Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?
Tax (3rd edition)
The regulatory authorities for direct taxes (income tax, capital tax and wealth tax) are the relevant cantonal tax authorities and the Federal Tax Administration (‘FTA’). The FTA is also competent for federal taxes, such as value-added tax (‘VAT’), withholding tax and stamp duties. Moreover, the Federal Customs Administration is in charge of customs duties.
Taxpayers may request a tax ruling to clarify the tax consequences of a planned structure or transaction. While Swiss law does not refer to tax rulings, this possibility derives from the practice of the tax authorities.
The length of time needed to resolve tax issues varies greatly and depends on the complexity of the issues at stake. There is no standard amount of time that a tax dispute will take to resolve. While the vast majority of tax disputes are settled prior to litigation, disputes that go to litigation can sometimes take years to resolve.
The Internal Revenue Service (“IRS”) is in charge of administering the Federal income tax laws and auditing tax returns. The IRS also has a program for granting advanced private letter rulings on certain issues, subject to payment of a user fee. State and local taxes are subject to separate audit and administration at the state or local level.
Large corporate taxpayers are under audit by the IRS on a continuous basis. Certain corporations also have been admitted into Compliance Assurance Program (“CAP”), which allows for real-time audit of issues prior to the corporation’s filing of its tax returns. CAP has been popular with corporate taxpayers in minimizing disputes with the IRS, but new applications to the CAP program were recently suspended.
The difficulty of dealing with the IRS depends on the nature of the issue and taxpayer’s relationship with the IRS. The IRS’ Large Business & International (LB&I) division has designated certain issues as “campaigns” requiring coordinated national treatment within the IRS. Issues involved in campaigns may be expected to involve more controversy between taxpayers and the IRS.
The Canada Revenue Agency, known as the “CRA,” administers tax law for the federal government as well as most provinces and territories. It is also responsible for registering and overseeing the activities of charities in Canada. The CRA ‘s audit and collection functions are typically performed by CRA personnel working at one of 51 tax services offices located throughout the country, and most processing is done by one of five tax centres. Ultimate responsibility for the CRA and its administration lies with the Minister of National Revenue, a member of the Prime Minister’s Cabinet.
The CRA maintains a toll-free telephone service to answer both general tax queries and address taxpayer-specific issues, and is increasingly focusing its efforts on making information more user-friendly and accessible, particularly through the Government of Canada website. Taxpayers can access most of their tax data through a secure portal on the website, and the CRA encourages (and sometimes requires) filings and other documents to be submitted through the portal.
Standard issues are typically resolved at the audit stage, through discussions and meetings with the auditor responsible for the file; auditors’ assessment proposals must be approved by their Team Leaders before being finalized. Taxpayers who disagree with a tax assessment may file an objection and have the matter reconsidered by the CRA’s internal appeals division, and the remaining issues are often resolved at that stage. However, there is often a significant delay (3 - 9 months) between the time an objection is filed and the time it is reviewed by the appeals division.
The length of time required to resolve tax issues varies significantly, depending on the complexity of the issues and the amounts at issue. Most tax issues, whether standard or complex, are resolved without the need for the taxpayer to initiate court proceedings, but the process can easily take a year or more, particularly in complex or contentious matters.
The key regulatory authorities for federal taxes are the tax offices led by the Ministry of Finance.
The Ministry of Finance also prepares draft tax bills for Federal Tax Laws, issues guidelines for the interpretation of tax provisions, rules of Federal Tax Laws, negotiates the Austrian double taxation agreements and has wide ranging competences in international tax law matters. Informal rulings on tax questions on a rather generic level (so-called “Express-Answering-Service”) may be obtained from the Austrian Ministry of Finance.
The tax offices are the main reference point for the day-to-day tax matters of taxpayers. Some of the tax offices are specialized for certain tasks like the collection of stamp duties and transfer taxes or refund of withholding taxes to non-residents under a double taxation convention.
Taxpayers may also apply for binding advance rulings on matters concerning transfer pricing, reorganizations or group taxation with the tax office against the payment of a fee of up to EUR 20,000. In other areas informal rulings based on good faith may be obtained. The time needed to resolve an issue with the local tax office or the Ministry depends on the scope, the complexity of the issue and the availability.
France does not have a regulatory authority dedicated to tax issues. The French system is based on taxpayers' declarations and tax administration's audits, which may lead to tax reassessments by specialised bodies such as the 'Direction des Grandes Entreprises' (Directorate for the largest companies) or 'Direction des vérifications nationales et internationales' (Directorate of national and international audits) for the largest companies, or local tax services for small and medium-sized enterprises (SME).
