An idea worth considering | April 1, 2010
It is often said that "if it's too good to be
true, it is." This truism should form the cornerstone of
any solid income tax planning model. After all, if something is too
good to be true (e.g., hybrid results, double deductions, double
economic non-taxation, form over substance, income assignments,
etc.), then it probably is — correct? This concept is
particularly relevant for MNEs (multinational enterprises), since
they must deal in multiple tax jurisdictions that often have
differing rules, regulations, policies, practices and procedures,
and differing views on what, if anything, is too good to be
true.
Suppose, however, that a transaction opportunity arises where an
MNE utilizes a basic form in which one MNE pays a service fee to
another, resulting in a simple, straightforward tax result
(deduction for payor, income inclusion for recipient). Suppose
further that the MNE can show that although the transaction
