Worldwide Transfer Pricing Reference Guide - Ernst &...

Worldwide Transfer Pricing Reference Guide2016–17

2Worldwide Transfer Pricing Reference Guide 2

Worldwide Transfer Pricing Reference Guide T r a ns f er P r icing r ul es a nd r eg ul a tions a r ound th e w or l d continue to g r ow in num b er a nd in com p l ex ity . P r a ctitioner s need to h a v e cur r ent k now l edg e of a com p l ex w eb of countr y ta x l a w s , r eg ul a tions , r ul ing s , m eth ods a nd r eq uir em ents .

T h e E Y World Transfer Pricing Global Reference Guide is a tool des ig ned to h el p inter na tiona l ta x ex ecutiv es q uick l y identif y tr a ns f er p r icing r ul es , p r a ctices a nd a p p r oa ch es . T h es e m us t b e under s tood in or der f or a com p a ny to ca r r y out b oth com p l ia nce a nd p l a nning a ctiv ities . T h e inf or m a tion incl uded in th e g uide now cov er s 1 1 8 countr ies a nd ter r itor ies in w h ich

T h e tr a ns f er p r icing g l ob a l r ef er ence g uide is m ea nt to p r ov ide a n ov er v iew f or th e cov er ed j ur is dictions r eg a r ding th eir tr a ns f er p r icing ta x l a w s , r eg ul a tions a nd r ul ing s ; O r g a nis a tion f or E conom ic C o- op er a tion a nd D ev el op m ent (O E C D ) g uidel ines tr ea tm ent, p r ior ities a nd p r icing m eth ods ; p ena l ties ; th e p otentia l f or r el ief f r om p ena l ties ; docum enta tion

a udits a nd tr a ns f er p r icing s cr utiny b y th e ta x a uth or ity ; a nd op p or tunities f or a dv a nce p r icing a g r eem ents (A P A s ).

l ink b el ow to f ol l ow a nd tr a ck th e l a tes t dev el op m ents th a t m a y b e r el ev a nt.

E Y o n B E P S

A w eb - b a s ed v er s ion of th is p ub l ica tion ca n b e f ound a t ey . com . P l ea s e ch eck th is w eb p a g e p er iodica l l y f or l a te- b r ea k ing countr y dev el op m ents .

conta ct l is ted a t th e b a ck of th is b r och ur e.

P l ea s e note th e a v a il a b il ity of oth er tr a ns f er p r icing m a ter ia l s s uch a s s ur v ey r ep or ts th a t s h a r e v iew s of ta x a uth or ities a nd ta x dir ector s (ey . com The Worldwide Corporate Tax Guide; The Worldwide Personal Tax Guide; a nd The Worldwide VAT, GST and Sales Tax Guide.

The content is correct as of 15th August 2016 unless otherwise noted. This publication should not be regarded as offering a complete explanation of the tax matters referred to and is subject to changes in the law and other applicable rules.

Worldwide Transfer Pricing Reference Guide3

http://www.ey.com/gl/en/services/tax/ey-oecd-base-erosion-and-profit-shifting-project-by-action

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C ontentsL eg end 7 F ij i 1 4 0

G l os s a r y of ter m s 8 F inl a nd 1 4 3

A l b a nia 1 0 F r a nce 1 4 6

A l g er ia 1 4 G a b on 1 5 4

A ng ol a 1 7 G eor g ia 1 5 6

A r g entina 2 1 G er m a ny 1 5 9

A r m enia 2 5 G h a na 1 6 6

A us tr a l ia 2 7 G ib r a l ta r 1 6 9

A us tr ia 3 8 G r eece 1 7 2

44 G ua m 1 7 5

4 G ua tem a l a 1 7 8

H ondur a s 1 8 1

4 4

H ung a r y 1 8 7

4 I cel a nd 1 9 3

I ndia 1 9 5

C a m er oon 7 6 I ndones ia 2 0 0

C a na da 7 9 I r a q 2 0 4

4 I r el a nd 2 0 6

C h il e 8 7 I s r a el 2 1 0

C h ina 9 3 I ta l y 2 1 4

C ol om b ia 9 9 J a p a n 2 1 9

4 J or da n 2 2 4

C r oa tia 1 0 7

C y p r us 1 1 0 K eny a 2 2 9

K os ov o 2 3 2

D enm a r k 1 1 5 K uw a it 2 3 5

L a os 2 3 9

E cua dor 1 2 2 L a tv ia 2 4 1

E g y p t 1 2 9 L eb a non 2 4 4

L ib y a 2 4 6

E s tonia 1 3 7 L ith ua nia 2 4 8

Worldwide Transfer Pricing Reference Guide 4

L ux em b our g 2 5 1

4

4 4

N a m ib ia 2 9 1 4

N eth er l a nds 2 9 3 T a iw a n 4 0

4

N ica r a g ua 3 0 2 T h a il a nd 4 1

N ig er ia 3 0 4 T ur k ey 4 1

N or w a y 3 0 4

O m a n 3 1 4

P a k is ta n 3 1 4 4

P a na m a 3 1 4

P a p ua N ew G uinea 3 4 4

P a r a g ua y 3 2 4

P er u 3 2 44

P h il ip p ines 3 2 44

P ol a nd 3 3 4

P or tug a l 3 4 T r a ns f er p r icing conta cts 4 5 4

Q a ta r 3 4


L egendTaxing authority and tax law: na m e of ta x ing a uth or ity a nd s ta tutor y p r ov is ions cur r entl y in ef f ect in ea ch j ur is diction.

Relevant regulations and rulings: cur r ent tr a ns f er p r icing r ul es a nd r eg ul a tor y p r ov is ions in ef f ect in ea ch j ur is diction.

OECD Guidelines treatment: cons ider a tion g iv en b y th e ta x ing a uth or ity to th e O E C D T r a ns f er P r icing G uidel ines f or

Documentation requirements: g ov er ning ta x a uth or ity r eq uir em ents or r ecom m enda tions th a t ta x p a y er s p r ep a r e a nd m a inta in w r itten docum enta tion to conf ir m th a t th e a m ounts ch a r g ed in r el a ted- p a r ty tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th s ta nda r d.

Priorities/pricing methods: tr a ns f er p r icing m eth ods a l l ow ed, a s w el l a s th e p r ior ity of ea ch m eth od.

Return disclosures/related-party disclosures: inf or m a tion on dis cl os ur es r eq uir ed f r om ta x p a y er s r eg a r ding r el a ted- p a r ty tr a ns a ctions .

Transfer pricing-specific returns: th es e incl ude a ny tr a ns f er p r icing - s p ecif ic f or m s r eq uir ed to b e f il ed w ith in th e j ur is diction.

Documentation deadlines: dea dl ine f or p r ep a r ing tr a ns f er p r icing docum enta tion.

Transfer pricing penalties: dis cus s ion of p otentia l l y a p p l ica b l e tr a ns f er p r icing p ena l ties if a ta x p a y er is deter m ined not to b e in com p l ia nce w ith th e r ul es im p os ed b y th e ta x ing a uth or ity .

Penalty relief: p otentia l w a y s in w h ich p ena l ties m a y b e r educed or a v oided.

Statute of limitations on transfer pricing assessments: dis cus s ion of th e a p p l ica b l e s ta tute of l im ita tions r eg a r ding tr a ns f er p r icing ex a m ina tion a nd a s s es s m ents .

Frequency of tax audits/transfer pricing scrutiny: dis cus s ion of th e l ev el of f r eq uency of th e ta x a uth or ity s ub j ecting

em p l oy ed. T h is is b a s ed on th e p a s t ex p er ience of our l oca l ta x p r of es s iona l s a nd is not a f or w a r d- l ook ing p r ediction.

APA opportunity: dis cus s ion of th e p os s ib il ity of ob ta ining a n a dv a nce p r icing a g r eem ent w ith th e ta x a uth or ity .

Impact of new OECD BEPS Action 8-10 guidelines: dis cus s ion on h ow a j ur is diction w il l a p p l y th e a m ended O E C D


Glossary of t erm sAPA (Advance Pricing Agreement)

th e deter m ina tion of th e a p p r op r ia te tr a ns f er p r icing m eth od to b e us ed f or p r icing inter com p a ny tr a ns a ctions . A P A s m a y b e unil a ter a l , b il a ter a l (tw o g ov er nm ents ) or m ul til a ter a l (th r ee or m or e g ov er nm ents ).

Arm’s-length principleT h e s ta nda r d a dop ted b y th e O E C D a nd in m a ny j ur is dictions , w h ich m a nda tes th a t th e r es ul t r el a ted p a r ties ob ta in f r om a n inter com p a ny tr a ns a ction a p p r ox im a tes th e r es ul t th a t uncontr ol l ed p a r ties w oul d h a v e ob ta ined h a d th ey under ta k en th e s a m e tr a ns a ction under th e s a m e cir cum s ta nces .

BEPS (Base Erosion and Profit Shifting)O n 1 2 F eb r ua r y 2 0 1 3 th e O E C D r el ea s ed its r ep or t Addressing Base Erosion and Profit Shifting f ol l ow ed b y th e r el ea s e of a n A ction P l a n on 5 O ct 2 0 1 5 . T h us , th e O E C D a im s to dev el op a p p r oa ch es f or a ddr es s ing g ov er nm ent

CbCR (Country-by-Country Reporting)

r ep or t th a t p r ov ides inf or m a tion on th eir g l ob a l a l l oca tion of incom e, econom ic a ctiv ity a nd ta x es p a id a m ong countr ies .

CFC (Controlled Foreign Corporation)

CPM (Comparable Profits Method)

a n a r m ’ s - l eng th cons ider a tion f or tr a ns f er s of ta ng ib l e p r op er ty , inta ng ib l e p r op er ty a nd s er v ices tr a ns a ctions . I f th e r ep or ted op er a ting incom e of th e tes ted p a r ty is not w ith in a cer ta in r a ng e, a n a dj us tm ent w il l b e m a de. I n ef f ect, th is m eth od r eq uir es a com p a r is on of th e op er a ting incom e th a t r es ul ts f r om th e cons ider a tion a ctua l l y ch a r g ed in a contr ol l ed tr a ns f er w ith th e op er a ting incom e of s im il a r ta x p a y er s th a t a r e uncontr ol l ed.

CSA (Cost Sharing Agreement) or CCA (Cost Contribution Arrangement)A f r a m ew or k a g r eed a m ong enter p r is es to s h a r e th e cos ts a nd r is k s of dev el op ing , p r oducing or ob ta ining a s s ets , s er v ices or r ig h ts a nd to deter m ine th e na tur e a nd ex tent of th e inter es ts of ea ch p a r ticip a nt in th e r es ul t of th e a ctiv ity of dev el op ing , p r oducing or ob ta ining th os e a s s ets , s er v ices or r ig h ts .


CUP method (Comparable Uncontrolled Price)

A tr a ns f er p r icing m eth od th a t com p a r es th e p r ice f or p r op er ty or s er v ices in a contr ol l ed tr a ns a ction w ith th e p r ice ch a r g ed f or p r op er ty or s er v ices tr a ns f er r ed in a com p a r a b l e uncontr ol l ed tr a ns a ction in com p a r a b l e cir cum s ta nces .

ETR (Effective Tax Rate)T h e p er centa g e ob ta ined b y div iding th e ta x p a y er ’ s ta x

th e r a te a t w h ich a ta x p a y er w oul d b e ta x ed if h is or h er ta x l ia b il ity w er e ta x ed a t a cons ta nt r a te r a th er th a n p r og r es s iv el y .

EU (European Union)

EUJTPF (EU Joint Transfer Pricing Forum)

r ep r es enta tiv es of g ov er nm ents a nd th e p r iv a te s ector , w h ich a dv is e a nd cons ul t on tr a ns f er p r icing is s ues .

FTE (Full-Time Equivalent)

em p l oy ed b y ta x a uth or ities to under ta k e tr a ns f er p r icing r ev iew s in th eir j ur is dictions .

GAAP (Generally Accepted Accounting Principles)T h e r ul es a nd p r a ctices r eq uir ed to b e f ol l ow ed in cer ta in

a ccount.

MNE (Multinational Enterprise)A m em b er of a r el a ted g r oup , th a t ca r r ies on b us ines s dir ectl y or indir ectl y in tw o or m or e countr ies .

MAP (Mutual Agreement Procedure)A dis p ute r es ol ution p r oces s f ound in A r ticl e 2 5 of th e

p r oces s of neg otia tion to r es ol v e m a tter s of ta x a tion not in a ccor da nce w ith th e p a r ticul a r ta x tr ea ty a nd to a ttem p t to a v oid doub l e ta x a tion.

OECD (Organisation for Economic Co-operation and Development)

to f os ter inter na tiona l tr a de a nd econom ic dev el op m ent. T h e O E C D h a s 3 4 m em b er s ta tes . A m ong its m a ny concer ns

s er v ices a nd th e a v oida nce of doub l e ta x a tion of incom e or

conv ention; s ee b el ow .

OECD Guidelines

a nd T a x A dm inis tr a tions , th e l a tes t edition of w h ich w a s p ub l is h ed b y th e O E C D in 2 0 1 0 . T h e O E C D G uidel ines endor s e th e a r m ’ s - l eng th p r incip l e a nd cons is t of a

b e a p p l ied.

OECD Model Tax Convention

is to b e us ed b y m em b er s ta tes in neg otia tions of b il a ter a l doub l e ta x tr ea ties . T h e O E C D a l s o p r ov ides com m enta r y on

th a t m em b er countr ies s h oul d f ol l ow th is com m enta r y , s ub j ect to th eir ex p r es s ed r es er v a tions th er eon, w h en a p p l y ing a nd inter p r eting th eir doub l e ta x tr ea ties .

PLI (Profit Level Indicator)

dis cus s ion of th eir a p p l ica tion.

PATA (Pacific Association of Tax Administrators)A n a s s ocia tion of th e ta x a dm inis tr a tions of A us tr a l ia ,

coop er a tion a nd th e ex ch a ng e of inf or m a tion a m ong

docum enta tion r eq uir em ents .

TNMM (Transactional Net Margin Method)


A lb ania

1 0Worldwide Transfer Pricing Reference Guide

Taxing authority and tax law

Relevant regulations and rulings

• L a w N o. 8 4 3 8 on I ncom e T a x es , a s a m ended (I ncom e T a x L a w ), da ted 2 8 D ecem b er 1 9 9 8

• 4

• E f f ectiv e 4 J une 2 0 1 4 , A r ticl es 3 6 - 3 6 / 7 w er e intr oduced, p r ov iding a m or e com p r eh ens iv e r eg ul a tor y f r a m ew or k on inter na tiona l tr a ns f er p r icing , a l ig ned w ith th e O E C D T r a ns f er P r icing G uidel ines of 2 0 1 0 (O E C D T P G 2 0 1 0 ).

•

•

• A r ticl e 1 1 5 / 1 a ddr es s es p ena l ties r el a ted to tr a ns f er p r icing .

• D oub l e ta x a tion tr ea ties ena cted b y A l b a nia

4p r ov iding f ur th er g uida nce on th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e a nd th e p r ep a r a tion of th e tr a ns f er p r icing docum enta tion.

im p l em enta tion of th e A P A s .

OECD Guidelines treatment

T h e a r m ’ s - l eng th p r incip l e under th e A l b a nia n tr a ns f er p r icing l eg is l a tion a nd ins tr uction is in l ine w ith th e p r ov is ions of A r ticl e 9 (1 ) of

2 0 1 0 .

in th e com p a r a b il ity a na l y s is , th e nine- s tep p r oces s of th e O E C D T P G 2 0 1 0 in th e s ea r ch f or com p a r a b l es a nd th e p r ep a r a tion of th e

th e O E C D g uida nce.

I ns tr uctions s h a l l p r ev a il .

Documentation requirements

D ocum enta tion r eq uir em ents a r e s tip ul a ted in A r ticl e 3 6 , P a r a g r a p h 5 , of th e I ncom e T a x L a w . F ur th er g uida nce on th e docum enta tion 4

1 1

A lb ania (continued)

Worldwide Transfer Pricing Reference Guide

•

•

• A des cr ip tion of th e contr ol l ed tr a ns a ction, incl uding a na l y s is of th e com p a r a b il ity f a ctor s a nd deta il s of a p p l ied tr a ns f er p r icing p ol icies

•

• A com p a r a b il ity a na l y s is , incl uding a des cr ip tion of th e p r oces s ca r r ied out to identif y com p a r a b l e uncontr ol l ed tr a ns a ctions , a n ex p l a na tion of th e b a s is f or th e r ej ection of a ny p otentia l inter na l com p a r a b l e uncontr ol l ed tr a ns a ctions , a des cr ip tion of th e com p a r a b l e uncontr ol l ed tr a ns a ctions , a n a na l y s is of th e com p a r a b il ity of th e contr ol l ed tr a ns a ctions a nd th e com p a r a b l e uncontr ol l ed tr a ns a ctions , a nd inf or m a tion on a ny com p a r a b il ity a dj us tm ents m a de

• A n ex p l a na tion of a ny econom ic a na l y s is a nd p r oj ections r el ied up on

• C oncl us ions on w h eth er th e conditions of th e contr ol l ed tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e, incl uding deta il s of a ny a dj us tm ents m a de to ens ur e com p l ia nce

• D eta il s of a ny A P A s or s im il a r a r r a ng em ents in oth er countr ies a p p l ica b l e to th e contr ol l ed tr a ns a ctions

• A ny oth er inf or m a tion th a t m a y h a v e a m a ter ia l im p a ct on th e deter m ina tion of th e ta x p a y er ’ s com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e, w ith r es p ect to th e contr ol l ed tr a ns a ctions

Priorities/pricing methods

a p p r op r ia te m eth ods . P r ef er ence is g iv en to th e b es t m eth od p r ov iding th e m os t r el ia b l e r es ul ts .

Return disclosures/related-party disclosures

th eir contr ol l ed tr a ns a ctions ex ceeds A L L 5 0 m il l ion.

(i. e. , w ith out of f s etting cr edit a nd deb it v a l ues ).

T h e notice conta ins inf or m a tion on th e na tur e of inter com p a ny tr a ns a ctions p er counter p a r ty , th e v a l ue th er eof , th e tr a ns f er p r icing m eth od a p p l ied a nd w h eth er tr a ns f er p r icing docum enta tion ex is ts . F ur th er m or e, th er e a r e l is ted tr a ns a ctions f or no cons ider a tion a nd b us ines s r es tr uctur ing s , incl uding r ea l l oca tion of f unctions , a s s ets or r is k s , a nd ch a ng es in th e g r oup l eg a l s tr uctur e.

Transfer pricing-specific returns

A l b a nia does not r eq uir e a s ep a r a te r etur n f or r el a ted- p a r ty tr a ns a ctions .

1 2



Documentation deadlines

D ocum enta tion m us t b e s ub m itted w ith in 3 0 da y s up on r eceip t of th e ta x a uth or ity ’ s r eq ues t, w h ich ca n b e initia ted a t a ny tim e a f ter th e

A l b a nia n, w h ich s h oul d b e p r ov ided w ith in 3 0 da y s of th e ta x a uth or ities ’ r eq ues t f or tr a ns l a tion.

T r a ns f er p r icing docum enta tion s h oul d b e up da ted a nnua l l y . H ow ev er , ta x p a y er s w ith a tur nov er of l es s th a n A L L 5 0 m il l ion th a t us e

conditions of th e contr ol l ed tr a ns a ctions , th e com p a r a b il ity of th e ex ter na l da ta a nd th e r el ev a nt econom ic cir cum s ta nces .

Transfer pricing penalties

T r a ns f er p r icing a dj us tm ents in w h ich no docum enta tion h a s b een m a de a v a il a b l e tr ig g er l a te p a y m ent p ena l ties of 5 % of th e a dditiona l incom e ta x l ia b il ity a s s es s ed f or ea ch m onth of del a y , ca p p ed a t 2 5 % th er eof , a s w el l a s def a ul t inter es t.

Penalty relief

T a x p a y er s th a t h a v e s ub m itted th e tr a ns f er p r icing docum enta tion in a tim el y m a nner (i. e. , w ith in 3 0 da y s up on r eceip t of th e ta x a uth or ities ’ r eq ues t) s h a l l b e r el iev ed f r om p ena l ties in th e ca s e of a tr a ns f er p r icing a dj us tm ent, a nd th ey w il l b e l ia b l e to p a y onl y th e a dditiona l ta x l ia b il ity a nd def a ul t inter es t.

I n p r incip l e, th e ta x a dm inis tr a tion b ea r s th e b ur den of p r oof to s ub s ta ntia te on w h a t g r ounds th ey cons ider th a t th e tr a ns f er p r ices a p p l ied a r e not in l ine w ith th e a r m ’ s - l eng th p r incip l e. H ow ev er , w h en th e ta x p a y er h a s p r ep a r ed docum enta tion a nd m a k es it a v a il a b l e to th e ta x a uth or ities , th e b ur den of p r oof s h if ts to th e ta x p a y er .

Statute of limitations on transfer pricing assessments

r ea s s es s m ent on th e m a tter a t is s ue in th e p r oceeding a r e not p r es cr ib ed.

Frequency of tax audit and transfer pricing scrutiny by the tax authority

to f our y ea r s . I n l ig h t of th e tr a ns f er p r icing r ul es th a t b eca m e ef f ectiv e on 4 J une 2 0 1 4 , a nd es p ecia l l y due to th e new l y intr oduced

a nticip a te th a t tr a ns f er p r icing ta x a udits w il l incr ea s e r a p idl y .

T h e ta x a dm inis tr a tion is unl ik el y to ch a l l eng e th e m eth odol og y a p p l ied. I n p r incip l e, in ex a m ining th e a r m ’ s - l eng th ch a r a cter of a tr a ns a ction, th e ta x a dm inis tr a tion s h oul d us e th e s a m e tr a ns f er p r icing m eth od a p p l ied b y th e ta x p a y er , to th e ex tent th a t it is th e m os t a p p r op r ia te one f or th a t tr a ns a ction.

1 3



APA opportunity

T a x p a y er s th a t under ta k e contr ol l ed tr a ns a ctions ex ceeding in a g g r eg a te th e v a l ue of A L L 4 , 2 b il l ion f or th e p r op os ed p er iod of a p p l ica tion a r e el ig ib l e to a p p l y f or unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s w ith no r ol l b a ck op tion. E x cep tions to th e a g g r eg a te

on A P A s p r ov ides m a na g em ent p r ocedur es , dis cl os ur e r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts .

Impact of new OECD BEPS Action 8-10 guidelines

A lgeria



dir ection)


• A r ticl e 1 4 1 b is of th e A l g er ia n D ir ect T a x C ode

• A r ticl e 1 9 2 of th e A l g er ia n D ir ect T a x C ode

• A r ticl e 2 0 ter of th e A l g er ia n T a x P r ocedur e C ode

• A r ticl e 1 6 9 b is of th e A l g er ia n T a x P r ocedur e C ode

A decr ee, da ted 1 2 A p r il 2 0 1 2 , dr ew up a l is t of entities ob l ig a ted to p r ov ide tr a ns f er p r icing docum enta tion a nd l is ted its content.


p r a ctice a r e not p r ov ided ex p l icitl y .


4

•

•

•

• A g ener a l des cr ip tion of th e f unctions p er f or m ed, r is k s incur r ed a nd a s s ets of ea ch r el a ted com p a ny

• A g ener a l des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy

•

• A des cr ip tion of th e com p a ny , th e a ctiv ities it p er f or m s a nd th e na tur e of th e tr a ns a ctions it is eng a g ed in, incl uding ch a ng es th a t h a v e

•(incl uding r oy a l ties ); th is inf or m a tion m a y b e p r es ented g l ob a l l y b y tr a ns a ction ty p e

•

• A l is t of th e m a in inta ng ib l e a s s ets h el d in r el a tion to th e com p a ny (s uch a s p a tents , tr a dem a r k s , tr a de na m es a nd k now - h ow )

• C op ies of a l l a g r eem ents b etw een th e com p a nies concer ned

1 5

A lgeria (continued)


• F ina ncia l inf or m a tion, ov er h ea d a nd a dm inis tr a tiv e ex p ens es , a nd r es ea r ch a nd dev el op m ent cos ts

•

a dm inis tr a tion.

• De jure or de factop r ov ided b y l a w

• J oint s tock com p a nies a nd p a r tner s h ip s th a t h a v e op ted f or th e ta x r eg im e f or j oint s tock com p a nies w h os e s a l es a t th e cl os e of th e

• De jure or de facto g r oup s of com p a nies in w h ich th e a nnua l s a l es of a ny one of th e m em b er com p a nies a r e g r ea ter th a n or eq ua l to

• C om p a nies es ta b l is h ed in A l g er ia th a t a r e m em b er s of f or eig n g r oup s (r eg a r dl es s of th e A l g er ia n ta x r eg im e a p p l ied)


tr a ns f er p r icing m eth od, b ut th e A l g er ia n ta x a uth or ities is s ued g uidel ines in 2 0 1 0 r ef er r ing to th e O E C D m eth ods . I n th eor y , a l l O E C D

com p a r a b il ity .

A l g er ia n tr a ns f er p r icing r ul es a p p l y f or b oth cr os s - b or der tr a ns a ctions a nd dom es tic tr a ns a ctions w ith r el a ted p a r ties .


I n th e f r a m ew or k of a ta x a udit, ta x ins p ector s a r e entitl ed to a udit p os s ib l e inf r ing em ent of th e a r m ’ s - l eng th p r incip l e w ith r el a ted p a r ties

b etw een indep endent enter p r is es .

Transfer pricing–specific returns

N ot a p p l ica b l e.


p r icing p ol icy in th e f r a m ew or k of a ta x a udit.

1 6

A lgeria (continued)



is entitl ed to s end a f or m a l notice a s k ing f or it to b e com p l eted or p r ov ided w ith in 3 0 da y s . T h e p ena l ty f or not doing s o ca n b e

a l s o a p p l y .

Penalty relief

(remise conditionnelle) p r ocedur e p r ov ided b y th e A l g er ia n T a x P r ocedur e C ode, under cer ta in conditions .


T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is th e s a m e a s f or a l l A l g er ia n cor p or a te ta x a s s es s m ents (i. e. , f our y ea r s f ol l ow ing th e y ea r f or w h ich th e ta x is due).


on a continuous b a s is .

T a x a udits a nd ta x r ea s s es s m ents r el a ted to tr a ns f er p r icing a r e m or e a nd m or e f r eq uent. F iel d a uditor s a r e not a l w a y s f a m il ia r w ith tr a ns f er p r icing concep ts , a nd th e a dj us tm ents s om etim es a r e not onl y g r ounded in th e O E C D G uidel ines . I t is a l s o w or th m entioning

APA opportunity

A l g er ia n T a x P r ocedur e C ode r ecentl y (f or com p a nies el ig ib l e f or th e D G E ), a nd in th eor y , it coul d cov er tr a ns f er p r icing .

Impact of new OECD BEPS Action 8–10 guidelines

A ngola

1 7 Worldwide Transfer Pricing Reference Guide


Administração Geral Tributária)

Código do Imposto Industrial)


4of L a w 1 9 / 1 4 of 2 2 O ctob er , a p p r ov ing th e I ndus tr ia l T a x C ode, p r ov ide g uida nce on tr a ns f er p r icing r eg ul a tions . T h e A ng ol a n tr a ns f er

4 4 4 4

g a s , a nd dia m ond com p a nies , a s w el l a s tel ecom m unica tions com p a nies , a r e, b y na tur e, l a r g e ta x p a y er s a nd th er ef or e s ub j ect to th e

p r icing p ur p os es .

ow ner s h ip inter es t of 1 0 % or m or e in th e ca p ita l or th e v oting r ig h ts of th e oth er entity

non- m a r ita l p a r tner s h ip or dir ect k ins h ip

eq uiv a l ent s itua tion f ol l ow ing th e ter m s of com p a ny l a w


O E C D G uidel ines a r e not a dop ted in th e l oca l tr a ns f er p r icing r eg ul a tions b eca us e A ng ol a is not a n O E C D m em b er countr y , a l th oug h cer ta in O E C D l a ng ua g e is incl uded in th e tr a ns f er p r icing r eg ul a tions ena cted.

T h e a r m ’ s - l eng th p r incip l e a p p l ies to a l l r el a ted- p a r ty tr a ns a ctions .

1 8

A ngola (continued)



4

4 4 4

4

T h e r eq uir em ent to p r ep a r e a nd s ub m it tr a ns f er p r icing docum enta tion a p p l ies to a l l com p a nies incl uded on th e L a r g e T a x p a y er s ’ L is t 4 4

tel ecom m unica tions com p a nies a nd com p a nies r ep or ting a nnua l r ev enue in ex ces s of A O A 7 b il l ion.

w ith th eir r es p ectiv e a s s ocia ted enter p r is es .

s ub j ect to docum enta tion.

(c) P r es enta tion of th e entity

(d) F unctiona l a na l y s is of th e entity

(f ) E conom ic a na l y s is of th e r el a ted- p a r ty op er a tions

T h e A ng ol a n l a w r eq uir es th a t a l l docum ents s ub m itted to th e ta x a uth or ities m us t b e w r itten in or tr a ns l a ted into P or tug ues e.





1 9

A ngola (continued)




th a t th e m a x im um a m ount of th e r a ng e is b eing a p p l ied. T h e a p p l ica tion of p ena l ties in th is r eg a r d w il l im p l y a r ep uta tiona l r is k to th e

p er f or m ing ca p ita l op er a tions , cur r ent inv is ib l e tr a ns a ctions (p a y m ents f or s er v ices a nd inta ng ib l es ) or tr a ding op er a tions th a t,

p r a ctice, it m a y com p l etel y b l ock th e da y - to- da y a ctiv ity of a ny ta x p a y er w h enev er its l eg a l na m e is com m unica ted b y th e G ener a l T a x

F or l a r g e ta x p a y er s , th e l a ck of com p l ia nce w ith th e tr a ns f er p r icing docum enta tion r eq uir em ents s h oul d a l s o p r ev ent th e a p p l ica tion of r ig h ts f or es een in th e cor r es p onding s ta tute, na m el y th e p os s ib il ity to p a y th e indus tr ia l ta x a t th e L a r g e

ta x p a y er ’ s da y - to- da y q ues tions a nd to p a y ta x deb ts in ins ta l l m ents .

T h e m os t im p or ta nt im p l ica tion of th e m os t r ecent tr a ns f er p r icing r ul es ena cted in A ng ol a w a s th e s h if t of th e b ur den of p r oof to th e ta x p a y er , w h ich is now r eq uir ed to p r oduce contem p or a neous docum enta tion to s us ta in th e tr a ns f er p r ices a p p l ied to tr a ns a ctions p er f or m ed w ith a s s ocia ted enter p r is es . I f th e ta x a uth or ities deem th a t a cer ta in a m ount ch a r g ed in a r el a ted- p a r ty contex t to a n A ng ol a n ta x p a y er is not cons is tent w ith th e a r m ’ s - l eng th p r incip l e, th e A ng ol a n ta x a uth or ities w il l p r op os e a n a dj us tm ent to th e p r ice of a g iv en tr a ns a ction a nd a s s es s a dditiona l ta x , p ena l ties a nd com p ens a tor y inter es t. T h e ta x a uth or ities a r e a l l ow ed to op en a n a udit a nd

I f a tr a ns f er p r icing a dj us tm ent is m a de, a p ena l ty eq uiv a l ent to 3 5 % of th e a dditiona l ta x w il l b e a p p l ied, p l us del a y inter es t a t th e non-com p ounded r a te of 1 % p er m onth (or 1 2 % p er y ea r ).

tr a ns a ctions inv ol v ing A ng ol a n ta x p a y er s , a s th e countr y h a s not y et s ig ned a ny doub l e ta x tr ea ty . T h e cur r ent tr a ns f er p r icing l eg is l a tion does not p r ov ide f or cr os s - b or der cor r el a tiv e a dj us tm ents .

Penalty relief


2 0

A ngola (continued)



T h e s ta tute of l im ita tions f or tr a ns f er p r icing a s s es s m ents is 5 y ea r s f r om th e l a s t da y of th e ta x y ea r - end or 1 0 y ea r s in ca s e of ta x inf r ing em ent.


r es p ectiv e l eg is l a tion (P r es identia l D ecr ee 1 4 7 / 1 3 of 1 O ctob er 2 0 1 3 a nd L a w 1 9 / 1 4 of 2 2 O ctob er ) w a s ena cted onl y f ew y ea r s a g o, no p a tter ns of a udit r is k h a v e y et b een es ta b l is h ed.

H ow ev er , des p ite th e l a w ’ s ea r l y s ta g e, tr a ns f er p r icing a udits a r e ex p ected to incr ea s e, a s th e s ub j ect b ecom es m or e p r om inent on th e r a da r of th e g ov er nm ent a nd A ng ol a n ta x a uth or ities .

APA opportunity

N ot y et f or es een.


C ons ider ing th is , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

A rgent ina



Administración Federal de Ingresos Públicos, or A F I P )


•

N o. 1 , 6 6 3 / 0 4 , N o. 1 , 6 7 0 / 0 4 , N o. 1 , 9 1 8 / 0 5 , N o. 1 , 9 5 8 / 0 5 , N o. 1 , 9 8 7 / 0 5 , N o. 3 , 1 3 2 / 1 1 , N o. 3 , 1 4 9 / 1 1 , N o. 3 , 4 7 6 / 1 3 , N o. 3 , 5 7 3 / 1 3 , N o. 3 , 5 7 6 / 1 3 a nd E x ter na l N otes N o. 6 / 0 5 a nd N o. 1 / 0 8 .

•

• O p inions f r om th e ta x a uth or ity a r e s ca r ce a nd nonb inding .



tr a ns f er p r icing s tudy f or a l l tr a ns a ctions w ith r el a ted p a r ties , deem ed r el a ted p a r ties a nd indep endent p a r ties l oca ted in ta x h a v ens .

h a v e b een es ta b l is h ed on a n a r m ’ s - l eng th b a s is .


T h e tes ted p a r ty m us t b e th e l oca l entity (i. e. , th e entity b a s ed in A r g entina ). T h e ta x p a y er s el ects th e m os t a p p r op r ia te m eth od, b ut th e

g oods tr a ns a ctions w ith b oth r el a ted a nd indep endent p a r ties w h er e th er e is a n inter na tiona l p r ice in a tr a ns p a r ent m a r k et.

2 2

A rgent ina (continued)


F or tr a ns a ctions inv ol v ing g r a ins , ol ea g inous p r oducts , oth er s oil p r oducts , oil a nd g a s , a nd a l l oth er g oods w ith w el l - k now n p r ices in

(or it is th e a g r eed- up on p r ice, if h ig h er th a n th e m a r k et p r ice). T h is m eth od m a y not a p p l y , h ow ev er , if th e l oca l ex p or ter ca n p r ov e th e

to l im it th e a p p l ica tion of th is m eth od or ex tend it to oth er tr a ns a ctions , dep ending on th e cir cum s ta nces .

E x p or t a nd im p or t tr a ns a ctions w ith indep endent p a r ties not l oca ted in ta x h a v ens a r e s ub j ect to inf or m a tion r eq uir em ents if th e a nnua l


• A n a nnua l tr a ns f er p r icing s tudy

•

•

•


• A nnua l F or m 7 4 3

• A nnua l F or m 9 6 9

• 4

• 4

• A nnua l F or m 8 6 7 (f or oth er ex p or ts a nd im p or ts w ith indep endent p a r ties not l oca ted in ta x h a v ens )

• 4

•


4

2 3




4

4 4

4dep ending up on th e l ev el of com p l ia nce w ith th e f or m a l duties r el a ted to th e contr ol of ta x es der iv ed f r om inter na tiona l tr a ns a ctions . P ena l ties f or f r a ud a r e 2 to 1 0 tim es th e unp a id ta x es .

44

Penalty relief

C oncer ning under p a y m ent a nd f r a ud, if th e non- r ecidiv is t ta x p a y er v ol unta r il y a m ends th e ta x r etur ns b ef or e r eceiv ing a s p ecia l notice

v ol unta r il y , or w ith in 1 5 da y s f r om th e s p ecia l notice, th en no p ena l ty s h a l l b e a p p l ied.


T h e g ener a l s ta tute of l im ita tions f or f eder a l ta x m a tter s is 5 y ea r s f or r eg is ter ed a nd r eg is tr a tion- ex em p t ta x p a y er s a nd 1 0 y ea r s f or unr eg is ter ed ta x p a y er s . T h es e p er iods b eg in on 1 J a nua r y f ol l ow ing th e y ea r in w h ich th e ta x r etur n is due.

T h e m or a tor ium r eg im e in p l a ce dur ing ca l enda r y ea r 2 0 0 9 a nd th e v ol unta r y decl a r a tion of th e f or eig n ex ch a ng e h ol ding r eg im e in

b y th e s ta tute of l im ita tions .

2 4




T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l ca n b e cons ider ed h ig h ; m ea nw h il e, th e ch a nce of a tr a ns f er p r icing r ev iew dur ing s uch a n a udit is es tim a ted a s m edium . N ev er th el es s , once tr a ns f er p r icing h a s b ecom e a top ic of th e a udit, th e l ik el ih ood of th e ta x a uth or ity ch a l l eng ing th e ta x p a y er ’ s tr a ns f er p r icing m eth odol og y is h ig h .

I n a ddition, tr ia l - l ev el cour t ca s es a r e b eing p ub l is h ed. I n m os t ca s es , th e ta x p a y er s ’ p os itions h a v e p r ev a il ed, b ut a f ew h a v e b een in f a v or of th e ta x a uth or ity . I n a ddition, s om e s econd- l ev el cour t ca s es a r e a l s o b eing p ub l is h ed. T h e ta x a uth or ity w il l l ik el y tr y to incr ea s e r ev enue a nd s tr ictl y enf or ce p ena l ties w ith com p a nies th a t a r e not com p l y ing w ith tr a ns f er p r icing r eq uir em ents .

dif f er ent f r om w h er e th e g oods w er e m a nuf a ctur ed, ca us ing a p r ice dif f er ence b eca us e of th e v a l ue a dded b y th e inter m edia te com p a ny . F ur th er s cr utiny a nd f or eig n tr a de contr ov er s y a r e ex p ected w ith r eg a r d to tr a ns f er p r icing , cus tom s a nd f or eig n ex ch a ng e contr ol is s ues

APA opportunity


A l th oug h O E C D r ul es a r e not m a nda tor y in A r g entina , th er e is a tendency in cour t ca s es to cons ider th e O E C D G uidel ines a s

of v iew , r ecent O E C D dev el op m ents a r e l ik el y to a f f ect th e tr a ns f er p r icing a na l y s es of A r g entine com p a nies . F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents .

A rm enia




C ur r entl y , A r m enia does not h a v e l oca l tr a ns f er p r icing r eg ul a tions b ut does h a v e doub l e ta x tr ea ties w ith 4 3 countr ies th a t conta in a n















Penalty relief


2 6

A rm enia (continued)






APA opportunity


Impact of new OECD BEPS Article 8–10 guidelines


A ust ralia




• D iv is ion 1 3 of P a r t I I I of I ncom e T a x A s s es s m ent A ct 1 9 3 6 (I T A A 1 9 3 6 )

•

• 4

•

A p p licab ilit y of legislat ion

D iv is ion 1 3 w a s ena cted in 1 9 8 2 a nd a p p l ies to incom e y ea r s th a t com m enced b ef or e 1 J ul y 2 0 1 3 . D iv is ion 1 3 a p p l ies a t th e dis cr etion of th e C om m is s ioner of T a x a tion (C om m is s ioner ) a nd ca nnot b e s el f - a s s es s ed.

4concur r entl y w ith D iv is ion 1 3 f or tr a ns a ctions w ith r el a ted p a r ties in countr ies th a t h a v e a doub l e ta x a tion a g r eem ent w ith A us tr a l ia .

O v erv iew of current legislat iv e fram ework

•

dis ch a r g e th is r es p ons ib il ity .

• P ena l ty r eg im e l ink ed to docum enta tion. T h e p r ep a r a tion of tr a ns f er p r icing docum enta tion is not com p ul s or y . H ow ev er , f a il ur e to p r ep a r e docum enta tion contem p or a neous l y in a ccor da nce w ith th e new r ul es p r ev ents th e ta x p a y er f r om es ta b l is h ing a r ea s ona b l y

a dj us tm ent th a t incr ea s es its ta x l ia b il ities in A us tr a l ia . A f a il ur e to p r ep a r e contem p or a neous docum enta tion ca nnot b e r em edied a t a l a ter p oint in tim e.

•

f or deter m ining th e a r m ’ s - l eng th conditions . T h is p r ov is ion m us t a l s o b e s el f - a s s es s ed b y th e ta x p a y er .

