1. MNE Groups may reorganise their distribution business models and, as result, conclude qualifying transactions that meet the conditions to be in-scope of the simplified and streamlined approach. Equally, there may be MNE Groups with in-scope transactions which, following the restructure of their distribution arrangements, no longer meet the conditions to apply the simplified and streamlined approach.
2. As stated in paragraph 9.34, MNE Groups are free to organise their business operations as they see fit and tax administrations do not have the right to dictate to MNE Groups how to design their structure or where to locate their business operations. Tax administrations, however, have the right to determine the tax consequences resulting from the reorganisation. In this regard, the guidance in Chapter IX remains relevant whether the simplified and streamlined approach is applicable to the pre-restructuring or post-restructuring qualifying transactions.
3. Some Associated Enterprises may attempt to artificially reorganise their arrangements to derive tax advantages from the application of the simplified and streamlined approach. Such scenarios may come under greater scrutiny by tax authorities to prevent the use of the approach for tax planning opportunities and jurisdictions may adopt targeted approaches to address these concerns.1
4. In some instances, the simplified and streamlined approach may apply to a restructured distributor with built-in losses from prior fiscal years. The tax treatment of such losses, in particular whether they are available or can be deductible, depends on each jurisdiction’s domestic legislation and administrative procedures and is not within the scope of this guidance.