International Business Transactions and Taxation: Practical Guidance and Framework for Executives (Management for Professionals)

Recent developments in the taxation of international enterprises are driven by the Organisation for Economic Co-operation and Development (OECD) of the Base Erosion and Profit Shifting (BEPS) initiative and have contributed to increase attention in practice, especially of large enterprises, resulting in different routes of action. This book provides a comprehensive overview of international business transactions at the customer interface with a focus on the specific role and tasks of the functions within a company. Three basic transactional models are introduced and analyzed, particularly to what extent they induce an international tax risk to the enterprise, in order to explore meaningful choices for action. The book inspires experienced practitioners as well as young professionals with or without formal business education to think beyond the context of their own experience and to define, implement and monitor tax-compliant transactional processes in their respective business. Individuals in companies are sensitized for compliance to these business processes resulting in a reduction of a hidden or frequently neglected, but significant tax risk. This book helps executives and managers create a shared understanding on international business transactions and facilitate detailed cross-functional discussions. Foreword 7 Preface 9 Acknowledgments 11 About the Book 12 Contents 14 About the Author 16 Abbreviations 17 1: Introduction 18 2: International Taxation and Transactional Models 21 OECD Triggers Attention to Transactional Models 21 First Approach to Transactional Models 24 The “Phantom” of Permanent Establishments 27 Managing a Permanent Establishment 30 Changing Transactional Models 31 3: Business Strategy and Transactional Models 34 Market-Driven Business Strategy 34 Synthesis: Triggers for Permanent Establishments 39 Permanent Establishments and Physical Distribution 40 Permanent Establishments and Customer Acquisition 40 Risk-Balanced Choice of Transactional Models 42 4: Direct Business 46 Definition 46 Basic Model 47 Variations of the Basic Direct Business Transactions 48 Functional Considerations for Implementation 53 Business Management: Marketing and Sales 53 Legal 59 Finance and Taxes 60 Regulatory and Trade Control 65 Supply Chain Management 66 IT and Master Data 67 HR and Leadership 68 Summary of Implications for Vendor and Customer 69 5: Merchandize Business 71 Definition 71 Basic Model 72 Variations of the Basic Merchandize Business Transactions 73 Functional Considerations for Implementation 78 Business Management: Marketing and Sales 78 Legal 82 Finance and Taxes 84 Regulatory and Trade Control 93 Supply Chain Management 95 IT and Master Data 97 HR and Leadership 97 Summary of Implications for Vendor and Customer 98 6: Agency Business 101 Definition 102 Basic Model: Internal Agents – Addressed by OECD BEPS 102 Basic Model: External Agents 104 Variations of the Basic Agency Business Transactions 106 Functional Considerations for Implementation 111 Business Management: Marketing and Sales 112 HR and Leadership 114 Corporate Taxes at Principal and Agent 118 Remaining Functions Operate as in Direct Business 118 Summary of Implications for Vendor and Customer 122 7: Conclusion 125 Choosing and Running Transactional Models 126 Switching Transactional Models 128 Ten Commandments: Key Takeaways 133 Appendix: The Bosch Case 135 What Happened? 135 The Consequences 136 What Can We Learn from Bosch Case for International Business Transactions? 137 Glossary 138 References and Further Reading 142 Further Reading 144