• C om p l ia nce w ith th e a r m ’ s - l eng th p r incip l e is a s s es s ed on th e a l ig nm ent of th e ta x p a y er ’ s a ctua l conditions w ith a r m ’ s - l eng th conditions .

th eir a r r a ng em ents a s w el l a s th e p r icing of indiv idua l tr a ns a ctions .

2 8

A ust ralia (continued)


entities op er a ting p er m a nent es ta b l is h m ents is not l es s th a n it w oul d b e if th e p er m a nent es ta b l is h m ent w a s a dis tinct a nd s ep a r a te

r ev enue a nd ex p ens es .

Recent ch anges — im p lem ent at ion of O E C D B E PS act ions

th r oug h 1 0 a nd 1 3 .

I m p lem ent at ion of A ct ions 8 – 1 0

docum ent r el ev a nt f or th e deter m ina tion of a r m ’ s - l eng th conditions . T h e r eg ul a tions g iv ing ef f ect to th is incl us ion w er e ex p ected to b e

I m p lem ent at ion of A ct ion 1 3

F ur th er dr a f t a dm inis tr a tiv e g uida nce h a s b een p r ov ided b y th e A T O in r el a tion to th e content of th e L oca l F il e, th e f or m of th e L oca l F il e, w h a t cons titutes a n a g r eem ent f or L oca l F il e p ur p os es a nd ex em p tions . T h e f ol l ow ing ov er v iew of th e im p l em enta tion is b a s ed on th e l eg is l a tion a nd our under s ta nding of th e a dm inis tr a tiv e g uida nce eith er r el ea s ed f or m a l l y b y th e A T O , or dis cus s ed w ith th e A T O in

CbCR

th e countr y in w h ich th a t entity is r es ident.

Master file

m us t b e l odg ed b y th e ta x p a y er th r oug h th e L oca l F il e f or m , a s th er e is cur r entl y no a utom a tic ex ch a ng e of inf or m a tion p r ov is ion th a t

2 9



Local file

l ev el des ig n a nd incl ude th e p r ov is ion of tr a ns a ctiona l inf or m a tion on a l l r el a ted- p a r ty dea l ing s , th e tr a ns f er p r icing m eth od us ed b y ea ch p a r ty eng a g ed in th e tr a ns a ction a nd a g r eem ents .

T h e A T O ’ s ob j ectiv e is to g a th er l a r g e a m ounts of da ta a nd th en da ta m ine th is .

th a t ta x p a y er s w il l h a v e to b uil d a l odg em ent tool , s ub s cr ib e to a com m er cia l ta x l odg m ent p r og r a m or us e a ta x a g ent to l odg e th e L oca l F il e.

ty p ica l l y due 6 m onth s a nd 1 5 da y s a f ter th e y ea r - end.

Interaction with other filings and transfer pricing documentation

docum enta tion r eq uir em ents .

counter p a r ties a r e r es ident a nd docum enta tion dis cl os ur es .

a nd a v a il a b l e to th e ta x p a y er a t th e tim e of l odg ing th e ta x r etur n if a ta x p a y er is s eek ing to a ch iev e p ena l ty m itig a tion. G iv en th a t

docum enta tion b ef or e l odg m ent of th e ta x r etur n.

4

•

•

• 4

• 4

• 4

•

44

3 0



4

p r icing r ecor d- k eep ing f or s m a l l ta x p a y er s , dis tr ib ution entities , cer ta in ty p es of s er v ices a nd s m a l l l oa ns under cer ta in cir cum s ta nces .

T h e A T O h a s a l s o p ub l is h ed a l a r g e num b er of tr a ns f er p r icing r ul ing s a nd oth er g uida nce in th e f or m of ta x deter m ina tions p r a ctice s ta tem ents a nd b ook l ets in r el a tion to th e h is tor ica l tr a ns f er p r icing l eg is l a tion. T h is g uida nce, w h ich is r el ev a nt f or y ea r s s ta r ting b ef or e

Tax at ion rulings ( TRs) in relat ion t o h ist orical t ransfer p ricing legislat ion

•

• 4 4

•

•

•

•

•

•

•

• 4

•

•

• 4

•

•

•

•

T a x p a y er s s h oul d ta k e ca r e w h en r el y ing on th e r ul ing s l is ted a b ov e a nd oth er g uida nce l is ted b el ow f or y ea r s s ta r ting on or a f ter 1 J ul y 2 0 1 3 , a s th e op er a tion of th e l eg is l a tion h a s ch a ng ed a nd th e A T O ’ s inter p r eta tion is l ik el y to ev ol v e.

Tax det erm inat ions ( TD s) :

4 4

3 1



A TO b ook let s:

• C oncepts and Risk Assessment

• Applying the Arm’s-Length Principle

• Advance Pricing Arrangements, Documentation

• Risk Assessment for Small to Medium Businesses

• Dependent Agent Permanent Establishments

• Marketing Intangibles, Business Restructuring — discussion paper on application of Australia’s transfer pricing rules

• ATO Discussion Paper on Intra-group Finance Guarantees and Loans — application of Australia’s transfer pricing and thin capitalization rules

A ssessm ent and adj ust m ent of t ransfer p rices

a r m ’ s - l eng th conditions r ep l a ce th e a ctua l conditions to deter m ine its A us tr a l ia n ta x a b l e incom e.

F ol l ow ing th e s el f - a s s es s m ent, th e C om m is s ioner , th r oug h th e A T O , ca n r a is e a dj us tm ents w h en h e b el iev es th a t th e s el f - a s s es s ed

a s s es s m ent of th e a r m ’ s - l eng th cons ider a tion of th e ta x p a y er ’ s tr a ns a ctions . I n a ddition, th e C om m is s ioner ca n s ub s titute a n a r m ’ s -l eng th a m ount of cons ider a tion onl y w h en a ta x p a y er h a s r eceiv ed l es s th a n a n a r m ’ s - l eng th a m ount or h a s p a id m or e th a n a n a r m ’ s -l eng th a m ount.

Reconst ruct ion of t ransact ions

s ub s ta nce of a r el a ted- p a r ty a r r a ng em ent w h er e th e econom ic s ub s ta nce does not m a tch th e l eg a l f or m .

th os e w ith in th e 2 0 1 0 O E C D G uidel ines , w h ich a p p l y onl y if th e uncom m er cia l tr a ns a ction a l s o p r a ctica l l y im p edes th e ta x a uth or ity f r om

r econs tr uction p r ov is ion b r oa dl y a nd coul d, f or ins ta nce, s eek a r econs tr uction of th e a r r a ng em ent to a l ig n tr a ns f er p r icing a dj us tm ents in a ccor da nce w ith w h a t th e C om m is s ioner cons ider s to b e com m er cia l l y r ea l is tic b eh a v ior a nd outcom es , ev en w h er e com p a r a b l e a nd

I n a ddition, th e A T O ca n a p p l y th e g ener a l a nti- a v oida nce p r ov is ions to r econs tr uct or dis r eg a r d a tr a ns a ction w h er e th e dom ina nt

3 2



T h e A T O h a s a l s o ex p r es s ed th e v iew th a t it ca n ch a ng e indiv idua l el em ents of th e a ctua l a r r a ng em ent outs ide th e r econs tr uction p r ov is ions to im p r ov e com p a r a b il ity . F or ex a m p l e, th e A T O m a y s eek to dis r eg a r d cer ta in ter m s of a tr a ns a ction if th es e a r e not ob s er v ed

dis a g r ee w ith th is inter p r eta tion a nd w oul d r eg a r d a ny ch a ng e in th e a ctua l tr a ns a ction a s a r econs tr uction. I t r em a ins to b e s een w h ich v iew w oul d p r ev a il in a l eg a l ch a l l eng e.

Multinational Anti-Avoidance Law and Diverted Profits Tax

•

• A n A us tr a l ia n entity is inv ol v ed w ith th e s a l es p r oces s (e. g . , b y m a na g ing th e cus tom er r el a tions h ip on a da y - to- da y b a s is ) b ut does not cons titute a p er m a nent es ta b l is h m ent.

I n a ddition, ex p os ur e dr a f t l eg is l a tion w a s r el ea s ed in l a te 2 0 1 6 w h ich f ur th er ex p a nds th e g ener a l a nti- a v oida nce p r ov is ions th r oug h th e

4

• A n A us tr a l ia n ta x p a y er tr a ns a cts w ith a n ov er s ea s r el a ted- p a r ty .

•

•

• T h e ta x p a id ov er s ea s in r el a tion to th e tr a ns a ction is 8 0 % or m or e th a n th e r eduction in th e A us tr a l ia n ta x l ia b il ity . T h e ta x p a id a l s o

due to l os s es or incentiv es , th is r educed a m ount f or m s th e b a s is f or a s s es s ing th e 8 0 % .

•


4

r ef er ence th e 2 0 1 6 O E C D G uidel ines w ith r etr os p ectiv e ef f ect f or y ea r s s ta r ting on or a f ter 1 J ul y 2 0 1 6 .


T h e p r ep a r a tion of tr a ns f er p r icing docum enta tion is not com p ul s or y . H ow ev er , ta x p a y er s th a t do not p r ep a r e contem p or a neous tr a ns f er 4

ev ent of a tr a ns f er p r icing a dj us tm ent. T h is w il l ty p ica l l y r es ul t in l a r g er p ena l ties if th e ta x p a y er r eceiv es a tr a ns f er p r icing a dj us tm ent th a t incr ea s es its ta x l ia b il ities in A us tr a l ia .

3 3



• 4

•

•

• E x p l a in th e p a r ticul a r w a y in w h ich th e r el ev a nt tr a ns f er p r icing p r ov is ions a p p l y (or do not a p p l y ) to th e ta x p a y er ’ s inter na tiona l r el a ted- p a r ty dea l ing s

• E x p l a in w h y th e a p p l ica tion of th e tr a ns f er p r icing p r ov is ions to th e ta x p a y er ’ s inter na tiona l r el a ted- p a r ty dea l ing s in th a t w a y b es t a ch iev es th e cons is tency w ith th e r el ev a nt g uida nce m a ter ia l s 1 (e. g . , 2 0 1 0 O E C D G uidel ines )

• I t a l s o r eq uir es th a t th e docum enta tion a l l ow s a ctua l conditions , a r m ’ s - l eng th conditions , com p a r a b l e cir cum s ta nces a nd th e r es ul t of th e a p p l ica tion of th e s ub div is ion to b e r ea dil y a s cer ta ined

4

dev el op m ents a b ov e.



• D eta il s of r es tr uctur ing ev ents inv ol v ing inter na tiona l r el a ted p a r ties (Q ues tion 1 7 , w h ich m us t b e com p l eted r eg a r dl es s of th e q ua ntum of th e tr a ns a ctions )

• D ea l ing s w ith b r a nch op er a tions (Q ues tion 1 8 , w h ich m us t b e com p l eted r eg a r dl es s of th e q ua ntum of th e tr a ns a ctions )

I n a ddition, if th e a g g r eg a te a m ount of tr a ns a ctions or dea l ing s w ith inter na tiona l r el a ted p a r ties , b oth r ev enue a nd ca p ita l in na tur e, is

•

• 4

1

3 4



•

• T y p e of tr a ns a ction, e. g . , r oy a l ties , inter com p a ny l oa ns , tech nica l s er v ices , a dm inis tr a tiv e s er v ices

• T h e q ua ntum p er ty p e of tr a ns a ction

• T h e p er centa g e of tr a ns a ctions of ea ch ty p e cov er ed b y contem p or a neous docum enta tion th a t h a s b een p r ep a r ed in a ccor da nce w ith th e f our - s tep p r oces s (tr a ns f er p r icing docum enta tion does not need to b e l odg ed w ith th e ta x r etur n)

• T r a ns f er p r icing m eth odol og ies s el ected a nd a p p l ied f or ea ch inter na tiona l r el a ted- p a r ty tr a ns a ction ty p e

• I nf or m a tion on tr a ns a ctions f or no p a y m ent or nonm oneta r y p a y m ent, s h a r e- b a s ed em p l oy ee r em uner a tion a nd cos t contr ib ution a r r a ng em ents (Q ues tions 1 4 th r oug h 1 6 )



a t a l a ter p oint in tim e.


f a il ur e to ta k e r ea s ona b l e ca r e a nd (3 ) a p ena l ty f or a f a l s e a nd m is l ea ding s ta tem ent m a de b y th e ta x p a y er . E a ch of th es e is ex p l a ined in m or e deta il b el ow . A l l p ena l ties ca n a p p l y to th e s a m e tr a ns a ction. D r a f t g uida nce on th e a s s es s m ent of tr a ns f er p r icing p ena l ties under

Penalt ies for sch em e sh ort falls

a p ena l ty ca n b e a p p l ied. T h e l ev el of p ena l ty w il l v a r y dep ending on w h eth er th e s ol e dom ina nt p ur p os e of th e a r r a ng em ent is to ob ta in

3 5



Penalt ies for failure t o t ak e reasonab le care

A dditiona l p ena l ties a p p l y w h er e th e C om m is s ioner m a k es a n a dj us tm ent th a t r es ul ts in a ta x s h or tf a l l a nd th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e. T h e l ev el of th e p ena l ty v a r ies dep ending on w h eth er th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e (2 5 % of th e

Penalt ies for false and m isleading st at em ent s

p ena l ty v a r ies dep ending on w h eth er th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e, h a s a cted r eck l es s l y or h a s h a d intentiona l dis r eg a r d f or th e r el ev a nt r ul es . T h e p ena l ties r a ng e f r om 2 0 to 6 0 p ena l ty units 2 p er s ta tem ent a nd a p p l y r eg a r dl es s of w h eth er a s h or tf a l l r es ul ted.

Penalties for significant global entities

O t h er p enalt ies

Penalt ies for F ailure t o lodge on t im e

4

P ena l ties in r el a tion to s a l es m a de b y a n ov er s ea s entity dir ectl y to a n A us tr a l ia n cus tom er

Public officer liability

conditions a r e cons is tent w ith a r m ’ s - l eng th conditions b ef or e s ig ning th e incom e ta x r etur n. I f th e conditions do not a l ig n a nd a tr a ns f er

ta x r etur n is not f a l s e or m is l ea ding .

A T O to do s o.

2

3 6



S h ort fall int erest ch arge ( S I C )

4

a p p l ies r eg a r dl es s of w h eth er th e ta x p a y er is l ia b l e f or a ny s h or tf a l l p ena l ty .

Penalty relief

A ta x p a y er w ith a n A P A w il l ty p ica l l y not incur p ena l ties . E x cep tions to th is incl ude non- a r m ’ s - l eng th dea l ing s th a t a r e not cov er ed b y th e A P A , or f or noncom p l ia nce w ith th e ter m s a nd conditions of th e A P A .

C om m issioner’ s discret ion t o rem it p enalt ies

it h a s th e dis cr etion to r em it th e p ena l ty in p a r t or in tota l . T h e p r a ctice s ta tem ent p r ov ides s om e v er y r es tr ictiv e ex a m p l es in w h ich

4docum enta tion ex is ts .


is s ued to th e ta x p a y er .

H is tor ica l l y , th er e h a s b een no s ta tute of l im ita tions w ith r es p ect to tr a ns f er p r icing a dj us tm ents . T h e ta x l eg is l a tion a p p l ica b l e f or

4


I n deter m ining w h eth er a n A us tr a l ia n ta x p a y er ’ s tr a ns f er p r icing a r r a ng em ent s h oul d b e r ev iew ed or a udited, th e A T O g ener a l l y

r es ul ts a p p ea r to b e com m er cia l l y r ea l is tic. T h e A T O h a s dev el op ed a s op h is tica ted r is k eng ine th a t cons ider s th es e f a ctor s , a l ong w ith

l ow - ta x j ur is dictions

3 7



•

• F ina ncing a r r a ng em ents , incl uding inter es t- f r ee l oa ns , inter es t- b ea r ing l oa ns a nd g ua r a ntee f ees

• C om p a nies under g oing s up p l y ch a in r es tr uctur ing s

•

•

•

• I nta ng ib l es (b oth A us tr a l ia n a nd f or eig n- ow ned)

•

T h e l ik el ih ood of a n a nnua l ta x a udit in A us tr a l ia w oul d b e a s s es s ed a s m edium in g ener a l . H ow ev er , if ta x p a y er s ex h ib it th e r is k f a ctor s

p er centa g e of inter na tiona l r el a ted- p a r ty tr a ns a ctions , th e l ik el ih ood th a t tr a ns f er p r icing w oul d b e r ev iew ed a s p a r t of a ny g ener a l ta x a udit is v er y h ig h .

f or com p a nies w ith th es e s tr uctur es ca n b e cons ider ed h ig h .

APA opportunity

4b inding on th e A T O . T h e p r a ctice s ta tem ent r einf or ces th e A T O ’ s s ta ted com m itm ent to m a inta ining th e A P A p r og r a m a s a n ef f ectiv e p a r t of A us tr a l ia ’ s tr a ns f er p r icing r eg im e.

th e A P A p r og r a m . T h e l a nds ca p e continues to ev ol v e, a nd ta x p a y er s cons ider ing a n A P A w oul d b e w el l - a dv is ed to ch eck th e l a tes t s ta te of p l a y w ith th eir a dv is or s b ef or e a p p r oa ch ing th e A T O .


w il l b e intr oduced into th e A us tr a l ia n l eg is l a tion w ith r etr os p ectiv e a p p l ica tion f r om 1 J ul y 2 0 1 6 .

A ust ria



• I ncom e T a x A ct a nd I ncom e T a x G uidel ines

• C or p or a te I ncom e T a x A ct a nd C or p or a te I ncom e T a x G uidel ines

• F eder a l T a x C ode (F T C )

• D oub l e ta x a tion tr ea ties ena cted b y A us tr ia

•on or a f ter 1 J a nua r y 2 0 1 6

• C r im ina l T a x L a w (C T L )


• 4

• T P D L a nd th e r el a ted r eg ul a tion f or im p l em enta tion of th e l a w

•

•

• I ncom e T a x G uidel ines 6 . 1 3 . 3 , 2 5 1 1 - 2 5 1 3

• C or p or a te I ncom e T a x G uidel ines 1 4 . 8 . 2 , 1 1 4 7

• 4

•

• 4

•


A ccor ding to th e A us tr ia n T r a ns f er P r icing G uidel ines , th e a r m ’ s - l eng th p r incip l e conta ined in th e incom e ta x l a w h a s to b e cons tr ued in l ine w ith th e O E C D G uidel ines a nd a ny up da tes th er eto.

E s ta b l is h m ents (A O A ), a l th oug h th e A O A is cur r entl y not f ul l y a p p l ica b l e, a s none of A us tr ia ’ s cur r ent doub l e ta x tr ea ties incl ude th e

cons ider ed a s b a s is f or th e im p l em enta tion of th e T P D L ).

T h e A us tr ia n T r a ns f er P r icing G uidel ines w er e r el ea s ed in th e f or m of a m inis ter ia l decr ee. T h ey a r e b inding on th e A us tr ia n ta x a uth or ities b ut a r e not b inding on A us tr ia n cour ts or ta x p a y er s .

3 9

A ust ria (continued)



T h e T P D L s tip ul a tes a n ob l ig a tion to p r ep a r e tr a ns f er p r icing docum enta tion a nd f ol l ow s th e th r ee- tier docum enta tion a p p r oa ch

•

r ev enues g ener a ted f r om a ctiv ities on th e m a r k et.

•

•

•a ccor ding to th e F T C ) a r e not a f f ected b y th e T P D L .

C ons ider ing th e a b ov e, in ca s e a n A us tr ia n cons tituent entity does not ex ceed th e tur nov er th r es h ol d, th e oth er r ecita l s need to b e

th e oth er h a nd, th e A us tr ia n ta x a uth or ities ca n s til l r eq ues t (a dditiona l ) inf or m a tion neces s a r y to a s s es s th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions in th e cour s e of a ta x a udit. C ons eq uentl y , ev en if th e T P D L does not a p p l y , tr a ns f er p r icing docum enta tion h a s to b e p r ep a r ed a ny w a y .

Obligation to file a CbC report

•

• T h er e is no q ua l if y ing com p etent a uth or ity a g r eem ent on th e ex ch a ng e of C b C r ep or ting in f or ce w ith th e ul tim a te p a r ent entity ’ s s ta te of

• T h er e h a s b een a s y s tem ic f a il ur e of th e ul tim a te p a r ent entity ’ s s ta te of r es idence (i. e. , th er e is a q ua l if y ing a g r eem ent in p l a ce, b ut th e ex ch a ng e of inf or m a tion w a s s us p ended or th e oth er contr a cting s ta te f a il ed to a utom a tica l l y tr a ns m it C b C r ep or ts ).

4 0



des ig na ted b y notice a s th e s ur r og a te p a r ent entity .

•

•is in ef f ect.

• T h er e is no s y s tem ic f a il ur e r eg a r ding th e ex ch a ng e of inf or m a tion.

•r ep or t cov er s ).

•

C ont ent of t h e C b C rep ort

inf or m a tion.

Content of the master file and local file

•

• D es cr ip tion of th e m ul tina tiona l g r oup ’ s b us ines s

• D ocum enta tion of m ul tina tiona l g r oup ’ s inta ng ib l es

•

•

• D es cr ip tion of th e l oca l cons tituent entity

• D ocum enta tion of m a ter ia l contr ol l ed tr a ns a ctions

• F ina ncia l I nf or m a tion

4 1



L anguage

b e p r ep a r ed in E ng l is h .


A us tr ia n T r a ns f er P r icing G uidel ines , th e m eth od th a t p r ov ides th e h ig h es t deg r ee of cer ta inty f or th e deter m ina tion of a n a r m ’ s - l eng th tr a ns f er p r ice h a s to b e s el ected.


I n ca s e of a ta x a udit, th e a uditor s us ua l l y a s k f or a des cr ip tion of m a j or r el a ted- p a r ty tr a ns a ctions , a s w el l a s dis cl os ur e of a l l contr a cts in p l a ce w ith r el a ted p a r ties a nd tr a ns f er p r icing s tudies a v a il a b l e. I n a n incr ea s ing num b er of ca s es , a n ex tens iv e tr a ns f er p r icing q ues tionna ir e is dis cus s ed.



4 2



ta x a uditor a t th e b eg inning of a ta x a udit. A s ub m is s ion dea dl ine w a s deter m ined, w h ich coul d v a r y g r ea tl y f r om ca s e to ca s e (e. g . ,

th e dea dl ine f or s ub m is s ion of th e T P D L w il l b e 3 0 da y s (w h enev er r eq ues ted b y th e ta x a uth or ities or ta x a uditor ). A n ex tens ion of th e dea dl ine s h oul d s til l b e p os s ib l e.


4item s in th e ta b l es in A p p endices 1 to 3 of th e T P D L due to intent com m its a ta x of f ens e. T h e C T L s tip ul a tes p ena l ties of up to

s uch ta x of f ens es is ex cl uded b y th e C T L .

th e ta x a uth or ities w il l r eg a r d a tr a ns a ction a s noncom p l ia nt w ith th e a r m ’ s - l eng th cr iter ion, w h ich a l s o incr ea s es th e r is k of a tr a ns f er p r icing a dj us tm ent.

I f th e ta x a b l e incom e is incr ea s ed b eca us e th e a r m ’ s - l eng th cr iter ion h a s not b een m et, nondeductib l e l a te- p a y m ent inter es t in th e

p a y m ents f or a ny a dditiona l p r ior y ea r f or up to 4 8 m onth s .

Penalty relie

T h er e a r e no r el ief p r ov is ions a v a il a b l e.

docum enta tion.

L a te- p a y m ent inter es t w il l b ecom e due on a ny cor p or a te incom e ta x p a y m ents f or a n a dditiona l p r ior y ea r , r eg a r dl es s of w h eth er th e


T h e s ta tute of l im ita tions on a tr a ns f er p r icing a dj us tm ent is us ua l l y s ix y ea r s a f ter th e end of th e ca l enda r y ea r in w h ich th e r el ev a nt


T a x a uth or ities r eg ul a r l y ex a m ine r el a ted- p a r ty tr a ns a ctions a nd tr a ns f er p r ices ch a r g ed. T h er e is a cl ea r tr end tow a r d incr ea s ed a w a r enes s of tr a ns f er p r icing p r ob l em s a m ong ta x a uditor s .

4 3



APA opportunity

A P A on th e b a s is of A r ticl e 2 5 (3 ) of th e r es p ectiv e doub l e ta x tr ea ty .

Impact of new OECD BEPS Action 8–10 guideline

b etw een th e inter na tiona l a nd na tiona l a r m ’ s - l eng th p r incip l e, th e O E C D G uidel ines do not onl y s er v e a s inter p r eta tiv e g uida nce f or

th e inter na tiona l a nd na tiona l a r m ’ s - l eng th p r incip l e needs to b e dy na m ica l l y inter p r eted (i. e. , new dev el op m ents r eg a r ding th e O E C D

B ah rain




44enter p r is es ).

OECD Guidelines treatmen










4 5

B ah rain (continued)






Penalty relief






APA opportunity



N ot a p p l ica b l e

B angladesh



• I ncom e T a x O r dina nce, 1 9 8 4

• 4


• 4

• 4

• 4 4or ig ina l l y intr oduced in th e F ina nce A ct 2 0 1 2 .

T h e p r icing of a ny incom e or ex p ens e a r is ing f r om inter na tiona l tr a ns a ctions b etw een a s s ocia ted enter p r is es w il l need to b e deter m ined

a r e enter p r is es f or w h ich m or e th a n 2 5 % v oting p ow er is h el d b y th e oth er or a com m on p a r ent h ol ds m or e th a n 2 5 % of v oting p ow er in

(a ) C um ul a tiv e a m ount of b or r ow ing f r om th e r el a ted- p a r ty cons titutes m or e th a n 5 0 % of th e b ook v a l ue of tota l a s s ets of l ender

(b ) C um ul a tiv e a m ount of g ua r a ntee p r ov ided cons titutes m or e th a n 1 0 % of th e b ook v a l ue of th e tota l b or r ow ing s of th e entity in f a v or of w h om g ua r a ntee h a s b een is s ued

(c) A p p ointm ent of m em b er s in th e b oa r d of dir ector s / ex ecutiv e dir ector b y th e oth er enter p r is e

(e) O ne enter p r is e h a s th e p r a ctica l a b il ity to contr ol th e decis ion of th e oth er enter p r is e

T r a ns f er p r icing p r ov is ions a r e a p p l ica b l e to th e f ol l ow ing ty p es of tr a ns a ctions b etw een a s s ocia ted enter p r is es , w ith a t l ea s t one of th em

• P ur ch a s e, s a l e or l ea s e of ta ng ib l e or inta ng ib l e p r op er ty

• P r ov is ion of s er v ices

• L ending or b or r ow ing m oney

• A m utua l a g r eem ent or a r r a ng em ent f or cos t a l l oca tion/ a p p or tionm ent

•

T r a ns a ctions w ith a th ir d p a r ty w il l b e deem ed tr a ns a ctions b etw een a s s ocia ted enter p r is es if th e th ir d p a r ty h a s a p r ior a g r eem ent w ith th e a s s ocia ted enter p r is e, or if th e ter m s of th e r el ev a nt tr a ns a ction a r e deter m ined in s ub s ta nce b etw een th e th ir d p a r ty a nd th e

p er s on or v entur e.

4 7

B angladesh (continued)



F iv e of th e s ix m eth ods p r es cr ib ed in th e l eg is l a tion to com p ute a r m ’ s - l eng th p r ices a r e in conf or m ity w ith th e O E C D G uidel ines .


A . Transfer p ricing docum ent at ion

•

•

•

•

•

• T h e na tur e a nd ter m s (incl uding p r ices ) of inter na tiona l tr a ns a ctions

• D es cr ip tion of f unctions p er f or m ed, r is k s a s s um ed a nd a s s ets em p l oy ed

•

•

• D es cr ip tion of m eth ods cons ider ed

•

• D eta il s of tr a ns f er p r icing a dj us tm ents

• A ny oth er inf or m a tion or da ta r el a ting to th e a s s ocia ted enter p r is e th a t m a y b e r el ev a nt f or deter m ina tion of th e a r m ’ s - l eng th p r ice

T h e a b ov e docum enta tion r eq uir em ents s h a l l not b e a p p l ica b l e in th e ca s e of a ta x p a y er w h os e a g g r eg a te v a l ue of inter na tiona l

B . S t at em ent of I nt ernat ional Transact ions

C . A ccount ant ’ s rep ort

C h a r ter ed A ccounta nt or cos t a ccounta nt w ith in th e tim e a nd f or m a t a s p r es cr ib ed.

4 8







A . Transfer p ricing docum ent at ion

T h er e is no s ta tutor y dea dl ine to s ub m it th e tr a ns f er p r icing docum enta tion. H ow ev er , it needs to b e p r ep a r ed a nd m a inta ined b y ev er y

B . S t at em ent of I nt ernat ional Transact ions

C . A ccount ant ’ s Rep ort

4 9




•ex ceeding 1 % of th e v a l ue of th e inter na tiona l tr a ns a ction.

•ta x p a y er f a ces a p ena l ty not ex ceeding 1 % of th e v a l ue of th e inter na tiona l tr a ns a ction.

•

•

Penalty relief

N o p ena l ty r el ief r eg ul a tion h a s b een p r ov ided to da te.



4a s th er e is no p r ecedent to s ub s ta ntia te th e na tur e of r is k s .

APA opportunity


B elarus




• T r a ns a ctions r el a ted to s a l e/ p ur ch a s e of im m ov a b l e p r op er ty a nd h ous ing b onds

tr a ns a ctions .

•

•

•

•s p ecia l ta x a tion r eg im es or s im il a r

a ca l enda r y ea r (ex cl uding indir ect ta x es ).

• L a r g e tr a ns a ctions

F or eig n tr a de tr a ns a ctions (1 ) of l a r g e ta x p a y er s or (2 ) w ith s tr a teg ic g oods a r e cons ider ed a s s ub j ect to tr a ns f er p r icing contr ol if th eir 4

tim b er .


p r icing r ul es do not r ef er to th e O E C D G uidel ines . P r a ctica l a p p l ica tion of tr a ns f er p r icing r ul es m a y th er ef or e b e dif f er ent f r om th e O E C D G uidel ines .

5 1

B elarus (continued)



• F ul l - s cop e tr a ns f er p r icing docum enta tion is to b e p r ep a r ed w ith r es p ect to l a r g e tr a ns a ctions .

•tr a ns a ctions .

•

• C om p r eh ens iv e inf or m a tion a b out r el a ted p a r ties

• I nf or m a tion a b out th e g r oup (s tr uctur e, des cr ip tion of a ctiv ities , g r oup tr a ns f er p r icing p ol icies )

• D es cr ip tion of th e tr a ns a ction (contr a ctua l ter m s a nd conditions )

• D es cr ip tion of g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , a nd tr a dem a r k s

• F a ctor s th a t im p a ct th e p r ice

• F unctiona l a nd r is k a na l y s is

•

• I nf or m a tion a b out r el a ted p a r ties

• D es cr ip tion of th e tr a ns a ction (contr a ctua l ter m s a nd conditions )

• D es cr ip tion of g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , a nd tr a dem a r k s

•

•

•


•

•

•

•

•

da ta , a l th oug h th er e is a l a ck of l oca l da ta b a s es a v a il a b l e in th e m a r k et. A t th e s a m e tim e, th e l a w a l l ow s ta x a uth or ities to us e s ecr et com p a r a b l es (cus tom s inf or m a tion, p eer s a na l y s is , etc. ).

5 2



Return disclosures/related-party disclosure

E f f ectiv e f r om 1 J ul y 2 0 1 6 , ta x p a y er s a r e r eq uir ed to inf or m th e ta x a uth or ities a b out th eir contr ol l ed tr a ns a ctions under ta k en dur ing a

m onth f ol l ow ing th e r ep or ting m onth , w h il e in p a r ticul a r ca s es it ca n dif f er . T h e r ep or ting h a s to b e done on a tr a ns a ction- b y - tr a ns a ction schet-factura


(a t l ea s t m onth l y ) r eg a r dl es s of w h eth er th e v ol um e of tr a ns a ctions ex ceeds th e es ta b l is h ed th r es h ol ds or not. P l ea s e r ef er to th e s ection a b ov e f or m or e deta il s .


• 1 0 w or k ing da y s f r om th e r eq ues t f or a des k ta x a udit

•

p r a cticed f or a des k ta x a udit.


•

• P ena l ties w il l b e im p os ed if a ta x p a y er ’ s incom e is a dj us ted a s a r es ul t of a ta x a udit, a nd if th e ta x p a y er did not p r ov ide th e tr a ns f er p r icing docum enta tion s up p or ting th e p r ices in a contr ol l ed tr a ns a ction.

•

• T h e p ena l ty of 2 0 % on th e a dditiona l ta x p a y a b l e is a l s o a p p l ied.

Penalty relief

P ena l ties ca nnot a p p l y if a ta x p a y er h a s a dj us ted its ta x r etur n a nd p a id outs ta nding ta x l ia b il ity b ef or e a ta x a udit.


T h e g ener a l r ul e is th a t th e ta x a uth or ity m a y a udit a ta x p a y er f or a ny num b er of y ea r s th a t a r e not cov er ed b y a p r ior ta x a udit. A s a

5 3




T r a ns f er p r icing m a tter s in contr ol l ed tr a ns a ctions a r e not s ub j ect to s p ecia l tr a ns f er p r icing a udits a nd a r e contr ol l ed w ith in g ener a l ta x a udits .

T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed dur ing a n a udit is cur r entl y unk now n b eca us e of th e nov el ty of th e

H ow ev er , des p ite its ea r l y s ta g e, tr a ns f er p r icing a udits a r e ex p ected to incr ea s e in f r eq uency , a s tr a ns f er p r icing is a top p r ior ity f or th e

APA opportunity

C ur r entl y , no A P A op p or tunities a r e f or es een.


B elgium




44

a p p ended to th e cor p or a te incom e ta x r etur n.

4 444 4

p r icing docum enta tion r ul es .

th e notes or a nnex s ection of th eir s ta tutor y a nnua l a ccounts .

ex is ting p a tent incom e deduction (P I D ) r eg im e. T h is new innov a tion r eg im e is ex p ected to b e intr oduced w ith r etr oa ctiv e ef f ect a s f r om

ta x p a y er s w il l h a v e th e r ig h t to continue to a p p l y th e 8 0 % p a tent incom e deduction until 3 0 J une 2 0 2 1 w ith r eg a r d to incom e der iv ed

th a t h a v e b een a p p l ied f or b ef or e 1 J ul y 2 0 1 6 b ut a r e onl y ef f ectiv el y ob ta ined a f ter th a t da te.

tex t of th e l a w r eg a r ding th e new innov a tion incom e is not y et a v a il a b l e. H ow ev er , it is env is a g ed th a t th e new r eg im e w il l (i) b r oa den th e s cop e of th e deduction to incl ude, in a ddition to p a tents , s of tw a r e, etc. , (ii) a p p l y to th e net a m ount of q ua l if y ing I P incom e a nd (iii) incl ude incom e f r om q ua l if y ing I P a s s ets onl y if th e ta x p a y er h a s incur r ed q ua l if y ing ex p ens es b y its el f r el a ting to th e dev el op m ent of

q ua l if y ing incom e w il l b e s ub j ect to a n ef f ectiv e ta x r a te of 5 . 1 % or l es s .

5 5

B elgium (continued)


ta x a b l e if th e incom e w er e r eceiv ed b y r es idents (in b oth tr ea ty a nd non- tr ea ty s itua tions ).

•

• A ta x p a y er s ub j ect to cor p or a te ta x

• A l eg a l entity

•

•

O r

•

T h e s cop e of th e ca tch - a l l cl a us e w il l b e na r r ow ed, a s it w il l onl y b e a p p l ica b l e w h en th e s er v ice p r ov ider h a s a dir ect or indir ect l ink of

l eg a l a nd econom ic contr ol .

de minimis regime

h er p r of es s iona l a ctiv ities . T h e new ca tch - a l l p r ov is ion, th er ef or e, ca n no l ong er b e a p p l ica b l e to s er v ices p r ov ided to a n indiv idua l w h o does not a ct w ith in th e f r a m ew or k of h is or h er p r of es s iona l a ctiv ity .

T h e new cl a us e is ex p ected to a p p l y a s f r om 1 J ul y 2 0 1 6 .

• A dm inis tr a tiv e g uidel ines a b out th e of f ens iv e a s p ects of tr a ns f er p r icing , is s ued in 1 9 9 9

• A dm inis tr a tiv e g uidel ines a b out th e def ens iv e a s p ects of tr a ns f er p r icing , is s ued in 2 0 0 0 a nd 2 0 0 3

•

• A dm inis tr a tiv e g uidel ines r eg a r ding th e f or m a l cr ea tion of a tr a ns f er p r icing a udit tea m w ith in th e ta x a uth or ity , is s ued in J ul y 2 0 0 6

• A dm inis tr a tiv e g uidel ines a b out tr a ns f er p r icing docum enta tion, th e tr a ns f er p r icing code of conduct a nd tr a ns f er p r icing a udits , is s ued in N ov em b er 2 0 0 6

5 6




I n its a dm inis tr a tiv e g uidel ines , th e ta x a uth or ity indica tes th a t ta x p a y er s g ener a l l y s h oul d f ol l ow th e g uida nce m entioned in th e O E C D

a p p l ica b l e v er s ion of th e O E C D G uidel ines h a s b een m a de b y th e ta x a uth or ity , in p r a ctice, it is g ener a l l y cons ider ed th a t th e m os t r ecent

tr a ns f er p r icing el em ents m a y dif f er f r om oth er countr ies ’ inter p r eta tion.


th a n w h a t w a s incl uded in th e 1 9 9 9 a dm inis tr a tiv e g uidel ines (w h ich s ta te th a t docum enta tion s h oul d dem ons tr a te th a t th e ta x p a y er ’ s p r icing com p l ies w ith th e a r m ’ s - l eng th p r incip l e to a v oid a n indep th tr a ns f er p r icing a udit), th e l a w of 1 J ul y 2 0 1 6 intr oduced f or m a l tr a ns f er p r icing docum enta tion r eq uir em ents .

•

•

O r

• A v er a g e a nnua l num b er of em p l oy ees of 1 0 0 in f ul l - tim e eq uiv a l ents (F T E s )

s h oul d conta in a n ov er v iew of th e m ul tina tiona l g r oup of com p a nies , incl uding th e na tur e of its b us ines s op er a tions , its inta ng ib l e a s s ets ,

a na l y s es , com p a r a b il ity s tudies a nd oth er inf or m a tion m us t a l s o b e p r ep a r ed a nd a tta ch ed to th e ta x r etur n. T h is deta il ed f or m is

T h er ef or e, com p a nies ex ceeding th e a b ov em entioned th r es h ol ds need to s ub m it m a nda tor y tr a ns f er p r icing f or m s w ith th eir cor p or a te

•

•

5 7



m ea s ur es of econom ic a ctiv ity . I n a ddition, th e a ctiv ities of a l l entities in ea ch countr y s h oul d b e dis cl os ed.

•

•of r es idence of th e ul tim a te p a r ent com p a ny .

•f a il ur e, no ef f ectiv e ex ch a ng e of inf or m a tion does ta k e p l a ce.

G er m a n), or in E ng l is h (cons ider ing th a t a tr a ns l a tion m ig h t b e r eq ues ted).

F ina l l y , w ith r es p ect to com p a nies not ex ceeding th e a b ov em entioned th r es h ol ds b ut h a v ing inter com p a ny tr a ns a ctions , th e ol d g uida nce

• A ctiv ities of th e g r oup , incl uding com p etitiv e p os ition, l ev el of m a r k et, econom ic cir cum s ta nces a nd b us ines s s tr a teg ies

•

• F unctiona l a na l y s is , incl uding a n ov er v iew of th e f unctions , r is k s a nd inta ng ib l es

• E conom ic a na l y s is s ections r eg a r ding th e tr a ns f er p r icing m eth ods us ed


I n p r incip l e, ta x p a y er s a r e f r ee to ch oos e a ny O E C D tr a ns f er p r icing m eth od a s l ong a s it r es ul ts in a r m ’ s - l eng th p r icing f or th e

F or m a l l y , ta x p a y er s a r e not r eq uir ed to us e m or e th a n one m eth od or dem ons tr a te th a t m ul tip l e m eth ods w er e cons ider ed, b ut s uch docum ented r ev iew s s tr ong l y s up p or t th eir p os ition to a p p l y a p a r ticul a r m eth od up on a n a udit.

I n th is r es p ect, th e ev ol v ing g uida nce f r om th e O E C D s h oul d a l s o b e cons ider ed.

