IFA Regional Congress in Prague

Prague hosted the Regional Congress of the IFA (the International Fiscal Organisation) at the beginning of February. The discussions were about crucial changes expected in international taxation in upcoming years. Developments in the international administration and regulation of taxes in the next period can bring more changes than in previous decades.

The most visible platform for development is primarily the coordinated joint action of developed countries reflected in the Action Plan by the OECD which addresses the phenomenon of lowering tax bases and transferring profits between various jurisdictions known as "BEPD" - Base Erosion and Profit Shifting. The goal is to tax business profit in the country where the business activity actually takes place. Within the next two years, the Action Plan should offer a specific solution on how to reach the goal, for example:

• very close coordination and cooperation of the national financial authorities (coordinated revisions, exchange of information, options for resolving conflict cases by mutual agreement, and so on);

• draft of a new model double taxation treaty that will put less emphasis on the formal side of the relationship;

• draft of a multilateral treaty on cooperation between OECD member states and other countries as well;

• adjustment of requirements for transfer documentation (i.e. documentation of transfer prices between individual companies within multinational groups) in a way that enables taxation in the country where the profit is created.

The field of international taxation and transfer pricing will significantly change in upcoming months. The formal fulfilment of legal conditions will no longer be sufficient for ensuring the legal certainty of tax payers. Emphasis will be put on communication with the tax administrator. We would be happy to assist your company in preparing for this change. We will inform you about any future development in our newsletters.