2.2. Study on Structures of Aggressive Tax Planning and Indicators
The study on Structures of Aggressive Tax Planning and Indicators 70 (hereafter the "ATP Study"), whose results were published in January 2016, provides a useful basis for identifying areas for action in the fight against tax avoidance. It identifies factors that are critical to set up ATP structures and the prevalence of such factors across Member States 71 .
The study focuses on national tax rules and practices, and not on treaty-related issues or international principles of allocation of taxing right. All conclusions that can be drawn from this study are therefore bound by its scope, and should not be interpreted as meaning that no action is necessary outside this scope. The study focuses on aggressive tax planning as defined in the Commission Recommendation 72 .
In order to find out which factors ("indicators") are critical to the set-up of ATP structures, the study identifies seven structures that are most commonly used by MNEs that engage in aggressive tax planning. From these ATP structures, the study extracts a set of indicators 73 . Below is an overview of the seven model structures:
| Type of ATP structure | Brief description 74 |
| 1. Offshore loan ATP structure | The structure takes advantage of situations where interest can be fully deducted in one MS whereas only a small interest spread is being taxed in another MS, with this other MS not imposing withholding tax on the interest paid to an offshore (low taxed) entity. |
| 2. Hybrid loan ATP structure (based on a model identified in an OECD report 75 ) | The structure takes advantage of the hybrid mismatch in qualification of a financing instrument. It benefits from a deduction of the payment in one MS (e.g. as interest) in combination with no inclusion in another MS (e.g. as tax-free dividend). By inserting an intermediate company resident in a third country, this structure still allows to benefit from a hybrid mismatch. |
| 3. Hybrid entity ATP structure (based on a model identified in an OECD BEPS report 76 ) | The structure relies on allocating interest costs to a company which is considered a taxable entity in the state of incorporation and as a transparent entity for tax purposes in the state of the participants. The structure takes advantage of the hybrid mismatch in qualification of an entity. It results in a tax deduction for interest in one MS without any inclusion of the payment in the other MS. |
| 4. Interest-free loan ATP structure | The structure takes advantage of a situation where on the one hand deemed interest costs on an interest-free debt can be deducted while there is no income pick-up on the other hand. |
| 5. Patent box ATP structure | The structure benefits from the favourable tax treatment of IP income according to a patent box or other specific tax regime in one MS, while at the same time another MS allows a deduction of royalty payments and does not levy any withholding tax on the outbound royalty payment. |
| 6. Two-tiered IP ATP structure (based on a model identified in an OECD report 77 ) | The ATP structure takes advantage of mismatches in rules on tax residence of a company incorporated in a MS. Based on such mismatch, the ATP structure benefits from deduction for royalty payments under license- and sub-license-arrangements without any inclusion of the received royalty income (given that the IP has been transferred to a subsidiary incorporated in a MS but tax resident outside of that MS and tax exempt). |
| 7. ATP structure based on IP and cost contribution agreement (based on a model identified in an OECD report 78 ) | The structure takes advantage of allocating all (or most) of the royalty payments to a company located in a low or no tax jurisdiction, while benefitting from R&D tax credit and deduction of royalties paid in (high tax) MS. This is achieved following a reorganisation and transfer of manufacturing, sales operation and supporting intangibles (IP). |
Annex A2 provides an overview of all structures and relevant indicators per structure. It should be noted that some ATP indicators concern tax rules that may pursue valid tax policy objectives.