5 8



Return disclosures/related-party disclosure

D ecr ee (it cur r entl y conta ins a b out 3 0 j ur is dictions th a t eith er do not l ev y cor p or a te incom e ta x or h a v e a nom ina l cor p or a te incom e ta x r a te th a t is l ow er th a n 1 0 % ). A m a nda tor y f or m (N o. 2 7 5 F ) f or r ep or ting dir ect or indir ect p a y m ents to p er s ons es ta b l is h ed in ta x h a v ens is to b e a tta ch ed to th e ta x r etur n. F a il ur e to r ep or t p a y m ents r es ul ts in nondeductib il ity of s uch p a y m ents . I n a ddition, th es e

• C om p a nies m us t p r ov ide inf or m a tion r eg a r ding th e na tur e a nd b us ines s p ur p os e of th eir r el ev a nt, of f - b a l a nce s h eet a r r a ng em ents ; if

th e com p a ny . T h is r eq uir em ent is a p p l ica b l e in ca s es of intr a g r oup g ua r a ntees , p l edg es , f a ctor ing l ia b il ities , tr a ns a ctions w ith s p ecia l -p ur p os e entities (w h eth er tr a ns p a r ent or not) a nd of f s h or e entities .

•th e ty p e of com p a ny , a dif f er ent s cop e of inf or m a tion is to b e p r ov ided, r a ng ing f r om m er el y l is ting s uch tr a ns a ctions to m entioning th e

a r m ’ s - l eng th na tur e of th eir inter com p a ny tr a ns a ctions . N oncom p l ia nce m a y r es ul t in dir ector l ia b il ity . I n a ddition, a ny s uch dis cl os ur es a r e a n ex cel l ent s our ce of inf or m a tion to initia te a (ta r g eted) tr a ns f er p r icing a udit.



•

•

docum enta tion a nd its contents s o a s to a s cer ta in th e cor r ectnes s of th e ta x a b l e incom e. A ta x p a y er h a s , in p r incip l e, onl y one m onth to p r ov ide s uch inf or m a tion. F or v a l id r ea s ons , th e one- m onth p er iod ca n b e ex tended.

5 9




th e new tr a ns f er p r icing docum enta tion ob l ig a tions incr ea s es th e l ik el ih ood of a tr a ns f er p r icing a udit.

p r icing f or m s ) r es ul ts in a n incom p l ete or ina ccur a te ta x r etur n, w h ich m a y l ea d to th e r ev er s a l of th e b ur den of p r oof .

T h e g ener a l ta x p ena l ty f r a m ew or k a p p l ies to tr a ns f er p r icing a dj us tm ents . T h es e p ena l ties v a r y f r om 1 0 % to 2 0 0 % (in ex cep tiona l ca s es ) of a dditiona l ta x . T h e r a te dep ends on th e deg r ee of intent to a v oid ta x or th e deg r ee of th e com p a ny ’ s g r os s neg l ig ence.

F ur th er m or e, f or l a te p a y m ents , inter es t is due on a dditiona l ta x a s s es s m ents (incl uding a s s es s m ents r es ul ting f r om a tr a ns f er p r icing a dj us tm ent).

Penalty relief

p r incip a l l y w ith th e ta x a uth or ity , th e ta x p a y er needs to p r ov ide a l l inf or m a tion neces s a r y to a l l ow th e ta x a uth or ity to v er if y th e com p a ny ’ s ta x p os ition.

T h er ef or e, b eca us e a dditiona l ta x a s s es s m ents l a r g el y dep end on th e deg r ee of intent to a v oid ta x es or on th e com p a ny ’ s g r os s neg l ig ence, p ena l ties m a y b e r educed or el im ina ted if th e ta x p a y er ca n dem ons tr a te its intent to es ta b l is h tr a ns f er p r ices in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e, w h ich w oul d g ener a l l y b e th e ca s e th r oug h th e a v a il a b il ity of deta il ed l oca l docum enta tion r ep or ts .


T h e g ener a l r ul es r eg a r ding th e s ta tute of l im ita tions a p p l y to tr a ns f er p r icing a s s es s m ents . T h er ef or e, th e ta x a uth or ity is entitl ed to m a k e a dditiona l a s s es s m ents f or a p er iod of th r ee y ea r s , s ta r ting f r om th e cl os ing of th e a ccounting y ea r .

H ow ev er , in th e ca s e of f r a ud b eing cons ider ed, th e ta x a uth or ity h a s th e r ig h t to a dj us t th e incom e dur ing a s ev en- y ea r p er iod, p r ov ided th a t th e ta x p a y er r eceiv ed p r ior notice of s er ious indica tions of f r a ud. I n ca s e of ta x l os s es , th e s ta tutes of l im ita tions do not r un until

s itua tions .


4

p r icing a udit tea m a b out ev er y tr a ns f er p r icing inv es tig a tion th ey p er f or m .

6 0



•

•

•

• T h e us e of ta x h a v ens or l ow - ta x - r a te countr ies

•

• C ir cul a r s tr uctur es

• I nv oices f or s er v ices s ent a t th e end of th e y ea r (i. e. , m a na g em ent s er v ices )

O cca s iona l l y , th e tr a ns f er p r icing a udit tea m p a r ticip a tes in cr os s - b or der tr a ns f er p r icing a udits (e. g . , w ith r es p ect to b us ines s r es tr uctur ing s ), w h ich a r e h el d j ointl y w ith th e ta x a uth or ities of (m os tl y ) neig h b or ing countr ies .

g ener a l ta x a udits . T h is is th e ca s e r eg a r dl es s of w h eth er dedica ted tr a ns f er p r icing ins p ector s s up p or t th e ta x ins p ector s .

APA opportunity

A dditiona l g uida nce in th is r es p ect is p r ov ided th r oug h v a r ious r oy a l decr ees .

4

A dv a nce D ecis ions .


I n its a dm inis tr a tiv e g uidel ines , th e ta x a uth or ity indica tes th a t ta x p a y er s g ener a l l y s h oul d f ol l ow th e g uida nce m entioned in th e O E C D

a p p l ica b l e v er s ion of th e O E C D G uidel ines h a s b een m a de b y th e ta x a uth or ity , in p r a ctice, it is g ener a l l y cons ider ed th a t th e m os t r ecent

B oliv ia



Servicio de Impuestos Nacionales)


• A ct N os . 5 1 6 a nd 5 4 9

•

•


O E C D r ul es a r e not ex p r es s l y a ccep ted, b ut th e cur r ent tr a ns f er p r icing r eg im e is b a s ed on th e O E C D G uidel ines .


(C I T ) due da tes .

4

• A n ov er v iew of th e ta x p a y er a nd com p l ete deta il s of r el a ted p a r ties

• A des cr ip tion of tr a ns a ctions w ith r el a ted p a r ties

• A des cr ip tion of p r icing p r ocedur es b etw een r el a ted p a r ties

• A n ov er v iew of th e ta x p a y er f r om com m er cia l a nd indus tr ia l p oints of v iew



6 2

B oliv ia (continued)



F or m 6 0 1 .


L ine o f b u s ines s T ax y ear - end

A g r icul tur e a nd a g r ib us ines s 3 0 J une

A l l oth er b us ines s es 3 1 D ecem b er


4

Penalty relief


• 4 y ea r s in 2 0 1 2

• 5 y ea r s in 2 0 1 3

• 6 y ea r s in 2 0 1 4

• 7 y ea r s in 2 0 1 5

• 8 y ea r s in 2 0 1 6

• 9 y ea r s in 2 0 1 7

• 1 0 y ea r s in 2 0 1 8

F ur th er m or e, tr a ns f er p r icing a udits ca n b e p er f or m ed w ith in a p er iod of tw o y ea r s .


6 3

B oliv ia (continued)


APA opportunity

Impact of new OECD BEPS Action 8–10 guideline

B raz il



Receita Federal)

4a nd N or m a tiv e I ns tr uction (I N ) 1 . 3 1 2 / 2 0 1 2


• 4p r ov iding th r ee m eth ods f or im p or ts a nd ex p or ts of a s s ets , g oods a nd s er v ices .

•

1 . f or unr el a ted p a r ties or b etw een unr el a ted p a r ties

2 .

3 .

•

1 . p a r ties dur ing th e s a m e y ea r

2 .

3 .

• N or m a tiv e I ns tr uction 2 4 3 / 2 0 0 2 p r ov ided th e m os t r el ev a nt inter p r eta tions a nd w a s v a l id until N or m a tiv e I ns tr uction 1 . 3 1 2 / 2 0 1 2 w a s is s ued in 2 0 1 2 , w ith f ur th er a m endm ents b y N or m a tiv e I ns tr uctions 1 . 3 2 1 / 2 0 1 3 , 1 . 3 2 2 / 2 0 1 3 , 1 . 3 9 5 / 2 0 1 3 , 1 . 4 3 1 / 2 0 1 3 a nd 1 . 4 9 8 / 2 0 1 4 .

•

•

•

• 4g oods , s er v ices or r ig h ts , dep ending on th e com p a ny ’ s indus tr y s ector

• 4

• P h a r m a ch em ica l s a nd p h a r m a ceutica l p r oducts

•

• O p tica l , p h otog r a p h ic a nd cinem a tog r a p h ic eq uip m ent a nd ins tr um ents

•

• E x tr a ction of oil a nd na tur a l g a s a nd der iv a tiv e p r oducts

6 5

B raz il (continued)


Relevant regulations and rulings (continued)

•

• C h em ica l p r oducts

• G l a s s a nd g l a s s p r oducts

• P ul p , p a p er a nd p a p er p r oducts

•

•

• O th er indus tr y s ector s

•

•

•

•

•

• T h e p r ev ious l y s el ected tr a ns f er p r icing m eth odol og y ca n’ t b e ch a ng ed once th e ta x ins p ection h a s b een initia ted, unl es s th e ta x a uth or ities dis q ua l if y th e m eth od.

•p a r ties .

•

•

•

•

•4

g uida nce on th e a p p l ica tion of th e new L a w 1 2 . 7 1 5 / 2 0 1 2 a nd h ow to ex er cis e th e p ow er to deter m ine cer ta in r ul es , w h er e th e l a w p r ov ides th e a uth or ity .

•

•

• I nter com p a ny a g r eem ents enter ed into b ef or e 3 1 D ecem b er 2 0 1 2 w il l f ol l ow th e p r ev ious r ul es (L a w 9 . 4 3 0 / 1 9 9 6 ), w h er eb y th e

p l us 3 % .

6 6



• I nter com p a ny a g r eem ents enter ed into a s of 1 J a nua r y 2 0 1 3 or a f ter w il l b e s ub j ect to th e new L a w 1 2 . 7 6 6 / 2 0 1 2 , w h ich dif f er entia tes inter es t r a tes dep ending on th e under l y ing cur r ency of ea ch a g r eem ent a nd a l s o a l l ow s f or a v a r ia b l e s p r ea d to

cons ider ed a s a new tr a ns a ction th a t is th er ef or e s ub j ect to th e new r eg ul a tions .

•

not incl uded in th e l a w a nd is th er ef or e s ub j ect to dif f er ent inter p r eta tions .

• 4

•

•

•

b y th e p r ev ious r ul es a nd w il l not b e s ub j ect to th e new r eq uir em ents . P l ea s e note th a t th e r enew a l or r eneg otia tion of ex is ting a g r eem ents s h oul d b e cons ider ed a s a new tr a ns a ction a nd th er ef or e b e s ub j ect to th e new r eg ul a tions .

•

•tr a ded in th e com m odities a nd f utur es ex ch a ng es a r e l is ted in A p p endix I I .

• E s ta b l is h ed th e p os s ib il ity of a dj us tm ents in r el a tion to v a r ia tions of q ua l ity , f ea tur es a nd content of th e s ub s ta nce of th e p r oduct s ol d.

• E s ta b l is h ed th a t in th e a b s ence of a q uota tion on th e tr a ns a ction da te, th e q uota tion to b e us ed is th e l a tes t one a v a il a b l e. I n a ddition, in ca s e it is not p os s ib l e to identif y th e tr a ns a ction da te, th e da te to b e us ed is th a t of th e im p or t docum enta tion or th e p r oduct s h ip da te f or ex p or t p ur p os es .

• E s ta b l is h ed th a t, in th e a b s ence of a q uota tion f or th e g oods in th e com m odities a nd f utur es ex ch a ng es (A p p endix I I ), th e p r ices of

(A p p endix I I I ).

• I N 1 . 4 9 8 / 2 0 1 4 b r oug h t b a ck s om e com m odities (cop p er , ir on, tin, m a ng a nes e) to A p p endix I th a t h a d b een r em ov ed b y I N 1 . 3 9 5 / 2 0 1 3

•th e r ul ing )1

cos ts a nd ex p ens e a p p or tionm ent.

• D eductib il ity g uidel ines on s h a r ed s er v ices cos ts a nd ex p ens es

• 2

r eim b ur s em ent.

• T h e r ul ing incr ea s es ta x p a y er s ’ com f or t l ev el to ex ecute cos t- s h a r ing a g r eem ents , cl a r if y ing th a t it is p os s ib l e to concentr a te, in a s ol e entity , on ex p enditur es contr ol r el a ted to cor e s up p or t s er v ices (e. g . , h um a n r es our ces , a ccounting , l eg a l ).

1 42 4

6 7



•

• C ons ider ed neces s a r y , nor m a l a nd us ua l f or th e g r oup entities ’ b us ines s

• P a id a nd p r op er l y s up p or ted b y a ny a v a il a b l e docum enta tion

•p a r ties

•a cq uir ed b y th e s h a r ed s er v ices center

• I t s h oul d b e m entioned th a t a l l com p a nies s h oul d k eep p r op er b ook k eep ing of a l l th e a cts dir ectl y r el a ted to th e ex p enditur es ’ a p p or tionm ent.

•

p or tion p a id b y ea ch com p a ny .


b a s ed m eth ods a nd th e concep t of a f unctiona l a nd r is k a na l y s is is not incl uded.

or cos t- p l us ) f or ea ch im p or ted (or ex p or ted) p r oduct, s er v ice or r ig h t.


4f or m s th a t r eq uir e ta x p a y er s to dis cl os e deta il ed inf or m a tion r eg a r ding th eir m a in inter com p a ny im p or t a nd ex p or t tr a ns a ctions .

A s p a r t of th es e contem p or a neous docum enta tion r eq uir em ents , ta x p a y er s need to dis cl os e th e tota l tr a ns a ction v a l ues of th e m os t tr a ded p r oducts , s er v ices or r ig h ts ; th e na m es a nd l oca tions of th e r el a ted tr a ding p a r tner s ; th e m eth odol og y us ed to tes t ea ch tr a ns a ction; th e ca l cul a ted b ench m a r k p r ice; th e a v er a g e a nnua l tr a ns f er p r ice; a nd th e a m ount of a ny r es ul ting a dj us tm ent.

docum ent th eir tr a ns f er p r ices b y ea ch p r oduct, s er v ice a nd r ig h t. F or p r oducts , th e ta x p a y er s h oul d docum ent ea ch p r oduct us ing th e

cus tom s a nd indir ect ta x p ur p os es .

of th e f ol l ow ing ca l enda r y ea r ).

6 8




m eth od (Método do Preço de Revenda menos Lucro) to docum ent a com p a ny ’ s tr a ns f er p r ices .

m eth ods to r educe th e p otentia l tr a ns f er p r ice ex p os ur e. T a x p a y er s m a y ch oos e w h ich ev er m eth od s uits th em b es t. T h is a p p r oa ch p r ov ides ta x p a y er s w ith th e op p or tunity to f ocus on th os e p r oducts a nd tr a ns a ctions th a t g ener a te th e h ig h es t a dj us tm ents under th e

or a v oiding th e a dj us tm ent). T h e oth er m eth ods of ten a r e m or e f a v or a b l e, a s th e r es ul t is m or e l ik el y to b e in l ine w ith inter na tiona l

docum enta tion to s up p or t th e a p p l ica tion of th e P I C a nd C P L m eth ods .

a dditiona l tr a ns f er p r icing m eth ods . E x p or ts a r e ex em p t f r om a p p l ica tions of th e tr a ns a ctiona l tr a ns f er p r icing r ul es if th ey m eet one of th e th r ee s a f e h a r b or s , w h ich a p p l y (1 ) to s m a l l ex p or ts , com p a r ed w ith th e ov er a l l b us ines s (l es s th a n 5 % of r ev enue is ex p or ted to

a nd, a l s o, th e inter com p a ny ex p or t tr a ns a ctions ca nnot ex ceed 2 0 % of tota l net ex p or t tr a ns a ctions , a nd th e l a s t a p p r oa ch is (3 ) w h en th e a v er a g e p r ice of ex p or ts is a t l ea s t 9 0 % of th e a v er a g e dom es tic s a l es p r ice. I f a s a f e h a r b or is not m et, us ua l l y th e cos t- p l us m eth od

F or tr a ns a ctions of p r oducts cons ider ed to b e com m odities , th e s a f e h a r b or is not a p p l ica b l e.

F or inter com p a ny im p or t a nd ex p or t tr a ns a ctions , no a dj us tm ent w il l b e r eq uir ed a s l ong a s th e a ctua l tr a ns f er p r ice does not ex ceed th e

m eth ods ), th e div er g ence m a r g in is r educed to 3 % .

I t is im p or ta nt to note th a t, under th e new r ul es intr oduced b y L a w 1 2 . 7 1 5 / 2 0 1 2 , th e ta x p a y er is b ound to th e tr a ns f er p r icing m eth od ch os en, a nd a ch a ng e of m eth od dur ing a ta x a udit is a ccep ted onl y f or y ea r s 2 0 1 2 onw a r d if th e ta x a uditor a p p l ies a dif f er ent m eth od.


of th e nex t ca l enda r y ea r ), a t w h ich tim e th e com p a ny w il l a l s o h a v e to dis cl os e th e tr a ns f er p r icing m eth ods ch os en a nd a ny r el a ted inf or m a tion.


6 9




y ea r .


T h e a m ount of th e p ena l ty m a y b e up to 2 0 % of th e om itted ta x (or 0 . 3 3 % p er da y ) if th e ta x p a y er p a y s th e r el a ted ta x es l a te b ut b ef or e

f r om 7 5 % to 2 2 5 % of th e om itted ta x es .

Penalty relief

C ur r entl y , no p ena l ty r el ief is a v a il a b l e.



v ol um es of a ccounting a nd tr a ns a ction da ta .

b ecom ing incr ea s ing l y s op h is tica ted in th eir a udit a p p r oa ch es a s th ey g r ow in num b er a nd dev el op ex p er ience.

7 0



APA opportunity

C ur r entl y , th er e is no op p or tunity to p ur s ue a n A P A .

I n cer ta in ca s es , unil a ter a l r ul ing s on th e inter p r eta tion of l a w , not on th e a ctua l p r ice to b e a p p l ied, a r e p os s ib l e.

r eg ul a tions h a v e b een is s ued y et.

Impact of new OECD BEPS Article 8–10 guidelines

da ta f r om m ul tip l e s our ces to v er if y a nd a udit a ta x p a y er ’ s tr a ns a ctions . T h es e incl ude num er ous da ta b a s es , w h ich tr a ck th e im p or ta tion

B ulgaria




•

•

• 42 0 0 6

•

ta x a b l e b a s e th a n w h a t w oul d h a v e b een a ch iev ed in unr el a ted- p a r ty tr a ns a ctions , th e ta x a uth or ities w il l a dj us t th e ta x a b l e b a s e a ccor ding l y .

F ur th er m or e, under A r ticl e 1 6 of th e C I T A , w h en one or m or e tr a ns a ctions , incl uding b etw een unr el a ted p a r ties , h a v e b een concl uded

tr a ns a ctions , cer ta in ter m s or th eir l eg a l f or m . I ns tea d, th e ta x a b l e a m ount th a t w il l b e cons ider ed w oul d b e ob ta ined in a m a r k et-cus tom a r y w a y of th e r el ev a nt ty p e a t m a r k et p r ices a nd is intended to a ch iev e th e s a m e econom ic r es ul t w ith out l ea ding to l ow er or no ta x .

dur ing th eir inv es tig a tions .


w h ich th e h ier a r ch y of m eth ods is a b ol is h ed, h a s not y et b een intr oduced in th e l oca l tr a ns f er p r icing l eg is l a tion.


T a x p a y er s b ea r th e b ur den of p r oof r eg a r ding th e a r m ’ s - l eng th na tur e of th e contr ol l ed p r ice a nd m us t p r es ent a l l r el ev a nt ev idence. I f

th e ta x p a y er to es ta b l is h th e tr a ns f er p r ice. I f th ey dis a g r ee w ith th e tr a ns f er p r ice a p p l ied, th ey s h oul d com e up w ith ev idence of th e m a r k et p r ice th ey cons ider a p p r op r ia te, b a s ed on a ny r ea dil y a v a il a b l e p ub l ic inf or m a tion.

7 2

B ulgaria (continued)


•

•ch a r ts of th e g r oup )

• E conom ic r ol e of th e div is ions w ith in th e g r oup

•

•

•dev el op m ent, s ucces s f a ctor s a nd r is k s )

• F unctiona l a na l y s is of th e com p a ny

•

• F ina ncing of th e enter p r is e

•

•p enetr a tion p ol icy to g a in a s h a r e of a p a r ticul a r m a r k et)

•countr ies inv ol v ed, s p ecia l ter m s a nd conditions

•

•

• A na l y s is of m eth ods a nd a p r es enta tion of th e tr a ns f er p r icing m eth od us ed

•conditions


•

•

•

ca s es in w h ich a p p l y ing th e tr a ditiona l m eth ods p r oduces a n uns a tis f a ctor y r es ul t.

7 3




th em , a s w el l a s th e r el a ted- p a r ty tr a ns a ctions .

s h oul d b e p a r ties w h er e one ex er cis es contr ol ov er th e oth er , w h er ea s f or ta x p ur p os es , p a r ties w il l b e r el a ted not onl y in th e ca s e of contr ol , b ut a l s o ev en in a ca s e w h er e one of th e p a r ties h ol ds dir ectl y 5 % of th e v oting s h a r es of th e oth er p a r ty .

•

• C er ta in ty p es of r el a tiv es

• E m p l oy er s a nd em p l oy ees

•

• P er s ons w h er e one of th em p a r ticip a tes in th e m a na g em ent of th e oth er or its s ub s idia r y

• P er s ons in w h os e m a na g em ent or contr ol l ing b ody p a r ticip a tes one a nd th e s a m e p er s on (l eg a l or na tur a l p er s on), incl uding ca s es w h en th e na tur a l p er s on is a r ep r es enta tiv e of a noth er p er s on

• A com p a ny a nd a p er s on, w h er e th e p er s on ow ns dir ectl y m or e th a n 5 % of th e com p a ny ’ s s h a r es w ith v oting r ig h ts

•

• P er s ons w h os e a ctiv ity is contr ol l ed b y a th ir d p er s on or its s ub s idia r y

• P er s ons ex er cis ing j oint contr ol ov er a th ir d p er s on or its s ub s idia r y

• P er s ons w h er e one of th em is a com m er cia l r ep r es enta tiv e of th e oth er

• P er s ons w h er e one of th em h a s m a de a dona tion to th e oth er

• P er s ons w h o p a r ticip a te (dir ectl y or indir ectl y ) in th e m a na g em ent, th e contr ol or th e ca p ita l of a noth er p er s on or p er s ons , th us b eing a b l e to neg otia te ter m s dif f er ent f r om th e r eg ul a r ones

•

• one

• O w ns dir ectl y or indir ectl y , or under a n a g r eem ent w ith a noth er p er s on, m or e th a n h a l f of th e v otes a t th e g ener a l m eeting of a noth er p er s on

• H a s th e p os s ib il ity to deter m ine dir ectl y or indir ectl y m or e th a n h a l f of th e m em b er s of th e m a na g ing or contr ol l ing b ody of a noth er p er s on

• H a s th e p os s ib il ity to m a na g e, incl uding th r oug h or tog eth er w ith a s ub s idia r y , in a ccor da nce w ith a p a r ticul a r s ta tute or contr a ct, th e a ctiv ity of a noth er p er s on

• A s a s h a r eh ol der or a p a r tner in a n entity , contr ol s indep endentl y , in a ccor da nce w ith a dea l m a de w ith oth er p a r tner s or s h a r eh ol der s of th e s a m e entity , m or e th a n h a l f of th e v otes a t th e g ener a l m eeting of th is entity

•

7 4




4inf or m a tion a b out tr a ns a ctions w ith dom es tic a nd nonr es ident r el a ted p a r ties , a s w el l a s w ith of f s h or e com p a nies .


a udit or ta x docum enta tion r ev iew w h en a ta x r ef und or ta x r el ief under a doub l e ta x conv ention is cl a im ed). I n th e cour s e of a tr a ns f er p r icing a udit, th e ta x a uth or ities coul d r eq ues t docum ents a nd inf or m a tion w ith in a cer ta in p er iod. T h e inf or m a tion r eq ues ted us ua l l y concer ns th e g r oup ’ s s tr uctur e, th e a udited com p a ny a nd its a ctiv ities , a na l y s is of tr a ns a ctions inv ol v ing r el a ted p a r ties , th e f unctions p er f or m ed in r el a tion to th os e contr ol l ed tr a ns a ctions , a nd p r oof a nd a w r itten ex p l a na tion w ith r eg a r d to th e tr a ns f er p r icing m eth ods

4


tr a ns a ctions is not a t a r m ’ s - l eng th .

ex p ens e w oul d b e cons ider ed a deem ed div idend a nd, th us , s ub j ect to a 5 % w ith h ol ding ta x .

•

• N ot b us ines s - r el a ted

O r

• I n ex ces s of m a r k et p r ice l ev el s

•

• T h e l oa n p r incip a l ex ceeds th e eq uity of th e b or r ow er a s of 3 1 D ecem b er of th e p r eceding y ea r

•

•

• T h e r ep a y m ent of th e l oa n dep ends on s a tis f a ction of oth er cr editor s ’ cl a im s or on p a y m ent of div idends

7 5



Penalty relief

T h is a l l ow s ta x p a y er s to s el f - a dj us t a ny ov er p r iced g r oup tr a ns a ctions w ith no th r ea t of p ena l ties .


1


APA opportunity

N o b inding r ul ing or A P A op p or tunities a r e cur r entl y a p p l ica b l e.

l im ited, b eca us e th e ta x a uth or ities r ef us e to p r ov ide a ny op inion a b out tr a ns a ctions th a t h a v e not y et b een s tr uctur ed a nd docum ented.


1

2 0 1 2 .

C am eroon




C ir cul a r on th e F ina nce L a w b y th e G ener a l D ir ector of T a x a tion

4


T h e O E C D G uidel ines on tr a ns f er p r icing m a y b e r el ied up on to deter m ine th e a r m ’ s - l eng th na tur e of inter na tiona l tr a ns a ctions , a nd s up p or ting docum enta tion s h oul d b e p r ep a r ed.


4

p r ov ided b y th e A dm inis tr a tion, th e s ta tem ent of s h a r es w h ich th ey ow n in oth er com p a nies w h er e s uch s h a r es do not ex ceed 2 5 % of th eir s h a r e ca p ita l . T h ey s h a l l a tta ch a deta il ed s ta tem ent of tr a ns a ctions w ith th e com p a nies w h ich contr ol th em or w h ich a r e under th eir contr ol , b e th ey in C a m er oon or a b r oa d. F or th e a p p l ica tion of th is p r ov is ion, th e notion of contr ol m us t b e under s tood a s us ed in

• A s ta tem ent of ow ner s h ip in oth er com p a nies if th e ow ner s h ip ex ceeds 2 5 % of th eir s h a r e ca p ita l . T h e s ta tem ent s h oul d b e a ccom p a nied

•

• A g ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding th e ch a ng es th a t occur r ed dur ing th e y ea r a udited

•

• A g ener a l des cr ip tion of th e f unctions p er f or m ed a nd r is k s a s s um ed b y th e r el a ted com p a nies , a s th ey a f f ect th e com p a ny

• A l is t of k ey inta ng ib l e a s s ets , incl uding p a tents , tr a dem a r k s , tr a de na m es a nd k now - h ow r el a ted to th e com p a ny

• A g ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy of th e g r oup

•

• A g ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding th e ch a ng es th a t occur r ed dur ing th e y ea r a udited

• A des cr ip tion of th e tr a ns a ctions w ith th e r el a ted com p a nies , incl uding th e na tur e a nd a m ount of tr a ns f er s , incl uding r oy a l ties

• A l is t of cos t- s h a r ing a g r eem ents a nd, if a p p l ica b l e, a cop y of th e p r el im ina r y a g r eem ents on tr a ns f er p r icing a nd r es cr ip ts r el a ting to th e deter m ina tion of tr a ns f er p r ices a f f ecting th e r es ul ts of th e com p a ny

7 7

C am eroon (continued)


• A p r es enta tion of th e m eth od f or deter m ining tr a ns f er p r ices in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e, incl uding a n a na l y s is of th e f unctions p er f or m ed, a s s ets us ed a nd r is k s a s s um ed, a nd a n ex p l a na tion of th e s el ection a nd a p p l ica tion of th e m eth od us ed

• A n a na l y s is of th e b ench m a r k s cons ider ed r el ev a nt to th e com p a ny w h en th e ch os en m eth od r eq uir es it




T a x p a y er s m us t dis cl os e r el a ted- p a r ty tr a ns a ctions . I ndeed, th e p r ov is ions of A r ticl e 1 8 - 3 indica te th a t a com p a ny m us t p r ov ide a

incl uded in th e tr a ns f er p r icing docum enta tion s ub m itted w ith th e r etur n.



under th e dep a r tm ent in ch a r g e of l a r g e enter p r is es .


Penalty relief

I n ca s e of p a r tia l or tota l f a il ur e to s ub m it th e r eq uir ed docum enta tion, a notice to p r ov ide or com p l ete th e docum enta tion w il l b e s er v ed to th e com p a ny w ith in 3 0 da y s f r om th e docum enta tion s ub m is s ion dea dl ine. T h is notice s h oul d r em ind th e ta x p a y er of th e p ena l ties in ca s e of f a il ur e to r ep l y , incl uding a dj us tm ents b a s ed on inf or m a tion a v a il a b l e to th e a uth or ity .

y ea r , ex cep t if th e com p a ny ob ta ins a n ex tens ion of th e dea dl ine f r om th e r el ev a nt a uth or ities .


4 Cameroonian Tax Procedure Handbook, th e ta x a uth or ities m a y cor r ect th e s ta tute of l im ita tions a p p l ica b l e to tota l or p a r tia l om is s ions up to th e end of th e f our th y ea r a f ter th e one in w h ich th e ta x es w er e due. T h us , th is l im ita tion p er iod s h oul d b e a p p l ica b l e to tr a ns f er p r icing a s s es s m ents a s w el l .

7 8

C am eroon (continued)



T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t g ener a l ta x a udit is a l s o h ig h . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is l ow .

APA opportunity

T h e r el ev a nt ta x l a w in C a m er oon is s il ent on A P A s . H ow ev er , b ef or e a contr a ct is concl uded or a tr a ns a ction is p er f or m ed, a ta x p a y er ca n r eq ues t a ta x r ul ing (rescrit fiscal) f r om th e ta x a uth or ities to g et th eir p os ition on th e p otentia l ta x im p l ica tions .

Impact of new OECD BEPS Action8-10 guidelines

C anada



4ta x a tion y ea r s th a t b eg a n a f ter 1 9 9 7 . I t cons titutes C a na da ’ s tr a ns f er p r icing l eg is l a tion a nd dea l s w ith th e deter m ina tion of tr a ns f er

contem p or a neous docum enta tion r eq uir em ents a nd tim ing of p r ov is ions to th e m inis ter , w h en r eq ues ted; m inis ter ia l dis cr etion r eg a r ding a ccep ta nce of dow nw a r d ta x a dj us tm ent r eq ues ts ; a nd th e a p p l ica tion of w ith h ol ding ta x to tr a ns f er p r icing a dj us tm ents . F or

4w ith h ol ding ta x im p l ica tions of tr a ns f er p r icing a dj us tm ents .


4

•

• 4 4

• 4 4

•


4

I C s a nd oth er a dm inis tr a tiv e g uida nce a r e cons ider ed ins tr uctiv e b ut not b inding . T h e O E C D G uidel ines a nd oth er O E C D r ep or ts a r e not

cons ider th e O E C D ’ s inter na tiona l p r incip l es a nd s ta nda r ds in r ea ch ing a decis ion.


4 4

• T h e p r op er ty or s er v ices to w h ich th e tr a ns a ction r el a tes

• T h e ter m s a nd conditions of th e tr a ns a ction a nd th eir r el a tions h ip , if a ny , to th e ter m s a nd conditions of th e tr a ns a ction enter ed into b etw een th e p er s ons or p a r tner s h ip s inv ol v ed

8 0

C anada (continued)


• T h e identity of th e p er s ons or p a r tner s h ip s inv ol v ed in th e tr a ns a ction, a nd th eir r el a tions h ip a t th e tim e th e tr a ns a ction w a s enter ed into

• T h e f unctions p er f or m ed, th e p r op er ty us ed or contr ib uted, a nd th e r is k s a s s um ed b y th e p er s ons or p a r tner s h ip s inv ol v ed in th e tr a ns a ction

•contr ib utions to cos ts of th e tr a ns a ction

•l os s es , or contr ib utions to cos ts of th e tr a ns a ction

inf or m a tion (e. g . , deta il s of cos t contr ib ution a r r a ng em ents , tr a ns l a tions of f or eig n docum ents a nd oth er g ener a l g uida nce).

4enh a nced cl a r ity w ith r es p ect to th e r ea s ona b l e- ef f or ts s ta nda r d a nd th er eb y th e p otentia l a p p l ica tion of tr a ns f er p r icing p ena l ties .


4

com p a r a b il ity b etw een tr a ns a ctions , f ol l ow ing a n a na l y s is of th e h ier a r ch y of m eth ods .

4a b a ndoning th e concep t of a na tur a l h ier a r ch y of m eth ods , it indica ted th a t a ccep ting th e p r ef er r ed m eth od in a p a r ticul a r cir cum s ta nce w oul d dep end on th e deg r ee of com p a r a b il ity a v a il a b l e under ea ch of th e m eth ods a nd th e a v a il a b il ity a nd r el ia b il ity of th e da ta .


da ta b a s e a nd is us ed to s cr een ta x p a y er s f or inter na tiona l ta x a udits .


T h e T 1 0 6 r etur ns r ef er r ed to a b ov e a r e es s entia l l y tr a ns f er p r icing r etur ns .


T a x p a y er s m us t p r ep a r e or ob ta in r ecor ds a nd docum ents th a t p r ov ide a des cr ip tion th a t is com p l ete a nd a ccur a te in a l l m a ter ia l 4 4

end.

8 1

C anada (continued)


4 4


4if s uch a dj us tm ents ex ceed th e l es s er of 1 0 % of th e ta x p a y er ’ s g r os s r ev enue f or th e y ea r or C A D 5 m il l ion, a nd if th e ta x p a y er h a s not m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices .

A ta x p a y er w il l b e deem ed not to h a v e m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices or a l l oca tions unl es s th e ta x p a y er h a s p r ep a r ed or ob ta ined r ecor ds or docum ents th a t p r ov ide a des cr ip tion th a t is com p l ete a nd a ccur a te, in a l l

4 4

w ith in th r ee m onth s of th e is s ua nce of a w r itten r eq ues t to do s o.

T r a ns f er p r icing - r el a ted p ena l ties a r e a s s es s ed w ith out r ef er ence to th e ta x p a y er ’ s incom e or l os s f or th e r el ev a nt r ep or ting y ea r a nd a r e not ta x - deductib l e.

Penalty relief

I f a ta x p a y er is deem ed to h a v e m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices or a l l oca tions w ith r es p ect to 4

a r is e w ith r es p ect to tr a ns a ctions cov er ed b y a n A P A , a s l ong a s th e A P A r em a ins in ef f ect a nd th e ta x p a y er com p l ies w ith its ter m s a nd conditions .

p ena l ty a ccor ding l y . I f th e r es ul t of th e ch a ng e is th a t th e a dj us tm ent no l ong er ex ceeds th e p ena l ty th r es h ol d, th e p ena l ty is r es cinded.


4

r ea s s es s a ta x p a y er a t a ny tim e.

ex tended r ea s s es s m ent p er iod. A num b er of C a na da ’ s ta x tr ea ties r es tr ict th e tim e f or C a na da to m a k e a n a dj us tm ent to a p er iod l es s th a n th e s ev en y ea r s a l l ow ed under th e I T A .

8 2

C anada (continued)



inter na tiona l tr a ns a ctions , es p ecia l l y tr a ns f er p r icing .

F or l a r g e cor p or a tions , th e l ik el ih ood of a n a nnua l ta x a udit is h ig h , a s is th e l ik el ih ood of tr a ns f er p r icing b eing r ev iew ed a s p a r t of th e a udit. T h e l ik el ih ood of a tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed, if tr a ns f er p r icing com es under a udit, is a l s o h ig h .

cour s e of a n a udit. T h is r eq ues t tr ig g er s th e th r ee- m onth w indow to p r ov ide th e contem p or a neous docum enta tion.

APA opportunity

4 4

ch a r g es ta x p a y er s onl y tr a v el cos ts it incur s in th e com p l etion of a n A P A .

w ith r es p ect to r ol l ing a n A P A b a ck to p r ior y ea r s , w ith th e m a in l im ita tion b eing th a t A P A s m a y not b e r ol l ed b a ck to y ea r s f or w h ich a 4

ta x a tion y ea r s th a t a r e cur r entl y under g oing a tr a ns f er p r icing a udit.


th r oug h its inf or m a tion ex ch a ng e netw or k .

8 3

C anada (continued)


r eq uir ed f or ta x a tion y ea r s th a t b eg in a f ter 2 0 1 5 . F ir s t ex ch a ng es b etw een j ur is dictions of countr y - b y - countr y r ep or ts a r e ex p ected

th e dr a f t l eg is l a tion, w h ich w il l b e r el ea s ed f or com m ents in th e com ing m onth s , a nd th e inf or m a tion r eq uir ed w il l b e cons is tent w ith th e

C ap e V erde



Direcção Nacional de Receitas do Estado)


• G ener a l r ul es a nd s cop e of a p p l ica tion of tr a ns f er p r icing r ul es

• T h e m eth ods f or th e deter m ina tion of tr a ns f er p r ices in l ine w ith th e a r m ’ s - l eng th p r incip l e

• C om p a r a b il ity cr iter ia

• C os t- s h a r ing a g r eem ents

• I ntr a g r oup s er v ices a g r eem ents

• D ocum enta tion r eq uir em ents

• C or r es p onding a dj us tm ents p r ocedur e


th e O E C D G uidel ines a s a s our ce of h ig h im p or ta nce in tr a ns f er p r icing m a tter s .


• 4

4

•

• P er m a nent es ta b l is h m ents of nonr es ident entities

• E ntities des ig na ted th a t th e ta x a uth or ities h a v e indica ted f or th is p ur p os e

•

•

8 5

C ap e V erde (continued)


tr a ns a ctions (v ol um es , ter m s a nd conditions ) f or th e y ea r under a na l y s is , a s w el l a s f or th e p r ev ious tw o y ea r s , or f or th e p er iod dur ing w h ich th ey h a v e b een occur r ing (if l es s th a n th r ee y ea r s )

•es ta b l is h ed, w h enev er th is inf or m a tion does not r es ul t f r om s ig ned a g r eem ents

• D es cr ip tion of th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er a nd th e r el a ted p a r ties inv ol v ed in th e intr a g r oup tr a ns a ctions

• G uidel ines w ith r es p ect to th e a p p l ica tion of tr a ns f er p r icing p ol icies r eg a r dl es s of its f or m a nd des ig na tion, w h ich conta in ins tr uctions na m el y a b out th e m eth odol og ies to us e, th e p r ocedur es f or inf or m a tion g a th er ing (es p ecia l l y inf or m a tion on inter na l com p a r a b l es ),

• A l l inter com p a ny a g r eem ents a nd unr el a ted- p a r ty a g r eem ents , incl uding inf or m a tion on del iv er y ter m s , a ny s up p l em enta l a ctiv ities inv ol v ed (e. g . , a f ter - s a l e s er v ices , w a r r a nty s er v ices , tech nica l a s s is ta nce), ex p l icit des cr ip tion of p r ices in contr ol l ed tr a ns a ctions a nd

a g r eem ents , etc.

