Tax treatment of international takeovers/mergers (2010)

    Prepared by the ICC commission on : Taxation
    Publication date : 14/01/2010 | Document Number : 180-507

    As the world business organization, and a representative body that speaks on behalf of enterprises from all sectors in every part of the world, the International Chamber of Commerce (“ICC”) has noted with concern a recent trend in some jurisdictions towards the taxation of international takeovers and mergers.

    In particular, a number of jurisdictions have asserted that they may impose capital gains taxes and withholding tax obligations in circumstances in which some portion of the transactional value derives from underlying assets in its jurisdiction even though the transaction has taken place entirely outside that jurisdiction. For example if a company in Country A takes over a company in Country B, which directly or indirectly owns a subsidiary in Country C, or indeed in Country D, E or F, Country C, D E or F may seek to impose such taxes.

    Separately, ICC notes that such recent changes are introduced by means of retrospective changes in law or policies. Such retroactivity undermines the stability of the tax regime of a country.

    ICC is concerned that this approach extends the scope of taxation outside commonly applied

    international taxation principles, and can create a significant barrier to international trade and