Restriction of tax benefits

In August 2016, the European Commission concluded that Ireland granted undue tax benefits of up to EUR 13 billion to Apple during the years 2003 to 2014. Apple’s tax benefits were enabled by rulings allocating the majority of their profits to a non-existing head office so that they were not subject to taxation. Similar rulings currently exist in various other jurisdictions for many other companies. They shall be avoided in the future in order to ensure that the profits of multinational groups are taxed i) at all and ii) in the jurisdiction where they are economically generated. The new rules developed by OECD under the so called BEPS (Base Erosion and Profit Shifting) program shall enable the tax authorities to exchange tax rulings and therefore to detect tax benefits as, for example, economically not justified profit shifting. In a nutshell, international ‹tax optimization› by favorable tax regimes and optimized allocation of profits (e.g. license fees) will in the future only be possible to a reduced extent and require careful and thorough tax planning. Multinational companies with tax rulings are well advised to review and – if needed – amend their tax structure in a timely manner.