• A des cr ip tion of th e m eth od or m eth ods us ed f or th e deter m ina tion of th e a r m ’ s - l eng th p r ice in ev er y contr ol l ed tr a ns a ction tog eth er , w ith r ea s ons f or ch oos ing th e m os t a p p r op r ia te m eth od

•th e ca s es w h er e r el ev a nt, th e tech nica l cr edits of th e s tudies a nd th e s ens itiv ity a nd s a f ety a na l y s is

• O th er r el ev a nt inf or m a tion


I t is f or es een th a t th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied to a contr ol l ed tr a ns a ction or to a s er ies of tr a ns a ctions to deter m ine w h eth er th os e tr a ns a ctions com p l y w ith th e a r m ’ s - l eng th p r incip l e.

ca s e, ex p l a ining not onl y th e r ea s on a cer ta in m eth od is cons ider ed a s th e m os t a p p r op r ia te to tes t w h eth er th e contr ol l ed tr a ns a ctions com p l y w ith th e tr a ns f er p r icing r ul es , b ut a l s o w h y oth er m eth ods a r e r ej ected.


(Declaração annual de informação contabilística e fiscal)

• I dentif y th e r el a ted entities

• I dentif y a nd decl a r e th e a m ount of tr a ns a ctions conducted w ith ea ch of th e r el a ted p a r ties

•a p p l ied

T h e dea dl ine f or th e s ub m is s ion of s uch r etur n cor r es p onds to th e end of th e s ev enth m onth a f ter th e cor r es p onding ta x y ea r - end.

8 6

C ap e V erde (continued)




I n th e a b s ence of p r ov is ions cov er ing th e dea dl ine to p r ep a r e tr a ns f er p r icing docum enta tion, it is r ea s ona b l e to a s s um e th a t it

cor r es p onding ta x y ea r - end.


Penalty relief




es ta b l is h ed.

APA opportunity


C h ile



Servicio de Impuestos Internos, or SII)

• C h il ea n ta x a tion r ul es a r e es ta b l is h ed in th e I ncom e T a x L a w (I T L ), ena cted in 1 9 7 4 .

•


A r ticl e 4 1 E es ta b l is h es th a t a ny cr os s - b or der tr a ns a ction h el d w ith a r el a ted- p a r ty , or w ith a n unr el a ted entity dom icil ed in a ta x h a v en, in a b a ck - to- b a ck tr a ns a ction or a ny tr a ns a ction r es ul ting f r om a r es tr uctur ing p r oces s is s ub j ect to tr a ns f er p r icing r eg ul a tions . T h e new r eg ul a tion is a p p l ica b l e a s of 1 J a nua r y 2 0 1 3 a nd a p p l ies to 2 0 1 3 ta x ob l ig a tions a nd th er ea f ter , th us a f f ecting th e inter com p a ny tr a ns a ctions enter ed into dur ing a nd a f ter 2 0 1 2 .

F or p r ior y ea r s , tr a ns f er p r icing m a tter s w er e r eg ul a ted b y A r ticl e 3 8 , a ccor ding to w h ich th e b ur den of p r oof w a s on th e I nter na l

44

A ccount ing p rincip les

Tax t reat ies

a g r eem ents w er e s ig ned b ut a r e not in f or ce.

Relat ionsh ip rules

4

•

• A n entity is a p er m a nent es ta b l is h m ent, a g ency or b r a nch of a h ea dq ua r ter s

• T r a ns a ctions a r e ca r r ied out w ith r es idents in ta x h a v ens

• T h ey a r e indiv idua l s w ith th eir s p ous es , or r el a tiv es up to th e f our th deg r ee of cons a ng uinity

• O ne of th e p a r ties ca r r ies out tr a ns a ctions w ith a th ir d p a r ty th a t, in tur n, ca r r ies out s im il a r tr a ns a ctions w ith p a r ties r el a ted to th e l a tter (b a ck - to- b a ck )

I ncom e t ax at ion

1.1. Increase in First Category Tax (corporate tax)

T h e F ir s t C a teg or y T a x w il l p r og r es s iv el y incr ea s e f r om 2 0 % to 2 5 % or 2 7 % (dep ending on th e ty p e of r eg im e under w h ich th e ta x p a y er

• 4

8 8

C h ile (continued)


•

•

•

•

1.2. New taxation regimes

(1 ) a ttr ib uted r eg im e (A r ticl e 1 4 A of th e I T L ), on w h ich b a s is f or eig n s h a r eh ol der s w il l b e s ub j ect to th e A dditiona l T a x (w ith h ol ding ta x on div idends ) on th e incom e of th e entities in w h ich th ey h a v e inter es ts in th e s a m e y ea r s uch incom e is tr ig g er ed, a nd (2 ) dis tr ib uted

4

•

• P a r tner s h ip s (Sociedades de Responsabilidad Limitada

•

•

• Sociedades Anónimas y Sociedades por Acciones

International tax rules

C h anges in ex cess indeb t edness rules

•r el a ted or not, s h a l l b e incl uded (b ef or e th is a m endm ent, onl y l oa ns g r a nted b y f or eig n r el a ted p a r ties s ub j ect to 4 % w ith h ol ding w er e incl uded).

• T h e 3 5 % p ena l ty ta x a p p l ies onl y to p a y m ents to r el a ted entities s ub j ect to th e 4 % w ith h ol ding ta x or not s ub j ect to w ith h ol ding ta x es .

• T h e concep t of r el a ted com p a ny now a p p l ies to a l l k inds of g ua r a ntees g r a nted b y g r oup com p a nies .

• T h es e new r ul es w il l a p p l y onl y to l oa ns g r a nted a f ter 1 J a nua r y 2 0 1 5 .

Recognit ion of foreign p assiv e incom e ( C F C rules)

I n a ccor da nce w ith new A r ticl e 4 1 G of th e I T L , f or eig n- s our ce incom e w il l continue to b e ta x ed on a ca s h b a s is , a s a g ener a l r ul e. A dditiona l l y , f r om 1 J a nua r y 2 0 1 6 , ta x p a y er s dom icil ed in C h il e w il l b e ta x ed on a n a ccr ua l b a s is on th e p a s s iv e incom e g ener a ted b y

•

• T h e f or eig n entity is dom icil ed in a countr y or ter r itor y w ith l ow or no ta x a tion, unl es s p r ov en oth er w is e

8 9

C h ile (continued)


General ant i- av oidance rules ( GA A R)

r el ev a nt ta x es a s if s uch a b us e or s im ul a tion nev er occur r ed. A nti- a b us e r ul es a p p l y to tr a ns a ctions ca r r ied out a f ter th e entr y into f or ce of th e s a m e; th er ef or e, a l l p r ior tr a ns a ctions w il l b e s ub j ect to th e r ul es cur r entl y in f or ce.

A ccor ding to th e new r ul es , a b us e w il l ex is t w h en ta x p a y er s cir cum v ent, tota l l y or p a r tia l l y , a ta x a b l e ev ent; r educe th e ta x b a s e or ta x ob l ig a tion; or del a y or def er th e cr ea tion of s uch ob l ig a tion w ith out a r ea s on dif f er ent f r om p ur el y ta x m otiv a tion.

I n tur n, s im ul a tion w il l b e deem ed to ex is t w h en th e l eg a l a cts or b us ines s a ctiv ities of ta x p a y er s concea l th e occur r ence of a ta x a b l e ev ent or th e na tur e of th e el em ents of th e ta x ob l ig a tion, or th e r ea l a m ount or cr ea tion of th e s a m e.


A l th oug h th e I T L does not m ention th e O E C D G uidel ines , it is im p or ta nt to note th a t C h il e w a s a ccep ted a s a f ul l m em b er of th e O E C D in 2 0 1 0 . T h er ef or e, th e g uidel ines s h oul d b e tr ea ted a s r el ev a nt w h en dea l ing w ith tr a ns f er p r icing is s ues .

w h en it is a p p l ica b l e.


T a x p a y er s m us t k eep a l l th e r el ev a nt inf or m a tion s up p or ting th e m eth ods us ed to deter m ine w h eth er th eir tr a ns a ctions a r e in

f or eig n a uth or ities f ur nis h inf or m a tion r el a ted to inter com p a ny tr a ns a ctions .

inter com p a ny tr a ns a ctions th a t a r e b eing a udited.


m eth od is a ccep ta b l e w h en a p p l ied in a ny r ea s ona b l e econom ic a na l y s is f or a ca s e in w h ich none of th e oth er m eth odol og ies is v ia b l e.

econom ic r ea l ity to deter m ine its m a r k et v a l ue. T h e ta x p a y er s h oul d b e a b l e to dem ons tr a te or s us ta in th e a p p l ica b il ity of s uch a m eth od ov er th e oth er s .

F or eig n com p a r a b l es a r e a ccep ted in th e a b s ence of l oca l com p a r a b l es a s l ong a s f or eig n com p a r a b l es a r e s im il a r in f unctions , a s s ets

T h e l oca l T P r ul es do not m a k e r ef er ence to s ecr et com p a r a b l es , a nd th er e is no b a ck g r ound of th e us e of th is ty p e of com p a r a b l e.

9 0

C h ile (continued)



T h is s ta tem ent com p r is es a l l inter com p a ny tr a ns a ctions h el d in th e p r ior y ea r , a nd it m us t dis cl os e a l l tr a ns a ctions h el d w ith r el a ted

p r icing econom ic a na l y s is .

•

• C om p a nies th a t enter ed into tr a ns a ctions w ith p a r ties dom icil ed in ta x h a v en countr ies (a ccor ding to th e l is t in A r ticl e 4 1 D of th e I T L )

•cur r ency ) w ith non- dom icil ed r el a ted p a r ties a s of 3 1 D ecem b er of th e com m er cia l y ea r to b e dis cl os ed

• T r a ns f er p r icing m eth od us ed

•

• G l ob a l or s eg m ented a na l y s is

•

• T r a ns f er p r icing a dj us tm ents (if a p p l ica b l e)



T h er e a r e no dea dl ines to p r es ent tr a ns f er p r icing docum enta tion.

docum enta tion).


4th e dif f er ence.

a l s o b e s ub j ect to a dditiona l p ena l ties a nd inter es t.

9 1

C h ile (continued)


Penalty relief

T h er e a r e no p ena l ties f or not p r ep a r ing a nd s ub m itting T P docum enta tion. H ow ev er , m a inta ining contem p or a r y T P docum enta tion

im p os ed.


T h e g ener a l s ta tute of l im ita tions is th r ee y ea r s s ta r ting f r om th e l a tes t da te a t w h ich th e ta x w a s due. I t coul d b e ex tended to s ix y ea r s 4

p r icing a udits , th e a p p l ica b l e s ta tute of l im ita tions w il l b e 1 2 m onth s , dur ing w h ich th e ta x a uth or ity w il l tes t th e p r op er a p p l ica tion of th e

•

•

• A r ev iew of th e a ccounting f or tr a ns a ctions b etw een r el a ted com p a nies


T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l , a s w el l a s th e l ik el ih ood th a t tr a ns f er p r icing w oul d b e r ev iew ed a s p a r t of th a t a udit, is cons ider ed to b e m edium . I f tr a ns f er p r icing is indeed r ev iew ed, th e l ik el ih ood th a t th e m eth odol og y w oul d b e ch a l l eng ed is deem ed to b e l ow .

T h e ta x p a y er f a ces th e b ur den of p r oof to s h ow th a t tr a ns f er p r ices in tr a ns a ctions w ith r el a ted p a r ties a r e cons is tent w ith th e a r m ’ s -l eng th p r incip l e.

g ener a ted f r om th e r ev iew of T P a s p ects (e. g . , inf or m a tion incl uded in th e T P r etur n) a nd not a s a r es ul t of oth er a udits of top ics dif f er ent f r om T P .

I t is im p or ta nt to h ig h l ig h t th a t w h en a ta x p a y er is s ub j ect to a ta x or tr a ns f er p r icing a udit p er f or m ed b y th e C h il ea n a uth or ities , k eep ing a tr a ns f er p r icing s tudy w il l b e cons ider ed a s a s tr ong m ech a nis m of def ens e.

of tr a ns f er p r icing a dj us tm ents m a de in oth er countr ies th a t h a v e enter ed into a conv ention w ith C h il e f or th e a v oida nce of doub l e

APA opportunity

h a s f ur nis h ed th e r el ev a nt inf or m a tion. T h e r es ol ution to a ccep t or r ej ect th e p r op os ed a g r eem ent ca nnot b e ch a l l eng ed b y eith er a n a dm inis tr a tiv e or l eg a l p r oces s . T h is a g r eem ent m a y l a s t f or up to f our com m er cia l y ea r s , a t th e end of w h ich it ca n b e ex tended b y a p r ior a g r eem ent b etw een th e p a r ties inv ol v ed.

9 2

C h ile (continued)



A l th oug h O E C D r ul es a r e not m a nda tor y in C h il e, th er e is a tendency in cour t ca s es to cons ider th e O E C D G uidel ines a s inter p r eta tiv e

O E C D dev el op m ents a r e l ik el y to a f f ect th e tr a ns f er p r icing a na l y s es of th e C h il ea n com p a nies . F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents .

I m p act of new O E C D B E PS A ct ion 1 3 C ount ry - b y - C ount ry Rep ort

T h e ob j ectiv e of th is ob l ig a tion is to g r a nt ta x a dm inis tr a tions a tool to contr ol ta x a v oida nce a nd ev a s ion w h il e a t th e s a m e tim e

T h is ob l ig a tion a p p l ies to C h il ea n g r oup s w ith cons ol ida ted r ev enue of a t l ea s t E ur o 7 5 0 m il l ion a s of p r ev ious y ea r cl os ing a nd in

•

•

• T a x es (p a id or deter m ined)

•

• A ccum ul a ted ea r ning s

• T a ng ib l e a s s ets

• N um b er of em p l oy ees

• A dditiona l f unctiona l inf or m a tion f or ea ch com p a ny of th e g r oup

C h ina


“China” refers to the mainland China jurisdiction in this publication.


• C h ina C or p or a te I ncom e T a x L a w (C I T L ), C h a p ter 6 , A r ticl es 4 1 to 4 8

•


• 4 4C ontem p or a neous D ocum enta tion

•

C ir cul a r 2 conta ins th e s ub s ta ntiv e r ul es w ith r es p ect to tr a ns f er p r icing , incl uding tr a ns f er p r icing m eth ods a nd com p a r a b il ity a na l y s is ;

44

C ir cul a r 2 cov er ing contem p or a neous docum enta tion r ul es p r ior to 2 0 1 6 . I t a l s o s up er s edes in its entir ety C ir cul a r (2 0 0 8 ) N o. 1 1 4 , w h ich cov er ed ta x r etur n dis cl os ur es p r ior to 2 0 1 6 .

4im p l em ents th os e p or tions of th e C ons ul ta tion D r a f t w ith in its s cop e. I t is ex p ected th a t f utur e r el ea s es w il l im p l em ent th e oth er p or tions of th e C ons ul ta tion D r a f t; h ow ev er , th e tim ing of s uch r el ea s es is unk now n.

•

Provides that entities with limited functions and risks (such as toll manufacturers, limited risk distributors, contract R&D service providers) that are making losses must prepare contemporaneous documentation (without regard to monetary thresholds) and spontaneously provide them to tax authorities by 20 June of the following year

• Provides that taxpayers that have incurred a transfer pricing adjustment on audit will be subject to a five-year follow-up period during which tax authorities will maintain scrutiny of the taxpayer’s transfer pricing results

• Sets out the guidelines for different tax authorities across China to coordinate work on tax investigations

•

Sets up a joint panel review mechanism for cases involving large taxpayers (capital over RMB100 million or revenues from main operations over RMB1 billion) to ensure consistency

9 4

C h ina (continued)


• Supplements Circular 2 guidance on MAPs under tax treaties

• 4 4 4 Provides guidelines for tax authorities investigating transfer pricing issues, including encouraging taxpayers to make self-adjustments even in the absence of a formal audit

• 4 Modifies Circular 2 by eliminating pre-approval requirements for entering into a cost sharing arrangement while strengthening follow-up monitoring

•

Disallows deductions for royalty and service payments to related parties under certain circumstances, such as when the related-party has inadequate substance


r ev is ions to th e O E C D G uidel ines r el a ting to r is k s a nd inta ng ib l es . H a v ing s a id th is , w h il e r ef er ence m a y b e h a d to th e O E C D G uidel ines , United Nations Practical

Manual on Transfer Pricing for Developing Countries

cer ta in nua nces .

K ey a r ea s in w h ich th e C h ines e a p p r oa ch m a y dif f er to s om e ex tent f r om oth er countr ies ’ under s ta nding of th e O E C D G uidel ines

•4

•

im p r ov em ents .

•

G uidel ines .


4s tock ow ner s h ip . F a m il ia l r el a tions h ip s a nd ov er l a p p ing b oa r ds of dir ector s or m a na g em ent p er s onnel ca n a l s o g iv e r is e to a r el a ted-p a r ty r el a tions h ip .

4 4

9 5

C h ina (continued)


4

4g r oup ’ s C b C r ep or t in th e cour s e of a n inv es tig a tion if th e ul tim a te p a r ent com p a ny is r eq uir ed b y its h om e j ur is diction to p r ep a r e a C b C

m ech a nis m b etw een C h ina a nd th a t j ur is diction or th e f a il ur e of s uch a n ex ch a ng e m ech a nis m to w or k in p r a ctice.

44

dis cl os ur es w ith r es p ect to b us ines s r es tr uctur ing s a r e des cr ib ed in g r ea ter deta il , a nd dis cl os ur e a nd b r ief des cr ip tions of a ny b il a ter a l

4

•v a l ues f or cus tom s p ur p os es )

•

•

• 4ta ng ib l e p r op er ty r enta l s a nd inter es t on l oa ns )

T a x p a y er s w h os e r el a ted- p a r ty tr a ns a ctions a r e w h ol l y dom es tic to C h ina a r e ex em p t f r om docum enta tion r eq uir em ents . T r a ns a ctions 4

r ep or ting r eq uir em ents ) a nd a r e not counted tow a r d th e th r es h ol ds in A r ticl e 1 3 .

4 4

• E nter p r is e ov er v iew

•

•

• C om p a r a b il ity a na l y s is

•

•

• T h e r eq uir em ent of ex tens iv e dis cl os ur es a nd a na l y s is of r el a ted- p a r ty s er v ice tr a ns a ctions , incl uding deta il ed dis cl os ur es of p a r ticip a nts

9 6

C h ina (continued)



da ta b a s es a v a il a b l e. T a x a uth or ities h a v e a cl ea r p r ef er ence f or l oca l C h ines e com p a r a b l es b ut, g iv en th e l im ited num b er of p otentia l

s ecr et com p a r a b l es ); s uch non- p ub l ic inf or m a tion is us ed in p r a ctice, es p ecia l l y in a r is k a s s es s m ent contex t.


4 4

•

•

•

• O w ner s h ip T r a ns f er of T a ng ib l e A s s et T r a ns a ctions F or m

• O w ner s h ip T r a ns f er of I nta ng ib l e A s s et T r a ns a ctions F or m

•

•

• F ina ncia l A s s et T r a ns a ctions F or m

• F ina ncing T r a ns a ctions F or m

•

• E q uity I nv es tm ent F or m

•

• O utb ound P a y m ent F or m

•

•

•


9 7

C h ina (continued)



4

r eq ues t (ex tended f r om 2 0 da y s under C ir cul a r 2 ).


f a il ing to m a inta in a ccounting b ook s a nd oth er r el ev a nt inf or m a tion, or f a il ing to p r ov ide s uch inf or m a tion to ta x a uth or ities up on

f a il ur e to m a inta in or p r ov ide contem p or a neous docum enta tion.

th e ta x a uth or ities a r e em p ow er ed to a s s es s ta x a b l e incom e on a deem ed b a s is (r a th er th a n on th e b a s is of tr a ns f er p r icing r es ul ts ).

dis cl os ur e f or m s or f a il s to m eet th e contem p or a neous docum enta tion r eq uir em ents . T o m eet th es e r eq uir em ents , in a ddition to p r ep a r ing th e docum enta tion des cr ib ed b el ow , th e ta x p a y er m us t p r ov ide it to ta x a uth or ities w ith in 3 0 da y s of th e r eq ues t (p r ior to 2 0 1 6 , w ith in 2 0 da y s of r eq ues t). I n a l l ev ents , w h eth er th er e is a n inter es t s ur ch a r g e or not, inter es t w il l b e a p p l ied to th e under r ep or ted

Penalty relief

docum enta tion r eq uir em ents a r e m et.


T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is 1 0 y ea r s .

• 4 4


4th ir ds of C h ina ’ s tr a ns f er p r icing ta x r ev enues ea ch y ea r .

ta x p os itions ta k en. H ig h - r is k ta x p a y er s a r e m uch m or e l ik el y to f a ce f or m a l ta x a udits .

9 8

C h ina (continued)


to r oy a l ties , ta x a uth or ities h a v e f ocus ed on th e ex tent to w h ich th e C h ines e ta x p a y er h a s m a de contr ib utions to th e v a l ue of l icens ed inta ng ib l es a nd p os s ib l y dev el op ed l oca l inta ng ib l es , th er eb y s ug g es ting r oy a l ty r a te r eductions a r e a p p r op r ia te. F or s er v ices , ta x a uth or ities h a v e s oug h t a uth entica tion th a t s er v ices w er e a ctua l l y p r ov ided, a nd th a t cos ts w er e a p p r op r ia tel y ca p tur ed a nd a l l oca ted

APA opportunity

A P A s a r e a v a il a b l e in C h ina , incl uding unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s . G uida nce r eg a r ding th e A P A p r oces s a nd p r ocedur es is 4

4r etur ns a nd th ey m us t h a v e m et contem p or a neous docum enta tion r eq uir em ents . T h er e is no a p p l ica tion f ee.

4

T h e im p or ta nce of of f er ing a h ig h - q ua l ity a p p l ica tion is h ig h l ig h ted b y cons ider ing s om e s ta tis tics . A s of 3 1 D ecem b er 2 0 1 4 , th er e w er e

4 44

4 4

th e 9 0 A P A r eq ues ts in th e p r e- a ccep ta nce s ta g e, 8 3 w er e b il a ter a l A P A r eq ues ts a nd onl y 7 w er e unil a ter a l .


4

s ta tute of l im ita tions w h er e th e r ecip ient onl y h a s l eg a l ow ner s h ip of th e inta ng ib l es b ut did not m a k e a ny v a l ua tion cr ea tion contr ib ution to th em .

C olom b ia



Dirección de Impuestos y Aduanas Nacionales, or DIAN)

4


• L a w 7 8 8 (ena cted D ecem b er 2 0 0 2 ) a nd L a w 8 6 3 (ena cted D ecem b er 2 0 0 3 ) es ta b l is h tr a ns f er p r icing r ul es , w h ich a r e A r ticl es 2 6 0 - 1 to 2 6 0 - 1 1 of th e C ol om b ia n T a x C ode.

•

p r icing ob l ig a tions . A dditiona l l y , tr a ns a ctions ca r r ied out b etw een ta x p a y er s in C ol om b ia a nd th eir r el a ted p a r ties l oca ted in f r ee tr a de

2 6 0 - 7 of th e C ol om b ia n T a x C ode.

tr a ns a ction com p l ies w ith th e a r m ’ s - l eng th p r incip l e. A ccor ding l y , oth er s ta tis tica l m ea s ur es ca n b e us ed, incl uding th e tota l r a ng e. A dditiona l l y , one- y ea r da ta of th e tes ted p a r ty a nd com p a r a b l e com p a nies m us t b e us ed in th e tr a ns f er p r icing a na l y s is . I f m ul tip l e- y ea r da ta is us ed, it s h oul d b e s up p or ted in th e tr a ns f er p r icing r ep or t.

to ca r r y out th e tr a ns f er p r icing a na l y s is of a n inter com p a ny tr a ns a ction. T h is r ul e a p p l ies ev en if th e tes ted p a r ty is th e r el a ted- p a r ty a b r oa d.


C - 6 9 0 of th e C ol om b ia n C ons titutiona l C our t, is s ued on 1 2 A ug us t 2 0 0 3 , th e O E C D G uidel ines a nd C om m enta r ies a r e a n a ux il ia r y s our ce of g uida nce a nd inter p r eta tion, b ut th ey a r e not m a nda tor y f or th e C ol om b ia n ta x a uth or ity . H ow ev er , th e O E C D G uidel ines h a v e b een


T a x p a y er s m us t p r ep a r e docum enta tion th a t s up p or ts th e a s s er tion th a t ea ch tr a ns a ction w ith f or eig n r el a ted p a r ties com p l ies w ith th e

f unctions , a s s ets , r is k s a nd deta il ed inf or m a tion a b out th e inter com p a ny tr a ns a ctions , a m ong oth er a r ea s ), a m a cr oeconom ic a na l y s is , a n indus tr y a na l y s is a nd th e tr a ns f er p r icing econom ic a na l y s is .

4in ta x h a v ens (r el a ted or indep endent p a r ties ) a r e s ub j ect to tr a ns f er p r icing a na l y s is if th e tota l a m ount of th e tr a ns a ctions ex ceeds

1 0 0

C olom b ia (continued)



b e a p p l ied eith er in th e f or m of a contr ib ution a na l y s is or a r es idua l a na l y s is ).

•

•b y th e th ir d p a r ty to th e r el a ted- p a r ty a b r oa d m us t b e us ed to ob ta in th e initia l p ur ch a s e v a l ue, th us ta k ing into a ccount th e a s s et’ s dep r ecia tion s ince a cq uis ition, in com p l ia nce w ith th e a p p l ica b l e a ccounting p r incip l es . I f no or ig ina l inv oice is a v a il a b l e, a th ir d p a r ty ’ s v a l ua tion m us t b e p er f or m ed to p r ov e th e a r m ’ s - l eng th v a l ue of th e a cq uir ed a s s et.

•

•

• C om p a ny r es tr uctur ing s th a t incl ude r edis tr ib ution of f unctions , a s s ets a nd r is k s m us t com p l y w ith th e a r m ’ s - l eng th p r incip l e.

•


A s p a r t of th e tr a ns f er p r icing r etur n, ta x p a y er s m us t dis cl os e inf or m a tion a b out r el a ted p a r ties , s uch a s w h eth er it’ s a f or eig n or l oca l

h a v en j ur is dictions a l s o m us t b e dis cl os ed.

O th er inf or m a tion dis cl os ed on th e tr a ns f er p r icing r etur n incl udes th e ty p e of inter com p a ny tr a ns a ction, th e a m ount of th e tr a ns a ction, th e tr a ns f er p r icing m eth odol og y a p p l ied, th e com p a ny a s s es s ed, th e p r ice or m a r g in ob ta ined in th e tr a ns a ction a nd th e a r m ’ s - l eng th r a ng e.

I t is a l s o neces s a r y to incl ude inf or m a tion r eg a r ding com p a r a b il ity a dj us tm ents , th e des ig na tion of th e tes ted p a r ty , th e a m ount of th e

a b out f unctions , a s s ets a nd r is k s , a nd deta il s a b out cos ts a nd ex p ens es incur r ed b y th e f or eig n entity , m us t b e incl uded in th e tr a ns f er p r icing docum enta tion.

tr a ns f er p r icing r ep or t to p r ov e th er e is no econom ic r el a tion b etw een th e p a r ties , a nd th e deta il s a b out f unctions , a s s ets , r is k s , a nd cos ts a nd ex p ens es s h oul d not b e incl uded in th e r ep or t.


T h e C ol om b ia n ta x a uth or ities r eq uir e a tr a ns f er p r icing inf or m a tiv e r etur n to b e com p l eted, a s r eq uir ed b y A r ticl e 2 6 0 - 9 of th e C ol om b ia n T a x C ode. T h is a nnua l r eq uir em ent m us t conta in inf or m a tion a b out r el a ted p a r ties , inter com p a ny tr a ns a ctions com p l eted

1 0 1




N or m a l l y , due da tes f or com p l y ing w ith th es e ob l ig a tions a r e in J ul y of th e f ol l ow ing ca l enda r y ea r .


T h e C ol om b ia n tr a ns f er p r icing r eg im e is s ues p ena l ties s tem m ing f r om th e s up p or ting docum enta tion a nd th e tr a ns f er p r icing r etur n. 1

Transfer pricing documentation

• 4 4 4

•

•a dditiona l l y , r ej ection of cos t a nd ex p ens e r el a ted to om itted op er a tions m a y a p p l y

• 4

•is s ued b y ta x a uth or ities

Transfer p ricing ret urn

•

•

•a dditiona l l y , r ej ection of cos t a nd ex p ens e r el a ted to om itted op er a tions m a y a p p l y

•

•

r etur ns or tr a ns f er p r icing a dj us tm ents .

1

1 0 2



Penalty relief

Transfer p ricing docum ent at ion

•

•

Transfer p ricing ret urn

•

•

•

noncom p l ia nce of f or m a l tr a ns f er p r icing duties .

Transfer p ricing adj ust m ent s

A p ena l ty of up to 1 6 0 % of th e a dditiona l ta x coul d a p p l y . F or a s el f - a s s es s m ent or a ccep ta nce of th e ch a l l eng es m a de b y th e ta x



4

•

a f or em entioned s er v ices com p l y w ith A r ticl e 1 0 7 of th e C ol om b ia n T a x C ode.

• I n th e l a s t y ea r , th e ta x a uth or ities h a v e s ta r ted to ch a l l eng e, on a g ener a l b a s is , th e s ets of com p a r a b l es dev el op ed b y ta x p a y er s a nd h a v e p r ep a r ed new s ets b y th em s el v es .

F r om a g ener a l p er s p ectiv e, th e l ik el ih ood of a n a udit is m edium .

1 0 3



APA opportunity

th em a s a v ia b l e a nd a dv a nta g eous op tion f or ta x p a y er s , a s th ey cons ol ida te th e ta x p a y er ’ s tr a ns f er p r icing p os ition a cr os s s ev er a l y ea r s ins tea d of on a y ea r - to- y ea r b a s is . T h e A P A a g r eem ent w il l b e v a l id f or th e y ea r it is s ub s cr ib ed to, th e y ea r b ef or e a nd up to th r ee ta x a b l e y ea r s a f ter .


T h e C ol om b ia n ta x a uth or ities h a v e indica ted th a t C ol om b ia w il l a p p l y th e new O E C D G uidel ines , in p a r ticul a r th os e r el a ting to A ction

r eg ul a tion. T h e incl us ion of th e new O E C D G uidel ines in th e l oca l r eg ul a tion w oul d need a n a m endm ent of th e p r im a r y l a w .

C ost a Rica

1 0 4Worldwide Transfer Pricing Reference Guide


Dirección General de Tributación, or DGT)


E x ecutiv e D ecr ee N o. 3 7 8 9 8 - H (th e T P E x ecutiv e D ecr ee), w h ich a dop ts tr a ns f er p r icing r eg ul a tions a p p l ica b l e to indiv idua l s or b us ines s Official Gazette on 1 3

44th e T P E x ecutiv e D ecr ee.



C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to dom es tic a nd cr os s - b or der r el a ted- p a r ty tr a ns a ctions m us t b e m a inta ined

ca r r ied out, a s w el l a s th e cor r ect a p p l ica tion of a n a p p r ov ed m eth od, a s s ta ted in th e T P E x ecutiv e D ecr ee. I t is neces s a r y to incl ude inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion a b out com p a r a b l e tr a ns a ctions or com p a nies m us t a l s o b e incl uded.



incom e ta x r etur ns .

1 0 5

C ost a Rica (continued)



(grandes contribuyentes grandes empresas territoriales) or is a n indiv idua l or entity op er a ting under th e


T a x p a y er s m us t p r ep a r e a nd m a inta in th e tr a ns f er p r icing docum enta tion on a n a nnua l b a s is . T h e T P E x ecutiv e D ecr ee does not s ta te a dea dl ine. T h e docum enta tion m us t b e a t th e dis p os a l of th e D G T up on r eq ues t.


N o ex p r es s m oneta r y p ena l ties a r e a p p l ied w h en ta x p a y er s f a il to m a inta in contem p or a neous tr a ns f er p r icing docum enta tion or th e

P r ocedur es s h oul d a p p l y b y def a ul t.

I n th e ca s e of a tr a ns f er p r icing incom e a dj us tm ent, s ur ch a r g es a nd p ena l ty inter es t a p p l y , p er th e g ener a l p r ov is ions of th e T a x C ode of

Penalty relief

N o p ena l ty r el ief r eg im e is in p l a ce.


T h e s ta nda r d f our - y ea r s ta tute of l im ita tions on g ener a l ta x a s s es s m ents s h oul d a p p l y . T h is s ta tutor y p er iod is ex tended to 1 0 y ea r s f or

T h e s ta tute of l im ita tions s ta r ts J a nua r y 1 f ol l ow ing th e due da te of th e ta x r etur n.


com p a nies w ith r el a ted tr a ns a ctions . T h e l ik el ih ood of tr a ns f er p r icing a s s es s m ents a s p a r t of a g ener a l ta x a udit is cons ider ed h ig h a s

1 0 y ea r s .

1 0 6

C ost a Rica (continued)


r ef er ences or g uidel ines f or ta x p a y er s , ta x a uditor s r ev iew ed a nd ch a l l eng ed r el a ted- p a r ty tr a ns a ctions p r im a r il y of m ul tina tiona l

in th e countr y . T h es e D G T a ctions w er e endor s ed b y s ev er a l r ul ing s f r om a dm inis tr a tiv e a nd j udicia l cour ts , a s w el l a s r ul ing s f r om th e

T h er e w a s a n a ttem p t to p a s s tr a ns f er p r icing l eg is l a tion th r oug h C ong r es s in 2 0 1 2 , b ut it w a s p a r t of a l a r g er ta x r ef or m p a ck a g e th a t w a s r ep ea l ed a f ter th e C ons titutiona l C our t decl a r ed th e w h ol e l a w uncons titutiona l . H ow ev er , des p ite l a ck ing a l a w r eg ul a ting

l eg a l cer ta inty in r el a tion to th is s ub j ect m a tter w h il e C ong r es s p a s s es m or e com p r eh ens iv e l eg is l a tion.

APA opportunity

A P A s a r e contem p l a ted under th e p r ov is ions of th e T P E x ecutiv e D ecr ee. T a x p a y er s ca n r eq ues t a n A P A f or a m a x im um of th r ee y ea r s . H ow ev er , th e cor r es p onding r eg ul a tions h a v e not y et b een ena cted.


T h er e is no r ef er ence to th e O E C D G uidel ines w ith in th e ex is ting tr a ns f er p r icing p r ov is ions .

cur r entl y v a l id.

A g r eem ent f or th e a utom a tic ex ch a ng e of countr y - b y - countr y r ep or ts , a nd m or e r ecentl y in A ug us t 2 0 1 6 , th e cr ea tion of a com m is s ion

tim e f r a m e in w h ich a m endm ents to th e ex is ting tr a ns f er p r icing r eg ul a tions w il l occur , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

C roat ia

1 0 7 Worldwide Transfer Pricing Reference Guide


• C or p or a te I ncom e T a x A ct (C I T A ct)

•


4m eth ods a l l ow ed a nd th e docum enta tion r eq uir ed to s up p or t p r ices b etw een r el a ted p a r ties .

I n g ener a l , a r m ’ s - l eng th p r icing is r eq uir ed onl y f or cr os s - b or der tr a ns a ctions b etw een r el a ted p a r ties . H ow ev er , in l ine w ith th e a m endm ents to th e C I T A ct (in f or ce a s of 1 J ul y 2 0 1 0 ), th e ob l ig a tion to com p l y w ith tr a ns f er p r icing r ul es is ex tended to tr a ns a ctions b etw een dom es tic entities if one of th e entities is eith er in a ta x - l os s p os ition or in a s p ecia l ta x s ta tus (p a y ing ta x a t a l ow er r a te or

b ef or e a m endm ents to th e l eg is l a tion w er e intr oduced (i. e. , th e op inion g ov er ns p r ior to 1 J ul y 2 0 1 0 ). A t p r es ent, neith er th e C I T A ct nor

I n l ine w ith A r ticl e 1 4 of th e C I T A ct, w h en deter m ining th e incom e f r om inter es t on l oa ns g r a nted/ r eceiv ed f r om r el a ted p a r ties , th e inter es t r a te a p p l ied f or ta x p ur p os es s h oul d b e th e r a te th a t w oul d b e a p p l ied b etw een non- r el a ted p a r ties a t th e tim e of g r a nting th e

inter es t r a te is th e one th a t ca n b e us ed in com p a r a b l e cir cum s ta nces or b etw een non- r el a ted p a r ties ). T h e inter es t r a te b etw een r el a ted

4


A l th oug h C r oa tia is not a n O E C D m em b er countr y , th e p r ov is ions of r el ev a nt C r oa tia n ta x l eg is l a tion a r e g ener a l l y b a s ed on th e O E C D

b a s ed on th e O E C D G uidel ines .


• C ol l ect inf or m a tion on th e cor p or a te g r oup in w h ich it op er a tes a nd its p os ition in th e g r oup , a nd p r ov ide a na l y s is of r el a ted- p a r ty tr a ns a ctions a nd oth er deta il s of th e g r oup a nd th e ta x p a y er

• I dentif y th e tr a ns f er p r icing m eth od a p p l ied; des cr ib e da ta , m eth ods a nd a na l y s is p er f or m ed in th e p r oces s of deter m ining tr a ns f er p r ices ; a nd p r ov ide r ea s ons th a t th e p a r ticul a r m eth od w a s s el ected

1 0 8

C roat ia (continued)


• D ocum ent a s s um p tions a nd ev a l ua tions us ed to deter m ine tr a ns f er p r ices (in l ine w ith th e p r incip l e of unb ia s ed tr a ns a ctions ), w ith r ef er ence to com p a r a b il ity , f unctiona l a na l y s is a nd r is k a na l y s is

• D ocum ent a l l ca l cul a tions of tr a ns f er p r icing b a s ed on th e s el ected m eth od (s uch docum enta tion s h oul d ena b l e a com p a r is on w ith th e p r ices a p p l ied b y oth er com p a r a b l e ta x p a y er s )

•cir cum s ta nces

•

•


T h e C r oa tia n C I T A ct r eg ul a tions do not p r ov ide deta il ed r ul es on h ow to a r r iv e a t th e a r m ’ s - l eng th p r ice th a t s h oul d b e a p p l ied in r el a ted-

a t a r m ’ s - l eng th .

s h oul d b e us ed on occa s ions w h en tr a ditiona l m eth ods ca nnot b e r el ia b l y a p p l ied.


A p p l ica b l e f or th e ta x r etur n f or 2 0 1 6 , a f or m outl ining r el ev a nt inf or m a tion on tr a ns a ctions w ith r el a ted p a r ties w il l need to b e s ub m itted (P D - I P O f or m ).


r el a ted- p a r ty tr a ns a ctions .


T h er e is no dea dl ine f or p r ep a r ing th e tr a ns f er p r icing docum enta tion p r es cr ib ed b y th e l eg is l a tion. T h e l a w r eq uir es th e tr a ns f er p r icing docum enta tion to b e r ea dil y a v a il a b l e a nd p r ov ided to th e ta x a uth or ities up on th eir r eq ues t in a ta x a udit. T h e docum enta tion s h oul d b e in C r oa tia n.

A l th oug h not p r es cr ib ed b y C I T l eg is l a tion, in p r a ctice, th e ta x a uth or ities s ta r ted r eq ues ting , on a ca s e- b y - ca s e b a s is , a s ta tem ent of th e tr a ns f er p r icing m eth od a p p l ied. T h e tr a ns f er p r icing docum enta tion is s ub m itted a s s up p or ting docum enta tion up on s ub m is s ion of th e


indiv idua l w ith in th e com p a ny m a y b e im p os ed f or a ny under es tim a tion of th e cor p or a te incom e ta x l ia b il ity . P ena l ty inter es t w oul d a l s o b e ca l cul a ted f r om th e da te th e ta x w a s due until th e da te th e ta x is p a id.

1 0 9

C roat ia (continued)


Penalty relief


T h e g ener a l s ta tute of l im ita tions f or deter m ining ta x l ia b il ities a nd r ig h ts in a p a r ticul a r ta x p er iod ex p ir es a t th e end of th e th ir d y ea r

s ta tute- b a r r ed, r eg a r dl es s of th e num b er of inter v ening ev ents initia ted b y th e ta x a uth or ity , on 1 J a nua r y 2 0 2 0 .

N ote, h ow ev er , th a t th e l a w ’ s p r ov is ions r eg ul a ting th e s ta tute- of - l im ita tions p er iod of th e r ig h t to a s s es s ta x h a v e b een a m ended, ef f ectiv e 1 J a nua r y 2 0 1 3 . T h e s ta tute- of - l im ita tions p er iod m entioned a b ov e now coul d b e p r ol ong ed in ca s es w h en inv es tig a tions a r e initia ted concer ning a dir ector , s h a r eh ol der or r el a ted- p a r ty in connection w ith th e a b us e of r ig h ts (e. g . , del ib er a te a ctions a im ed a t nonp a y m ent of ta x ) or unex p l a ined s our ces of a s s ets .


