Nairobi, 14 – 18 February 2011

1. Large Taxpayer Units10. Identification and Selection of Large Business (Definition and Criteria used)Characteristics of Large Business Nairobi, 14 – 18 February 2011

2. Large Business’ Identification Criteria International perspectives: • Identification criteria vary substantially across countries- no “hard and fast” rules or points where you draw the line. • For developing countries, the IMF recommends criteria that gives coverage of 50-60% of all tax revenues, starting initially from a lower base. • Common criteria are one or more of gross turnover, assets, tax paid, and/or some special factor (e.g., industry).

3. Identification of Large Business • Some countries ensure that all members of large corporate groups are administered together. • Some developed countries ensure that associated “high wealth” individuals who control the target companies are also administered by their LTUs. • In many developed countries criteria are set at discretion of the Tax Administration management, and do not require changes to the law or ministerial approval.

4. Common identification criteria(Practices eight OECD countries) • amount of turnover or gross sales; • value of assets; • amount of tax paid; • operating in certain business sectors (e.g. banking, insurance, oil, etc.); • engaged in international business activities; and • number of employees.  • Some countries, for example Ireland, have their large business unit also administer “high net-worth individuals” (HNWI).

5. Large Business Classification CriteriaAustralia • The Australian Taxation Office (ATO) defines large taxpayers as economic groups and single entities with an annual turnover greater than $250 million, these entities are allocated to the Large Market segment. This market also includes all:  • Petroleum Rent Resources Tax (PRRT) and National Tax Equivalents Regime (NTER) taxpayers; • Banks (including both resident and foreign); and • Insurance companies (both general and life).

6. Canada • Canada Revenue Agency defines large taxpayers as businesses with gross revenues in excess of $250 million.

7. France • Businesses with either turnover or assets of greater than €400 million, also known as “key” large enterprises (“noyau dur”). In addition, the LTU is also responsible for :  • Shareholder entities owning (in)directly more than 50% of the key large enterprises identified above; • Subsidiaries controlled (in)directly by the key large enterprises having over 50% share ownership; • Entities belonging to the same integrated group; and • Entities part of a consolidated group.

8. Ireland • The Irish Large Cases Division (LCD),established in 2003, identifies large business as corporate groups with a turnover greater than €162m or total tax payments greater than €16m. LCD is also responsible for other taxpayers:  • The financial services sector (banking, insurance, and pensions); • Certain sectors, which had relatively few large-scale enterprises regardless of case size; • High net worth individuals (HNWIs) with net assets over €50m / income over €1.3m and non-residents with substantial economic interests in Ireland.

9. Norway • The Central Tax Office for Large Enterprises (the CTO) is responsible for large enterprises. Criteria include:   • Turnover ( no preset amount); • International business activities; • Complexity of tax matters • Companies operating in certain industries, e.g., banks, insurance, oil, trading, technology and investment companies. • The determination that an entity qualifies as a large business, is made by the office of the Directorate of Taxes.

10. The Netherlands Qualifying as a very large business if one of the following criteria is met: • Listed on the Amsterdam or foreign stock-exchange; • A WOLB¹ amount of more than €25 million; • A foreign parent and a WOLB-amount of more than €12,5 million; • At least five foreign subsidiaries and/or permanent establishment and a WOLB-amount of more than €12.5 million; • All companies in the financial industry (banks, insurance), the oil and gas industry (upstream and downstream) and in the energy-supply industry are determined to be very large businesses; • All non-profit organisations with a WOLB-amount of more than €37.5 million are qualified as very large organisations; or • Other taxpayers not meeting the above factors, may be covered under the “the supervision-concept” for very large businesses if complex issues exist, or a taxpayer is viewed as potentially a high-profile case or with certain degree of financial risk. • ¹The WOLB-amount is a weighted average of profit tax (income tax or corporate tax), VAT and employment

11. UK Criteria: • UK enterprises with more than 250 employees; • UK enterprises with fewer than 250 employees, and more than €50 million turnover and more than €43 million assets; • UK companies owned by foreign multi-nationals and more than 100 UK employees; • UK companies and enterprises with high risk scores for Corporation Tax or Value Added Tax, and VAT avoidance and partial exemption cases; • Large and complex partnerships; • Businesses liable to Income Tax with a turnover of more than £5 million; or • Employers who fall within any of the preceding categories.   • LBS deal with the very largest of the businesses determined by Turnover and Assets with LC taking responsibility for the balance.

