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Thailand enacts transfer pricing legislation

The Revenue Code Amendment Act to introduce specific transfer pricing provisions into the income tax law (No. 47) was published in the Royal Gazette on November 21, 2018, and therefore has become law. Specific transfer pricing provisions will apply to accounting periods starting on or after January 1, 2019. Once in effect, Thailand's income tax law will contain a definition of the arm's-length principle and introduce penalties for failure to comply with the transfer pricing disclosure requirement, in addition to the penalties for failure to comply with Thailand transfer pricing rules.

ATO releases draft profit guidance for Auastralian distributors - are you in the danger zone?

The Australian Taxation Office (ATO) has released a draft Practical Compliance Guideline (PCG), 2018/DB, which sets out its profit expectations for Australian distributors. Guidance is provided for specific industry segments -pharmaceutical and life sciences, information and communications technology (ICT), and automotive -as well as a general distribution category for distributors in all other industry segments.

Transfer pricing tax disputes - HMRC’s response to Profit Diversion

With the resolution of some major transfer pricing enquiries by HMRC since the introduction of Diverted Profits Tax, together with the introduction of further far-reaching legislation in the recent Budget, it’s a good time to look the changing landscape for transfer pricing disputes in the UK and what might come next. In this series of articles we will share experience gained on how best to prepare for, and successfully navigate a way through, the new type of TP enquiry in the UK.

Israeli tax authority issues transfer pricing guidance on business restructuring

On 1 November 2o18 the Israeli Tax Authority (ITA) published a circular providing its view regarding business restructuring of an Israeli entity that is part of a multinational group. The circular sets out the ITA's position on the identification and characterization of a business restructuring and, in the event that a business restructuring has occurred, the circular sets out the methods for performing a valuation of the functions, risks and/or assets (FAR) that have been terminated or transferred outside of Israel

Cameco decision addresses transfer pricing recharacterisation rules in Canada

The Tax Court of Canada (the TCC or the Court) published on September 26 its decision in Cameco Corporation (2018 TCC 195), resolving a long-running dispute between Cameco Corporation (Cameco, the Appellant) and the Minister of National Revenue (the Minister or the Crown) involving reassessments to Cameco's 2003, 2005, and 2006 taxation years. The adjustments made in the reassessments related to the prices used in the purchase and sale of uranium contracts involving Cameco, Cameco Europe (CESA, a Swiss branch of Cameco's Luxembourg subsidiary) and, later, its Swiss subsidiary (CEL), as well as its US-based subsidiary (Cameco US) and third parties. The Minister's reassessments were based on arguments that Cameco's structure, specifically the reorganization that took place in 1999, was a sham. The Minister further argued that CESA/CEL performed few if any valuable functions during the years under consideration and, accordingly, reassessments were warranted pursuant to either paragraphs 247(2)(b) and (d) or paragraphs 247(2)(a) and (c) of the Income Tax Act (the Act), the latter being the transfer pricing provisions more typically employed (and referred to by the TCC as the traditional transfer pricing rules).

CbC Data: What happens next?

At PwC’s global TP conference in Tokyo in October an informal survey was conducted of what individual tax authorities are doing with the CbC data that has started to arrive. An interesting picture emerges of several dozen varieties of ‘not much…yet’; and four where visible action or specific plans provide insight into what many, if not most countries, are likely to do.

Keeping the PEace - The (re)Emergence of Unilateral PE Measures in wake of Multilateral Efforts

Unilateral advances on digital taxes and digital PE concepts will challenge international tax harmony and cause serious challenges - are we ready? The past year has seen our tax world manage to slowly gain ground in post-BEPS territory, but also it’s been a year in which we have witnessed the rise of revolutionary concepts attempting to lead ‘old’ taxation frameworks into the digital era.

TP Perspectives: Anti-avoidance and the arm's length principle

Tax authorities around the world are increasingly seeking additional tools to use in their attempts to tax business profits locally which they consider to be diverted from their jurisdictions. In addition to the implementation of the Organisation for Economic Co-operation and Development (OECD)’s anti Base Erosion and Profit Shifting (BEPS) recommendations, some countries are going further and introducing or proposing additional domestic legislation which is separate from, but interacts closely with, transfer pricing legislation. Fundamentally, these rules mean that if the legal arrangements are not considered to reflect the economic reality or the pricing is not arm’s length, tax authorities can essentially rewrite how the transaction should look and levy tax accordingly. The impact of this on businesses is that they are having to reach a clear, evidence-based view in respect of these complex and often subjective rules, and in many cases are having to respond to ever more detailed and far-reaching information requests from local tax authorities, looking at the activities and motivation for the business operating model.

