ICC Document & publication

ICC Policy Statement on Exit Taxes

Serious obstacles for international business restructurings and movements of capital (2014)

The International Chamber of Commerce (ICC) released a revised Policy Statement on “Exit taxes: Serious obstacles for international business restructurings and movements of capital.” The revised document acknowledges recent developments in the international taxation landscape and advises against exit taxes regimes.

This Policy Statement on ‘Exit taxes: Serious obstacles for international business restructurings and movements of capital’ prepared by the ICC Commission on Taxation is a revised version of the 2006 Statement on the same. The international taxation environment has changed due to the financial deficits faced by national governments while global business models evolved in the face of competitive pressures. The international community is currently debating a fundamental restructuring of the international taxation system. Moreover, as a means to increase their revenues more countries consider levying additional taxes, such as exit taxes, with a risk of double taxation. The revised Policy Statement acknowledges these recent developments, most notably the Organization for Economic Cooperation and Development (OECD) Base Erosion and Profit Shifting Project (BEPS) project initiated by the G20. It also makes reference to the 2013 OECD Transfer Pricing Guidelines and the OECD Model Income Tax Treaty.

The Policy Statement advises against exit taxes regimes which generally seek to tax unrealized gains the moment a company’s seat or assets leave the country. States should find means to protect their tax bases using the existing and the generally accepted tax rules to tax the recapture of previously tax deductible amortization or depreciation without resorting to additional exit taxes. If such regimes are nevertheless enacted, ICC strongly believes that, in the interest of avoiding excessive or double taxation, at a minimum certain safeguards should be included to protect the free movement of capital and the efficient functioning of enterprises.

The Policy Statement offers recommendations for minimum standards in the design and application of such measures that would take into account the arm’s length principle and avoidance of double taxation. Furthermore, the revised Policy Statement suggests that where the levy of exit taxes is appropriate, taxpayers should have the possibility to provide adequate guarantees to cover the future tax claim.