However, the French tax administration (FTA) may issue rulings in specific matters such as transfer pricing (Article L 80 B of the tax procedure code). These rulings provide the taxpayer with protection and legal certainty as the tax authorities take an official stance on a specific question.
Besides, an advanced tax ruling may be requested by a taxpayer before the 'Direction de la Legislation Fiscale' (Tax legislation directorate) on any particular situation which triggers a specific tax issue in order to secure this situation, such as a foreign investment fund applying for a special French tax regime (OPCI or FPCI) which refers to criteria unknown from non-French investment funds. As a general rule, it takes no less than 6 months to get an advance tax ruling. The lack of response does not generally mean an implicit agreement.
Furthermore, special committees have been implemented in highly technical matters to improve the discussions and relationships between the FTA and the taxpayers and provide them with recommendations, such as the 'comité consultatif du crédit d'impôt pour dépenses de recherche' (committee for research and development tax credit).
The Tax Department within the Ministry of Finance was formed in 2014 by combining the Inland Revenue Department, which administers direct taxation, and the VAT Service.
As with many government departments in Cyprus, routine procedures, such as final agreement of tax returns and issuing of assessments, can take time. However, the department responds efficiently and constructively to inquiries. Advance tax rulings are available and taxpayers may request an expedited ruling, guaranteeing a response within 21 working days provided all the necessary information is supplied, on payment of the prescribed fee (currently EUR2,000).
The key regulatory authority in Brazil is the federal tax administration agency, the Receita Federal do Brasil (RFB or Brazilian Revenue). The Brazilian Revenue is also in charge of inspection activities and the collection of social security contributions. States and municipalities also have their own tax administration agencies.
Each of the tax agencies is usually quite available for dealing with standard issues and taxpayers doubts and queries on a daily basis. Taxpayers may request assistance from the public servants by means of scheduling appointments with the tax authorities and pre determining the matter to be discussed. This kind of clarifications may be rendered in presence of the taxpayer during such meetings.
Pursuant to the Federal Brazilian Revenue, assistance to taxpayer is viewed “as a specialized service, essential to induce and facilitate voluntary compliance of tax obligations, and is provided at Taxpayer Assistance Centers - CAC.”
More complex issues can be dealt through a Voluntary Inquiry with the government, whereby a taxpayer may in case of doubt regarding the interpretation of a tax rule, file a direct inquiry with the correspondent tax authority (“consulta”). The government’s decision is binding to the taxpayer and the correspondent tax plus interest must be collected within 30 days after notification of said decision, without imposition of any penalty. If the taxpayer does not agree with the rendered decision, it can challenge it before the judicial courts. A response to the tax voluntary inquiry may be rendered within a 6-12months period.
The key regulatory authorities in Germany are the German Federal Ministry of Finance (Bundesfinanzministerium), the German Federal Central Tax Office (Bundeszentralamt für Steuern) and the Ministries of Finance of the 16 Federal States with their regional and local tax offices.
The German Federal Ministry of Finance is the main tax authority in terms of preparing draft tax bills and issuing (internal) guidelines for the interpretation of tax provisions and rules. It negotiates the German double taxation agreements and has wide ranging competences in international tax law matters.
The Federal Central Tax Office is the main tax authority dealing with international tax law matters under the control of the German Federal Ministry of Finance. For example, the refund of withholding tax on dividend payments or royalties by foreign entities is usually processed through the Federal Central Tax Office.
The Ministries of Finance of the German Federal States are the supervising authorities for the regional and local tax offices. The regional tax offices control and support the local tax offices in terms of general management and in certain tax law matters. The local tax offices are the main reference point for the day-to-day tax matters of the taxpayers like reviewing tax returns, issuing tax assessments and collecting taxes. Taxpayers may also apply for a binding tax ruling with respect to the tax consequences of a planned structure or transaction.
The time needed to resolve an issue with the local tax office depends on the scope and the complexity of the issue at hand. Regularly, standard issues can be directly resolved with the competent local tax office in a cooperative way. Many local tax offices have shown to follow a hands-on approach. However, more complex issues may require more extensive negotiations involving the regional tax offices and even the German Federal Ministry of Finance. Such negotiations may last several months.
The Office of the Revenue Commissioners was established by Government Order in 1923. The Order provided for a Board of Commissioners comprising three Commissioners, one of whom is appointed Chairman. Irish Revenue’s structure is designed around its customer base. Irish Revenue Regions are responsible for customers within their geographical area, except for those large corporates and high wealth individuals dealt with by the Large Cases Division. There are also Divisions with responsibility for policy, legislation and interpretation functions. In total, Irish Revenue comprises of 16 Divisions each of which is headed by an Assistant Secretary.