12. US • The Large and Mid-Size Business (LMSB) Division serves corporations, S Corporations and partnerships with assets > $10 million. • LMSB’s customers fall into one of two categories: • Coordinated Industry Cases (CIC) which consist of about 1,200 of the largest corporations, the majority of which are multinational in operations; or • Industry Cases (IC) are corporations and business entities with $10 million or more in assets, excluding CIC cases. • Factors used in determining a CIC cases include gross assets, gross receipts, operating entities, multiple industry status, total foreign assets, related party transactions, and foreign tax. CIC cases are complex and require a team examination.

13. Number of Large Taxpayers and Tax Revenue collected By TBU’s (2006/7)

14. Scope of Taxes Covered by LBU

15. Major characteristics of large business segment • Concentration of revenue • Complexity of the business and tax dealings • Polices and strategies to minimize tax liabilities • Withholding agent or intermediary role • Uses of professional tax advisors • Large businesses have their own tax department to manage the tax affairs of the company • Generally large businesses are publicly listed corporate companies • Many large taxpayers have international dealings and a significant number of compliance issues arise from international transactions and structures

16. Concentration of revenue • a small number of large taxpayers account for a disproportionately large amount of revenue and have a critical role in the administration of taxes. • The amount of revenue results from the pure size of these taxpayers and the range of taxes for which they are responsible including their role as withholding agents.

17. Complexity of the business and tax dealings • multiple operating entities; • diverse business interest; • high volume of transactions in day-to-day business activities; • large number of employees; • international business dealings; • cross border transactions with related parties; • unique industry characteristics (such as banking); • widely spread in geographical terms; • complicated issues (involving complex tax law and accounting principles) • polices and strategies to minimize tax liabilities; and • complex financing and business structures.

18. Withholding Withholding agent or intermediary role – the main taxes collected by the large taxpayers, as intermediaries, include: • personal or employee income tax withholdings and social contributions; • value added tax or good and services tax; and • withholding tax on certain cross border payments such as dividends, royalties and interest.

19. International dealings • Many large taxpayers have international dealings • A significant number of compliance issues arise from international transactions and structures. • For example, Canada indicated that 50% of its large case audits involve international issues. Australia specified that about 68% of their large taxpayers have some level of international dealings.

20. 10. Identification and selection of Large Business (Definition and criteria used) and main characteristics of Large BusinessThe Netherlands Nairobi, 14 – 18 February 2011

21. Main classification of the clients • Individuals • almost every inhabitant • collecting and refunds • Small enterprises • Medium large enterprises • Very large enterprises • If usefull we create special target groups of simular enterprises

22. Definition of a VLE Very Large Enterprises: • listed on the Amsterdam stock-exchange; • fiscal importance > euro 25 million • a foreign mother company and a fiscal importance > euro 12,5 million • at least 5 foreign subsidiaries and/or permanent establishments and a fiscal importance > euro 12,5 million • Tax administration VLE: 765 staff in total

23. Special entities • Departments • many public servants • Big cities > 100.000 inhabitants • large VAT questions • Large hospitals (wages and vat) • Universities (wages) • Large infrastructural projects (high speed railways, etc. huge investments)

24. Special target groups • Banks and Insurance enterprises • Oil & gas enterprises • Energy and environmental enterprises • APA

25. Dutch Global Players • Shell • Akzo Nobel • KPN Telecom • Unilever • ING • ABNAMRO • Philips • Heineken • KLM