TP Perspectives: TP in the automotive industry

At the heart of the BEPS project are payments for intangibles and substance requirements. To be sure, the OECD guidelines put suppliers under increased scrutiny by tax authorities. In the past, many tax authorities challenged the business models of suppliers if the income of an entity in a group was not commensurate with their substance. In this article, we examine how the OECD guidelines provide strong support for this view.

TP Perspectives: IP Ownership and arm's length compensation

In July 2017, the OECD released an updated version of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations ("OECD Guidelines"), which incorporates new transfer pricing approaches agreed to by OECD and G20 countries in the 2015 base erosion profit shifting (BEPS) plan final reports. The OECD Guidelines address the issues of returns to IP development by focusing on people function and risk control. In this article, we consider returns to an IP Company with varying degree of economic substance in four different scenarios. Through this analysis, we highlight economic considerations that need to be taken in account when applying the OECD approach to determining IP returns.

Coordinated approach to transfer pricing controls within the EU: "Think international – act international – audit international"

In October 2018, the EU Joint Transfer Pricing forum agreed the Report on a coordinated approach to transfer pricing controls within the EU (the “Report”). The report establishes best practices by issuing various recommendations for both taxpayers and tax administrations, and encourages closer cooperation in the field of transfer pricing controls. The report is aimed at ensuring that tax administrations use the possibilities provided for under the Directive on Administrative Cooperation in the Field of Taxation (Directive 2011/16/EU) on a real time basis for the purpose of achieving a high degree of coordination, smooth communication and exchange of information during a transfer pricing control. It is increasingly common to see tax administrations across the EU working together where there are cross-border arrangements in which they have a shared interest. The UK is making increasingly use of these collaborative approaches, either by international exchange of information or multilateral controls within the EU.

'Cameco' decision addresses the sham doctrine in Canada

On 26 September, the Tax Court of Canada published its decision in Cameco Corporation (2018 TCC 195), resolving a long-running dispute between Cameco Corporation and the Minister of National Revenue involving reassessments to Cameco’s 2003, 2005, and 2006 taxation years. This Tax Insight focuses on the Court’s findings in respect of the sham argument.

Change in Definition of Permanent Establishment in UK Law

The UK finance bill, which was published on 7 November 2018, includes the legislation required to update UK domestic law to align with the UK’s position on the changes to the Permanent Establishment (“PE”) definition arising from the OECD’s Base Erosion and Profit Shifting (“BEPS”) project and included within the Multi-Lateral Instrument (“MLI”). This effectively expands the definition of PE in the UK which, together with forthcoming changes to many Double Tax Treaties, is likely to result in more PEs arising.

Belgium launches pilot program on cooperative tax compliance

The Large Enterprises Division of the Belgian tax administration (LE Division) has announced its launch of a two-year pilot project on cooperative tax compliance (Cooperative Tax Compliance Program - 'CTCP).The program seeks to transform the traditional approach of ex-post tax investigations into a system of proactive, real-time, and constructive dialogue on the tax affairs of corporations. Reducing tax uncertainty, enhancing compliance, and fostering mutual understanding are main goals of the initiative.

OECD Transfer Pricing on Financial Transactions

In early July, as follow up work in relation to the BEPS project, the OECD issued a new public discussion draft paper (the “Draft Paper”) regarding the transfer pricing aspects of financial transactions. The Draft Paper seeks to clarify principles previously included in the 2017 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the “OECD Transfer Pricing Guidelines”) in relation to four areas. Further detail on each of these topics and the implications for Financial Services groups appears below.

EMEA Permanent Establishments Webcast Series - Current Developments in PE Asia-Pacific

After a short break, we are pleased to inform you that we will resume the PE Webcast Series, with Episode 5 – Current developments in PE Asia-Pacific. This webcast will be held on Tuesday, 30 October 2018, 2.00 – 3.00 pm CET and will focus on the typical PE issues that may arise from activities in Australia, China, India and Singapore. Please follow the link to register for the session and we look forward to discussing this important topic with you.