I n th e p a s t f ew y ea r s , th e ta x a uth or ities h a v e incr ea s ed th eir f ocus on p r ices a p p l ied in tr a ns a ctions w ith r el a ted p a r ties a nd th e f r eq uency of tr a ns f er p r icing a udits . I nitia l l y , b eca us e of l im ited ex p er ience in tr a ns f er p r icing , th e ta x a uth or ities tended to dis p ute s er v ice ch a r g es b etw een r el a ted com p a nies . H ow ev er , ta x ins p ector s h a v e b ecom e m or e k now l edg ea b l e a b out tr a ns f er p r icing a nd a r e incr ea s ing l y a w a r e of th e is s ues .

T h e ta x a uth or ities is s ued a m a nua l conta ining ins tr uctions f or ta x ins p ector s to f ol l ow in tr a ns f er p r icing a udits . T h e m a nua l a l s o

tr a ns f er p r ices a nd f or p r ep a r ing th e docum enta tion th a t s up p or ts th em .

O nce a ta x a udit is initia ted, th er e is a h ig h r is k of tr a ns f er p r icing b eing r ev iew ed w ith in th e a udit, es p ecia l l y w h en r el a ted- p a r ty

APA opportunity

C r oa tia h a s not im p l em ented l eg is l a tion concer ning A P A s , b ut th ey a r e ex p ected to b e intr oduced in th e nea r f utur e.

G uidel ines , it is l ik el y th a t th e C r oa tia n ta x a uth or ities w il l f ol l ow th e r ecom m enda tions s et in th e new a m endm ents of th es e G uidel ines .

Rep ub lic of C y p rus




T r ea ty T a x C onv ention. H ence, dur ing a ta x a udit, tr a ns f er p r icing is s ues coul d th eor etica l l y a r is e.


I n p r incip l e, O E C D G uidel ines a r e ex p ected to b e a p p l ica b l e in ca s e of a tr a ns f er p r icing is s ue.


N o docum enta tion r eq uir em ents .









A ny tr a ns f er p r icing a dj us tm ents th a t m a y a r is e dur ing a ta x a udit m a y tr ig g er a dditiona l incom e ta x l ia b il ity (p l us a p p l ica b l e inter es t a nd

1 1 1

Rep ub lic of C y p rus (continued)


Penalty relief



T h e s ta tute of l im ita tions is th e s a m e a s it is f or incom e ta x (i. e. , 6 y ea r s , w h ich m a y b e incr ea s ed to 1 2 y ea r s in ca s e of f r a ud).


I n p r incip l e, th e l ik el ih ood of a n a nnua l ta x a udit a nd th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is l ow . I n ca s e tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e p r ob a b il ity th a t tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is l ow .

APA opportunity

N ot a v a il a b l e, a l th oug h th e ta x a uth or ities m a y ch a ng e th eir p r a ctice in th e nea r f utur e.


C z ech Rep ub lic




D ir ectiv e D - 3 3 2 dis cus s es th e a p p l ica tion of inter na tiona l s ta nda r ds in th e ta x a tion of tr a ns a ctions b etw een a s s ocia ted com p a nies .

a s s es s m ents , th e l a tter of w h ich cor r es p onds to th e p r el im ina r y p r ice a g r eem ent p r incip l es w ith in th e m ea ning of th e O E C D G uidel ines .

D ir ectiv e D - 3 3 4 outl ines r eq uir em ents of th e ex p ected s cop e of docum enta tion of a tr a ns f er p r icing m eth odol og y a g r eed up on b etw een r el a ted p a r ties . I t a l s o com m ents on th e s cop e a nd na tur e of docum enta tion in a ccor da nce w ith th e C ode of C onduct on T r a ns f er P r icing

F or um .

D ir ectiv es D - 3 3 2 , 3 3 3 a nd 3 3 4 a r e not l eg a l l y b inding , b ut th e ta x a uth or ity us ua l l y f ol l ow s th em in p r a ctice.


4

f or s ub s ta ntia ting th e m eth od of ca l cul a ting th e a r m ’ s - l eng th p r ice.


T h er e a r e no f or m a l s ta tutor y docum enta tion r eq uir em ents in p l a ce. D - 3 3 4 des cr ib es th e docum enta tion th a t is ex p ected a nd m a y b e r eq uir ed b y th e ta x a uth or ity . T h e dir ectiv e is not l eg a l l y b inding , b ut it is f ol l ow ed in p r a ctice. D - 3 3 3 s ets out docum enta tion th a t

a s s es s m ent s h oul d conta in inf or m a tion on th e g r oup , th e com p a ny , th e b us ines s r el a tions h ip , oth er cir cum s ta nces a f f ecting th e b us ines s r el a tions h ip a nd th e tr a ns f er p r icing m eth od.

I t is cr ucia l f or th e ta x p a y er to h a v e s up p or ting docum enta tion in ca s e th e ta x a uth or ity a udits th e tr a ns a ctions , a s th e b ur den of p r oof

th e ta x a udit, th e a uth or ity m a y r eq ues t a ny docum enta tion th a t r ea s ona b l y s ub s ta ntia tes th e a ctua l ch a r a cter a nd s ub s ta nce of th e

to s up p or t v a r ious a s p ects of th e tr a ns a ction.


1 1 3

C z ech Rep ub lic (continued)



4

I n a ddition, a l l ta x p a y er s h a v e to dis cl os e in th e cor p or a te incom e ta x r etur n w h eth er th ey w er e eng a g ed in tr a ns a ctions w ith r el a ted p a r ties .

E f f ectiv e 1 J a nua r y 2 0 0 1 , th e ex ecutiv es of a contr ol l ed entity a r e r eq uir ed to com p l ete a m em or a ndum w ith r es p ect to r el a tions h ip s a nd tr a ns a ctions w ith com p a nies in th e g r oup . T h is does not a p p l y if a contr ol l ing a g r eem ent is concl uded. N ote th a t th is is b a s ed on com m er cia l l eg is l a tion r a th er th a n on ta x l eg is l a tion, a nd th e m em or a ndum h a s no dir ect ta x im p a ct or ta x a s p ects .



g ener a l l y w ith in 1 5 da y s of th e ta x p a y er ’ s r eceip t of a r eq ues t f r om th e ta x a uth or ity . T h is tim e l im it m a y b e ex tended a t th e dis cr etion of th e ta x a uth or ity if th e ta x p a y er s o r eq ues ts .


eith er 2 0 % of th e unp a id ta x or 1 % of th e decr ea s ed or r educed ta x l os s w il l b e a p p l ied. T h er ea f ter , inter es t is a s s es s ed a t 1 4 % a b ov e th e

Penalty relief


T h e g ener a l s ta tute of l im ita tions a p p l ies . E f f ectiv e 1 J a nua r y 2 0 1 1 , th e l im it s et b y th e T a x C ode is th r ee y ea r s f r om th e end of th e

under ta k es a n a ct dir ected a t th e a s s es s m ent of ta x , th en th e th r ee- y ea r tim e l im it b eg ins a g a in. T h e l im it w il l a l s o b e p r ol ong ed if th e

m a y not b e a s s es s ed a f ter 1 0 y ea r s .

1 1 4

C z ech Rep ub lic (continued)



p a r t of th a t a udit is h ig h . T h e ta x a uth or ity h a s a dop ted a g l ob a l a p p r oa ch . A udit s ub j ects a r e s el ected b a s ed on com p l ex cr iter ia , a nd tr a ns f er p r icing is onl y one a s p ect a m ong m a ny oth er s . I nta ng ib l es , r oy a l ties , l ong - ter m l os s es a nd s er v ice f ees a r e s een a s th e m os t

conta ining f ul l - tim e s p ecia l is ts dedica ted to tr a ns f er p r icing is s ues .

APA opportunity

r eq ues t, th e ta x a dm inis tr a tor decides w h eth er th e ta x p a y er h a s ch os en a tr a ns f er p r icing m eth od th a t w oul d r es ul t in a tr a ns f er p r ice deter m ina tion on a n a r m ’ s - l eng th b a s is . T h e b inding a s s es s m ent ca n b e is s ued onl y f or tr a ns a ctions ef f ectiv e in a p a r ticul a r ta x p er iod or th a t w il l b e ef f ectiv e in th e f utur e. I t is im p os s ib l e to a p p l y f or a b inding a s s es s m ent of b us ines s r el a tions h ip s th a t h a v e a l r ea dy a f f ected ta x l ia b il ity . D - 3 3 3 deta il s th e p r ocedur e f or is s uing b inding a s s es s m ents a nd th e p a r ticul a r s f or th e a p p l ica tion. G ener a l l y , th e ta x a dm inis tr a tor s h oul d is s ue th e decis ion w ith in s ix m onth s .


tr a ns f er p r icing l eg is l a tion a nd th e cur r ent p r a ctice in th e tr a ns f er p r icing a r ea , it is l ik el y th a t th e a m ended O E C D T r a ns f er P r icing G uidel ines w il l b e a p p l ied on tr a ns a ctions th a t ca n s til l com e under ta x a udit.

D enm ark



• D a nis h T a x A s s es s m ent A ct

• D a nis h T a x C ontr ol A ct


4 0 1 , of 2 8 A p r il 2 0 1 6 , a p p l ies to contr ol l ed tr a ns a ctions ca r r ied out in incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or l a ter . T h e p r ev ious r eg ul a tion, N um b er 4 2 , of 2 4 J a nua r y 2 0 0 6 , on docum enta tion of tr a ns f er p r icing of contr ol l ed tr a ns a ctions , w il l b e r ep ea l ed w ith ef f ect

4a f ter 1 J a nua r y 2 0 1 7 , w h il e f or incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or no l a ter th a n 3 1 D ecem b er 2 0 1 6 , it is p os s ib l e to a p p l y

4 4 4on T r a ns f er P r icing D ocum enta tion.

T h e ta x a uth or ities h a v e p ub l is h ed g uidel ines on th e a p p l ica tion of th e E x ecutiv e O r der on T r a ns f er P r icing D ocum enta tion. T h es e

I n 2 0 0 9 , th e ta x a uth or ities p ub l is h ed a dditiona l docum enta tion g uidel ines on v a l ua tion. T h e g uidel ines a p p l y to th e v a l ua tion of com p a nies , s h a r es a nd intel l ectua l p r op er ty r ig h ts . T h e g uidel ines incl ude a des cr ip tion of v a l ua tion m odel s , r ecom m enda tions on th e

r ev is ed on 1 5 J a nua r y 2 0 1 3 .



•

• A n a nnua l tota l b a l a nce of l es s th a n D K K 1 2 5 m il l ion

O r

• A n a nnua l r ev enue of l es s th a n D K K 2 5 0 m il l ion

4

1 1 6

D enm ark (continued)


•

•

m il l ion) in th e im m edia tel y p r eceding incom e y ea r . T h e r eq uir em ent to p r ep a r e th e C b C r ep or t is a p p l ica b l e f or incom e y ea r s s ta r ting on or a f ter 1 J a nua r y 2 0 1 6 , if th e ul tim a te p a r ent com p a ny is a D a nis h ta x r es ident. I f cer ta in conditions a r e m et, D a nis h s ub s idia r ies of a non- D a nis h p a r ent m a y a ct a s a s ur r og a te a nd m a y s ub m it a C b C r ep or t on b eh a l f of th e non- D a nis h p a r ent in D enm a r k . A p r ov is ion

F or incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or no l a ter th a n 3 1 D ecem b er 2 0 1 6 , com p a nies ca n ch oos e to p r ep a r e tr a ns f er p r icing 4 4 4

4

• A des cr ip tion of th e g r oup , incl uding th e l eg a l g r oup s tr uctur e; h is tor y of th e g r oup , incl uding a des cr ip tion of r es tr uctur ing s ,

• A des cr ip tion of th e D a nis h entity a nd th e oth er entities inv ol v ed in inter com p a ny tr a ns a ctions w ith th e D a nis h entity (p r im a r y b us ines s

• A des cr ip tion of ea ch inter com p a ny tr a ns a ction

• C om p a r a b il ity a na l y s is (da ta b a s e s ea r ch if neces s a r y ) f or ea ch inter com p a ny tr a ns a ction

• A l is t of a ny w r itten inter com p a ny a g r eem ents in r el a tion to th e inter com p a ny tr a ns a ctions a nd a cop y of a ny w r itten a g r eem ents th a t th e D a nis h entity or th e r el a ted p a r ties h a v e enter ed into w ith f or eig n ta x a uth or ities r eg a r ding inter com p a ny tr a ns a ctions

to 9 0 da y s . F or eig n com p a r a b l e com p a nies a r e a ccep ted.

I n a ddition, new r ul es a s of J a nua r y 2 0 1 3 ca m e into f or ce, a l l ow ing th e ta x a uth or ities to r eq ues t entities th a t a r e s ub j ect to th e tr a ns f er p r icing docum enta tion r eq uir em ents to ob ta in a n a uditor ’ s r ep or t under s p ecia l cir cum s ta nces .


a p p r op r ia te m eth od, th e ta x p a y er s h oul d cons ider th e a s p ects r eg a r ding th e a p p l ica tion of m eth ods s ta ted in th e O E C D G uidel ines .




onl y if th e tota l v a l ue of th e contr ol l ed tr a ns a ctions ex ceeds D K K 5 m il l ion in th e incom e y ea r .

1 1 7




T h er e is a n a s s um p tion in th e docum enta tion r ul es th a t th e docum enta tion is b eing p r ep a r ed contem p or a neous l y . I n a ny ev ent,

da y s of th e ta x a uth or ities ’ r eq ues t f or docum enta tion. T h e ta x a uth or ities ca n in p r incip l e s ta r t a ta x a udit f or a n incom e y ea r w h en th e


P ena l ties w er e intr oduced f or incom e y ea r s com m encing on or a f ter 2 A p r il 2 0 0 6 . P ena l ties a r e a p p l ica b l e if th e tr a ns f er p r icing docum enta tion r eq uir em ents a r e not ob s er v ed due to th e ta x p a y er ’ s g r os s neg l ig ence or w il l f ul m is conduct.

a dj us tm ent. T h e p ena l ty a m ounts a r e nondeductib l e.

4 4 4 42 0 1 1 ) w il l b e l ev ied on a l l p r ior - y ea r a dj us tm ents of cor p or a te ta x es p a y a b l e. F ur th er m or e, nondeductib l e inter es t of 0 . 8 % w il l b e a dded

4 4

w a s intr oduced in 2 0 1 3 .

Penalty relief

s til l a p p l ies . A s s ta ted a b ov e, a deq ua te tr a ns f er p r icing docum enta tion s ub m itted in due tim e w il l p r ov ide p ena l ty p r otection.



ch a l l eng ed is a l s o h ig h .

T h e ta x a uth or ities op er a te dedica ted tr a ns f er p r icing a udit center s a cr os s D enm a r k s ol el y to ca r r y out tr a ns f er p r icing a udits indep endentl y of g ener a l ta x a udits . T h e D a nis h G ov er nm ent h a s l a unch ed initia tiv es w ith a f ocus on m ul tina tiona l com p a nies , incl uding incr ea s ing th e f unds a l l oca ted to th e ta x a uth or ities a nd tig h tening th e p ena l ty r ul es in tr a ns f er p r icing ca s es . T h e ta x a uth or ities a r e

1 1 8



•

• I nta ng ib l e a s s ets

•

• P r icing of intr a g r oup tr a ns a ctions of g oods a nd s er v ices

•

APA opportunity

T h e D a nis h l eg is l a tion p r ov ides f or unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s . T h er e is no b il a ter a l A P A r eg im e in p l a ce, h ow ev er it is

y ea r s .


D o minic an R ep u b l ic



Dirección General de Impuestos Internos, or DGII)


I n J a nua r y 2 0 0 7 , a n a m endm ent to A r ticl e 2 8 1 of th e D om inica n T a x C ode intr oduced th e a r m ’ s - l eng th p r incip l e, a l l ow ing th e D G I I to

y ea r 2 0 1 1 .

4A s of 9 N ov em b er 2 0 1 2 , th r oug h th e ena ctm ent of L a w 2 5 3 - 1 2 (L a w ), th es e r eg ul a tions w er e incor p or a ted into A r ticl e 2 8 1 of th e

4 4 4

T h e decr ee b r oa dened th e s cop e of A r ticl e 2 8 1 of th e D om inica n T a x C ode, w h ich now s ta tes th a t tr a ns f er p r icing r eg ul a tions a p p l y to

• A r es ident a nd a nonr es ident r el a ted- p a r ty

• A r es ident a nd a r es ident r el a ted- p a r ty

• A r es ident a nd a n indiv idua l , cor p or a tion or entity dom icil ed in a ta x h a v en

T r a ns f er p r icing a dj us tm ents w il l a p p l y onl y if th e inter com p a ny tr a ns a ction r es ul ts in a ta x def er r a l or r eduction of ta x a b l e incom e.

T h e D G I I w il l a s s um e th a t ta x a b l e incom e h a s b een r educed or def er r ed w h en th e inter com p a ny tr a ns a ction, a s or ig ina l l y p r iced, r es ul ts in (i) com p ens a tion of ca r r y f or w a r d l os s es , (ii) b a s e er os ion in f a v or of a noth er j ur is diction or (iii) a r b itr a g e of ta x r a tes a m ong r es idents .


th e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion. H ow ev er , th e tr a ns f er p r icing r eg ul a tions in th e D om inica n T a x C ode a r e m a inl y b a s ed on th e O E C D G uidel ines .


C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to dom es tic a nd cr os s - b or der inter com p a ny tr a ns a ctions m us t b e m a inta ined.

4com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e to th e D G I I .

• A deta il ed des cr ip tion of th e na tur e of th e tr a ns a ctions

•


• T r a ns f er p r icing m eth od em p l oy ed, incl uding th e m eth od s el ection p r oces s

•

1 2 0

D o minic an R ep u b l ic (continued)


4

• T a x p a y er s w h os e tota l a m ount of inter com p a ny tr a ns a ctions does not ex ceed D O P 1 0 m il l ion a nd th a t h a v e no tr a ns a ctions w ith entities l oca ted in ta x h a v ens or under p r ef er entia l ta x r eg im es

•r es ul t in a ta x def er r a l or ov er a l l r eduction of ta x r ev enues

N ev er th el es s , ta x p a y er s ex cl uded f r om th e docum enta tion r eq uir em ents a r e s til l s ub j ect to com p l y ing w ith th e a r m ’ s - l eng th p r incip l e a nd



T h er e a r e no r el a ted- p a r ty dis cl os ur es th a t a r e to b e m a de on g ener a l incom e ta x r etur ns .


4


a nd r ecor ds . I f r eq ues ted b y th e ta x a uth or ities , docum enta tion s h oul d b e p r ov ided w ith in th e p er iod th e ta x a uth or ities s tip ul a te in th e notice.


A r ticl e 2 8 1 b is of th e D om inica n T a x C ode, w ith r ef er ence to A r ticl e 2 5 7 , dicta tes th a t f a il ur e to p r ov ide tr a ns f er p r icing docum enta tion on tim e or f a il ur e to p r ov ide tr ue, com p l ete or a ccur a te inf or m a tion coul d r es ul t in p ena l ties of up to th r ee tim es 0 . 2 5 % of th e p r ev ious y ea r ’ s incom e.

F ur th er m or e, a ny a dditiona l ta x g ener a ted b y D G I I p r ice a dj us tm ents s h oul d b e s ub j ect to s ur ch a r g es a nd p ena l ty inter es t.

Penalty relief

• 4 0 % r eduction of th e s ur ch a r g es a s s es s ed if th e com p a ny decides to v ol unta r il y a m end its ta x r etur n w ith out a ny p r ior notice f r om th e ta x a uth or ities

1 2 1

D o minic an R ep u b l ic (continued)


• 3 0 % r eduction of th e s ur ch a r g es if , a f ter b eing a udited, th e dif f er ence b etw een th e es tim a ted ta x a nd th e ef f ectiv el y p a id ta x r ep r es ents l es s th a n 3 0 % of th e l a tter



g ener a l ta x a udit is cons ider ed h ig h . E v en th oug h tr a ns f er p r icing r eg ul a tions a r e r el a tiv el y new in th e countr y , th e D G I I h a s b een a ctiv e in ta x a udits r eg a r ding tr a ns f er p r icing is s ues .

APA opportunity

A P A s , b il a ter a l or m ul til a ter a l , a r e contem p l a ted in A r ticl e 2 8 1 b is of th e D om inica n T a x C ode a nd in D ecr ee N o. 7 8 - 1 4 .

Timelines and general information

• T a x p a y er s ca n r eq ues t a n A P A f or a cer ta in tim e p er iod a nd r enew it f or a n a dditiona l th r ee y ea r s .

•

• 4p r es um ed to h a v e b een denied.

• T h e decr ee es ta b l is h es th e inf or m a tion th a t m us t b e incl uded in th e A P A r eq ues t.

F ur th er m or e, A r ticl e 2 8 1 of th e D om inica n T a x C ode contem p l a tes a p r otection r eg im e (regimen de protección

is s ues a cor r es p onding r es ol ution once th e indus tr y or econom ic a ctiv ity is s el ected.


A s of th e da te of th is p ub l ica tion, th e ta x a uth or ities h a v e not m a de p ub l ic a ny f or m a l initia tiv e to up da te ex is ting tr a ns f er p r icing r ul es

cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur .

E c u ad o r



Servicio de Rentas InternasServicio Nacional de Aduanas del Ecuador

Ley Orgánica de Régimen Tributario Interno Ley Reformatoria Para La Equidad Tributaria En El Ecuador, or L E T ); O r g a nic C ode f or P r oduction, T r a de a nd I nv es tm ents (Código Orgánico de la Producción, Comercio e Inversiones

Código Orgánico de Organización Territorial, Autonomía y Descentralización, or C O O T A D ); a nd th e ex ecutiv e or der r eg ul a tions of th os e l a w s , doub l e ta x a tion tr ea ties a nd s up r a na tiona l nor m s .


• D om es tic tr a ns a ctions a r e a f f ected b y th e tr a ns f er p r icing r eg im e. C om p ul s or y del iv er y of its docum enta tion m a y b e w a iv ed if cer ta in conditions a r e m et.

• T h er e a r e r es tr ictiv e deductib il ity l im its f or r oy a l ties , tech nica l s er v ices , m a na g em ent f ees a nd cons ul ting s er v ices p a id to r el a ted p a r ties .

• C er ta in indir ect a l l oca ted ex p ens es p a id to r el a ted p a r ties a r e r es tr icted.

•

• T h e us e of th e inter q ua r til e r a ng e, w h en m or e th a n one com p a r a b l e is f ound, is com p ul s or y f or ev er y a p p l ica b l e m eth od. A l s o, th e tr a ns f er p r icing a dj us tm ent m us t b e ca l cul a ted to th e m edia n of th e com p a r a b l es s et.

•th e ex cl us ion of com p a nies m a k ing l os s es .

• T h e ta x a dm inis tr a tion m a y us e s ecr et com p a r a b l es .

•

•

• E l im ina ting th e com p ul s or y a p p l ica tion of h ier a r ch y of m eth ods

• A l l ow ing th e ta x a dm inis tr a tion to es ta b l is h a nti- a v oida nce r ul es

•

• H a v e a p a y a b l e C I T g r ea ter th a n 3 % of th eir ta x a b l e r ev enues

• N ot p er f or m tr a ns a ctions w ith ta x h a v ens

• N ot h a v e g ov er nm ent contr a cts r el a ted to th e ex p l or a tion a nd ex p l oita tion of nonr enew a b l e r es our ces

1 2 3

E c u ad o r (continued)


ty p e a nd cl a s s of tr a ns a ction, num b er of tr a ns a ctions , na m e of r el a ted- p a r ty , a ddr es s of r el a ted- p a r ty a nd th e ta x r a te a p p l ica b l e to th e r el a ted- p a r ty .

tr a ns a ctions a r e ty p ica l l y th e s ub j ect of deta il ed a na l y s es . A s th e O E C D G uidel ines s h a l l b e us ed a s a tech nica l r ef er ence f or E cua dor ia n

th os e r el a ted w ith A ction 3 .

4p a r ties not to ex ceed 3 0 0 % of th e eq uity .


inter na tiona l tr ea ties s ig ned b y E cua dor h ol d s up r em a cy ov er th e O E C D G uidel ines .

a dm inis tr a tion k eep s p os ted a nd up da ted a t its w eb s ite.

• T r ea tm ent of l oa ns to p a r ent com p a nies or s h a r eh ol der s a s div idends (A ction 2 )

• O b l ig a tion to tr ea t ta x h a v ens or p r ef er entia l ta x r eg im es a s r el a ted p a r ties , p unis h m ent to s h a r eh ol der s in s uch j ur is dictions , a b il ity to

• 4

•

•

• N ondeductib il ity of r ecentl y tr a ded inta ng ib l es (A ction 8 )

• D eductib il ity l im its to s er v ices a nd a l l oca tion tr a ns a ctions (A ction 1 0 )

• O b l ig a tion to r ev ea l cr ea tion or tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions (A ction 1 2 )


•

•

1 2 4



•

•

• C a l cul a ted a dj us tm ents f or ea ch tr a ns a ction

ev en th oug h th e com p a ny does not r ea ch th e th r es h ol d a m ounts a nd on tr a ns a ctions th a t did not a ccum ul a te f or th e th r es h ol d.

• F ul l f unctiona l a na l y s is of th e m ul tina tiona l g r oup a nd th e l oca l p a r ty

•

• D eta il ed f unctiona l des cr ip tion of th e inter com p a ny tr a ns a ctions , a s w el l a s docum ents f or th e econom ic s ub s ta nce of th e tr a ns a ctions ,

•

•

• E conom ic a na l y s is , incl uding deta il ed r ea s oning f or ev er y m eth odol og ica l decis ion

•outcom e

• D eta il ed com p a r a b il ity f a ctor s a na l y s is

• D eta il ed r ea s ons f or r ej ection of noncom p a r a b l e com p a nies , incl uding deta il ed inf or m a tion of s uch com p a ny

•

• A na l y s is des cr ip tion a nd concl us ion

f or its tr a ns f er p r icing a na l y s is .

T h e T P A nnex a nd T P docum enta tion m us t b e s ub m itted up to tw o m onth s a f ter th e ta x r etur n of th e com p a nies a ccor ding to th e ninth

a p p l ica b l e to a ny of th e counter p a r ts or in ca s e a ny of th em h a s s h a r eh ol der s l oca ted in ta x h a v ens or l ow ta x j ur is dictions .

a f or em entioned th r es h ol d is s ur p a s s ed, ex cep t w h en th e ta x p a y er h a s tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions or w h en th e ta x p a y er h a s a contr a ct w ith th e E cua dor ia n G ov er nm ent f or ex p l or a tion or ex p l oita tion of nonr enew a b l e r es our ces .


m eth od) m a y b e us ed.

1 2 5



th e E cua dor ia n ta x a dm inis tr a tion to is s ue tech nica l g uidel ines th a t a l l ta x p a y er s m us t f ol l ow unl es s th ey m a y docum ent th e r ea s ons b eh ind th e us e of a dif f er ent m eth odol og ica l el ection.

com m odities r ul e).

•

• E x is tence of r ef er ence p r ices

•

• A v a il a b il ity of inf or m a tion r eg a r ding th e l is ting p er iods

• A ccep ta nce or p r oh ib ition of inter m edia r ies

com p a nies is a ccep ta b l e if th e ta x p a y er s ca n docum ent a nd dem ons tr a te th a t it is not p os s ib l e to a cces s p ub l ic inf or m a tion of l oca l com p a nies .

in s uch ca s e, th e p r ev ious y ea r ’ s inf or m a tion m a y b e us ed if a dem ons tr a tion of s im il a r conditions h a p p ening in b oth y ea r s is incl uded.


p r ov iding enoug h inf or m a tion to m a k e s ur e th a t econom ic s ub s ta nce of th e tr a ns a ctions is docum ented, incl uding th e a b il ity of r el a ted p a r ties to p r ov ide s er v ices b eing p a id b y th e E cua dor ia n ta x p a y er .

N oneth el es s , inf or m a tion r eg a r ding ow ner s h ip of com p a nies is r eq uir ed f or a l l ta x p a y er s f or g ener a l ta x p ur p os es , incl uding th e C I T r a te.

•

•r el a tions h ip to th e ta x p a y er a nd th e ta x p a y er h a s not b een a b l e to p r ov e th a t th er e is no r el a tions h ip on m a na g em ent, a dm inis tr a tion, contr ol or ca p ita l

tr a ns a ctions b eing h el d.

1 2 6




ta x a dm inis tr a tion, a s w el l a s b y th e ex ter na l a uditor s b eca us e of T a x a nd C om p a nies L a w s com p l ia nce r eq ues ts . T h e f ol l ow ing is ty p ica l

•com m unica te th e tr a ns f er p r icing a na l y s is outcom e b ef or e th e is s ua nce of th e a udit r ep or t

•

•

•

•


A p r il ).


I n s p ite of th e a b ov e, th e ta x a dm inis tr a tion is s ued a docum ent (Instructivo para el Establecimiento de Sanciones Pecuniarias) th a t is us ed to es ta b l is h th e p ena l ty a m ount a ccor ding to th e s er ious nes s of th e f a ul t or m is dem ea nor (l a te del iv er y or incom p l ete or er r oneous

A s s es s m ents of a ny k ind, incl uding tr a ns f er p r icing a dj us tm ents , m us t ch a r g e inter es t (a r ound 1 3 % p er y ea r ) f or th e tim e b etw een th e

p a id. I n a ddition, a 2 0 % s ur ch a r g e on th e a s s es s m ent w il l b e a p p l ied.

Penalty relief

C ur r entl y , no p ena l ty r el ief r eg im e is a v a il a b l e; nev er th el es s , th e 2 0 % s ur ch a r g e m a y b e p r ev ented w h en a n a s s es s m ent is a ccep ted a t


r etur n.

1 2 7




I n r ecent y ea r s , th e num b er of ca s es inv ol v ed in ong oing l itig a tion a nd under g oing dom es tic a p p ea l s (p r eceding cour t a ction) h a s incr ea s ed. T a x h a v ens , r oy a l ties a nd com m odities a r e f r eq uentl y inv ol v ed in dis p utes .

indus tr ies , r ecur r ence of l os s es , tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions a nd com p l ia nce p r ecedents . I f a ta x p a y er is s el ected f or a g ener a l ta x a udit, th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h .

I f tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is a l s o h ig h . F or ex a m p l e, in a udits of w h ich tr a ns f er p r icing is a s ub j ect, th e p er centa g e of r ev iew s w h er e a s s es s m ents a r e b a s ed on ch a l l eng ing th e m eth odol og y (or a t l ea s t th e com p a r a b l es s et) is m or e th a n 7 5 % .

O n th e oth er h a nd, th er e is a p r ob a b il ity th a t f or cer ta in p r im a r y a g r icul tur a l p r oducts , nonr enew a b l e na tur a l r es our ces or a ny k ind of

b eca us e of cer ta in b us ines s a ctiv ities in r el ev a nt indus tr ies .

A tr a ns f er p r icing a udit is tr ig g er ed b y a centr a l decis ion- m a k ing b ody . T o deter m ine w h ich ta x p a y er s to a udit, th es e el em ents a r e

•

• N a tur e of r el a ted- p a r ty tr a ns a ctions under ta k en b y th e ta x p a y er

•

• P r ev ious ta x a udits of th e ta x p a y er

• L ow r a tio of p a id C I T / r ev enue

• I m p or ta nt ch a ng es in th e op er a ting s tr uctur e of a com p a ny , s uch a s th e a p p l ica tion of a l ow - r is k s tr uctur e

APA opportunity

T h e E cua dor ia n ta x a dm inis tr a tion is s ued a n A P A - l ik e p r ocedur e th a t deta il s th e k ind of inf or m a tion th a t w oul d b e r eq ues ted to a s k

ex p l a ined to th e a dm inis tr a tion.

T h e cons ul ta tion p r ocedur es b eca m e m a s s iv e a s th e r es ul t of th e l im ita tion of cer ta in ex p ens es p a id to r el a ted p a r ties , w h er e th e onl y w a y to l if t th e l im ita tion is to r eq ues t f or a r ul ing on th e p r ice of th e r el ev a nt tr a ns a ction.

th e cons ul ta tion, b ut th e tim e w il l dep end on th e com p l ex ity a nd th e num b er of cons ul ta tions under th e r ev iew of th e l oca l ta x a dm inis tr a tion.

1 2 8




T h e O E C D G uidel ines a r e a p p l ica b l e a s tech nica l g uidel ines f or ev er y tr a ns a ction not b eing r eg ul a ted b y a ny inter na l l a w , r eg ul a tion or

w il l b e a p p l ica b l e f or tr a ns a ctions th a t E cua dor ia n com p a nies h ol d w ith r el a ted p a r ties (dom es tic or cr os s - b or der ) s ta r ting 1 J a nua r y 2 0 1 7 .

E g y p t




T o r a is e ta x p a y er a w a r enes s of tr a ns f er p r icing p r incip l es a nd h ow to a p p l y A r ticl e 3 0 of th e I T L a nd A r ticl es 3 8 , 3 9 a nd 4 0 of its ex ecutiv e r eg ul a tion, th e E T A , w ith th e a s s is ta nce of th e O E C D , is s ued its tr a ns f er p r icing g uidel ines in 2 0 1 0 . T h e E T A decided to is s ue

p r ov ides ta x p a y er s w ith g uida nce on th e a r m ’ s - l eng th p r incip l e, com p a r a b il ity a na l y s is , tr a ns f er p r icing m eth ods a nd docum enta tion r eq uir em ents .

T h e up com ing p a r ts of th e tr a ns f er p r icing g uidel ines w il l a ddr es s oth er is s ues , s uch a s th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e to tr a ns a ctions inv ol v ing inta ng ib l e p r op er ty , intr a g r oup s er v ices , cos t contr ib ution a r r a ng em ents (C C A s ) a nd A P A s .

T a x p a y er s m a y s ub m it th eir tr a ns f er p r icing docum enta tion in E ng l is h . H ow ev er , a n A r a b ic v er s ion is g ener a l l y r eq ues ted dur ing th e ins p ection p r oces s .

conditions ta k ing p l a ce b etw een non- a s s ocia ted p er s ons , w h ich a r e l ia b l e to r educe th e ta x b a s e or tr a ns f er its b ur den f r om a ta x a b l e

T h e h ea d of th e a dm inis tr a tion m a y concl ude a dv a nce a g r eem ents w ith a s s ocia ted p er s ons on one or m or e m eth ods f or deter m ining th e a r m ’ s - l eng th p r ice.

• A s p ous e, a nces tor s a nd des cenda nts (f a m il y m em b er s )

• C a p ita l a s s ocia tions a nd a p er s on th a t h ol ds a t l ea s t 5 0 % of th e v a l ue of s h a r es or v oting r ig h ts , w h eth er dir ectl y or indir ectl y

• P a r tner s h ip s , th e j oint p a r tner s a nd s il ent p a r tner s of th os e p a r tner s h ip s

• A ny tw o or m or e com p a nies w h er e a th ir d p a r ty h ol ds 5 0 % or m or e of th e v a l ue of s h a r es or of th e v oting r ig h ts in ea ch com p a ny

Introducing the General Anti-Avoidance Rule (GAAR):

T h e r ul e w a s intr oduced under A r ticl e N o. 9 2 (b is ) of L a w N o. 5 3 of 2 0 1 4 , w h ich w a s p ub l is h ed b y th e E g y p tia n G ov er nm ent on 3 0 J une 2 0 1 4 . A r ticl e N o. 9 2 p r ov ides th a t ta x im p l ica tions of tr a ns a ctions w oul d not b e a ck now l edg ed (up on deter m ining a ta x a s s es s m ent) w h er e it is p r ov ed th a t th e p ur p os e or one of th e m a in p ur p os es of s uch tr a ns a ctions is to a v oid or p os tp one ta x es .

•tr a ns a ction.

•b a s ed on th e tr a ns a ction.

• T h e tr a ns a ction incl udes s om e cr iter ia h a v ing contr a dicting im p a cts el im ina ting ea ch oth er .

I n a l l ca s es , th e b ur den of p r ov ing th e tr a ns a ction’ s a b us iv e p ur p os e f a l l s up on th e E T A . H ow ev er , th e ta x p a y er m a y p r ov ide ev idence th a t coul d dis p r ov e a ccus a tions of a g g r es s iv e ta x p l a nning .

1 3 0

E g y p t (continued)


of f er s its a p p r ov a l .


a ny one of th e m eth ods m entioned in th e O E C D G uidel ines , or a ny oth er a ccep ta b l e m eth od s uita b l e f or th e ta x p a y er , m a y b e f ol l ow ed.


p r icing docum enta tion (a nd oth er s up p or ting docum ents , incl uding inter com p a ny a g r eem ents , s ch edul es a nd inv oices ) to s up p or t its decl a r ed tr a ns a ctions on th e ta x r etur n. A ccor ding to th e r ul es , h ow ev er , th e b ur den of p r oof s h if ts to th e ta x p a y er in th e ev ent th a t th e

T h e tr a ns f er p r icing docum enta tion does not need to b e s ub m itted w ith th e ta x r etur n b ut s h oul d b e a v a il a b l e a t s h or t notice if th e E T A r eq ues ts it.


I n A r ticl es 3 9 a nd 4 0 of th e I T L , th e ex ecutiv e r eg ul a tions es ta b l is h th e m eth ods of ca l cul a ting th e a r m ’ s - l eng th p r ice.

4a p p l y ing th is m eth od is una v a il a b l e, a ny of th e tw o oth er m eth ods p r es cr ib ed in A r ticl e 3 9 m a y b e a p p l ied.

I n ca s e of ina b il ity to a p p l y a ny of th e th r ee m eth ods m entioned, a ny oth er m eth od des cr ib ed b y th e O E C D G uidel ines or a ny oth er

a ccep ta b l e m eth ods , p r ov ided th e ta x p a y er ca n dem ons tr a te th a t th e m eth od us ed is th e m os t a p p r op r ia te f or th e a na l y s is a nd g iv e r ea s ons f or w h y th e oth er m eth ods a r e not a p p r op r ia te.


• N a m e of th e r el a ted- p a r ty or p a r ties , a l ong w ith th e g r oup s tr uctur e

• T h e na tur e of th e r el a tions h ip

• T y p e of th e r el a ted- p a r ty tr a ns a ctions , if a ny

• T h e v a l ue of th e tr a ns a ctions

• T h e m eth od us ed to deter m ine th e f a ir m a r k et p r ice a nd th e r ea s ons f or s el ecting th is m eth od

• T h e countr y of or ig in f or ta ng ib l e a nd inta ng ib l e g oods

• T h e countr y of th e s up p l ier

1 3 1




cor p or a te ta x r etur n.


tr a ns f er p r icing s tudy w ith th e a nnua l ta x r etur n. T h e tr a ns f er p r icing r ep or t w il l b e r eq uir ed dur ing th e ins p ection p r oces s . F r om 2 0 1 0

l a tes t, tr a ns f er p r icing docum enta tion s h oul d b e com p l eted b y J une f or com p a nies w ith a D ecem b er y ea r - end (in p r incip l e, w ith out th e ex tens ion, th e com p a nies w oul d h a v e until A p r il ) to b e contem p or a neous .


• 5 % of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount is eq uiv a l ent to 1 0 % a nd up to 2 0 % of th e l eg a l l y p a y a b l e ta x

• 1 5 % of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount is eq uiv a l ent to m or e th a n 2 0 % a nd up to 5 0 % of th e l eg a l l y p a y a b l e ta x

• 4 0 of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount eq uiv a l ent to m or e th a n 5 0 % of th e l eg a l l y p a y a b l e ta x

Penalty relief

p ena l ties a nd inter es t m entioned in th e I T L .



of E g y p t indica ted th a t tr a ns f er p r icing a dj us tm ents a r e a m a j or a nd p r ior ity s our ce of ta x incom e to th e countr y . H ence, th e E T A h a s

th e a s s es s m ent, th e E T A dem a nds docum ents to s up p or t inter com p a ny p r icing .

a r m ’ s - l eng th p r incip l e a r e l ik el y to b e a s s ig ned b y th e E T A a l ow ta x r is k r a ting . H ow ev er , ta x p a y er s g iv ing ina deq ua te cons ider a tion to th eir tr a ns f er p r icing p r a ctices w il l b e a s s ig ned a h ig h r is k r a ting .

1 3 2



T a x p a y er s w ith h ig h p er ceiv ed r is k a r e m or e l ik el y to b e a udited b y th e E T A th a n th os e p er ceiv ed to h a v e l ow r is k .

ex p er ience.