Standard queries are normally dealt with through an online portal. Depending on the nature of the query, response times can vary from 3 days to 6 weeks or even longer in complex matters. Complex matters may be dealt with face to face with the relevant technical division in Irish Revenue. Large taxpayers may be invited to join the Irish Revenue’s Co-operative Compliance Framework (“CCF”). Taxpayers within the CCF have direct access to an Irish Revenue official and can expect matters to be dealt with more quickly.
The ITA is the main regulatory authority with respect to taxes in Israel, consisting of two main units, income tax and VAT. The NII is the state institution responsible for the regulation and collection of social security payments in Israel.
Resolution of matters with the ITA generally depends on the complexity of the issues at stake, but can range from a few weeks to over a year, not including legal appeal procedures.
The key regulatory authority in Malaysia is the Inland Revenue Board (“IRB”). The IRB is a body corporate established pursuant to the Inland Revenue Board of Malaysia Act 1995. Its functions include, inter alia, acting as agent of the Government and to provide services in administering, assessing, collecting and enforcing payment of income tax, petroleum income tax, real property gains tax, estate duty, stamp duties and advising the Government on matters relating to taxation.
Taxpayers’ experiences with the IRB are quite subjective and may vary depending on the complexity of issues, quantum of taxes in dispute as well as financial key performance indicators imposed on IRB collection officers.
Ordinarily tax audits and tax investigations may take up to 6 to 18 months to be resolved.
The key tax policy authority for tax related matters in Mexico is the Ministry of Treasury. Specifically, the Income Undersecretary and the Tax Attorney General’s Office, both dependent of the Ministry of Treasury, are in charge of overseeing Mexico’s tax policies and transforming such policies into law, respectively. This, of course, with the unavoidable participation of Congress when it comes to new legislation or amendments thereof.
The Tax Administration Service (“SAT”) is the authority in charge of overseeing that tax obligations are duly complied with. From a regulatory perspective, the SAT annually issues regulations to gather and simplify the understanding of general rules they issue, which are generally related to tax compliance, but it is also empowered to assess taxpayers whenever tax obligations are infringed or overlooked.
When it comes to dealing with key regulators, although not established under law as a formal process per se, it is a common practice for taxpayers to be involved with tax authorities in the issuance of Tax Administration Rules, in particular when it comes to the issuance of rules that are industry or sector specific where the contribution of taxpayers adds value.
Additionally, taxpayers have other means to approach authorities when it comes to resolving standard issues; for instance, they may seek for clarity when interpreting tax laws or regulations by submitting consultations before tax authorities. In addition, through the Taxpayer’s Defense Office (Prodecon), there are certain procedures that may assist the taxpayer in approaching authorities to clarify about the application of certain legal provisions or regulations.
Lastly, Accounting and Bar Associations in Mexico frequently release public statements addressing certain issues regarding tax policies and practices, situation that often times materializes in the amendment of certain tax provisions.
However, effectiveness in resolving standard issues normally takes more time than the time established under tax regulations. For instance, obtaining VAT refunds has been always an important issue. According to a study issued by the World Bank Group it takes, in average, up to 42 weeks to obtain a VAT refund in Mexico while in countries such as France (6.2), Canada (14) or Spain (16.2), to mention a few, it takes less than half the time.
Notwithstanding, auditing procedures usually do follow the timeframes established under tax laws due to the fact that, if this is not the case, taxpayers would most likely controvert the validity of the assessment (successfully).
The main regulatory authority for tax matters is the Ministry of Finance. The tax administration is divided into five regions, and the tax assessments etc. are carried out by the regional tax offices. Further, there are three specialised tax offices: The Central Tax Office for Foreign Tax Affairs, the Oil Taxation Office, and the Central Tax Office for Large Enterprises. The regional tax offices and the specialised tax offices are administratively governed and instructed by the national Directorate of Taxes.
Timing and the ability to resolve tax issues with the tax authorities, tend to vary depending on the specific case handler and which tax office you are dealing with. Usually, standard and straight-forward issues might be easy to resolve, but with more complicated matters it may take several years before the case is resolved.
Panama tax authority is known as the Internal Revenue Office which is a directorate under the Ministry of Economy and Finance.
The Internal Revenue Office is divided into several departments, including: taxpayers’ assistance, legal advisory, international taxation, transfer pricing, collections, account balances, audit, invoicing, exemptions and refunds. However, all acts must be signed and issued by its Director.
