The Sales Country as a Tax Credit Country – Implementation Issues, Complexity Costs and Tax Planning

50 Pages Posted: 28 Nov 2017

See all articles by Lisa Maria Fell

Lisa Maria Fell

University of Mannheim - Accounting and Taxation

Date Written: November 24, 2017


The international taxation of multinational enterprises (MNEs) stands under public and political pressure. The OECD BEPS project is striving for taxation in line with economic activity and value creation. While this might prevent book profit shifting it comes at the risk of investment shifting and corresponding losses in tax revenue. Academics put forward destination-based taxation to prevent investment shifting. This might come at the cost of taxing MNEs’ profits not in all places of value creation. This conflict can be solved by a mechanism first proposed by Schreiber/Fell. Possible further implementation forms, especially within the OECD framework of transfer pricing and possible instruments to use shall be examined within this paper. The implementation forms shall be compared based on the involvements of information, coordination, differentiation, cooperation and consensus need, while taking into account the remaining flexibility for states involved and tax planning opportunities. While all three possible implementation forms within transfer pricing could be feasible next steps, taking into account preferences of states involved, the mechanism as such can be questioned from a stability point of view. While all states involved despite tax havens could be possible winners when entering the mechanism, sales countries could not be incentivized to uphold it from a pure revenue perspective. As a consequence, states involved should take the long-term trends in taxation into account in order to think about a solution based on coordination.

Keywords: BEPS, Coordination, Country-by-Country Reporting, Credit Method, Destination-Based, Inter-Nation Equity, International Profit Allocation, International Investment Neutrality, International Business Taxation, Multinational Enterprise, OECD, Profit Split Method, PSM, Transfer Pricing

JEL Classification: A12, C65, E62, F21, F23, F68, H21, H25, H26, K34

Suggested Citation

Fell, Lisa Maria, The Sales Country as a Tax Credit Country – Implementation Issues, Complexity Costs and Tax Planning (November 24, 2017). Available at SSRN: or

Lisa Maria Fell (Contact Author)

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131

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