Bringing his expertise in multinational corporations and tax regulation to the Levin College of Law from the University of Navarra School of Law in Pamplona, Spain, Professor Antonio Vazquez del Rey spoke to on Nov. 12, concerning multinational corporations and how they create international economic challenges.

Vazquez del Rey also just concluded teaching a semester-long course titled, “Multinational Corporations” at the Levin College of Law as part of the Foreign Enrichment Program.

In his presentation, Vazquez del Rey focused on the concepts of international and multinational corporations and the difficulty in formulating an internationally recognized legal concept of multinational corporations for the purposes of taxation and regulation.

He explained that guidelines set out by the Organisation for Economic Co-operation and Development (OECD), which define such entities are not mandatory, but rather a set of non-binding recommendations. Vazquez del Rey still called the OECD guidelines “one of the most accepted approaches or concepts multinational corporations,” but noted that membership to the OECD includes only countries from Europe and North America.

The OECD broadly considers multinational corporations to be companies that are based in a home country or jurisdiction, but operate with a subsidiary or other branch in another country, Vazquez del Rey explained. He added that such entities may include equity-based groups, joint ventures, and franchises or production agreements.

“If we consider a corporate tax is mostly enforced because of residence, those companies [and] subsidiaries, will have to pay the corporate tax of the host state,” Vazquez del Rey stated.

In most cases, a holding company will manage the different subsidiaries and shares of a multinational corporation, Vazquez del Rey explained, adding that international tax issues arise when trying to differentiate between foreign subsidiaries and permanent establishments. Both are subject to tax liability, Vazquez del Rey stated, but tax benefits of a subsidiary will be paid to the home country via royalties, dividends, interest, or other benefits. Permanent establishments, however, pay taxes immediately to its host state and may incur larger tax liability for corporations.

International guidelines for regulation are needed, Vazquez del Rey said, because “in most of the countries, there are no specific legal or tax regulations addressing the reality of multinational enterprises.”