The caseload of the Tax Authority is heavy and the turnaround time is generally slow. Among the factors that contribute to the slow pace of the tax authority are its centralized organization, a lack of sufficient personnel to meet the demand and the lack of an efficient method to organize and manage the documents. Standard issues could takes as minimum (6) months to be resolve.
For national taxes which are imposed by the national government under the Tax Code and other related laws, the main regulatory authority is the Bureau of Internal Revenue. For tariff and customs duties imposed under the Tariff and Customs Code of the Philippines, the regulatory authority is the Bureau of Customs. For local or municipal taxes under the Local Government Code, it is the concerned local government unit which regulates it. Standard tax issues are relatively resolved in a short time. However, complex and policy issues that involve substantial amount take years and are usually elevated to the court for resolution.
Portuguese key regulatory authority for tax issues is the so-called AT (“Autoridade Tributária e Aduaneira”).
At the local tax office, taxpayers solve most of their standard issues rapidly. However, in order to optimize resources, the AT has been increasingly developing its internet portal (www.portaldasfinancas.gov.pt) in such a way that by acceding it with the respective credentials, a taxpayer can submit tax returns, consult his/her tax situation, submit exemption requests and present other claims. More recently, the portal has included a special service called “e-balcão”, which allows taxpayers to submit a specific query to the AT and obtain an answer within some days.
There is also an AT direct telephone line available which can be used to solve specific issues or even clarify more general queries.
The competent tax authorities are the following:
- Revenue Agency (Agenzia delle Entrate): the agency has jurisdiction on the administration (including collection) of all direct and indirect taxes (such as corporate and personal income taxes; regional tax on productive activities and registration tax and VAT respectively).
- Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli): the agency provides customs services and administers customs and excises duties. The agency is also the regulatory body competent for gaming activities.
- Government Property Agency (Agenzia del Demanio): the agency is tasked with the administration of real estate properties owned by the State.
- Financial Police (Guardia di Finanza) has special powers to ensure tax compliance and may carry out tax audits.
Several procedures grant taxpayers the possibility to obtain clearance from the tax authorities before completing a transaction or entering into an arrangement. The main procedures are the following:
- General advance rulings. A ruling may be asked to the tax authorities in order to obtain (i) advance clearance on the interpretation or application of tax law in a specific case (interpretative and characterisation rulings); (ii) confirmation on whether, based on a certain set of evidences, certain regimes (such as CFC or sham companies legislation) shall be applied to a certain case; (iii) advance clearance on the application of the GAAR to a specific case; (iv) disapplication of a specific anti-abuse regime that would be otherwise applicable.
General advance rulings provides for an effective instrument to obtain advance clarification on the Italian tax ramifications associated with a specific situation. Indeed, the tax authorities must reply to the ruling application within 90 days (in the case of interpretative and characterisation rulings) or 120 days (in all other cases). A ruling is binding on the tax authorities, but only in respect of the requesting taxpayer. If no reply is given within 90 or 120 days, it is assumed that the tax authorities agree with the interpretation of the requesting taxpayer.
- International tax ruling. Multinational companies can request a ruling from a specific unit of the tax authorities on matters relevant to cross-border transactions (such as transfer pricing legislation or attribution of profits to permanent establishments). The international tax ruling is binding on both parties for five tax years. The Italian tax authorities send a copy of the ruling to the competent authorities in the relevant states of the taxpayers involved in the ruling for transparency purposes.
- Ruling for new investments. Taxpayers who wish to make new investments in Italy for a value exceeding EUR30 million, which have a positive impact on employment, can use this special ruling procedure. Under this procedure, Italian and foreign investors can obtain advance rulings on the following matters: Applicable tax regime; Transfer pricing; Absence of abuse; Other material tax issues of the proposed investment based on the investment business plan. The tax authorities must reply within 120 days. A reply is binding on the tax authorities, but only in respect of the requesting taxpayer. If no reply is given within 120 days, it is assumed that the tax authorities agree with the interpretation of the requesting taxpayer.
The top authority regarding tax matters is the Revenue Administration, which is responsible for the collection of tax and enforcement of tax law. The time it takes to reach a solution depends on the complexity of the tax matter. Standard issues can be resolved in a couple months with a non-compulsory administrative solution rather than with a lawsuit. More complex issues may take years to resolve.