Autumn Budget 2018 - UK Digital Tax

The Chancellor and Financial Secretary to the Treasury have increasingly raised the prospect of a UK Digital Services Tax (DST) in the past few months. The Chancellor is reported to have told officials that “nothing is off the table” and his conference speech noted that “the time for talking is coming to an end and the stalling has to stop … if we cannot reach [multilateral] agreement the UK will go it alone with a digital services tax of its own.”

OECD Financial Transactions Paper Podcast - Guarantees

In this podcast, PwC transfer pricing professionals Jeff Rogers and Daniel Pybus discuss the Guarantees section of the OECD draft financial transactions paper (with some specific insights on the GE Capital case a number of years ago). This podcast forms part of a 5 part series which will cover Delineation, Captives, Interest rate pricing, Guarantees and Cash pooling.

OECD Financial Transactions Paper Podcast - Cash Pooling

In this podcast, PwC transfer pricing professionals Michel van der Breggen, David Ledure and Daniel Pybus discuss the Cash Pooling section of the OECD discussion draft providing insights from a European perspective and also the crossover with recent case law in this area. This podcast forms part of a 5 part series which will cover Delineation, Captives, Interest rate pricing, Guarantees and Cash pooling.

OECD Financial Transactions Paper Podcast - Interest Rate Pricing

In this podcast, PwC transfer pricing professionals Nick Houseman and Daniel Pybus discuss the Interest Rate Pricing section of the OECD draft financial transactions paper (with some specific insights on the crossover between the OECD paper and the Chevron case). This podcast forms part of a 5 part series which will cover Delineation, Captives, Interest rate pricing, Guarantees and Cash pooling.

OECD Financial Transactions Paper Podcast - Captives

In this podcast, PwC transfer pricing professionals Loic Webb-Martin and Daniel Pybus discuss the Captives section of the OECD draft financial transactions paper focussing on the key takeaways, short term actions, and the longer term direction of the OECD / implications of the paper. This podcast forms part of a 5 part series which will cover Delineation, Captives, Interest rate pricing, Guarantees and Cash pooling.

Closer look at the recent HMRC transfer pricing and DPT statistics

This article takes a closer look at the recent HMRC transfer pricing and diverted profits tax (DPT) statistics for 2017/18 and what they mean. Overall, tackling transfer pricing remains a priority area for HMRC, with the 2017/18 TP yield high at £1.7b (in line with the previous year) and an increasing number of HMRC staff dealing with TP issues. The key takeaways from the recent statistics are: 1. Transfer pricing yield remains high 2. DPT is bringing in tax revenues 3. HMRC settles TP enquiries faster 4. HMRC is focused on MAP, limiting resources to deal with APAs.

Practical Impact of BEPS Projects on Transfer Pricing for Private Business

Transfer Pricing (“TP”), the area of international tax concerned with the pricing of intercompany transactions used to be the focus of PLC boardrooms rather than Private Business, but no longer. The OECD’s Base Erosion and Profit Shifting (“BEPS”) project has raised the profile of TP on tax authorities radars for UK inbounds and UK PLCs as well as privately owned and private equity backed business. As a consequence, we have seen a significant increase in the number of TP audits and challenges on Due Diligence, which can give rise to price chips, TP adjustments, penalties, interest, and reputational risk.

More payments face WHT risk from 1 January 2019 as six more territories ratify MLI

Companies face a potentially increased withholding tax (WHT) burden on payments, etc between the UK and Australia, France, Japan, Lithuania and the Slovak Republic from 1 January 2019. These five territories deposited their ratification instruments and final positions in September for the multi-lateral instrument (MLI) to effect BEPS modifications to existing tax treaties. Israel did similarly, but the current UK-Israel tax treaty is not a covered tax agreement for the MLI on the basis that a new agreement or Protocol is being negotiated. There is, of course, a wider impact of these territories’ ratifications for other counterparties and in relation to other taxes. These six join the earlier nine ratification territories so that, where a bilateral treaty is covered (with one proviso) the new year date is also applicable if the treaty involves any two of the current fifteen ratification territories.