APA opportunity

A P A s a r e a v a il a b l e in E g y p t, b ut none h a v e b een concl uded to da te.


• A ction 5 (H a r m f ul T a x P r a ctices )

• A ction 6 (T r ea ty A b us e)

•

• 4

s ta nda r ds . I n a ddition, E g y p t a l s o needs to s ig n m ul til a ter a l ex ch a ng e of inf or m a tion a g r eem ents w ith oth er countr ies in or der to w or k

A s of D ecem b er 2 0 1 6 , no a m endm ents h a v e b een intr oduced to th e l oca l ta x l a w . I n a ddition, E g y p t did not s ig n a ny m ul til a ter a l ex ch a ng e of inf or m a tion a g r eem ents w ith oth er countr ies dur ing 2 0 1 6 .

E l S al v ad o r



Dirección General de los Impuestos Internos (D G I I ) a nd Ministerio de Hacienda


com p a r a b il ity concep t.

Disclosure in the tax report

4 4

nex t b us ines s da y ).

r ep or t r eg a r ding tr a ns a ctions conducted b y th e ta x p a y er w ith its r el a ted p a r ties or entities dom icil ed in ta x h a v en j ur is dictions , indica ting w h eth er th e ta x p a y er com p l ies w ith th e tr a ns f er p r icing l eg is l a tion (m a inl y th e a r m ’ s - l eng th p r incip l e).

Guía de Orientación (G O ), N o. 0 0 1 / 2 0 1 2 , intended to p r ov ide g ener a l g uida nce to ta x p a y er s a b out th e ta x tr ea tm ent of r el a ted- p a r ty tr a ns a ctions or tr a ns a ctions w ith entities dom icil ed in ta x h a v en j ur is dictions .

a p p l ica tion of w ith h ol ding ta x a nd nondeductib il ity of cos ts a nd ex p ens es in r el a ted- p a r ty tr a ns a ctions a nd tr a ns a ctions w ith ta x h a v ens . F or ta x a uditor s , it p r ov ides g uida nce a b out dis cl os ur es in th e ta x r ep or t.

Recent ch anges

4g uidel ines w h en deter m ining m a r k et p r ices of r el a ted- p a r ty tr a ns a ctions .


G uidel ines to deter m ine th e p r icing us ed in r el a ted- p a r ty tr a ns a ctions . A s a r es ul t, ta x p a y er s ca n ca r r y out th eir tr a ns f er p r icing a na l y s es in a ccor da nce w ith O E C D G uidel ines , a nd it is b inding up on th e ta x a uth or ities .


s a id tr a ns a ctions com p l y w ith tr a ns f er p r icing r eg ul a tions . F ur th er m or e, th e ta x a uth or ities h a v e a l r ea dy s ta r ted tr a ns f er p r icing a udits .

1 3 4

E l S al v ad o r (continued)


I n ca s e a ta x p a y er does not m a inta in contem p or a neous tr a ns f er p r icing docum enta tion, no p ena l ties a p p l y , b ut th er e is a n incr ea s ed r is k th a t th e ta x a uth or ities w il l a ttem p t to r eca l cul a te a nd a dj us t it a ccor ding to th eir cr iter ia .

I n a ny ca s e, ta x p a y er s s h oul d h a v e a l l s up p or ting da ta a nd inf or m a tion to dem ons tr a te th a t th eir inter com p a ny tr a ns a ctions m eet th e a r m ’ s - l eng th p r incip l e.

A m ong th e docum enta tion r eq uir em ents im p os ed b y th e G O a nd th e D ecr ee, inf or m a tion a b out th e ta x p a y er a nd its m ul tina tiona l g r oup s h oul d b e incl uded, a s w el l a s a com p l ete f unctiona l a na l y s is a nd cr iter ia f or th e s el ection of com p a r a b l es (tr a ns a ctions or com p a nies ) a nd th e a p p l ica b l e tr a ns f er p r icing m eth odol og y .

ov er a l l O E C D G uidel ines a s a v a l id r ef er ence f or es ta b l is h ing tr a ns f er p r ices .

E v en th oug h th er e is no ex p l icit docum enta tion ob l ig a tion f or ta x p a y er s in th e T C , th e f a ct th a t th e ex ter na l a uditor h a s to is s ue a n Dictamen Fiscal) ef f ectiv el y r eq uir es ta x p a y er s to p r ep a r e a nd m a inta in


m eth od w h en a dj us ting p r ices .

w h en deter m ining a nd a s s es s ing p r ices in r el a ted- p a r ty tr a ns a ctions . I n a ddition, th e G O es ta b l is h es th a t th e f ol l ow ing m eth ods a r e


D isclosure in t h e t ax audit rep ort

4 4

b us ines s da y ).

conducted b y th e ta x p a y er w ith its r el a ted p a r ties or w ith entities dom icil ed in ta x h a v en j ur is dictions , indica ting w h eth er th e ta x p a y er com p l ied w ith th e tr a ns f er p r icing l eg is l a tion (m a inl y , th e a r m ’ s - l eng th p r incip l e).


4

4

• T h e na m e of th e r el a ted- p a r ty or of th e ta x - h a v en- dom icil ed p a r ty

•

1 3 5



• T h e a nnua l a m ount of th e tr a ns a ctions

• T h e com p a r a b il ity cr iter ia a p p l ied

• T h e m eth odol og y a p p l ied

• T h e com p a r a b il ity a dj us tm ents m a de

• T h e des cr ip tion of th e tr a ns a ction (l is ted a r e 1 9 op er a tions of incom e, 2 0 of ex p ens e, 7 of a s s ets a nd 5 of l ia b il ities )

44

m inim um w a g es a p p l ies .



b a l a nce s h eet, m inus a ny s ur p l us on th e r ev a l ua tion of a s s ets . T h is is im p os ed w h en th e ta x p a y er does not h a v e s up p or ting docum enta tion or f a il s to com p l y w ith th e ob l ig a tion to m a inta in a l l docum enta tion f or 1 0 y ea r s f or tr a ns a ctions conducted w ith r el a ted

l es s th a n nine m onth l y m inim um w a g es . 1

F ailure t o com p ly wit h § 1 3 5 - ( f)

council f or not com p l y ing w ith th e r es p ons ib il ities of th e p r of es s ion.

A dditiona l l y , w h en th e ta x a uditor ’ s noncom p l ia nce is due to th e f a ct th a t th e ta x p a y er f a il ed to p r ov ide th e inf or m a tion a nd

m inim um w a g es .

Failure to file related parties information return

44

m onth l y m inim um w a g es .

a p p l ies .

1 4

1 3 6



General p enalt ies and int erest in case of t ax adj ust m ent s

I n ca s e of a dj us tm ents f or under p a y m ents eith er on incom e ta x or v a l ue- a dded ta x , a g ener a l p ena l ty of 2 5 % of th e unp a id ta x a p p l ies ,

F ur th er m or e, l a te inter es t a l s o a p p l ies . I f th e ta x l ia b il ity is p a id w ith in tw o m onth s of th e or ig ina l p a y m ent ter m , th e a p p l ica b l e a nnua l inter es t r a te is 6 . 1 6 % . I f th e ta x l ia b il ity is p a id m or e th a n tw o m onth s a f ter th e or ig ina l p a y m ent ter m , th e a p p l ica b l e a nnua l inter es t r a te is 1 0 . 1 6 % .

Penalty relief

a uth or ities , a 7 5 % p ena l ty r eduction a p p l ies ; if a n ex a m ina tion is a l r ea dy ong oing , a 3 0 % p ena l ty r eduction m a y s til l a p p l y .



h ig h . T h e ta x a uth or ities h a v e b een inv es ting in tr a ining p er s onnel outs ide th e countr y to im p l em ent tr a ns f er p r icing a udit p r og r a m s a nd

b e ch a l l eng ed is m edium , a nd th e l ik el ih ood th a t th e s et of com p a r a b l es w il l b e ch a l l eng ed is h ig h .

APA opportunity

T h er e is no A P A p r og r a m a v a il a b l e.


D G I I w il l a m end cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur . I t w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

E s to nia




•

• 4

• 4

• 4

•

C ur r ent E s tonia n tr a ns f er p r icing l eg is l a tion is ef f ectiv e a s of 1 J a nua r y 2 0 0 7 , a m ended a s of 1 J a nua r y 2 0 1 1 .

2 0 0 7 . T h e r eg ul a tion s ets out in m or e deta il th e p r incip l es f or deter m ining th e a r m ’ s - l eng th p r ice a nd a l s o es ta b l is h es docum enta tion r eq uir em ents . T h er e h a v e b een a f ew cour t r ul ing s a nd a n incr ea s ing num b er of ta x p r oceeding s on tr a ns f er p r icing is s ues in E s tonia .


T h e ta x a uth or ities f ol l ow th e O E C D G uidel ines . H ow ev er , dom es tic l eg is l a tion is th e p r ev a il ing l a w .


A l l entities m us t b e a b l e to p r ov e th a t tr a ns a ctions w ith r el a ted p a r ties ta k e p l a ce a t a r m ’ s - l eng th . Y et th er e is a n a dditiona l

•

• A r es ident of a l ow - ta x - r a te ter r itor y

•

• N um b er of em p l oy ees (incl uding a s s ocia ted p er s ons ) is a t l ea s t 2 5 0

•

• 4

• C om p a ny a na l y s is

• I ndus tr y a na l y s is

• F unctiona l a na l y s is

• E conom ic a na l y s is

1 3 8

E s to nia (continued)



T h er e is no h ier a r ch y of m eth ods ; a l l a r e tr ea ted a s eq ua l . H ow ev er , if a v a il a b l e, inter na l a nd E s tonia n dom es tic da ta is p r ef er r ed f or deter m ining th e a r m ’ s - l eng th p r ice.



C ur r entl y , th e E s tonia n ta x l a w s do not r eq uir e a s ep a r a te r etur n f or r el a ted- p a r ty tr a ns a ctions .


T h er e is no dea dl ine f or p r ep a r ing tr a ns f er p r icing docum enta tion. H ow ev er , ta x p a y er s a r e ob l ig ed to s ub m it th e docum enta tion w ith in 6 0 da y s of th e ta x a uth or ity ’ s r eq ues t.


I f th e p r ice of a tr a ns a ction concl uded b etw een a r es ident com p a ny a nd a p er s on a s s ocia ted w ith th is com p a ny dif f er s f r om th e m a r k et v a l ue of th e tr a ns a ction, incom e ta x s h a l l b e im p os ed on th e a m ount th a t th e com p a ny w oul d h a v e r eceiv ed a s incom e, or th e a m ount th a t th e com p a ny w oul d not h a v e incur r ed a s ex p ens es if th e tr a ns f er p r ice h a d conf or m ed to th e m a r k et v a l ue of th e tr a ns a ction. T h e incom e ta x r a te is 2 0 % on th e g r os s a m ount of th e ta x a b l e dif f er ence (i. e. , 2 0 / 8 0 of th e net a m ount) a nd is p a y a b l e ev en if a com p a ny h a s l os s es .

I f ta x is a s s es s ed, inter es t on th e ta x a m ount a t th e r a te of 0 . 0 6 % p er da y , up to th e p r incip a l ta x a m ount, w il l b e im p os ed r etr oa ctiv el y a s of th e da te w h en th e ta x w a s s up p os ed to b e p a id until a ctua l p a y m ent (h er e, inter es t is s ub j ect to incom e ta x a t th e r a te of 2 0 / 8 0 a s a nonb us ines s - r el a ted ex p ens e).

Penalty relief

T h er e is no p ena l ty r el ief if a ta x p a y er h a s th e neces s a r y docum enta tion b ut th e tr a ns f er p r icing is deter m ined to b e non- a r m ’ s - l eng th

th e ta x p a y m ent is a l w a y s a s s es s ed.

1 3 9

E s to nia (continued)



T h e s ta tute of l im ita tions f or m a k ing a n a s s es s m ent of ta x is th r ee y ea r s . I n th e ev ent of intentiona l f a il ur e to p a y or w ith h ol d a n a m ount

s ub m is s ion of th e ta x r etur n th a t w a s eith er not s ub m itted or conta ined inf or m a tion l ea ding to a n incor r ect deter m ina tion of th e ta x due.


a s m edium .

APA opportunity

C ur r entl y , th e E s tonia n ta x l a w s do not p r ov ide a ny op p or tunity to concl ude A P A s .


F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents ; h ow ev er , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

F ij i



• I ncom e T a x A ct

• F ij i’ s doub l e ta x a g r eem ents


4

w ith in w h ich th e tr a ns f er p r icing r ul es op er a te.


G uidel ines , r a th er th a n s up er s ede th em , a nd th e O E C D G uidel ines s h oul d b e r ef er r ed to if m or e deta il is r eq uir ed.


4b e incl uded in tr a ns f er p r icing docum enta tion.

th a t its contr ol l ed tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e.

th e ta x p a y er ’ s tr a ns f er p r ices a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e in l ig h t of th e r el ev a nt f a cts a nd cir cum s ta nces .


•

•

• C os t- p l us

•

•

b or der a nd a r e p er f or m ed b y m ul tina tiona l s .

1 4 1

F ij i (continued)



•




•F J D 1 0 0 , 0 0 0 .

•

• I f th e f a il ur e is k now ing l y or r eck l es s l y m a de, th e ta x p a y er f a ces a p ena l ty eq ua l to 7 5 % of th e a m ount of ta x p a y a b l e f or th e ta x p er iod to w h ich th e f a il ur e r el a tes

O r

• I n a ny oth er ca s e, th e ta x p a y er f a ces a p ena l ty eq ua l to 2 0 % of th e a m ount of ta x p a y a b l e f or th e ta x p er iod to w h ich th e f a il ur e r el a tes

•

• I f th e s ta tem ent or om is s ion w a s m a de k now ing l y or r eck l es s l y , th e ta x p a y er f a ces a p ena l ty eq ua l to 7 5 % of th e ta x s h or tf a l l .

• I n a ny oth er ca s e, th e ta x p a y er f a ces a p ena l ty eq ua l to 2 0 % of th e ta x s h or tf a l l .

• T h e a m ount of p ena l ty im p os ed under th e a b ov em entioned ca s es is incr ea s ed b y 1 0 p er centa g e p oints if th is is th e s econd a p p l ica tion of th e p ena l ties r el a ting to m a k ing f a l s e or m is l ea ding s ta tem ents , or 2 5 p er centa g e p oints if th is is th e th ir d or a s ub s eq uent a p p l ica tion.

Penalty relief

•

O r

• T h e com m encem ent of a n a udit of th e ta x a f f a ir s of th e ta x p a y er

1 4 2

F ij i (continued)



a l l a s s es s m ents w il l a l s o a p p l y to tr a ns f er p r icing a s s es s m ents .

• I n th e ca s e of f r a ud, w il l f ul neg l ect or s er ious om is s ion b y or on b eh a l f of th e ta x p a y er , a t a ny tim e

O r

•


• C om p a ny incur r ing ong oing l os s es

•

• D ea l ing s w ith a s s ocia tes in ta x h a v en j ur is dictions

•

• T h os e w h o of f er s p ecia l r educed ta x r a tes f or a p a r ticul a r a ctiv ity

• P oor com p l ia nce p r oces s es a nd r ecor ds

• I ntr a g r oup ch a r g es , e. g . , m a na g em ent a nd tech nica l f ees

• L a r g e r oy a l ty p a y m ents a nd ex ces s iv e deb t l ev el s (i. e. , inter es t p a y m ents )

• T r a ns f er of inta ng ib l es

•

APA opportunity

A P A s a r e not a v a il a b l e in F ij i cur r entl y b ut m a y b e cons ider ed l a ter in th e contex t of intr oducing a b inding r ul ing s p r oces s . C ur r entl y , th er e is one A P A in ex is tence in F ij i.

v iew of el im ina ting a ny tr a ns f er p r icing im p l ica tions of th e s a m e, ev en th oug h s uch dis cus s ions a r e not b inding on eith er p a r ty .


F inl and



4


1 J a nua r y 2 0 0 7 or l a ter .

T h er e is no es ta b l is h ed ca s e l a w on b us ines s r es tr uctur ing s in F inl a nd. H ow ev er , th er e h a v e b een s om e a dv a nce r ul ing s r el a ting m a inl y 4

p r icing a dj us tm ent).


T h e F innis h r eg ul a tions a nd ta x p r a ctice in g ener a l f ol l ow th e O E C D G uidel ines .


T h e tr a ns f er p r icing docum enta tion a im s to p r ov e th a t th e p r ices us ed in cr os s - b or der intr a g r oup tr a ns a ctions a r e a ccep ta b l e f r om th e

• G r oup com p a nies , if th e g r oup em p l oy s a t l ea s t 2 5 0 em p l oy ees , r eg a r dl es s of th e a m ount of tur nov er or a s s ets

•4

• T h e F innis h b r a nch es of a f or eig n com p a ny , if th e a b ov e conditions a r e m et b y th is com p a ny

•

E C )

r eg a r ding th e f or eig n ow ner s is a l s o ta k en into a ccount on a p r o r a ta b a s is . G r oup com p a nies a r e r eq uir ed to p r ov e th e a r m ’ s - l eng th na tur e of cr os s - b or der intr a g r oup tr a ns a ctions b y p r ep a r ing tr a ns f er p r icing docum enta tion. A ccor ding to th e l a w , th e docum enta tion

• A des cr ip tion of th e b us ines s

• A des cr ip tion of a s s ocia ted enter p r is es

• I nf or m a tion on tr a ns a ctions b etw een a s s ocia ted enter p r is es

1 4 4

F inl and (continued)


• A f unctiona l a na l y s is r eg a r ding tr a ns a ctions b etw een a s s ocia ted enter p r is es

• A com p a r a b il ity a na l y s is , incl uding a v a il a b l e inf or m a tion on com p a r a b l es

• A des cr ip tion of th e tr a ns f er p r icing m eth od a nd its a p p l ica tion


T a x p a y er s m a y ch oos e a ny of th e O E C D tr a ns f er p r icing m eth ods , a s l ong a s th e ch os en m eth od r es ul ts in a n a r m ’ s - l eng th p r icing f or th e intr a g r oup tr a ns a ction. I n its s el ection of th e m eth od, a ta x p a y er s h oul d cons ider th e a s p ects r eg a r ding th e a p p l ica tion of m eth ods s ta ted in th e O E C D G uidel ines .


4th e ta x a uth or ities ca nnot ob ta in a deq ua te inf or m a tion on th e tr a ns a ction b y us ing a n a p p r op r ia te inter na tiona l tr ea ty , th e ta x p a y er is r es p ons ib l e f or p r es enting s uch inf or m a tion.


I f a ta x p a y er (incl uding a F innis h b r a nch of a f or eig n com p a ny ) is ob l ig a ted to p r ep a r e tr a ns f er p r icing docum enta tion in F inl a nd, th e F innis h ta x a uth or ities a l s o r eq uir e F or m 7 8 to b e com p l eted a nd dis cl os ed w ith th e a nnua l cor p or a te incom e ta x r etur n. I nf or m a tion

r ep or ted on F or m 7 8 .

H ow ev er , inf or m a tion r eg a r ding th e tr a ns f er p r icing m eth od a p p l ied is not r ep or ted in th is f or m .


b e s ub m itted w ith in 9 0 da y s of a r eq ues t b y th e ta x a uth or ities .


p r icing of intr a g r oup tr a ns a ctions h a s b een a t a r m ’ s - l eng th . I n a ddition, a p os s ib l e a dj us tm ent of ta x a b l e incom e m a y r es ul t in a s ep a r a te ta x p ena l ty of up to 3 0 % of th e a dj us ted a m ount of incom e, a s w el l a s p ena l ty inter es t.

1 4 5

F inl and (continued)


Penalty relief

P ena l ties ca n b e r educed or r em ov ed if th e ta x p a y er p r es ents s up p l em enta r y tr a ns f er p r icing docum enta tion th a t s up p or ts th e a r m ’ s -l eng th na tur e of th e intr a g r oup tr a ns a ctions . T h e deter m ina tion of p ena l ties w il l b e m a de on a ca s e- b y - ca s e b a s is .

4ca s es w h er e th e ta x p a y er h a s a deq ua tel y tr ied to f ol l ow th e a r m ’ s - l eng th p r incip l e in its intr a g r oup p r icing .



p a r t of a n a udit, a nd th e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y s im il a r l y is h ig h .

APA opportunity

A dv a nce r ul ing s a r e a v a il a b l e in F inl a nd. T h er e is no l eg is l a tion f or A P A s ; h ow ev er , th e ta x a uth or ities h a v e indica ted th eir w il l ing nes s to


a s s es s ing th e a r m ’ s - l eng th na tur e of intr a g r oup tr a ns a ctions .

F r anc e



Direction Générale des Finances Publiques, or D G F iP ; f or m er l y , Direction Générale des Impôts, or D G I ). T h e Mission d’Expertise Juridique et Economique Internationale

Autorité des normes comptable)

Relevant regulations and rulings •

r eg im e)

• 4

•

•

•4

F r a nce h a s a l s o concl uded ta x tr ea ties w ith m or e th a n 1 0 0 countr ies in th e w or l d.

OECD Guidelines treatment T h e F r ench ta x a uth or ities cons ider th e F r ench tr a ns f er p r icing r eg ul a tions to b e cons is tent w ith th e O E C D G uidel ines a nd a r e f ol l ow ing

indica tor of a de facto tr a ns f er of s om eth ing of v a l ue, w h ich s h oul d b e ta x ed. I n a ddition, s p ecia l a ttention s h oul d b e p a id to r es tr uctur ing op er a tions (e. g . , s ite cl os ur e, l a y of f a nd tr a ns f er of g oing concer ns ), a s w el l a s th e v a l ue contr ib ution of th e F r ench ta x p a y er to th e

tr a ns a ctions (e. g . , l oa ns , g ua r a ntees ), a s w el l a s continuing dis cus s ions a r ound intel l ectua l p r op er ty r ig h ts .

Documentation requirements G ener al tr ans f er p r ic ing d o c u mentatio n r eq u ir ements ( A r tic l e L 1 3 B o f th e F P T C ) w h er e A r tic l e L 1 3 A A d o es no t ap p l y

F or s m a l l a nd m edium enter p r is es th a t do not m eet th e cr iter ia s tip ul a ted in L 1 3 A A (s ee b el ow ), th e F T A m a y r eq uir e inf or m a tion

inf or m a tion, a nd th e s h or t dea dl ine under w h ich a ta x p a y er m a y h a v e to p r ov ide it, l ea ds to a de facto docum enta tion r eq uir em ent

•

• F unctiona l a na l y s is , contr a cts , l eg a l a nd m a na g em ent a ccount inf or m a tion

1 4 7

F r anc e (continued)


•m eth od)

S p ec ial tr ans f er p r ic ing d o c u mentatio n r eq u ir ement ( A r tic l es L 1 3 A A and L 1 3 A B o f th e F P T C )

• 4

•s uch tur nov er or g r os s a s s ets

•

•

I f th e docum enta tion is not im m edia tel y p r ov ided to th e F T A , it s h oul d b e del iv er ed w ith in 3 0 da y s of th e F T A ’ s r eq ues t. I f docum enta tion is m is s ing , or if th e ta x p a y er f a il s to p r ov ide ex h a us tiv e a nd com p r eh ens iv e docum enta tion w ith in 3 0 da y s of a f or m a l notice f r om th e F T A , a p ena l ty of up to eith er 5 % of th e tr a ns f er p r icing r ea s s es s m ent or 0 . 5 % of th e v ol um e of tr a ns a ctions (s ee a b ov e) w oul d b e a p p l ied,

• General information concerning the related enterprises (economic, legal, financial background of the group):

• G ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding ch a ng es th a t occur r ed dur ing th e a udited p er iod, com p a r ed w ith p r ev ious y ea r s

•

• G ener a l des cr ip tion of th e f unctions ca r r ied out a nd r is k s b or ne b y th e r el a ted entities , to th e ex tent th a t th ey im p a ct th e a udited com p a ny

• L is t of th e m a in inta ng ib l e a s s ets h el d in r el a tion to th e a udited com p a ny

• G ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy of th e g r oup

• Specific information pertaining to the audited company:

• G ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding ch a ng es th a t occur r ed dur ing th e a udited p er iod, com p a r ed w ith p r ev ious y ea r s

•r oy a l ties

• L is t of th e cos t- s h a r ing a g r eem ents

• C op y of tr a ns f er p r icing r ul ing s

• P r es enta tion of th e m eth ods us ed to deter m ine th e tr a ns f er p r ices (incl uding a n a na l y s is of th e f unctions , r is k s a nd a s s ets , a nd w ith a n

•

• I nf o r matio n p er taining to ag r eements o r tax r u l ing s o b tained b y th e au d ited c o mp any ’ s r el ated p ar ties f r o m f o r eig n tax au th o r ities ( if known by the audited entity in question)

4

1 4 8



p a r ties f r om f or eig n ta x a uth or ities ev en if s uch r ul ing s a r e not tr a ns f er p r icing - r el a ted a nd do not im p a ct th e r es ul ts of th e F r ench ta x p a y er . T h is docum enta tion r eq uir em ent enter ed into f or ce f r om 1 J a nua r y 2 0 1 4 onw a r d. I n p r a ctice, th e r eq uir em ent does not cov er docum ents ob ta ined f r om f or eig n ta x a dm inis tr a tions th a t a r e not in th e p os s es s ion of th e F r ench ta x p a y er .

44

m il l ion E ur o).

4

I t is im p or ta nt to note th a t th e r eq uir em ent to p r ov ide f ul l tr a ns f er p r icing docum enta tion in ca s e of a ta x a udit r em a ins in f or ce a nd th a t

•incl uding th e inta ng ib l e a s s ets h el d b y th e g r oup a nd us ed b y th e r ep or ting entity (e. g . , p a tents , tr a dem a r k s a nd k now - h ow ). T h e r ep or ting entity s h a l l r ep or t th e na tur e of th e a s s et a nd th e countr y w h er e th e entity ow ning th e a s s et r es ides . F ur th er m or e, th e r ep or ting entity h a s to m ention a g ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy a p p l ied b y th e g r oup a nd r el a ted to th e r ep or ting entity .

• I n th e s econd ta b l e, f or a l l intr a g r oup tr a ns a ctions (incl uding incom e, ex p ens es , a nd p ur ch a s e a nd dis p os a l of a s s ets ) w ith a n a g g r eg a te

th e tr a ns f er p r icing m eth od a p p l ied, th e countr y or countr ies in w h ich th e r el a ted- p a r ty a t th e oth er end of th e tr a ns a ction(s ) is / a r e incor p or a ted, a nd a ny ch a ng e in th e tr a ns f er p r icing p ol icy or th e na tur e a nd l oca tion of th e a s s ets . I n a ddition, th e F r ench ta x p a y er is a l s o r eq uir ed to dis cl os e a ny ch a ng e th a t m a y h a v e occur r ed in th e tr a ns f er p r icing m eth od b eing a p p l ied a nd p r ov ide a dditiona l

b us ines s r es tr uctur ing s itua tions .

ca p a b il ity to identif y ta x p a y er s w ith th e h ig h es t tr a ns f er p r icing ex p os ur e a nd a l l oca te g ov er nm enta l a udit r es our ces a ccor ding l y .

dev el op m ents . A ccor ding l y , th e p r ep a r a tion of th is l ig h t docum enta tion r ep or t s h oul d th er ef or e b e s een a s a n im p or ta nt ex tens ion to th e

ex ch a ng e a g r eem ents , s ub j ect to r ecip r ocity .

1 4 9



T h e r eq uir em ent a p p l ies to l eg a l entities es ta b l is h ed in F r a nce th a t (i) p r ep a r e cons ol ida ted a ccounts , h ol d dir ectl y or indir ectl y f or eig n

r eq uir em ent.

th e F P T C , s up p l em enta r y docum enta tion, incl uding a l l docum ents nor m a l l y r eq uir ed b y th e F T A f r om com p a nies s ub j ect to C I T , a nd s uch

out in A r ticl e L 1 0 of th e F P T C (s ee a b ov e).



th e l ink s of dep endence b etw een th e F r ench a udited entity a nd th e r el a ted p a r ties ). T h es e l eg a l p r ov is ions a l s o p r ov ide a n ob l ig a tion to dis cl os e th e a ctiv ities of th e r el a ted p a r ties .



ex cep tiona l cir cum s ta nces . E x ceeding s uch dea dl ine m a y tr ig g er p ena l ties m entioned p r ev ious l y .

1 5 0



a n a udit. I f not, th e F T A w il l s end a f or m a l cl a im f or th e docum enta tion, w h ich w il l p r ov ide f or a 3 0 - da y dea dl ine, s ta r ting on th e da y th e f or m a l cl a im w a s r eceiv ed b y th e ta x p a y er , a f ter w h ich p ena l ties f or docum enta tion f a il ur e w il l a p p l y .


g ener a l l y a p p l ied a s a cons eq uence of a tr a ns f er p r icing r ea s s es s m ent. T r a ns f er p r icing r ea s s es s m ents f r om th e F T A tr ig g er a n

•

•

p ena l ties . T h is p ena l ty r eg im e is ens h r ined in A r ticl e 1 7 3 5 ter of th e F T C a nd w a s a m ended b y th e F r ench P a r l ia m ent on 1 8 D ecem b er 2 0 1 4 . T h e cur r ent tr a ns f er p r icing p ena l ty r eg im e th er ef or e onl y a p p l ies to r ea s s es s m ent notices th a t w er e is s ued b y th e F T A a f ter th a t

•

• 0 . 5 % of th e v ol um e of tr a ns a ctions r el a ting to th e docum ents th a t f a il ed to b e p r ov ided to th e ta x a uth or ities

• 5 % of th e r ea s s es s m ents b a s ed on A r ticl e 5 7 (a r m ’ s - l eng th p r incip l e) of th e F T C , incl uding tr a ns a ctions m entioned in th e a b ov e p oint

P ena l ties g ener a l l y a p p l ied a s a r es ul t of a tr a ns f er p r icing r ea s s es s m ent, r eg a r dl es s of com p l ia nce w ith tr a ns f er p r icing docum enta tion

•

doub l e ta x tr ea ty p er m its th e F T A to tr ea t th e tr a ns f er p r icing r ea s s es s m ent a s a deem ed div idend dis tr ib ution, th e a ctua l w ith h ol ding ta x a p p l ied of cour s e dep ends on th e r el ev a nt ta x tr ea ty p r ov is ions . 1

1

1 5 1



• I f th e tr a ns f er is tr ea ted a s a deem ed div idend, th e ta x a uth or ities a l s o us ua l l y a p p l y a 1 0 % p ena l ty f or not decl a r ing th e w ith h ol ding ta x .

• H ow ev er , if cer ta in cum ul a tiv e conditions a r e m et, a t th e r eq ues t of th e ta x p a y er , th e w ith h ol ding ta x es m a y b e w a iv ed. T h es e cum ul a tiv e

ta x p a y er w ith in 6 0 da y s f r om th e r eq ues t. H ow ev er , th e ta x p a y er ca nnot h a v e r ecour s e to A r ticl e L 6 2 A if th e non- F r ench r el a ted- p a r ty th a t enter ed into th e r ea s s es s ed tr a ns a ction w ith th e F r ench entity is l oca ted in a non- coop er a tiv e s ta te or ter r itor y .

• L a te inter es t p a y m ents a r e a p p l ied in th e ca s e of ta x r ea s s es s m ents m a de on th e g r ounds of A r ticl e 5 7 of th e F T C . T h e or dina r y l a te p a y m ent inter es t r a te is 0 . 4 0 % p er m onth (i. e. , 4 . 8 % p er y ea r ).

• 4

h ow ev er , dep ending on tr ea ty p r ov is ions ).

I n a ddition, th e a dj us tm ent m a y r es ul t in a r ea s s es s m ent of oth er ta x es a nd contr ib utions , s uch a s b us ines s or l oca l ta x es a nd em p l oy ee

4of a ta x tr ea ty or th e E ur op ea n A r b itr a tion C onv ention), ta x col l ection coul d cur r entl y b e s us p ended dur ing th e entir e m utua l a g r eem ent p r oces s a nd p os tp oned until th e com p etent a uth or ities r ea ch a n a g r eem ent (A r ticl e L 1 8 9 A of th e F P T C ). T h is m ea s ur e h a s b een

Penalty relief

D ur ing a ta x a udit a nd b ef or e th e ta x a uth or ities s end th e notice of r ea s s es s m ent, ta x p a y er s , under th e f r a m ew or k of A r ticl e L 6 2 of th e F P T C , a r e a l l ow ed to cor r ect th eir er r or s or om is s ions in cons ider a tion of a r educed l a te p a y m ent inter es t r a te (3 . 3 6 % p er y ea r ), w h ich

cor r es p onding a dditiona l ta x es a t th e s a m e tim e.

C onv ention) to a v oid doub l e ta x a tion r es ul ting f r om th e r ea s s es s m ent. A dm inis tr a tiv e g uidel ines

p ena l ties ).

A s s es s m ent of a tr a ns f er p r icing docum enta tion p ena l ty under L 1 3 A A (tr a ns f er p r icing docum enta tion p ena l ty r eg im e) does not


T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is th e s a m e a s f or a l l F r ench cor p or a te ta x a s s es s m ents , g ener a l l y th r ee y ea r s

l os s ca r r y f or w a r ds ). A s p ecia l ex tens ion ca n a p p l y in th e ca s e of a r eq ues t f or inter na tiona l ta x a s s is ta nce (A r ticl e L 1 8 8 A of th e F P T C ).

w a s tr a ns f er r ed b ut not decl a r ed on tim e (ex tens ion f r om th r ee to s ix y ea r s in th is p a r ticul a r ca s e). A n ef f ectiv e ex tens ion to 1 0 y ea r s a p p l ies in ca s es w h er e p er m a nent es ta b l is h m ents a r e deem ed to ex is t b y th e F T A a nd w h er e th e non- F r ench entity nev er decl a r ed a ny a ctiv ities in F r a nce to th e F T A .

1 5 2




p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h . T h e num b er of ta x a udits in tr a ns f er p r icing is incr ea s ing cons ider a b l y , a nd th e F T A is b ecom ing m or e ex tens iv e a nd tech nica l in its q uer ies , b eca us e it now

in a s y s tem a tic m a nner g oing f or w a r d, ta x a udits f ocus ing on th is top ic a r e on th e r is e, a nd it is b ecom ing com m on to s ee v a l ua tion

g r oup b ef or e a nd a f ter th e b us ines s r es tr uctur ing a nd th e inter na l com m unica tion b etw een th e g r oup entities to deter m ine, f or ex a m p l e,

th e inf or m a tion ob ta ined s up p or ts it, th e F T A w il l not h es ita te to r ea s s es s th e ta x p a y er b a s ed on a n a l ter na tiv e tr a ns f er p r icing m eth od

h a v e b een entitl ed to a h ig h er r etur n f or its non- r outine f unctions p r ev ious l y or to b e p er f or m ed.

ta x a b l e p os ition of th e com p a ny .

From an overall perspective, transfer pricing issues that receive the greatest scrutiny are:

•op er a ting m a r g in, l ik el y to h ide a ch a ng e in th e tr a ns f er p r icing p ol icy a p p l ied

• P r oduct s a l e p r ices (under es tim a ted or ov er es tim a ted p r ices ), es p ecia l l y (b ut not onl y ) in ca s e of l os s es

•

• F r eq uency of ta x a udit a nd tr a ns f er p r icing s cr utiny b y th e ta x a uth or ity (continued)

• P er m a nent es ta b l is h m ents

• C l os ur e a nd conv er s ion cos ts

• I nta ng ib l es a nd econom ic ow ner s h ip (incl uding q ues tions a b out r oy a l ties )

•F r ench , a nd it us ua l l y r ej ects P a n- E ur op ea n s ea r ch es )

• F ina ncia l tr a ns a ctions

A s a n a l ter na tiv e to a tr a ns f er p r icing dis p ute, th e F T A incr ea s ing l y s eek s to deem th e ex is tence of a p er m a nent es ta b l is h m ent to tr y a nd a l l oca te a dditiona l ta x a b l e b a s e to th e F r ench ter r itor y a nd does not h es ita te to r es or t to j udicia l s ea r ch es in ins ta nces w h er e th e F T A f eel s th a t a uditor s ca nnot a cces s inf or m a tion v ia nor m a l inv es tig a tiv e p r ocedur es .

Other tax audit trends:

•

•inf or m a tion f r om a ccounting s y s tem s .

1 5 3



• 4

s ub s idia r ies .

• 44

F r ench h ol ding s w il l a l s o h a v e to dis cl os e th e deta il of th eir cons ol ida ted a ccounts , a l l ow ing th e F T A to identif y th e ta x p r ov is ions , f or ins ta nce.

F ew cour t decis ions in F r a nce g o into deta il ed tr a ns f er p r icing is s ues . O ne of th e m a in q ues tions r el a tes to th e b ur den of p r oof , w h ich us ua l l y is s a id to r es t w ith th e ta x ins p ector s .

APA opportunity

into th e A P A p r og r a m . T h is s ection w a s p r ov ided b y th e F ina nce A m endm ent A ct f or 2 0 0 4 a nd ca m e into f or ce 1 J a nua r y 2 0 0 5 . I t 4

4

T h er e is no r ol l b a ck p os s ib il ity .


a l l ow s th e F T A to do s o.

G ab o n




tr a ns f er p r icing .


T h e T a x A uth or ity a ccep ts th e O E C D G uidel ines .


to v a l ida te th e tr a ns f er p r icing p ol icy . T h e docum ent s h oul d a l s o incl ude inf or m a tion a b out th e r el a tions h ip w ith oth er g r oup com p a nies

4

a nd a ctiv ities of a l l th e g r oup com p a nies .



T h er e a r e no dis cl os ur e r eq uir em ents .

Transfer-pricing-specific returns

1 5 5

G ab o n (continued)




A ny ex ces s iv e ch a r g es w oul d b e r eg a r ded a s dis tr ib utions of incom e a nd b e s ub j ect to w ith h ol ding ta x es a s th e ca s e m a y b e.

T a x a dj us tm ents f or tr a ns f er p r icing a r e s ub j ect to th e nor m a l p ena l ty r ul es . I n ca s e of a n a udit b y th e ta x a uth or ities , a n incor r ect cor p or a te ta x r etur n is s ub j ect to a p ena l ty of 1 . 5 % on th e b a s is of th e a m ount r ecov er ed, ca p p ed a t 5 0 % . I n ca s e of w il l f ul neg l ect, th e p ena l ty is incr ea s ed b y 1 0 0 % . I n ca s e of f r a ud, th e p ena l ty is 1 5 0 % ov er a nd a b ov e th e p ena l ty f or a n incor r ect ta x r etur n a s deta il ed a b ov e.

Penalty relief


T h e s ta tute of l im ita tion is f our y ea r s a f ter th e p a y m ent of cor p or a te ta x is due. T a x es a r e due b y 3 0 A p r il f ol l ow ing th e ca l enda r y ea r -end.


T h e tr a ns f er p r icing l eg is l a tion is r el a tiv el y new . H ow ev er , ta x a udits a r e incr ea s ing l y f ocus ing on r el a ted- p a r ty tr a ns a ctions , es p ecia l l y w h en th e ta x p a y er is in a r ecur r ent l os s p os ition.

APA opportunity

G a b on h a s j us t intr oduced a n A P A a g r eem ents f or r el a ted- p a r ty tr a ns a ctions in th e F ina nce A ct 2 0 1 4 .


G eo r g ia




T h e tr a ns f er p r icing g ener a l p r incip l es a r e p r ov ided in A r ticl es 1 2 6 to 1 2 9 1 of th e G T C .

A dditiona l l y , tr a ns f er p r icing in G eor g ia is r eg ul a ted b y th e I ns tr uction on P r icing I nter na tiona l C ontr ol l ed T r a ns a ctions 2 (I ns tr uction).

G eor g ia n tr a ns f er p r icing r ul es g ener a l l y f ol l ow th e O E C D G uidel ines . T h ey a p p l y to cr os s - b or der tr a ns a ctions b etw een a G eor g ia n r es ident com p a ny a nd a r el a ted f or eig n com p a ny . I n cer ta in ca s es , th es e r ul es m a y a l s o a p p l y to tr a ns a ctions b etw een a G eor g ia n r es ident com p a ny a nd a n unr el a ted f or eig n com p a ny , w h er e th e l a tter is a r es ident of a l ow - ta x j ur is diction or of f s h or e countr y . T h e G eor g ia n G ov er nm ent deter m ines th e l is t of l ow - ta x j ur is dictions a nd of f s h or e countr ies . 3

Relat ed p art ies

s ep a r a tel y or in th e a g g r eg a te ex ceed 5 0 % of a noth er p a r ty ’ s ca p ita l , (ii) h a s th e p ow er to contr ol a b oa r d of dir ector s of a noth er p a r ty or


G eor g ia n tr a ns f er p r icing r ul es g ener a l l y f ol l ow th e O E C D G uidel ines . T h e I ns tr uction conta ins a dir ect r ef er ence to th e O E C D G uidel ines 2 0 1 0 a nd s ets f or th th a t is s ues th a t a r e not r eg ul a ted b y th e G T C or th e I ns tr uction s h a l l b e r eg ul a ted b y th e O E C D G uidel ines .


