This is part of the series of interviews I am conducting of highly respected tax experts and luminaries in Silicon Valley. Many of them will be speaking at the 2017 TEI – High Tech Tax Institute Conference in November. Eric Ryan is one such Silicon Valley tax luminary who was also responsible for receiving the world’s first Bilateral Advanced Pricing Agreement (U.S. – Australia). I know of Eric Ryan’s professional accomplishments since Apple Computer retained me to find him many years ago. Eric Ryan was formerly the Head of Tax at Apple Computer, a National Tax Partner/Transfer Pricing with PWC and is an international Tax Lawyer with DLA Piper, Palo Alto, CA. He understands the world of tax from all perspectives.

For anyone new to leadership roles in corporate tax organizations who have yet to meet Eric; he is super smart, friendly, and brings a world of experience in international tax and transfer pricing to you. You have a wonderful opportunity to introduce yourself to Eric Ryan at the San Jose State University – TEI High Tech High Conference on November 13th and 14th 2017.

1. When the United Kingdom leaves the EU what does it mean for UK Tax Treaties and related items?

The UK’s double tax treaties are bilateral matters between the UK and the relevant treaty counter party and so have nothing to do with the EU – meaning that Brexit should have no impact.  However, what the UK may lose is access to the EU Directives that are designed to remove certain fiscal obstacles for companies operating in more than one EU Member State (i.e. the Parent / Subsidiary Directive, Interest and Royalties Directive and Merger Directive).

Businesses that currently rely upon EU directives mentioned above to ensure tax free movement of funds between the UK and other EU member states should be considering whether they can replicate those benefits post-Brexit via the UK’s double tax treaties.  For example, many of the UK’s treaties with other EU countries provide for a zero rate of withholding tax, but not in all cases, so Brexit may trigger additional withholding tax leakage in some structures.

In addition, many UK regulated industries (e.g. banking) are allowed  to “passport” their operations to other EU countries fairly easily.  These type of businesses may need to establish operations in EU countries after Brexit, which will involve tax planning in addition to regulatory issues.

2. What about Transfer Pricing?

 EU law has, historically, had a significant impact on the UK’s transfer pricing rules in that it has required those rules to be applied on a domestic basis (with exceptions for small and medium-sized enterprises) as well as on a cross-border basis.  Post-Brexit the UK may have greater freedom to depart from EU law.  Business restructurings in light of Brexit may well result in more transfer pricing scrutiny in the UK.  But he UK tends to follow OECD TP Guidelines, so that standard may become even more important.

3. Is the EU considering replacing Transfer Pricing with Formulary Apportionment?

Yes, the EU has proposed a system called the Common Consolidated Corporation Tax Base (CCCTB), which is essentially formulary apportionment.  The CCCTB is attractive to some members of the EU as a way of combating the issues identified by the OECD BEPS initiatives.  However, the UK was not a supporter of the CCCTB, and so Brexit may ensure that the UK is not forced to adopt this unwanted system.  Being outside of the EU CCCTB could make the UK quite an attractive place to center an international structure in Europe in the future.

4. What do you suggest corporate tax executives do to prepare for these upcoming Brexit changes?

As mentioned above, corporate structures which rely in EU Directives to eliminate withholding taxes, capital taxes, and other items will need to review whether a UK bi-lateral tax treaty or similar arrangement will keep cross-border transactions with EU parties free of tax impositions.

5. Besides Brexit, what other UK tax issues will you be discussing?

We will also be discussing the recently enacted provisions of UK tax laws relating to international structures, including the UK Diverted Profits Tax (DPT).  This provision has created significant problems for US multinationals with tax efficient structures and a presence in the UK, such as a marketing services subsidiary.  We will be discussing the DPT provisions and the type of restructurings that US multinationals have been implementing to deal with the DPT.

6. Will you be providing any special handouts to those in attendance at your presentation at the San Jose State/TEI – High Tech Tax Institute Conference in November 2017?

We have a panel presentation with two UK tax practitioners and myself.  We will have a slide deck presentation available to all attendees with summaries of the issues and helpful structure charts.

7. What is the best way to contact you if someone has a question?

Contact Eric Ryan