Israeli tax authority issues transfer pricing guidance on entity classification and safe harbor ranges

The Israeli Tax Authority (ITA) on 5 September 2018 published two circulars setting out its approach to classification and transfer pricing methods that are appropriate for use in connection with certain intercompany transactions between an Israeli entity and related parties abroad that are part of a multinational group. The circulars set out the ITA's view on the appropriate way to distinguish between entities performing marketing activities and those performing sales activities, as well as how to choose the most appropriate transfer pricing method for use with intercompany transactions involving such entities. Finally, the circulars include indicative benchmark ranges for some transactions that could be used as a form of safe harbor (providing an exemption from certain transfer pricing documentation requirements) where certain requirements are met.

Tax Court of Canada rules in favor of Cameco in transfer pricing case

The Tax Court of Canada has recently published its decision in the long-running dispute between Cameco and the Canada Revenue Agency (CRA) relating to transfer pricing adjustments made by the CRA to Cameco's 2003, 2005, and 2006 taxation years. The adjustments related to the prices used for purchase and sale of uranium contracts involving Cameco, its Swiss­ and US-based foreign subsidiaries, and third parties.

Diverted Profits Tax - dealing with deadlines

In this article, we suggest a constructive approach to HMRC engagement as a key deadline for the issue of preliminary and final charging notices for 2016 approaches. For a business with a December year end which had notified HMRC of potential chargeability to DPT, HMRC has until 31 December 2018 to issue a preliminary notice for the year ended 31 December 2016. This will be particularly relevant for companies that received a notice into 2015 and there remain unresolved issues, or where HMRC have started challenging or querying their 2016 arrangements.

OECD releases additional guidance on Country-by-Country reporting

On 13 September 2018, the OECD released additional guidance on the implementation of country-by-country reporting (CBCR) developed under Action 13 of the OECD BEPS action plan. The new guidance provides additional clarifications with respect to a number of areas, including the treatment of dividends, the use of shortened numbers in Table 1, the treatment of major shareholdings and the reporting consequences of mergers and acquisitions. In some cases, MNE Groups will have filed CBCRs inconsistently with the additional guidance and will have to determine whether to amend CBCRs for prior and future reporting periods.

PwC comments on discussion draft on transfer pricing aspects of financial transactions under BEPS Actions 8-10

On 14 September 2018, the OECD published the public comments received on the discussion draft on transfer pricing aspects of financial transactions, which deals with follow-up work in relation to Actions 8-10 (“Assure that transfer pricing outcomes are in line with value creation”) of the BEPS Action Plan. Part 3 of the public comments (page 115) include the PwC response to the discussion draft. Read the PwC response here.

India’s second APA Annual Report reflects growth, shift in focus

India's Central Board of Direct Taxes (CBDT) have released the Second Annual Report on the Indian Advance Pricing Agreement Programme. The APA Report highlights the progress made in financial year 2017-18. The APA statistics continue to be encouraging, as the total number of concluded APAs has reached 219 (of which 67, including 9 bilateral APAs, were signed in FY 2017-18). A noteworthy development is the shift in focus from Unilateral APAs to Bilateral APAs. There was a slight increase in time taken to conclude APAs in FY 2017-18 over the average of prior periods.

Hong Kong - extensive changes to exchange of information rules enter into force

Hong Kong is honouring its commitment to meet the international standards on exchange of information for tax purposes. With the additional disclosure and increased tax transparency, business groups and individuals should carefully assess whether the changes made will have any potential impact on their tax exposure in their jurisdiction of residence and any other jurisdictions where they have business operations or investment activities.

Permanent Establishment - Services PE developments

Managing Permanent Establishment (“PE”) risks have always been a challenge for tax departments of large Multinational Corporations (“MNCs”). The risks are often largely dependent on the activities and travel patterns of many hundreds or thousands of staff, and keeping track of individuals’ movements and activities is often very difficult.

OECD publishes long-awaited additional guidance on use of profit split methods

On 21 June, the OECD published revised guidance on application of the profit split method. This follows a mandate in Action 10 of the BEPS Action Plan, seeking clarification on application of the profit split method in light of global value chains, and represents a full revision of the current guidance on the use of profit splits in Chapter II of the OECD's Transfer Pricing Guidelines for Multinational Enterprises, as well as the associated Annex II.

Hong Kong enacts new BEPS and transfer pricing law

Hong Kong formally introduces a transfer pricing (TP) regulatory regime and documentation requirement into Hong Kong tax law. As a member of the Inclusive Framework, Hong Kong has begun to fulfill its pledge to put in place the OECD BEPS Initiatives with this enactment. This is the first piece of legislation to explicitly address TP matters in Hong Kong.