• O v er v iew of th e b us ines s op er a tions of th e G eor g ia n enter p r is e

• A na l y s is of th e econom ic f a ctor s a f f ecting th e p r ices

1 42 I b id.3

1 5 7

G eo r g ia (continued)


•

• D es cr ip tion of th e contr ol l ed tr a ns a ctions

• A na l y s is of th e com p a r a b il ity f a ctor s

• D eta il s of th e g r oup ’ s tr a ns f er p r icing p ol icy

• T r a ns f er p r icing m eth od a p p l ied a nd r ea s ons f or s el ection of a p a r ticul a r m eth od


• D eta il s of A P A s r el ev a nt to th e contr ol l ed tr a ns a ction (if a ny )

• C oncl us ion on com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e a nd, w h er e r el ev a nt, on a dj us tm ents m a de b y th e G eor g ia n enter p r is e to its tr a ns f er p r ices or ta x a b l e incom e

• O th er inf or m a tion th a t m a y h a v e a m a ter ia l ef f ect w ith r eg a r d to com p l ia nce of th e a r m ’ s - l eng th p r incip l e

T h e tr a ns f er p r icing docum enta tion m a y b e s ub m itted in th e G eor g ia n or E ng l is h l a ng ua g es . H ow ev er , w h enev er th e docum enta tion is s ub m itted in E ng l is h , th e ta x a uth or ities m a y r eq ues t G eor g ia n tr a ns l a tion to b e a r r a ng ed b y a ta x p a y er .


4

m eth ods ca n p r ov ide r el ia b l e r es ul ts a nd s uch oth er m eth od y iel ds a r es ul t cons is tent w ith th a t w h ich w oul d b e a ch iev ed b y indep endent enter p r is es eng a g ing in com p a r a b l e uncontr ol l ed tr a ns a ctions under com p a r a b l e cir cum s ta nces . I n s uch ca s es , a ta x p a y er s h a l l b ea r th e

T a x p a y er s s h oul d s el ect th e m os t a p p r op r ia te m eth od a ccor ding to th e na tur e of th eir b us ines s , com p a r a b il ity f a ctor s a nd th e a v a il a b il ity of r el ev a nt inf or m a tion. I f th er e is a l a ck of inter na l com p a r a b l es or inf or m a tion (or if th es e inter na l com p a r a b l es or inf or m a tion a r e not

com p a r a b l es is p r oh ib ited.


D is cl os ur e of tr a ns a ctions w ith r el a ted p a r ties , a nd a l s o oth er ty p es of th ir d- p a r ty tr a ns a ctions th a t w oul d r em a in s ub j ect to tr a ns f er

r etur ns .




T h e docum enta tion h a s to b e s ub m itted w ith in 3 0 da y s up on r eq ues t b y th e ta x a uth or ity .

1 5 8

G eo r g ia (continued)



s ub m itted w ith in th e dea dl ine, th e s ta nda r d p ena l ty f or th e f a il ur e to s ub m it inf or m a tion to th e ta x a uth or ities w il l a p p l y . I n a ddition, th e

Penalty relief

p r icing a dj us tm ents .


is a utom a tica l l y ex tended to 1 1 y ea r s w h en a ta x p a y er ch oos es a 1 0 - y ea r ca r r y f or w a r d of l os s es . T a x ca nnot b e r ea s s es s ed a f ter th is p er iod h a s el a p s ed.


4f ocus ed on a ta x p a y er ’ s b us ines s a ctiv ities , s up p l y ch a in op er a tions a nd tr a ns f er p r icing s tr a teg ies th a n ev er b ef or e.

APA opportunity

G E L 5 0 m il l ion. I n p r incip l e, th e a g r eed- up on m eth od is b inding th r oug h out th e A P A ter m , w h ich is th r ee y ea r s , w ith th e p os s ib il ity of ex tens ion.

T h e l a w a l s o intr oduces th e p os s ib il ity f or a ta x p a y er to concl ude m ul til a ter a l A P A s w h er e th e tr a ns a ctiona l counter p a r ties a r e in a j ur is diction w ith w h ich G eor g ia h a s a doub l e ta x tr ea ty . H ow ev er , b eca us e th er e a r e no s p ecia l r eg ul a tions in th is r eg a r d y et, it is im p os s ib l e to concl ude m ul til a ter a l A P A s a t th is s ta g e.


G er many



Bundeszentralamt für Steuern) or b y G er m a n s ta te a uth or ities


p r incip l e, it is a s s um ed th a t b oth p a r ties inv ol v ed in a n inter com p a ny tr a ns a ction h a v e f ul l k now l edg e a b out a l l f a cts a nd cir cum s ta nces (inf or m a tion tr a ns p a r ency ).

T a x A ct on 1 J a nua r y 2 0 0 8 . A n E x ecutiv e O r der L a w p r ov iding deta il s on h ow th e new tr a ns f er p r icing p r ov is ions r el a te to b us ines s r es tr uctur ing s a nd tr a ns f er of f unctions is ef f ectiv e f r om 2 0 0 8 onw a r d.

O n 1 3 O ctob er 2 0 1 0 , new A dm inis tr a tion P r incip l es f or th e E x a m ina tion of I ncom e A l l oca tion b etw een r el a ted p a r ties in ca s es of cr os s -

ca s es , th e r eceiv ing entity of a f unction ex cl us iv el y p er f or m s th e tr a ns f er r ed f unction f or th e tr a ns f er r ing entity a nd r eceiv es a cos t-

v a l ua tion of th e tr a ns f er p a ck a g e is not r eq uir ed. T h is ex em p tion f r om ex a m ina tion of th e tr a ns f er p a ck a g e g ener a l l y a f f ects th e tr a ns f er of r outine f unctions f or w h ich ex ecution is connected w ith l ow r is k s a nd th a t, a s a cons eq uence, a r e us ua l l y r em uner a ted on th e b a s is of th e cos t- p l us m eth od.

es ta b l is h m ent, s uch a s th e s up p l y of g oods , a s er v ice p r ov is ion a nd ev en l icens ing a r r a ng em ents . T h es e dea l ing s h a v e to b e p r iced in

dif f er ent p a r ts of one enter p r is e, contem p or a neous tr a ns f er p r icing docum enta tion b ecom es cr ucia l to def end th e tr a ns f er p r ices a p p l ied

deter m ined b a s ed on th e A O A if th e A O A is not y et im p l em ented in th e a p p l ica b l e doub l e ta x tr ea ty . H ow ev er , f or th e tr ea ty r el ief , th e

I n O ctob er 2 0 1 4 , a n E x ecutiv e O r der L a w w ith r eg a r d to th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e to p er m a nent es ta b l is h m ents w a s r el ea s ed. T h e m a in is s ues cov er ed b y th e E x ecutiv e O r der L a w a r e th e a ttr ib ution of a s s ets a nd r is k s to a p er m a nent es ta b l is h m ent, th e

of b a nk s a nd ins ur a nce com p a nies a nd cons tr uction a nd ex p l or a tion s ites . F ur th er m or e, th e E x ecutiv e O r der L a w s tip ul a tes th a t th e

a nd ex p ens es a ttr ib uta b l e to th e p er m a nent es ta b l is h m ent, incl uding deem ed r ev enues a nd ex p ens es r es ul ting f r om inter na l dea l ing s . P a r t of th e A ux il ia r y C a l cul a tion is docum enta tion notes on th e r ea s oning f or th e a p p l ied a s s et a ttr ib ution. I n p a r ticul a r , if th e ta x p a y er

1 6 0

G er many (continued)


dev ia tes f r om th e b a s ic p r incip l es f or th e a s s et a ttr ib ution l a id dow n in th e E x ecutiv e O r der L a w , it s h oul d b e p r op er l y docum ented th a t

D ecem b er 2 0 1 4 .

a f ter 3 1 D ecem b er 2 0 1 2 , th e D r a f t A dm inis tr a tiv e P r incip l es dif f er entia te th e f ol l ow ing s cena r ios dep ending on th e ty p e of doub l e ta x

•

•I P ); f ul l a p p l ica tion of A O A in ca s e of cor r es p onding a p p r oa ch in oth er countr y .

•countr y a p p l ies A O A ; oth er w is e no a p p l ica tion, b ut p r oof f r om ta x p a y er r eq uir ed.

4is r eq uir ed a nd th e a ttr ib ution r ul es f or ca p ita l , etc. , a p p l y . I n oth er w or ds , th e ta x p a y er h a s to p r ep a r e a n A ux il ia r y C a l cul a tion f or th e

2 0 1 0 is a p p l ica b l e (a s des cr ib ed a b ov e).

•

• 4 4

• 4

T h e A dm inis tr a tion P r incip l es do not cons titute b inding l a w f or ta x p a y er s or th e cour ts b ut a r e b inding f or th e ta x a uth or ity a nd th er ef or e

P r incip l es is to p r ov ide a dir ectiv e concer ning th e ta x a udit tr ea tm ent of tr a ns f er p r icing ca s es a nd to ens ur e a unif or m a p p l ica tion of r ul es a nd m eth ods .

I n a ddition to th e th r ee A dm inis tr a tion P r incip l es m entioned a b ov e, a dm inis tr a tion cir cul a r s concer ning incom e a l l oca tion w ith r eg a r d to cr os s - b or der cos t s h a r ing a r r a ng em ents (da ted 3 0 D ecem b er 1 9 9 9 ), cr os s - b or der s econdm ent of p er s onnel (da ted 9 N ov em b er 2 0 0 1 ),

ta x es on incom e a nd ca p ita l (da ted 1 3 J ul y 2 0 0 6 ), h a v e b een p ub l is h ed s ince 1 9 9 9 .

1 6 1



A utom a tic I nf or m a tion E x ch a ng e D ir ectiv e, w h ich w a s a dop ted in D ecem b er 2 0 1 5 a nd g ov er ns th e ex ch a ng e of inf or m a tion concer ning

•

• A dditiona l inf or m a tion r ep or ting ob l ig a tions im p os ed on m ul tina tiona l enter p r is es


T h e O E C D G uidel ines p r ov ide s up p or t f or dom es tic us e b ut do not cons titute b inding l a w in G er m a ny . G er m a n tr a ns f er p r icing r eg ul a tions

m eth ods , docum enta tion r eq uir em ents a nd th e tr ea tm ent of tr a ns f er s of f unctions ). T h e G er m a n ta x a uth or ities cons ider th e G er m a n tr a ns f er p r icing l a w s a nd r eg ul a tions to b e g ener a l l y cons is tent w ith th e O E C D G uidel ines .


A p r il 2 0 0 5 p r ov ides th e ta x a uth or ity ’ s inter p r eta tion of th e r eq uir em ents s et out in th e G ener a l T a x C ode a nd in th e E x ecutiv e O r der L a w .

General docum ent at ion req uirem ent s are:

•

•

•ter m s , b us ines s s tr a teg ies a nd v a l ue ch a in

•p r ice, l is t of com p a r a b l es a nd docum enta tion of a dj us tm ent ca l cul a tions

S p ecial docum ent at ion req uirem ent s

T h e ta x p a y er h a s to docum ent a ny s p ecia l cir cum s ta nces us ed to s ub s ta ntia te th e a r m ’ s - l eng th na tur e of th e p r ice deter m ined, incl uding

p r ice a dj us tm ents a nd ca us es of l os s es f r om inter com p a ny tr a ns a ctions , a nd counter m ea s ur es (if l os s es occur in m or e th a n th r ee

I n g ener a l , tr a ns f er p r icing docum enta tion m us t b e p r ep a r ed in G er m a n. H ow ev er , ta x p a y er s m a y a s k f or a p p r ov a l to p r ep a r e tr a ns f er p r icing docum enta tion in E ng l is h . I n p r a ctice, ta x p a y er s m os tl y us e E ng l is h docum enta tion a nd p r ov ide tr a ns l a tions up on ta x a uth or ities ’ r eq ues t.

Modification of existing German documentation requirements

1 6 2



docum enta tion r eq uir em ent.

•

•

• G ener a l des cr ip tion of th e ov er a l l s tr a teg y f or th e us e of inta ng ib l e a s s ets in th e v a l ue ch a in, in p a r ticul a r w ith r eg a r d to dev el op m ent, ow ner s h ip a nd ex p l oita tion

•

g r oup a nd docum ent th e a r m ’ s - l eng th na tur e of th e r es p ectiv e inter com p a ny p r icing . T h e m os t im p or ta nt inf or m a tion, w h ich needs to b e incl uded, is th e s el ection a nd a p p l ica tion of th e tr a ns f er p r icing m eth od us ed, a s w el l a s th e tim e of th e tr a ns f er p r icing deter m ina tion

g uida nce on th e a m ended docum enta tion r eq uir em ents .

I m p lem ent at ion of t h e C b C R st andard

D ecem b er 2 0 1 6 onl y .

a utom a tica l l y del iv er ed b y th e G er m a n ta x a uth or ities to ta x a uth or ities of f or eig n countr ies th r oug h ex ch a ng e- of - inf or m a tion ch a nnel s . T h e a utom a tic ex ch a ng e w ith f or eig n countr ies w il l onl y ta k e p l a ce on th e b a s is of a n under l y ing a g r eem ent w ith th e countr y , i. e. , us ua l l y a doub l e ta x tr ea ty .

•em p l oy ees , s ta ted ca p ita l , a ccum ul a ted ea r ning s a nd ta ng ib l e a s s ets oth er th a n ca s h or ca s h eq uiv a l ents in ea ch j ur is diction in w h ich th e g r oup op er a tes

•

entity ’ s m a in b us ines s a ctiv ity or a ctiv ities

1 6 3



• A G er m a n g r oup p a r ent com p a ny

• A des ig na ted s ur r og a te p a r ent com p a ny

O r

• A dom es tic g r oup com p a ny of a f or eig n g r oup p a r ent com p a ny

th e C b C r ep or t. I f th is inf or m a tion is m is s ing in th e G er m a n ta x r etur n, th e G er m a n entity is r eq uir ed to s ub m it th e C b C r ep or t b y its el f


T h e a p p l ica tion of tr a ns f er p r icing m eth ods is dep endent on th e a v a il a b il ity a nd q ua l ity of th ir d- p a r ty com p a r a b l e da ta . T h r ee s itua tions

cos t- p l us . A ny p r ice w ith in th e f ul l r a ng e of f ul l y com p a r a b l e th ir d- p a r ty da ta m eets th e a r m ’ s - l eng th p r incip l e.

I f l im ited com p a r a b il ity ex is ts , a l l O E C D m eth ods (w h os e a p p l ica tion is a p p r op r ia te in th e ca s e under r ev iew ) a r e a l l ow ed, i. e. , th e

r a ng e of a v a il a b l e th ir d- p a r ty com p a r a b l e da ta m us t b e l im ited b y a p p l y ing s ta tis tica l m ea s ur es (e. g . , th e inter q ua r til e r a ng e).

I f no com p a r a b l e da ta ex is ts , th e l a w s tip ul a tes th a t ta x p a y er s h a v e to conduct a h y p oth etica l a r m ’ s - l eng th a na l y s is to der iv e a r m ’ s -l eng th tr a ns f er p r ices . A ccor ding l y , in com p l ia nce w ith th e s o- ca l l ed p r udent a nd dil ig ent b us ines s m a na g er p r incip l e, a nd b a s ed on th e f unctiona l a na l y s is a nd inter na l p r oj ections , th e ta x p a y er h a s to es ta b l is h a r a ng e of h y p oth etica l a r m ’ s - l eng th p r ices . T h e r a ng e of

p a y . T h e ta x p a y er m us t us e th e v a l ue w ith in th e r a ng e of neg otia tion th a t h a s th e h ig h es t p r ob a b il ity of com p l y ing w ith th e a r m ’ s - l eng th p r incip l e. I f th e ta x p a y er p r ov ides no r ea s oning b eh ind ch oos ing th a t v a l ue, th e a r ith m etic m ea n of th e r a ng e of v a l ues is a s s um ed to b e th e a r m ’ s - l eng th tr a ns f er p r ice f or th e tr a ns a ction under r ev iew .



A p a r t f r om tr a ns f er p r icing docum enta tion r eq uir em ents , no s ep a r a te r etur ns f or r el a ted- p a r ty tr a ns a ctions a r e cur r entl y r eq uir ed.


I n G er m a ny , contem p or a neous docum enta tion r eq uir em ents ex is t onl y f or ex cep tiona l b us ines s tr a ns a ctions . F or s uch ex tr a or dina r y b us ines s tr a ns a ctions (e. g . , r es tr uctur ing w ith in th e g r oup ), th e docum enta tion m us t b e p r ep a r ed contem p or a neous l y (i. e. , w ith in s ix m onth s of th e end of th e b us ines s y ea r in w h ich th e tr a ns a ction h a s occur r ed). H ow ev er , th e p r ep a r a tion of contem p or a neous docum enta tion is s tr ong l y r ecom m ended f or a l l cr os s - b or der tr a ns a ctions .

1 6 4



D ocum enta tion m us t b e s ub m itted w ith in 6 0 da y s up on r eceip t of th e ta x a uth or ity ’ s r eq ues t. I n th e ca s e of ex tr a or dina r y b us ines s tr a ns a ctions (e. g . , tr a ns f er of f unctions ), docum enta tion m us t b e s ub m itted w ith in 3 0 da y s of th e ta x a uth or ity ’ s r eq ues t. I n g ener a l , th e r eq ues t is m a de in th e cour s e of a ta x a udit.


G ener a l T a x C ode, a r eb utta b l e p r es um p tion a p p l ies under w h ich th e ta x p a y er ’ s incom e h a d b een r educed b y th e a m ount of ina p p r op r ia te tr a ns f er p r ices , th er eb y f or m ing th e b a s is of a tr a ns f er p r icing a dj us tm ent.

incom e, p r ov ided th a t th e ta x p a y er does not r eb ut th e p r es um p tion. T h is a l s o h ol ds tr ue w h en a ta x p a y er does not dis cl os e r el ev a nt da ta a v a il a b l e onl y f r om th e f or eig n r el a ted p a r ties . I f es tim a tion b y th e ta x a uth or ities is indica ted in s uch ca s es a nd it is p os s ib l e to deter m ine th e r el ev a nt incom e onl y w ith in a cer ta in r a ng e, th e r a ng e m a y b e f ul l y ex p l oited to th e ta x p a y er ’ s detr im ent.

T h e l eg is l a tion ta k es into cons ider a tion th a t a s ing l e a p p r op r ia te tr a ns f er p r ice does not ex is t a nd th a t com p a r a b l e th ir d- p a r ty p r ices m a y

ev ent th a t th e ta x p a y er ’ s tr a ns f er p r ice f a l l s outs ide th e f ul l r a ng e (in ca s e of f ul l com p a r a b il ity of th ir d- p a r ty da ta ) or th e inter q ua r til e r a ng e (in ca s e of l im ited com p a r a b il ity of th ir d- p a r ty da ta ) of a r m ’ s - l eng th p r ices .

P ena l ties ca n b e a s s es s ed b a s ed on th e ta x p a y er ’ s noncom p l ia nce w ith th e docum enta tion r eq uir em ents . A n a ctua l incom e a dj us tm ent is not s ub j ect to p ena l ties , b ut inter es t is a s s es s ed on th e a dditiona l ta x p a y m ents (6 % p er a nnum , w h ich is nondeductib l e f or ta x p ur p os es ). I nter es t s ta r ts a ccr uing 1 5 m onth s a f ter th e end of th e ca l enda r y ea r in w h ich th e ta x l ia b il ity a r os e.

4

a uditor s in a tim el y m a nner up on r eq ues t.

tr a ns a ction is s ub m itted, th e b ur den of p r oof s h if ts to th e ta x p a y er , a nd th e G er m a n ta x a uth or ities ca n a s s es s incom e a dj us tm ents up to th e m os t unf a v or a b l e p oint w ith in th e a r m ’ s - l eng th r a ng e. T a x p a y er s , th er ef or e, h a v e to ens ur e th a t th eir tr a ns f er p r icing docum enta tion

Penalty relief


neg l ig ent ev a s ion of ta x es or ta x f r a ud, it is m uch l ong er (1 0 y ea r s in th e ca s e of ta x f r a ud). T h es e p er iods com m ence a t th e end of th e ca l enda r y ea r in w h ich th e ta x l ia b il ity a r os e. N o s p ecia l tim e l im it p r ov is ions a p p l y if inter com p a ny tr a ns a ctions a r e inv ol v ed. T h e

1 6 5



g ener a l r eg im e of th e s ta tute of l im ita tions a p p l ies in a ccor da nce w ith th e G ener a l T a x C ode. A ccor ding l y , ea ch ca s e h a s to b e ca r ef ul l y

w ith in th e s ta tutor il y p r es cr ib ed a s s es s m ent p er iod, w h ich is s ub j ect to th e s ta tute of l im ita tions f or a s s es s m ents .

T h e a s s es s m ent p er iod, h ow ev er , does not s ta r t b ef or e th e end of th e ca l enda r y ea r in w h ich th e ta x p a y er h a s s ub m itted th e ta x r etur n (b ut a l s o does not s ta r t l a ter th a n th r ee y ea r s a f ter th e y ea r th e ta x l ia b il ity a r os e). T h er e a r e a num b er of s ta tutor y ex cep tions to th e s ta tute of l im ita tions f or a s s es s m ents (e. g . , it s h oul d b e k ep t in m ind th a t th e l im ita tion p er iod is inter r up ted w h en a ta x a udit b eg ins ).

of l im ita tions h a v e ex p ir ed b ef or e.


w ith r es p ect to tr a ns a ctions q ua l if y ing a s ex cep tiona l b us ines s tr a ns a ctions under th e docum enta tion p r ov is ions , s uch a s th e tr a ns f er

tr a ns f er p r icing m ech a nis m w il l b e ch a l l eng ed, if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, is a l s o h ig h .

APA opportunity

th e I nter g ov er nm enta l a g r eem ent a nd m us t w a iv e its r ig h t to a p p ea l ta x a s s es s m ents , to th e ex tent th a t th ey a r e in l ine w ith th e content of th e A P A .


G er m a ny does not h a v e a n ex p l icit r ef er ence in its dom es tic l a w to th e l a tes t a p p r ov ed v er s ion of th e O E C D G uidel ines . T h e O E C D

it ca n b e a s s um ed th a t th e G er m a n ta x a uth or ities w il l a p p l y th e a m ended O E C D G uidel ines on tr a ns a ctions th a t ca n s til l com e under

G h ana



th e nine doub l e ta x a g r eem ents cur r entl y in ef f ect com p l ete th e ta x a r ch itectur e.


4p r ov ides r ul es r eg a r ding th e a p p l ica tion of th e a r m ’ s - l eng th s ta nda r ds .

• T a x p a y er s in a contr ol l ed r el a tions h ip

•

• A p er m a nent es ta b l is h m ent a nd oth er r el a ted b r a nch es of th e p er m a nent es ta b l is h m ent

• A ta x p a y er a nd a noth er ta x p a y er w h o a r e in a n em p l oy m ent r el a tions h ip

• T h e p ur ch a s e a nd s a l e of g oods

• T h e p ur ch a s e, s a l e, l ea s e or us e of a ta ng ib l e a s s et

• T h e p ur ch a s e, s a l e, l ea s e or us e of a n inta ng ib l e a s s et

• T h e p r ov is ion of m a na g em ent s er v ices , tech nica l s er v ices a nd oth er intr a g r oup s er v ices

•

•

•


T h e r ul es f ol l ow th e O E C D G uidel ines .

1 6 7

G h ana (continued)



T h e r ul es s ta te th a t a p er s on w h o eng a g es in a tr a ns a ction w ith a noth er p er s on w ith w h om it h a s a contr ol l ed r el a tions h ip s h a l l m a inta in contem p or a neous docum enta tion deta il ing th e tr a ns a ctions eng a g ed in b y th a t p er s on f or ea ch ta x y ea r . T h e r eg ul a tions p r ov ide g uida nce a b out th e na tur e of docum enta tion to b e r eta ined. G ener a l l y , th is f ol l ow s th e O E C D r eq uir em ents .

4

p r icing s tudy .


T h e tr a ns f er p r icing r ul es r eq uir e th e us e of th e m os t a p p r op r ia te m eth od to p r ice r el a ted- p a r ty tr a ns a ctions .

•

•

•

•

•

N otw ith s ta nding th e tr a ns f er p r icing m eth ods s ta ted, th e com m is s ioner - g ener a l m a y us e a dif f er ent m eth od or , in w r iting , p er m it a ta x p a y er to us e a noth er m eth od. T h e com m is s ioner - g ener a l m a y do th is w h er e, in h is op inion, h a v ing cons ider ed th e na tur e of th e



1 6 8

G h ana (continued)



T h e com m is s ioner - g ener a l m a y r eq ues t a dditiona l inf or m a tion f r om th e ta x p a y er , w h o w oul d b e r eq uir ed to com p l y w ith th e r eq ues t w ith in th e r eq uir ed tim e f r a m e. N o g uida nce is cur r entl y a v a il a b l e a b out th e tim e f r a m e.


a l s o a p p l y to th e tr a ns f er p r icing r eg ul a tions .

Penalty relief


T h e g ener a l s ta tute of l im ita tions p r es cr ib es 1 2 y ea r s , a f ter w h ich th e com m is s ioner - g ener a l ca nnot r ecov er ta x . T h e ta x l a w , h ow ev er ,


r etur n. I n p r a ctice, th e l ik el ih ood of a n a nnua l ta x a udit (incl uding tr a ns f er p r icing s cr utiny ) occur r ing is m edium . T h e l ik el ih ood of th e p r icing m eth od b eing ch a l l eng ed in a tr a ns f er p r icing a udit is l ow to m edium .

APA opportunity

T h er e is no A P A a v a il a b l e f or m ul tina tiona l s op er a ting in G h a na .


G h a na is a m em b er of th e O E C D D ev el op m ent C entr e. I n th e tr a ns f er p r icing p r a ctice notes is s ued b y th e com m is s ioner - g ener a l (w h ich b inds th e com m is s ioner - g ener a l onl y ), th e com m enta r ies in th e O E C D G uidel ines a r e r ef er r ed to a s b eing inter p r etiv e a ids to th e tr a ns f er

G ib r al tar




4C om m is s ioner of I ncom e T a x th e p ow er to counter ta x a v oida nce a nd p r ov ides th a t th is is to b e cons tr ued in s uch m a nner a s b es t s ecur es

• 4

•

b y th e O E C D

• A l l docum ents p ub l is h ed b y th e O E C D , a t a ny tim e b ef or e 1 J a nua r y 2 0 1 1 , a s p a r t of its T r a ns f er P r icing G uidel ines E nter p r is es a nd T a x A dm inis tr a tions , tog eth er w ith s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e


A s s et out a b ov e, th e g ener a l a nti- a v oida nce p r ov is ions in th e ta x l a w s ta te th a t th os e p r ov is ions s h a l l b e cons tr ued in a m a nner th a t b es t

on I ncom e a nd on C a p ita l p ub l is h ed b y th e O E C D , a nd s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e


T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w .

H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion in a r ea s of s ub j ectiv ity . T h e ex is tence of docum enta tion need not b e dis cl os ed in or p r ov ided w ith th e r etur n. I n p r a ctice, due to G ib r a l ta r ’ s r el a tiv el y l ow r a te of cor p or a te ta x (1 0 % f or m os t com p a nies ), th e r eq uir em ent to docum ent tr a ns f er p r icing is m or e l ik el y to a r is e f r om th e j ur is diction in w h ich th e




1 7 0

G ib r al tar (continued)







im m edia tel y a f ter th e da te a t w h ich th e ta x w a s due. A f ur th er s ur ch a r g e of 2 0 % of th e under p a id a m ount is due if th e a m ount r em a ins

Penalty relief

C om m is s ioner of I ncom e T a x .


T h e C om m is s ioner of I ncom e T a x h a s one y ea r f r om th e da te th a t a r etur n is r eceiv ed to g iv e notice of h is intention to m a k e a n inq uir y a b out a r etur n. A f ter th a t da te ex p ir es , f or up to s ix y ea r s f r om th e end of th e r el ev a nt a ccounting p er iod or ta x y ea r , th e C om m is s ioner of I ncom e T a x m a y r a is e a n a s s es s m ent up on dis cov er y th a t a p er s on h a s not b een a s s es s ed ta x or w a s a s s es s ed a t a l es s er a m ount th a n oug h t to h a v e b een a s s es s ed. T h er e is no tim e l im it f or a dditiona l a s s es s m ents to b e r a is ed w h en a ny f or m of f r a udul ent or w il l f ul def a ul t or neg l ig ent conduct h a s b een com m itted.


tr a ns f er p r icing a r e r el a tiv el y uncom m on.

I n p r a ctice, b eca us e of G ib r a l ta r ’ s r el a tiv el y l ow r a te of cor p or a te ta x (1 0 % f or m os t com p a nies ), th e r eq uir em ent to j us tif y tr a ns f er p r icing is m or e l ik el y to a r is e f r om th e j ur is diction in w h ich th e G ib r a l ta r - ta x a b l e entity ’ s counter p a r ty is ta x a b l e. T h is w oul d not a p p l y

APA opportunity

b ut th e r ul ing s s ta te th a t th ey a r e g iv en on th e b a s is of th e f a cts a nd cir cum s ta nces a s des cr ib ed b y th e ta x p a y er in th e r eq ues t a nd on th e b a s is of th e ta x l a w in f or ce a t th e tim e of th e r ul ing .

1 7 1

G ib r al tar (continued)



H ow ev er , a s s ta ted a b ov e, th e g ener a l a nti- a v oida nce p r ov is ions in th e ta x l a w s ta te th a t th os e p r ov is ions s h a l l b e cons tr ued in a m a nner

a ctiv ities w ith in a m ul tina tiona l g r oup of com p a nies , a nd s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e

G r eec e



4 4 4


T r a ns f er p r icing in G r eece is dr iv en b y th e I ncom e T a x C ode (L . 4 1 7 2 / 2 0 1 3 ) a nd th e T a x P r ocedur es C ode (L . 4 1 7 4 / 2 0 1 3 ), doub l e

• C ir cul a r P O L 1 1 4 2 / 0 2 . 0 7 . 2 0 1 5 a im s to cl a r if y tr a ns f er p r icing is s ues , a f f ecting inter com p a ny tr a ns a ctions p er ta ining to ta x y ea r s 4

th e b ench m a r k ing s tudies to b e us ed f or docum enta tion p ur p os es ).

• 4 44 4

2 0 1 4 .

• 4a nd a nnul m ent of a n A P A . T h e decis ion r ef er s to th e p r ocedur es of b oth unil a ter a l a nd b il a ter a l A P A s f or cr os s - b or der inter com p a ny

4

• 4


T a x C ode, th e p r ov is ions r eg a r ding inter com p a ny tr a ns a ctions a r e inter p r eted a nd im p l em ented in a ccor da nce w ith th e O E C D G uidel ines .


P er s ons s ub j ect to docum enta tion r eq uir em ents incl ude ta x p a y er s w ith a tota l v a l ue of inter com p a ny tr a ns a ctions of m or e th a n

E ntities ex em p t f r om incom e ta x ob l ig a tions a r e a l s o ex em p t f r om tr a ns f er p r icing docum enta tion r eq uir em ents .

T a x p a y er s q ua l if y ing a s s ub j ect to docum enta tion r eq uir em ents need to docum ent a l l tr a ns a ctions ir r es p ectiv e of v a l ue, w h er ea s ex p ens e tr a ns a ctions f ul l y ta x a dj us ted f or cor p or a te incom e ta x p ur p os es a r e ex em p t f r om docum enta tion r eq uir em ents .

4

•th e b r a nch es .

•

ta x a uth or ities up to th e dea dl ine f or th e s ub m is s ion of com p a nies ’ cor p or a te incom e ta x (C I T ) r etur ns (i. e. , in p r incip l e, 3 0 J une f or

1 7 3

G r eec e (continued)



4 44 4


s ub m is s ion of com p a nies ’ C I T r etur ns .


th e s ub m is s ion of com p a nies ’ C I T r etur ns .


T h e tr a ns f er p r icing docum enta tion s h oul d b e p r ep a r ed a nnua l l y b y th e dea dl ine f or th e s ub m is s ion of com p a nies ’ C I T r etur ns , h ow ev er


4

•

•

ex ceed 1 0 % of th e v a l ue of th e tota l tr a ns a ctions s ub j ect to docum enta tion, no p ena l ty a p p l ies .

•

•

a f ter 9 0 da y s or it is not p r ov ided a t a l l .

1 7 4

G r eec e (continued)


I n a ddition, th e g ener a l incom e ta x ina ccur a cy p ena l ties r a ng ing f r om 1 0 % to 5 0 % of th e ta x under p a y m ent w il l a p p l y , a s w el l a s def a ul t inter es t.

Penalty relief

N o p ena l ty r el ief is a v a il a b l e.



T h e l ik el ih ood of ta x a udit b y th e l oca l ta x a uth or ities in g ener a l ca n b e cons ider ed a s h ig h , b a s ed on r ecent ex p er ience. F ur th er , in th e

f ol l ow ed b y th e G r eek ta x a uth or ities . T a x a uth or ities tend to ch a l l eng e r el a ted- p a r ty tr a ns a ctions a nd th er e is a cl ea r tr end tow a r d incr ea s ed a w a r enes s of tr a ns f er p r icing is s ues a m ong l oca l ta x a uditor s .

APA opportunity

T h e T a x P r ocedur es C ode, a l ong w ith th e im p l em enting decis ion, p r ov ides th e p os s ib il ity of a n A P A f r om 1 J a nua r y 2 0 1 4 . A n A P A w il l cov er a ny r el ev a nt cr iter ia us ed f or th e intr a g r oup p r icing .

T h es e cr iter ia m a inl y incl udes th e tr a ns f er p r icing m eth od, th e com p a r a b l e da ta to b e us ed a nd a ny r el ev a nt a dj us tm ents to b e m a de, a s w el l a s th e cr itica l a s s um p tions under w h ich th e a p p r ov ed tr a ns f er p r icing m eth odol og y w il l r em a in v a l id.

A n A P A ter m ca nnot ex ceed f our y ea r s , a nd a r etr oa ctiv e ef f ect is not p os s ib l e.


a m endm ents .

concl uding th e tr a ns a ction; th us in th e a b s ence of ex p l icit g uida nce r eg a r ding th e tim e f r a m e f or th e a p p l ica tion of r ev is ed O E C D T r a ns f er

K eep ing th is in m ind, th e p os s ib il ity of th e G r eek ta x a uth or ities ta k ing a r ob us t p os ition a nd tr y ing to r etr oa ctiv el y a p p l y new g uida nce if th is s up p or ts th eir p os ition ca nnot b e r ul ed out.

G u am




• 4

• 4

•4

44

•

4

•

to r em a in a n is s ue up on w h ich th e I P N s w il l f ocus .

•ex a m p os itions . H ow ev er , th e C I P w a s w ith dr a w n on 2 6 J une 2 0 1 2 .

r eg ul a tions th a t h a d b een in ef f ect a s of 1 J a nua r y 2 0 0 7 . T h e new s er v ices r eg ul a tions ex p l icitl y r eq uir e s tock - b a s ed com p ens a tion to b e 4


F or dom es tic p ur p os es , th e O E C D G uidel ines do not p r ov ide s up p or t a nd w oul d not b e dir ectl y r el ev a nt to th e a p p l ica tion of a ny p r icing m eth ods . H ow ev er , if ta x p a y er s p ur s ue com p etent a uth or ity r el ief f r om doub l e ta x a tion or a b il a ter a l A P A , th e O E C D G uidel ines a r e r el ev a nt a nd m a y b e us ed to dem ons tr a te com p l ia nce w ith inter na tiona l p r incip l es .

1 7 6

G u am (continued)



T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion to a v oid th e p ena l ties des cr ib ed a b ov e. T h e ex is tence of docum enta tion need not b e eith er dis cl os ed on, or p r ov ided w ith , th e r etur n.

docum enta tion (f ur th er des cr ib ed b el ow ) th a t s ub s ta ntia tes th e ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

• A n ov er v iew of th e ta x p a y er ’ s b us ines s a nd a n a na l y s is of th e l eg a l a nd econom ic f a ctor s a f f ecting p r icing

•

•

• A des cr ip tion of th e p r icing m eth od a nd r ea s ons th e m eth od w a s s el ected (a b es t- m eth od a na l y s is )

• A des cr ip tion of a l ter na tiv e m eth ods a nd w h y th ey w er e not s el ected

•

• A des cr ip tion of com p a r a b l es us ed, h ow com p a r a b il ity w a s ev a l ua ted a nd a ny a dj us tm ents th a t w er e m a de

• A n ex p l a na tion of a ny econom ic a na l y s is a nd a ny p r oj ections us ed to dev el op th e p r icing m eth od

•

• A g ener a l index of th e p r incip a l a nd b a ck g r ound docum ents a nd a des cr ip tion of th e r ecor d- k eep ing s y s tem


inter com p a ny tr a ns a ction.

•

•

•

•


4

1 7 7

G u am (continued)


Transfer pricing-specific returns 4 4


Transfer pricing penalties 4

or g r os s v a l ua tion m is s ta tem ent, r es p ectiv el y . T h e p ena l ties a r e ca l cul a ted a s a p er centa g e of th e under p a y m ent, or th e p ena l ty m a y a p p l y to a v a l ua tion m is s ta tem ent. T h er e is no p ena l ty f or f a il ur e to h a v e docum enta tion; h ow ev er , docum enta tion m a y h el p ta x p a y er s a v oid a p ena l ty .

Penalty relief P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia th e p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s

4



T h e l ik el ih ood of a n a nnua l ta x a udit is dep endent on th e f a cts a nd cir cum s ta nces . T h e intr oduction of w h a t th e O E C D r ef er s to in its

f r om G ua m is b a s ica l l y th e s a m e a s th e l ik el ih ood of a g ener a l ta x a udit.

APA opportunity

r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts . A dditiona l com p etent a uth or ity g uida nce 4


G u atemal a



Superintendencia de Administración Tributaria


to a p p l y w h en a s s es s ing th e a r m ’ s - l eng th p r incip l e, th e ta x p a y er ’ s ob l ig a tion to p r ep a r e a nd m a inta in th e tr a ns f er p r icing docum enta tion neces s a r y to s up p or t th e a r m ’ s - l eng th na tur e of inter com p a ny p r icing , a nd th e em p ow er m ent of th e ta x a uth or ities to a dj us t p r ices .

4 Publinews

is s ua nce of D ecr ee 1 9 - 2 0 1 3 .


conducted b etw een G ua tem a l a n ta x p a y er s a nd th eir r el a ted p a r ties a b r oa d. T h e tr a ns f er p r icing r ul es a l s o p r es ent a n a dditiona l non-

im p or ts or ex p or ts of g oods w ith w el l - k now n p r ices in inter na tiona l m a r k ets .


•

•

• D es cr ip tion of th e inter com p a ny tr a ns a ctions p er f or m ed b y th e com p a nies of th e cor p or a te g r oup

• D es cr ip tion of th e f unctions p er f or m ed a nd r is k s a s s um ed b y th e com p a nies of th e cor p or a te g r oup

• I nf or m a tion r eg a r ding th e inta ng ib l e a s s ets of th e cor p or a te g r oup

• D es cr ip tion of th e tr a ns f er p r icing p ol icy of th e cor p or a te g r oup

• I nter com p a ny s er v ice a g r eem ents s ub s cr ib ed b y th e com p a nies of th e cor p or a te g r oup

• A P A s s ub s cr ib ed to b y th e com p a nies of th e cor p or a te g r oup

• A nnua l r ep or t of th e cor p or a te g r oup

1 7 9

G u atemal a (continued)


•

•

• D es cr ip tion of th e inter com p a ny tr a ns a ctions p er f or m ed b y th e ta x p a y er


• D es cr ip tion of th e tr a ns f er p r icing m eth odol og y a p p l ied


tr a ns a ctions inv ol v ing im p or ts or ex p or ts of g oods w ith w el l - k now n p r ices in inter na tiona l m a r k ets .


F Y 2 0 1 3 onw a r d), w h ich w il l incl ude inf or m a tion r eg a r ding th eir inter com p a ny tr a ns a ctions , to th e a nnua l ta x r etur n.


a tr a ns f er p r icing inf or m a tion r etur n.