The Japanese regulatory authority responsible for the enforcement of tax laws is the National Tax Agency (NTA) of Japan. The actual day-to-day tax laws enforcement in front of the taxpayers is made by the regional taxation bureaus and the district tax offices, which are lower administrative bodies of the NTA. There are 12 reginal taxation bureaus over Japan (with the largest one being the Tokyo Regional Taxation Bureau) and numerous district tax offices. Generally, regional taxation bureaus are in charge of middle to large size of corporate taxpayers having stated capital of 100 million yen or more, while the rest is handled by district tax offices.
Dealing with these tax authorities involves two aspects: one is prior consultation and private advice that is typically sought before a transaction is undertaken, and the other is tax audit that is typically made after a tax return was filed. In the former case, it is generally easy to deal with the tax authority seeking its view, provided that its view is not binding and has no effect of estoppel. If the taxpayer wants a binding ruling, it must apply for an advance ruling in writing, however, this is not very common in practice as it generally takes substantial time (e.g., 6 months). As such, many taxpayers only undertake informal prior consultation even if it has no legally binding effect – practically this may suffice. Unless the issue involved is so novel with no or little precedents, there are generally little difficulties in dealing with the tax authority. The process would generally take 1-2 months.
In the latter case of a tax audit, it is not uncommon that the position of the tax authority and that of the taxpayer are acutely different and extensive discussions are undertaken in the course of the audit, especially in cases involving alleged tax avoidance or in transfer pricing cases. Here, often ‘standard’ issues do not become a large issue because in many cases the outcome is clear without engaging in substantial debates. Rather, in tax audit, novel and unprecedented issues often become a key subject to be discussed. The length of tax audit varies from a case to case; routine tax audit on small taxpayers often finishes in less than a week, while transfer pricing audit on large corporate taxpayers often continues around two years.
The tax system is administrated by the Dutch tax authorities (DTA). The DTA is part of the Dutch Ministry of Finance. The DTA is generally well approachable and can provide taxpayers advance certainty on the tax treatment of certain transactions.
The DTA may agree to enter into advance tax rulings (ATR) and advance pricing agreements (APA) within the boundaries of published ruling policy. An ATR and APA can generally be relied upon and will be respected in court, provided all relevant facts have been disclosed. A denial of a request for a ruling cannot be appealed. However, certain statutory provisions in the corporate income tax (CIT) act specifically provide for the possibility of obtaining advance approval and for an accompanying possibility of appealing against a ruling decision on certain specific cases.
In recent years, the DTA has launched a program under which taxpayers can enter into a so-called covenant under the cooperative compliance regime (horizontaal toezicht). Under a covenant, a taxpayer commits to report tax issues to the DTA upfront in an open and transparent way and to file CIT returns within a specified period of time (usually six months after the end of the taxable year). In return, the DTA commits to respond to these tax issues in a timely manner and to issue final CIT assessments within six months after the filing of the return.
For day-to-day tax matters, the DTA can be contacted through a call center. More complex matters will be forwarded to the local tax inspector for further analysis.
The main regulatory bodies are the Ministry of Finance and the National Agency for Fiscal Administration (“NAFA”). As a general rule, taxpayer guidance is performed by NAFA and, in principle, any taxpayer can address its questions or issues with this body. However, taxpayer guidance is often vague (i.e. reiteration of the provisions of tax law) and the answering time is often long, in case such answer is effectively provided to the taxpayer.
The key regulatory authorities are the Commissioner for Income Tax, who manages the Income Tax Office and is responsible for the administration and collection of tax in Gibraltar. The Minister for Finance is ultimately responsible for matters handled by the Income Tax Office.
Generally, the length of time it will take to resolve a matter will largely depend on the nature of the matter that is being considered. The Income Tax Office is on the whole, very easy to deal with and are readily accessible and able to help on any queries.
Her Majesty’s Revenue and Customs (HMRC or the Revenue) is the regulatory authority for tax matters. 2015/16 surveys show mixed outcomes, varying according to customer segment. Outcomes from large businesses are generally positive with 82% saying that they had a good experience overall with HMRC. Outcomes from agents acting for small businesses and individuals were less positive with 62% finding HMRC to be approachable and only 26% being satisfied with time taken by the Department.
The resolution of disputes with HMRC, particularly if leading to litigation, tends to be a relatively lengthy process. In 2012, HMRC published a commentary on its litigation and settlement strategy (LSS), the aim behind which was to provide a mechanism for HMRC to settle disputes in a non-confrontational and collaborative way. However, in practice, HMRC often approach disputes in a litigious and uncompromising manner, particularly in cases where the revenue exposure is high. This means that a large number of tax disputes still proceed all the way to courts and tribunals.