Latest Transfer Pricing and DPT statistics from HMRC

HMRC has just released its latest statistics on transfer pricing and Diverted Profits Tax (DPT). In the 6 years to 2017/18, HMRC recorded some £6.5 billion of additional tax by challenging transfer pricing arrangements, with the yield in 2017/18 approaching £1.7 billion. DPT, now in its third year, produced a separate yield of £388 million and the number of DPT notifications has risen to 220. The other significant change is the dramatic fall in Advance Pricing Agreement (APA) applications, which fell to 16 in 2017/18, half the previous year, coupled with an increase in the number of requests for the Mutual Assistance Procedure (MAP) which have more than doubled over the last 6 years. While the average time taken to resolve MAP cases has remained fairly constant at around 2 years, the average time taken to complete APAs has increased substantially and is now over 3 years.

Belgian transfer pricing decision analyses profit attribution to a PE

Beginning in February of 2018, the Belgian tax authorities will initiate a new wave of transfer pricing (TP) audits. The central transfer pricing investigation team (TP Unit) is investing in additional manpower and changing investigation approaches to increase the effectiveness of audits. Taxpayers should also expect more scrutiny on TP matters from other tax departments, such as the Large Companies Department and the Special Tax Inspectorate (BBI/ISI), given specific training was recently conducted to educate these field inspectors on new international tax developments and given the enhanced collaboration protocols those tax departments now have with the TP Unit. Taxpayers may also be increasingly faced with joint/multilateral audits and the international exchange of information through such audits. The TP Unit is teaming with foreign tax authorities more frequently to conduct investigations and check consistency of taxpayer information.

Peru clarifies requirements for Master File and CbC Reporting

On 29th June 2018, the Peruvian Tax Administration (SUNAT) published the Superintendence Resolution. The resolution establishes the scope and deadlines for the presentation of the Master File (MF) and the Country-by-Country Report Informative Returns (CbC Report). With this guidance, multinational groups having operations in Peru that have not yet prepared these Informative Returns for Fiscal Year 2017 should do so as soon as possible.

Mexico issues new rules for transfer pricing adjustments

On 11 July 2018, the Mexican Tax Authority (SAT) published amendments to the rules for transfer pricing adjustments. The rules provide the definition of transfer pricing adjustments, the types of adjustment, and additional requirements to be met for adjustments to income and deductions. The new rules should provide greater clarity and certainty to taxpayers in Mexico but require more supporting documentation.

Profit fragmentation – draft legislation

The new anti-avoidance rules on profit fragmentation apply from April 2019. They are designed to target abusive arrangements but the draft legislation is much wider. We believe that many normal businesses may need to notify HMRC of arrangements involving overseas entities under the new rules, even if it is clear that no extra tax will ultimately be due. We have brought this to HMRC’s attention but it is unlikely that any industry specific exemptions will be introduced.

OECD non-consensus discussion draft on the transfer pricing aspects of financial transactions: no longer just about contractual risk

One of the last missing pieces of the OECD BEPS project, is the development of transfer pricing guidance on financial transactions. While the OECD had pushed back the publication several times, on 3 July it published a first discussion draft (the Draft). The complexity of the topics and disparate regional approaches has led to the publication of a non-consensus document, within which there are many areas where the OECD is seeking input from commentators. The Draft sets outs various approaches that may be appropriate for the covered topics, without giving explicit guidance. This Tax Insight provides a brief summary of the Draft, while more detailed observations will follow shortly in a Tax Insight and Tax Policy Bulletin

The UK Tops Forbes' Best Countries For Business 2018

Forbes determines the Best Countries for Business by rating 153 nations on 15 different factors including property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape and investor protection, weighting each category equally. The UK has risen from last year’s fifth place to first place in 2018.

Transfer Pricing Updated draft APA template released by IRS offers taxpayers more options

On 14 May, the IRS's Advance Pricing and Mutual Agreement Program (APMA) released a new template that taxpayers must use when requesting an advance pricing agreement (APA) in the US. The new template updates a proposed draft template that the IRS made available for public discussion in September 2017. An announcement explaining the new template and the IRS response to public comments preceded its release.

