationsImplications
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Proposed Business ModelSingleEuropean EntitySingle European Entity with permanent establishments
throughout Europe
EU Commissionaires will merge into European HQ.
The former Commissionaires will each maintain their
own offices and employees locally as a registered
branch. As a consequence, European HQ will likely
have permanent establishments (PEs) in eachapplicable jurisdiction.
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Proposed Business ModelSingleEuropean Entity (2)
The employees of the former Commissionaires will
perform similar functions and manage similar risks as in
the current model (the additional functions related to the
LRD model will be performed by European HQ in
Germany).
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SEE Acts as a LRD
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2014 Baker & McKenzie Amsterdam N.V.
Points of attention
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VAT/customsPost-
RestructuringTP
BusinessRestructuring
PE/FE RisksChoice of
distributionmodel
Operationalchanges
Choice of HQ
legal entity
Employment
RestructuringIssues
Anticipating
Legislativechanges
US Taximplications
CorporateRestructuring
Issues
BranchOperationsImplications
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2014 Baker & McKenzie Amsterdam N.V.
Contact
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Giuliana Polacco
Local Partner
Milan Tax
+39 2 76231368
Margreet Nijhof
Local Partner
Amsterdam Tax
+31 20 551 7543
Folkert Idsinga
Principal
Amsterdam Tax
+31 20 551 7599
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Contact
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Jan-Willem Gerritsen
Salary Partner
Amsterdam Tax
+31 20 5517454
Kim Tan
Local Partner
Amsterdam Corporate (Notary)
+31 20 551 7906
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