New Dutch transfer pricing decree implements OECD guidelines

The Decree provides further guidance on application of the arm's length principle and aims to incorporate recent changes following the OECD BEPS project and related changes in the 2017 OECD Transfer Pricing Guidelines. The Decree emphasises the importance of conduct over contract and functions to control risks, as well as explicitly calling attention to penalties.

Transfer pricing - cost base and share options

Many listed and some unlisted companies, whether UK or inbound, will meet the conditions to claim a statutory UK Corporate Tax deduction in relation to their employee share plans. There are a number of conditions to be met to claim this deduction, with one of the most important being that the employee actually acquires shares. Many companies now net settle their awards i.e. the share award is settled partly in shares and partly in cash, with the cash being used to fund the taxes due. This can restrict the statutory deduction the company can claim as employees acquire less shares. Companies should consider the impact of net settlement on their current and historic corporate tax deductions in the UK and how these share awards should be reported on their ERS annual returns.

Are the future OECD transfer pricing guidelines on related party financial transactions set in stone?

A consultation draft (practice note) to help policymakers and tax authorities of developing countries address potential profit shifting from mining activities through excessive interest deductions was published on 18 April 2018 by the OECD and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). Notwithstanding the limited scope of this report, it offers a glimpse of the OECD's evolving stance on the transfer pricing aspects around interest limitation rules.

Australia extends CbC reporting deadline for Local File Part A

In relation to the Australian Country by Country (CbC) reporting rules, the Australian Taxation Office (ATO) has released the timeframes for filing the Australian Local Files for the year ended 31 December 2017 ("Year 2" Australian Local Files) or later. Taxpayers that wish to lodge "Part A" of their Local File instead of completing certain questions on the International Dealings Schedule (IDS) will have until 14 September 2018 to lodge Part A.

OECD guidance on attribution of profits to PEs leaves unanswered questions

On 22 March, the OECD released a final report containing additional guidance on attribution of profits to permanent establishments (the Report). The Report sets forth high-level principles for attributing profits to permanent establishments (PEs), following the two discussion drafts published in July 2016 and June 2017 and public discussions held in November 2016 and November 2017. The Report provides further guidance on the Final Reports on Base Erosion and Profit Shifting (BEPS) published in October 2015.

First bilateral APA completed between Belgian and Indonesian tax authorities

This is the first BAPA between both countries, and is also one of the very few Competent Authority cases (including Mutual Agreement Procedures) between an EU jurisdiction and the Government of the Indonesian Republic. The BAPA concerns the arm's length remuneration for the use and exploitation of intangibles by an Indonesian operational company, and licensed by a Belgian company.

Vietnam update on transfer pricing filing due dates

On 24 February 2017, the Vietnamese government released transfer pricing decree No. 20/2017/ND-CP: “Providing the tax administration applicable to enterprises having controlled transactions” (Decree 20). Decree 20, which is effective from 1 May 2017, is understood to apply to taxpayers with a year end after this date.

UK Transfer Pricing Legislation Updated

UK Transfer Pricing legislation provides that it is to be interpreted “in such manner as best secures consistency" with a specific version of the OECD Guidelines. Until now this was the 2010 version as amended by the OECD’s final Base Erosion and Profit-Shifting (BEPS) Report of October 2015.

New Taiwan transfer pricing documentation requirements finalised

On 13 November 2017, the Taiwan Ministry of Finance (MOF) announced amendments to the Rules Governing Assessment of Profit-seeking Enterprise Income Tax on Non-Arm's Length Transfer Pricing (TP Assessment Rules). Subsequently, on 13 December 2017, the thresholds for the Master File and the Country-by-Country Report (CbC Report) were announced. A three-tiered approach, including the existing Local File and newly introduced Master File and CbC Report, will apply starting from fiscal year 2017.

IRS issues guidance to examiners on important transfer pricing issues

On 21 January 2018, the IRS Large business and International (LB&I) Division on issued five memoranda providing administrative guidance to examiners on several key transfer pricing related examination issues. The memoranda also highlight certain technical transfer pricing issues that remain priorities for LB&I. In general, the memoranda reflect the IRS's broader intent to deploy effectively its limited examination resources and to be selective and strategic in the types of transfer pricing issues it decides to pursue.

CbC reporting local filing obligation confirmed for certain Canadian taxpayers

The Canada Revenue Agency (CRA) recently confirmed that a Canadian taxpayer must file a 2016 country-by-country (CbC) report as a constituent entity (CE) in Canada - even if a CbC report is filed by the group's ultimate parent entity (UPE) or surrogate parent entity (SPE) in another jurisdiction - in all cases where (1) Canada does not have an activated exchange agreement with the jurisdiction of the UPE or SPE by 31 December 2017 or (2) has an activated agreement but it is not in effect for fiscal years beginning 1 January 2016.

Draft transfer pricing legislation comes to Hong Kong

On 29 December 2017, a draft bill to implement key actions arising from the OECD BEPS agenda was published. The draft bill includes significant changes to codify transfer pricing, introduce country-by-country (CbC) reporting and Master File and Local File transfer pricing documentation, expand the Advance Pricing Agreement (APA) regime and introduce a stringent penalty regime with potential civil and criminal sanctions. The draft bill is more complex than expected, goes beyond the BEPS minimum standards and introduces a strict approach to determining "the" arm's length price.

PwC response to OECD on attribution of PEs

On 22 March, the OECD released a final report containing additional guidance on attribution of profits to permanent establishments (the Report). The Report sets forth high-level principles for attributing profits to permanent establishments (PEs). The new additional guidance indicates that the high-level principles should apply regardless of whether the countries involved have adopted the principles of the Authorised OECD Approach (AOA) to attributing profits to PEs. It addresses issues surrounding commissionaire structures and the anti-fragmentation rules covered in the report on BEPS Action 7 issued on 5 October 2015 and under the Multilateral Instrument (MLI). In general, while offering some helpful and welcome views, the Report is limited to providing high-level guidance.

OECD seeks input on new mandatory disclosure rules

There have been dramatic improvements in tax transparency over the past decade. However, challenges still remain. High profile leaks, such as the release of the 'Panama' and the 'Paradise' papers by the International Consortium of Investigative Journalists (ICIJ), underscore the widespread use of offshore structures to hide beneficial ownership of assets and income.

Country by Country Reporting update

The OECD recently issued a new handbook outlining 19 Transfer Pricing and BEPS risks and risk assessment options available to Tax Authorities to determine if multi national enterprises (MNEs) groups are exhibiting those risk.

Country by Country Reporting - are you prepared for XML conversion

UK headquartered groups caught by Country by Country Reporting (CbCR) rules with December year ends, the deadline for their first submission is 31 December 2017. The report must be made in the form of an XML document. You cannot submit a pdf or alternative file format. PwC's service takes your excel or word CbC report and with limited additional effort from you converts the information into an XML format ready for submission.

The risky side of transfer pricing

The revised OECD Transfer Pricing Guidelines (2017) include a detailed risk analysis framework to guide taxpayers and tax authorities on the allocation and assumption of risk under the arm's length principle. The purpose of this article is to review the current stance of tax authorities globally as to how they are intending to use this risk analysis framework in practice.

The impact of DEMPE

Before BEPS asking a TP practitioner what does DEMPE mean? might have elicited a strange response, but BEPS has changed all that. This article discusses DEMPE functions, what are they, which are important and what do they mean for a transfer pricing analysis.

Customs & TP – solutions for harmony

The rules governing customs duties and transfer pricing often don't align. Managing these inherent disconnections is complex, time consuming and challenging for businesses. This article discusses how to effectively manage these tensions and gain additional cross tax efficiencies and reduce risk/administrative burden.

OECD, BEPS and Permanent Establishments

PwC's submitted response to the OECD for PricewaterhouseCoopers International Limited on behalf of its network of member firms welcoming the opportunity to comment on the OECD’s second Public Discussion Draft on Additional Guidance on the Attribution of Profits to Permanent Establishments and requesting a chance to speak at the subsequent public consultation.

TP Documentation in the Middle East?

This Tax Insight, from Transfer Pricing, analyses some of the potential benefits for multinationals operating in the Middle East of preparing and maintaining a TP Masterfile and TP local files on a selective basis.

HMRC's TP and DPT statistics to 2016/17

HMRC recently released its 2016/17 statistics in relation to transfer pricing and diverted profits tax. In the years from 2011/12 to 2016/17, HMRC secured £5.914 billion of additional tax by challenging the transfer pricing arrangements of multinationals. DPT was first applied in 15/16.