A s of F Y 2 0 1 5 , docum enta tion m us t b e r ea dil y a v a il a b l e b y th e due da te of th e a nnua l incom e ta x r etur n (w h ich m us t b e p r es ented

docum enta tion s h oul d b e p r ov ided w ith in 2 0 da y s f r om th e r eceip t of th e notice.


th e g ener a l ta x p ena l ties . P ena l ties f or f a il ur e to p r es ent th e tr a ns f er p r icing docum enta tion, up on r eq ues t of th e ta x a uth or ity , w oul d b e

Penalty relief

T h er e a r e cur r entl y no p r ov is ions f or r eductions in p ena l ties .

1 8 0

G u atemal a (continued)




T h e l ik el ih ood of a g ener a l ta x a udit a nd tr a ns f er p r icing a s s es s m ents a s p a r t of a g ener a l ta x a udit is m edium . A l th oug h tr a ns f er p r icing

APA opportunity


a m end cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur .

H o nd u r as



Servicio de Administración de Rentas

• D ecr ee N o. 2 3 2 - 2 0 1 1 th a t es ta b l is h es th e T r a ns f er P r icing L a w , A r ticl es 1 to 2 2

• E x ecutiv e D ecr ee N o. 0 2 7 - 2 0 1 5 , w ith its r eg ul a tions on tr a ns f er p r icing , A r ticl es 1 to 4 0

• 4


H ondur a n tr a ns f er p r icing p r ov is ions a p p l y to a l l tr a ns a ctions conducted b y H ondur a n ta x p a y er s w ith l oca l r el a ted entities , f or eig n r el a ted entities a nd w ith entities op er a ting under a s p ecia l ta x r eg im e in H ondur a s . T h e r eg ul a tions a l s o a p p l y to tr a ns a ctions conducted b y ta x p a y er s w ith entities dom icil ed in ta x h a v ens .

P r icing L a w is in f or ce f r om 1 J a nua r y 2 0 1 4 .


T h e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es , a s l ong a s th ey do not contr a dict th e H ondur a n ta x s y s tem .


C ontem p or a neous tr a ns f er p r icing docum enta tion r eg a r ding r el a ted- p a r ty tr a ns a ctions is m a nda tor y a nd m us t b e m a inta ined. A ccor ding

• T h e a ctiv ities a nd f unctions p er f or m ed b y th e ta x p a y er

• T h e r is k s a s s um ed a nd a s s ets us ed b y th e ta x p a y er in ca r r y ing out th es e a ctiv ities a nd f unctions

• T h e deta il s of th e item s , docum ents , f a cts a nd cir cum s ta nces a s s es s ed f or j us tif y ing th e p r ices or a m ounts b etw een r el a ted entities

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• T h e v a l ua tion m eth od us ed, indica ting th e r ea s ons a nd a r g um ents w h y it w a s cons ider ed a s th e m os t a p p r op r ia te m eth od

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• D eta il s of com p a r a b l e tr a ns a ctions a nd com p a r a b il ity f a ctor s not s el ected, s ta ting th e r ea s ons a nd cons ider a tions f or dis p os a l

• D es cr ip tion of th e com p a r a b l e com p a ny ’ s b us ines s a nd its ch a r a cter is tics

• T h e m edia n a nd th e a r m ’ s - l eng th r a ng e

• T h e a r m ’ s - l eng th p r ice

• D eta il s of th e a dj us tm ents to tr a ns f er p r ices f or th es e to com p l y w ith th e a r m ’ s - l eng th p r incip l e

1 8 2

H o nd u r as (continued)



r ea s ona b l y a p p l ied, a nd th a t it r ep r es ents w h a t th ir d p a r ties w il l a g r ee up on under com p a r a b l e a r m ’ s - l eng th cir cum s ta nces ). A ta x p a y er ca n us e a n a l ter na tiv e m eth od w h en it is in a ccor da nce w ith th e inter na tiona l p r a ctice a nd s ta nda r ds , a nd p r ev ious l y a p p r ov ed b y th e


T a x p a y er s m us t r ep or t on th e incom e ta x r etur n w h eth er th ey conducted tr a ns a ctions w ith r el a ted p a r ties a nd dis cl os e th e tota l a m ount of s uch r el a ted- p a r ty tr a ns a ctions , indica ting if th ey a r e incom e, p ur ch a s es or oth er ex p ens e item s .


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•y ea r - end.


T a x p a y er s a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion a nnua l l y b y th e due da te of th e incom e ta x r etur n. T h e docum enta tion


I f ta x p a y er s r ep or t ta x a b l e incom e l es s th a n it s h oul d h a v e b een under a r m ’ s - l eng th conditions , a p ena l ty of 1 5 % on th e cor r es p onding incom e a dj us tm ent a p p l ies .

I f ta x p a y er s f a il to p r ov ide th e cor r ect inf or m a tion or f a il to decl a r e a cor r ect ta x a b l e incom e, th en th e p ena l ties w il l b e th e g r ea ter of 3 0 %

Penalty relief

T h er e is cur r entl y no p ena l ty r el ief r eg im e in p l a ce.


1 8 3

H o nd u r as (continued)



4

APA opportunity

A P A s a r e contem p l a ted under th e p r ov is ions of D ecr ee 2 3 2 - 2 0 1 1 a nd E x ecutiv e D ecr ee 0 2 7 - 2 0 1 5 . T a x p a y er s ca n r eq ues t a n A P A f or a


H o ng K o ng ( S A R )




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4A dj us tm ents , is s ued in A p r il 2 0 0 9

4

4


4r ecom m ended b y th e O E C D G uidel ines .


inv es tig a tion, th e ta x p a y er is ex p ected to h a v e m a inta ined r ecor ds th a t h a v e deta il s a b out inter com p a ny tr a ns a ctions w ith r eg a r d to

docum enta tion is p r ep a r ed, a nd ty p ica l l y , r ep or ts a r e p r ep a r ed in E ng l is h .

4

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• T h e na tur e, ter m s , p r ices a nd q ua ntum of r el ev a nt tr a ns a ctions , incl uding tr a ns a ctions th a t f or m a s er ies a nd a ny r el ev a nt of f s ets

• T h e m eth od b y w h ich th e na tur e, ter m s a nd q ua ntum of r el ev a nt tr a ns a ctions w er e a r r iv ed a t, incl uding a ny s tudy of com p a r a b l es under ta k en

• T h e m a nner b y w h ich th e s el ected m eth od h a s r es ul ted in a r m ’ s - l eng th ter m s or in w h ich it h a s not, th e com p uta tiona l a dj us tm ent r eq uir ed a nd h ow it h a s b een ca l cul a ted; th is us ua l l y incl udes a n a na l y s is of m a r k et da ta or oth er inf or m a tion a b out th ir d- p a r ty com p a r a b l es

1 8 5

H o ng K o ng ( S A R ) (continued)


• T h e ter m s of r el ev a nt com m er cia l a r r a ng em ents w ith b oth th ir d- p a r ty a nd g r oup cus tom er s ; th es e incl ude contem p or a neous com m er cia l a g r eem ents (e. g . , s er v ice or dis tr ib ution contr a cts , l oa n a g r eem ents ) a nd a ny b udg ets , f or eca s ts or oth er p a p er s conta ining inf or m a tion r el ied up on in a r r iv ing a t a r m ’ s - l eng th ter m s , etc.

I n a ddition, D I P N 4 6 a l s o r ef er s to th e O E C D G uidel ines f or f ur th er g uida nce a b out docum enta tion r eq uir em ents .


cir cum s ta nces in w h ich tr a ditiona l tr a ns a ction da ta is not a v a il a b l e, com p a r a b l e or r el ia b l e.


p a id f or r oy a l ties , f ees p a id to nonr es idents f or s er v ices r ender ed in H ong K ong a nd th e l oca tion of th e nonr es ident p er s on.



D ocum enta tion is g ener a l l y r eq uir ed onl y up on r eq ues t.


a nd 8 2 A f or noncom p l ia nce. O f f ens es ca n incl ude a ny p er s on w h o, w ith out a r ea s ona b l e ca us e or w ith w il l f ul intent to ev a de ta x , f a il s to

a r etur n in tim e; f a il s to inf or m ch a r g ea b il ity f or ta x ; m a k es a ny f a l s e s ta tem ent in connection w ith a cl a im f or a ny deduction of th e

or m a k es us e of a ny f r a ud, a r t or contr iv a nce to ev a de ta x , a m ong oth er s .

im p r is onm ent.

Penalty relief

T h e s ca l e of th e p ena l ty to b e im p os ed on a ta x p a y er in H ong K ong is deter m ined b a s ed on th e na tur e of th e om is s ion, th e q ua ntum of

th e of f ens e p er iod. P ena l ties ca n b e s ca l ed up w a r d or dow nw a r d b a s ed on s uch f a cts of th e ca s e.

1 8 6

H o ng K o ng ( S A R ) (continued)



T h e s ta tute of l im ita tions in H ong K ong is s ix y ea r s a f ter th e end of th e a s s es s m ent y ea r . I n th e ca s e of f r a ud or w il l f ul ev a s ion, th e s ta tute of l im ita tions is ex tended to 1 0 y ea r s f r om th e end of th e a s s es s m ent y ea r .


T h e r is k of a n a nnua l ta x a udit in H ong K ong m a y b e tr ig g er ed b y a v a r iety of s itua tions , s uch a s if th e a ccounts of a b us ines s a r e h ea v il y

not p r op er l y m a inta ined, or r eq ues ted inf or m a tion is not p r ov ided.

r eceiv ed, or tr a ns a ctions a r e w ith ta x h a v en l oca tions ). A n a udit r el a ted to tr a ns f er p r icing w il l b e a im ed a t r ev iew ing th e inter com p a ny p r icing p ol icies a nd a ny a na l y s is p r ep a r ed to s up p or t th e p r icing , cons ider ing th e f a cts of th e b us ines s a nd th e tr a ns a ctions . T r a ns f er

com m on l ine of inq uir y . N ota b l y , a m ong a s s et m a na g er s , th e a l l oca tion of f ee r ev enue into H ong K ong is a n incr ea s ing l y f r eq uent a r ea of

f a cts a nd cir cum s ta nces of th e ta x p a y er .

APA opportunity

4of th e A P A p r og r a m . A P A s w il l b e l im ited to b il a ter a l or m ul til a ter a l a g r eem ents a nd g ener a l l y w il l not incl ude unil a ter a l a g r eem ents . H ow ev er , unil a ter a l a g r eem ents m a y b e cons ider ed if a tr ea ty p a r tner does not w is h to p a r ticip a te in a n A P A , in w h ich th e H ong K ong com p etent a uth or ity is una b l e to r ea ch a n a g r eem ent w ith th e r el ev a nt tr ea ty p a r tner , or w h er e a non- tr ea ty p a r tner is p r ep a r ed to g iv e a unil a ter a l A P A r eg a r ding tr a ns a ctions integ r a l l y l ink ed to th e tr a ns a ctions cov er ed b y a b il a ter a l or m ul til a ter a l A P A .


h a r m f ul ta x p r a ctices ), A ction 6 (p r ev enting tr ea ty a b us e), A ction 1 3 (tr a ns f er p r icing docum enta tion) a nd A ction 1 4 (enh a ncing dis p ute

C ons ul ta tion P a p er p r op os es th e intr oduction of tr a ns f er p r icing r ul es in H ong K ong , incl uding a dop tion of th e th r ee- tier ed a p p r oa ch to

H u ng ar y



• C or p or a te I ncom e T a x (C I T ) a nd D iv idend T a x (A ct on C I T )

• T a x P r ocedur e (A ct on T a x P r ocedur e)


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•

•

•

• 1 ef f ectiv e 1 J a nua r y 2 0 1 0 , a m ended w ith a n ef f ectiv e da te of 2 1 J une 2 0 1 3 ; under s p ecia l cir cum s ta nces , a m ended v er s ion is op tiona l l y a p p l ica b l e to com p l ia nce l ia b il ities p er ta ining to 2 0 1 2 a s w el l

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• 4

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•ef f ectiv e 1 J a nua r y 2 0 1 5

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• 4

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• 4

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• 4

1

1 8 8

H u ng ar y (continued)


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•w a iv er of r eceiv a b l es

• 4

•


th e O E C D G uidel ines m a y b e us ed a s a p r im a r y r ef er ence.


deter m ine th e f a ir m a r k et p r ices , a s w el l a s th e f a cts a nd cir cum s ta nces s up p or ting th em .

T h e deta il ed docum enta tion ob l ig a tion m us t b e a p p l ied f or a l l r el a ted- p a r ty a g r eem ents in ef f ect in th e ta x y ea r . T h e deta il s of th e docum enta tion ob l ig a tion a r e r eg ul a ted b y D ecr ee 2 2 . F or eig n entities (us ua l l y f or eig n ta x p a y er s eng a g ed in b us ines s a ctiv ities th r oug h a H ung a r ia n p er m a nent es ta b l is h m ent) a r e a l s o s ub j ect to th e docum enta tion ob l ig a tion. H ow ev er , tr a ns f er p r icing r ul es a r e not r eq uir ed to b e ob s er v ed w h en th e C I T b a s e w oul d not ch a ng e ev en if a non- a r m ’ s - l eng th p r ice w er e a p p l ied (i. e. , if th e incom e a ttr ib uta b l e to th e f or eig n p er m a nent es ta b l is h m ent is ex em p t f r om H ung a r ia n ta x , b a s ed on th e a p p l ica b l e doub l e ta x tr ea ty ).

O v er a l l , th e H ung a r ia n tr a ns f er p r icing docum enta tion r eq uir em ents a r e cons is tent w ith th e O E C D G uidel ines . T h e f ol l ow ing l is t outl ines

•a uth or ity ) of th e r el a ted p a r ties p a r ticip a ting in th e r el a ted- p a r ty tr a ns a ction under r ev iew

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• P er iod dur ing w h ich th e a g r eem ent is ef f ectiv e

• C h a r a cter is tics of th e s er v ice p r ov ided or g oods s ol d (f unctiona l a na l y s is )

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• A na l y s is of th e r el ev a nt m a r k et (indus tr y a na l y s is )

• T h e m eth od a p p l ied f or es ta b l is h ing th e a r m ’ s - l eng th p r ice

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• D es cr ip tion of com p a r a b l e s er v ices a nd g oods tr a ns a ctions

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• T h e a r m ’ s - l eng th p r ice, m a r g in or r a ng e

1 8 9



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• P r ep a r a tion a nd a m endm ent da te of th e docum enta tion

• I f cons ol ida ted tr a ns f er p r icing docum enta tion is p r ep a r ed (s ing l e docum enta tion cov er ing s ev er a l s im il a r or s tr ong l y inter r el a ted tr a ns a ctions ), r ea s ons f or cons ol ida tion h a v e to b e p r ov ided

concl uded b etw een th e H ung a r ia n ta x p a y er a nd its r el a ted p a r ties . T a x p a y er s m us t decl a r e to th e N T C A (on th e C I T r etur n) w h ich ty p e of tr a ns f er p r icing docum enta tion th ey w oul d l ik e to p r ep a r e (eith er th e s ing l e docum enta tion or th e j oint docum enta tion).

Th e ob ligat ory elem ent s of t h e com m on docum ent at ion are t h e following:

• A g ener a l des cr ip tion of th e b us ines s a nd th e b us ines s s tr a teg y of th e enter p r is e, incl uding th e ch a ng es f r om th e p r ev ious y ea r

•th e g r oup m em b er s a nd a des cr ip tion of th e p a r ent com p a ny ’ s p a r ticip a tion in th e op er a tion of its s ub s idia r ies )

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• A g ener a l des cr ip tion of th e f unctions a nd r is k a nd th e ch a ng es in th es e, com p a r ed w ith th e p r ev ious y ea r

• I nf or m a tion a b out th e ow ner s h ip of inta ng ib l e a s s ets a nd r oy a l ties p a id a nd r eceiv ed

• A des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy or tr a ns f er p r icing s y s tem

• C os t contr ib ution a g r eem ents (C C A s ) a nd A P A s r el a ting to th e deter m ina tion of th e a r m ’ s - l eng th p r ice a nd cour t decis ions a b out th e a r m ’ s - l eng th p r ice

•

The country-specific documentation must include the following information:

•a uth or ity ) of th e r el a ted- p a r ty

• D es cr ip tion of th e b us ines s enter p r is e a nd th e s tr a teg y of th e b us ines s enter p r is e, incl uding th e ch a ng es , com p a r ed w ith th e p r ev ious y ea r

•a nd th e p er iod dur ing w h ich th e a g r eem ent is ef f ectiv e

• C om p a r a b l e s ea r ch (ch a r a cter is tics of th e s er v ice p r ov ided or g oods s ol d, f unctiona l a na l y s is , contr a ctua l conditions a nd econom ic cir cum s ta nces )

• D es cr ip tion of th e com p a r a b l e da ta

• T r a ns f er p r icing p ol icy of th e g r oup

•

1 9 0



s er v ices in th e H ung a r ia n tr a ns f er p r icing r eg ul a tions . L ow - v a l ue- a dded intr a g r oup s er v ices ty p ica l l y a r e r outine s er v ices p r ov ided b etw een r el a ted p a r ties outs ide th e s cop e of th e m a in b us ines s a ctiv ity (e. g . , inf or m a tion tech nol og y s er v ices or a dm inis tr a tion s er v ices ). F or th es e s er v ices , ta x p a y er s m a y p r ep a r e tr a ns f er p r icing docum enta tion encom p a s s ing a r el a tiv el y l es s - deta il ed tech nica l a na l y s is . A ccor ding to th e a m endm ent of D ecr ee 2 2 in 2 0 1 2 , th is ty p e of docum enta tion is a p p l ica b l e if th e v a l ue of th e tr a ns a ctions does not

g iv en ta x y ea r . I n th is ca s e, th e cos t- p l us m eth od is a ccep ted w ith out a s ep a r a te a na l y s is , a nd th e l a w cons ider s m a r k up s ch os en f r om

2

E x em p t ions from t h e docum ent at ion ob ligat ion according t o D ecree 2 2 are as follows:

•

•th e ta x p a y er or th e cos t- b ea r ing entity

• I f th e N T C A es ta b l is h ed th e a p p l ica b l e a r m ’ s - l eng th p r ice in a r es ol ution (A P A )

• C a s h tr a ns f er s

• T r a ns a ctions ca r r ied out b etw een a H ung a r ia n r es ident ta x p a y er ’ s f or eig n p er m a nent es ta b l is h m ent a nd its r el a ted- p a r ty , if th e ta x p a y er ’ s C I T b a s e does not incl ude th e incom e a ttr ib uta b l e to th e f or eig n p er m a nent es ta b l is h m ent

F or 2 0 0 9 a nd onw a r d, th e docum enta tion ca n a l s o b e p r ep a r ed in a f or eig n l a ng ua g e. H ow ev er , a t th e N T C A ’ s r eq ues t, th e ta x p a y er h a s to p r ep a r e a H ung a r ia n tr a ns l a tion (a n ex cep tion a p p l ies f or E ng l is h , F r ench a nd G er m a n l a ng ua g e docum enta tion).


A s a n im p or ta nt new r eq uir em ent in a r el a tiv el y w ide a r r a y of ca s es , ta x p a y er s a r e r eq uir ed b y l a w to a p p l y th e inter q ua r til e r a ng e in th eir p r icing a nd a s s es s th eir H ung a r ia n ta x l ia b il ities a ccor ding l y .


th e contr a cting p a r ty to th e N T C A . C es s a tion of th e r el a ted- p a r ty s ta tus m us t a l s o b e r ep or ted.

I n th e C I T r etur n, th e ta x b a s e s h oul d b e a dj us ted if th e p r ice us ed in th e r el a ted- p a r ty tr a ns a ction dif f er s f r om th e f a ir m a r k et p r ice. I n th eir y ea r - end cor p or a te ta x r etur ns , ta x p a y er s m us t decl a r e w h ich ty p e of tr a ns f er p r icing docum enta tion th ey h a v e el ected to p r ep a r e.

N T C A ; h ow ev er , th e ta x p a y er needs to p r es ent th e docum enta tion dur ing a ta x a udit.

2

of th e tr a ns f er p r icing docum enta tion is not b ef or e 2 1 J une 2 0 1 3 .

1 9 1







I n r el a tion to a ta x b a s e a dj us tm ent, a p ena l ty of 5 0 % of th e unp a id ta x m a y b e im p os ed, a s w el l a s a l a te p a y m ent inter es t ch a r g e a t

Penalty relief



ca l cul a ted f r om th e ta x y ea r in w h ich ta x es s h oul d h a v e b een decl a r ed, r ep or ted or p a id. H ow ev er , w ith in th e f r a m ew or k of th e A r b itr a tion C onv ention, it is p os s ib l e to r eq ues t a ta x b a s e a dj us tm ent ev en a f ter th e s ta tute of l im ita tions h a s ex p ir ed.


ex is tence a nd com p l etenes s of th e docum enta tion (i. e. , w h eth er a l l tr a ns a ctions a r e cov er ed).

y ea r s .

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• T h e ta x p a y er ca m e to a n unus ua l concl us ion r eg a r ding th e tr a ns f er p r ices

1 9 2



• T h e p r icing m eth od is unus ua l

• T h e tr a ns a ctions th em s el v es ca n b e r eg a r ded a s unus ua l or uniq ue (es p ecia l l y h y b r ids , C C A s a nd cer ta in r oy a l ty a r r a ng em ents )

T h e N T C A continuous l y coop er a tes w ith oth er countr ies ’ ta x a uth or ities a nd f ol l ow s th e inter na tiona l tr a ns f er p r icing a uditing p r a ctices

th e N T C A is now r a th er k now l edg ea b l e a b out m a tter s concer ning m eth od s el ection; th er ef or e, th e r is k of th e ta x p a y er ’ s a p p l ica tion of a

APA opportunity

to th e p r ov is ion.

3

r eq ues t, th e ta x p a y er does not h a v e to p r ep a r e tr a ns f er p r icing docum enta tion f or th e tr a ns a ctions cov er ed b y th e A P A .


3

I c el and




T h e G ov er nm ent h a s is s ued a r eg ul a tion (N o. 1 1 8 0 / 2 0 1 4 ) w ith a dditiona l g uidel ines on docum enta tion a nd p r icing . O n

1 5 J une 2 0 1 5 , I cel a nd’ s P a r l ia m ent p a s s ed a b il l a m ending A r ticl e 5 7 of th e I cel a nd I ncom e T a x A ct N o. 9 0 / 2 0 0 3 .


p a r ties b a s ed on th e O E C D p r incip l es


ex tent of tr a ns a ctions w ith r el a ted p a r ties , incl uding th e r ea s oning f or tr a ns a ction p r ices a nd oth er ter m s . T h e duty ex is ts a s of th e b eg inning of th e nex t op er a tiona l y ea r . T h e docum enta tion r eq uir em ents do not a p p l y to dom es tic tr a ns a ctions .



4 4


D ocum ents m us t b e p r ov ided to th e ta x a uth or ities w ith in 4 5 da y s of a r eq ues t, a nd docum ents m us t b e k ep t f or s ev en y ea r s .

1 9 4

I c el and (continued)



T h er e is no p ena l ty f or f a il ur e to p r ov ide docum enta tion.

b a s ed on th e O E C D p r incip l es . T h es e a dj us tm ents ca n b e p er f or m ed w ith in th e dom es tic s ta tute of l im ita tion p er iod (i. e. , f or th e s ix p r ev ious y ea r s f r om th e da te of th e a dj us tm ent). A 2 5 % p ena l ty ca n b e a p p l ied to th e a dj us tm ent of p r icing in ca s e of under p a y m ents .

Penalty relief

A ccor ding to A r ticl e 1 0 8 of A ct 9 0 / 2 0 0 3 on incom e ta x , th e g ener a l r ul e is th a t a p ena l ty ca n b e a v oided if th e ta x a b l e p a r ty is not r es p ons ib l e f or th e s itua tion ca us ing th e a dj us tm ent of p r icing , or if th e s itua tion is ca us ed b y f or ce m a j eur e.

F a il ur e to com p l y w ith docum enta tion r ul es does not p r ov ide p ena l ty r el ief .


T h e s ta tute of l im ita tions p er iod is s ix y ea r s p r ior to th e y ea r of a s s es s m ent.


T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l dep ends on s ev er a l f a ctor s , s uch a s th e s ur v eil l a nce p l a n of th e ta x a uth or ities , th e ty p e

T h er e is a h ig h l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a ta x a udit.

D ue to th e f a ct th a t tr a ns f er p r icing r ul es j us t ca m e into ef f ect, it is h a r d to a s s es s th e l ik el ih ood of tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed.

APA opportunity

I cel a ndic ta x a uth or ities do not is s ue A P A s . I t is uncer ta in if ta x a uth or ities w il l p r ov ide b inding op inions on tr a ns f er p r icing .

Impact of new OECD Guidelines

F or m a l l y , th er e is no l oca l p os ition or ca s e l a w ; h ow ev er , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

I nd ia



•

• I ncom e T a x D ep a r tm ent


• 44

• 44

T h e p r icing of inter na tiona l tr a ns a ctions b etw een a s s ocia ted enter p r is es w il l need to b e deter m ined w ith r eg a r d to th e a r m ’ s - l eng th p r incip l e us ing m eth ods p r es cr ib ed under I ndia n tr a ns f er p r icing r eg ul a tions . A s s ocia ted enter p r is es a r e enter p r is es f or w h ich 2 6 % of th e v oting p ow er in one is h el d b y th e oth er or a com m on p a r ent h ol ds a t l ea s t 2 6 % of th e v oting p ow er in b oth s uch enter p r is es in a ddition to cer ta in oth er s cena r ios th a t w oul d deem tw o enter p r is es a s a s s ocia ted. T r a ns f er p r icing p r ov is ions a p p l y to th e f ol l ow ing ty p es of

• P ur ch a s e, s a l e or l ea s e of ta ng ib l e or inta ng ib l e p r op er ty


•p ur ch a s e or s a l e of m a r k eta b l e s ecur ities or a ny ty p e of a dv a nce, p a y m ents or def er r ed p a y m ent or r eceiv a b l e; or a ny oth er deb t a r is ing dur ing th e cour s e of b us ines s

• A m utua l a g r eem ent or a r r a ng em ent f or cos t a l l oca tion or a p p or tionm ent

•

•

T r a ns a ctions w ith a th ir d p a r ty w il l b e deem ed tr a ns a ctions b etw een a s s ocia ted enter p r is es if th e th ir d p a r ty h a s a p r ior a g r eem ent w ith th e a s s ocia ted enter p r is e, or if th e ter m s of th e r el ev a nt tr a ns a ction a r e deter m ined, in s ub s ta nce, b etw een th e th ir d p a r ty a nd th e a s s ocia ted enter p r is e, ev en if th e ta x p a y er a nd th ir d p a r ty a r e b oth dom es tic entities .

S afe- h arb or p rov isions

a l s o cov er tr a ns a ctions p er ta ining to l ending m oney a nd p r ov iding a g ua r a ntee b y a n I ndia n entity to its w h ol l y ow ned s ub s idia r y .

h a r b or r ul es , op tiona l f or a ta x p a y er , conta in th e conditions a nd cir cum s ta nces under w h ich th e ta x a uth or ity w oul d a ccep t th e nor m s a nd m a r g ins a nd th e r el a ted com p l ia nce ob l ig a tions .

a p p l ica b l e ta x tr ea ty .

Worldwide t ransfer p ricing reference guide 1 9 6

I nd ia (continued)


Specified domestic transactions

w ith r eg a r d to th e a r m ’ s - l eng th p r incip l e us ing m eth ods p r es cr ib ed under I ndia n tr a ns f er p r icing r eg ul a tions .


I ndia n l eg is l a tion is b r oa dl y b a s ed on th e O E C D G uidel ines . F iv e of th e s ix m eth ods p r es cr ib ed in th e l eg is l a tion to com p ute a r m ’ s - l eng th p r ices conf or m w ith th e O E C D G uidel ines .

incons is tent w ith dom es tic l a w .


• O w ner s h ip s tr uctur e

•

•

• N a tur e a nd ter m s (incl uding p r ices ) of inter na tiona l tr a ns a ctions

• D es cr ip tion of f unctions p er f or m ed, r is k s a s s um ed a nd a s s ets em p l oy ed

•

•

• D es cr ip tion of m eth ods cons ider ed

•

• D eta il s of tr a ns f er p r icing a dj us tm ents

• A ny oth er inf or m a tion or da ta r el a ting to th e a s s ocia ted enter p r is e th a t m a y b e r el ev a nt f or deter m ining th e a r m ’ s - l eng th p r ice

1 9 7

I nd ia (continued)



f or a s im il a r uncontr ol l ed tr a ns a ction. N o h ier a r ch y of m eth ods ex is ts ; r a th er , th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied.

p oints to b e eq uiv a l ent to th e a r m ’ s - l eng th p r ice a nd h a s a l l ow ed a p r es cr ib ed p er centa g e of v a r ia tion b etw een th e a r m ’ s - l eng th p r ice

a p p r oa ch to us ing a n a r m ’ s - l eng th p r ice r a ng e b y us ing th e 3 5 th a nd 6 5 th p er centil es , ins tea d of th e inter na tiona l l y a ccep ted p r a ctice of th e inter q ua r til e r a ng e (if cer ta in conditions a r e m et, s uch a s a v a il a b il ity of m inim um 6 da ta p oints ).


to p r ov ide inf or m a tion s uch a s th e na tur e a nd v a l ue of th e tr a ns a ction, deta il s a b out th e a s s ocia ted enter p r is e w ith w h ich th e tr a ns a ction w a s under ta k en a nd th e m eth od us ed to b ench m a r k th e tr a ns a ction.

s ta tem ents .



A l th oug h a n a ccounta nt’ s r ep or t m us t b e s ub m itted a l ong w ith th e ta x r etur n, th e ta x p a y er is not r eq uir ed to f ur nis h th e tr a ns f er p r icing


• F or not m a inta ining docum enta tion, f a il ur e to r ep or t th e tr a ns a ction, or m a intena nce of or f ur nis h ing ina ccur a te p a r ticul a r s , a p ena l ty of 2 % of th e tr a ns a ction v a l ue m a y b e l ev ied.

•

•of th e a dditiona l ta x l ia b il ity a r is ing f r om th e a dj us tm ent m a y b e l ev ied, unl es s th e ta x p a y er is a b l e to dem ons tr a te th a t th e a r m ’ s - l eng th p r ice w a s deter m ined in g ood f a ith a nd w ith due dil ig ence.

Worldwide t ransfer p ricing reference guide 1 9 8

I nd ia (continued)


• F or tr a ns a ctions under ta k en f r om 1 A p r il 2 0 1 6 onw a r d, a p ena l ty of 5 0 % on th e ta x p a y er on under r ep or ted incom e m a y b e l ev ied in th e ca s e of a tr a ns f er p r icing a dj us tm ent if it r es ul ts in under r ep or ting of incom e. T h e p ena l ty ca n b e incr ea s ed to 2 0 0 % if th e under r ep or ting is th e cons eq uence of m is r ep or ting .

•

Penalty relief

A dditiona l l y , im m unity f r om im p os ition of p ena l ty m a y b e s oug h t f or tr a ns a ctions under ta k en f r om 1 A p r il 2 0 1 6 onw a r d under cer ta in conditions .


4


H ow ev er , th e ta x a uth or ities r ecentl y r em ov ed th is num er ica l b ench m a r k f or s el ecting ca s es f or tr a ns f er p r icing a udits . T h is is s een a s a m ov e to s h if t th e a p p r oa ch of s el ecting ca s es f or tr a ns f er p r icing a udits b a s ed on th e f a cts a nd cir cum s ta nces of th e ca s es . H ow ev er , r eg a r dl es s of th e a p p r oa ch f or s el ecting ca s es f or a udit, th e r is k of tr a ns f er p r icing a udit continues to r em a in r el a tiv el y h ig h . I n a ddition, a udits a r e ca r r ied out a nnua l l y , a nd once a ca s e is s el ected f or a tr a ns f er p r icing a udit, th er e is a h ig h l ik el ih ood of r ecur r ing a udits th er ea f ter .

a udit p r oceeding s .

p r icing m eth odol og y w il l b e ch a l l eng ed is a l s o h ig h .

T h e inf or m a tion tech nol og y , b us ines s p r oces s outs our cing , b a nk ing a nd p h a r m a ceutica l s ector s h a v e r eceiv ed p a r ticul a r a ttention.

ta x p a y er s . T h e ta x p a y er is r eq uir ed to dem ons tr a te th a t th e intr a g r oup s er v ices w er e a ctua l l y r ender ed or th e intel l ectua l p r op er ty w a s

ex ces s iv e w h en com p a r ed w ith indus tr y s ta nda r ds a nd, th us , dis a l l ow ed.

T h e ta x a uth or ities h a v e s oug h t a n up da ted a na l y s is us ing da ta th a t m a y not b e a v a il a b l e to th e ta x p a y er w h en contem p or a neous docum enta tion is p r ep a r ed.

1 9 9

I nd ia (continued)


its tr a ns f er p r icing docum enta tion. D ur ing r ecent a udits , ta x a uth or ities h a v e p a id cons ider a b l e a ttention to th e a p p r oa ch a dop ted b y th e ta x p a y er w h en s el ecting com p a r a b l e da ta .

a l l eg ing th a t s uch ex p ens es m a y cons titute a n inter na tiona l tr a ns a ction if th e inta ng ib l es a r e not ow ned in I ndia . I n s uch a ca s e, th e a uth or ities ex p ect r ep or ting a nd s ep a r a te b ench m a r k ing of s uch tr a ns a ctions .

APA opportunity

T h e A P A r eg im e h a s b een intr oduced in I ndia , ef f ectiv e 1 J ul y 2 0 1 2 . T h e A P A r ul es p r ov ide a n op tion f or ta x p a y er s to s eek a unil a ter a l ,

a l s o b een intr oduced b y th e F ina nce (N o 2 ) A ct, 2 0 1 4 . A r ol l b a ck w oul d b e a v a il a b l e to ta x p a y er s th a t h a v e a p p l ied f or a n A P A f or a

y ea r under th e A P A , w h ich th e ta x a uth or ities do not s ub j ect to a com p l ia nce a udit.


p ena l ties .

out l eg is l a tiv e ch a ng es in its dom es tic l a w .

I nd o nes ia



L ux ur y G oods L a w


• L a w N um b er 7 Y ea r 1 9 8 3 r eg a r ding I ncom e T a x (a m ended b y L a w N um b er 3 6 Y ea r 2 0 0 8 ) (P P h L a w )

•

•4 2 Y ea r 2 0 0 9 ) (P P N L a w )

ex is ts . A r ticl e 1 8 (3 ) a l s o a l l ow s a r edeter m ina tion of deb t a s eq uity . T h e r edeter m ina tion s h oul d b e m a de in a ccor da nce w ith eq uity a nd com m on p r a ctice of b us ines s f or indep endent p a r ties (i. e. , in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e). A s p ecia l r el a tion is deem ed to

• A ta x p a y er h a s dir ect or indir ect ow ner s h ip of 2 5 % or m or e in a noth er ta x p a y er or tw o or m or e oth er ta x p a y er s

• A ta x p a y er contr ol s a noth er ta x p a y er or tw o or m or e oth er ta x p a y er s

•

contr a ct of w or k or th e coop er a tiv e a g r eem ent.

4 4

• C onduct a com p a r a b il ity a na l y s is a nd deter m ine com p a r a b l e tr a ns a ctions

• D eter m ine th e a p p r op r ia te tr a ns f er p r icing m eth od

• A p p l y th e a r m ’ s - l eng th p r incip l e b a s ed on th e r es ul ts of th e com p a r a b il ity a na l y s is a nd th e m os t a p p r op r ia te tr a ns f er p r icing m eth od

•

4T h e r eg ul a tions m a y b e a p p l ied w h en th er e a r e tr a ns a ctions b etw een a ta x p a y er a nd a noth er dom es tic ta x p a y er or p er m a nent

•

• T h e im p os ition of th e s a l es or l ux ur y g oods ta x

• T r a ns a ctions conducted w ith ta x p a y er s of oil a nd g a s p r oduction- s h a r ing contr a ctor s

2 0 1

I nd o nes ia (continued)



p r incip l es of th e O E C D G uidel ines in its r eg ul a tions . H ow ev er , it s h oul d b e noted th a t th e D G T ’ s p r a ctica l a p p l ica tion of th e a r m ’ s - l eng th p r incip l e in a n a udit contex t r eg ul a r l y div er g es f r om th e p r incip l es endor s ed b y th e O E C D G uidel ines .


4

th eir r el a ted- p a r ty tr a ns a ctions dur ing th e y ea r .

D ocum enta tion r eq uir em ents a r e l a r g el y p r es cr ip tiv e a nd s h oul d a l s o a ddr es s k ey p oints th a t th e D G T w il l r a is e dur ing a udits b a s ed on

2 0 1 3 .


• T h e a dv a nta g es a nd dis a dv a nta g es of ea ch m eth od

• T h e s uita b il ity of th e m eth od b a s ed on th e f unctiona l a na l y s is

• T h e a v a il a b il ity of r el ia b l e inf or m a tion to a p p l y th e m eth od

• T h e l ev el of com p a r a b il ity b etw een th e tes ted tr a ns a ction a nd p otentia l com p a r a b l e da ta , incl uding th e r el ia b il ity of p otentia l a dj us tm ents


T h e inf or m a tion r eq uir ed incl udes th e counter p a r ty , th e ty p e of tr a ns a ction, th e v a l ue of th e tr a ns a ction, th e tr a ns f er p r icing m eth od a p p l ied a nd th e r ea s on f or th e a p p l ica tion of th e m eth od. A dditiona l l y , ta x p a y er s a r e r eq uir ed to dis cl os e w h eth er th ey h a v e tr a ns f er p r icing docum enta tion p r ep a r ed.


2 0 2




docum enta tion f r om th e D G T , ta x p a y er s a r e r eq ues ted to s ub m it th eir docum enta tion w ith in 7 da y s ; h ow ev er , th ey h a v e 3 0 da y s to s ub m it th eir docum enta tion under th e r eg ul a tion.


I na p p r op r ia te dis cl os ur e of inf or m a tion r eg a r ding r el a ted- p a r ty tr a ns a ctions b y a ta x p a y er in a cor p or a te incom e ta x r etur n m a y b e cons tr ued a s a n a ct of f r a ud th a t coul d l ea d to a n a dm inis tr a tiv e p ena l ty of up to 4 0 0 % of th e ta x under p a y m ent. T h er e is a p ena l ty of

4tr a ns a ctions a s a r es ul t of th e ta x a udit p r oces s .

Penalty relief

T h er e a r e no p r ov is ions f or p ena l ty r el ief .



I n g ener a l , th e l ik el ih ood of a n a nnua l ta x a udit is h ig h . I n a ddition, a ta x p a y er ’ s a p p l ica tion f or a ta x r ef und w il l tr ig g er a n a utom a tic ta x

T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a r eg ul a r a nd s p ecia l ta x a udit is h ig h , a nd th e l ik el ih ood th a t th e ta x a uth or ity w il l ch a l l eng e th e tr a ns f er p r icing m eth odol og y is a l s o h ig h , a s I ndones ia h a s a n a g g r es s iv e tr a ns f er p r icing contr ov er s y env ir onm ent. T h is a g g r es s iv e a udit env ir onm ent is p a r tia l l y dr iv en b y th e I ndones ia n G ov er nm ent’ s des ir e to incr ea s e I ndones ia ’ s ta x col l ection a s a p er centa g e of th e g r os s dom es tic p r oduct (G D P ).

p r icing a udit, unl es s it is a s p ecia l a udit, w il l occur a s a p a r t of a n a l l - ta x es a udit. T h e D G T h a s a centr a l tr a ns f er p r icing tea m a nd/ or v a l ua tions tea m th a t is a s s ig ned to ca s es a s needed. T h e centr a l tr a ns f er p r icing tea m or v a l ua tions tea m m ig h t a l s o b e inv ol v ed in

I n p r a ctice, in a ddition to ta x p a y er s th a t a r e s ub j ect to a n a utom a tic ta x a udit a s a p a r t of th e ta x ov er p a y m ent p r oces s , ta x p a y er s th a t

• A l a r g e num b er of r el a ted- p a r ty tr a ns a ctions w ith of f s h or e entities

•

•

•

•

2 0 3



b y a udit tea m s .

APA opportunity

4

1 2 J a nua r y 2 0 1 5 , r eg a r ding th e f or m a tion a nd im p l em enta tion of a n A P A . T h is r eg ul a tion b eca m e ef f ectiv e f r om 9 0 da y s a f ter th e ena ctm ent da te (i. e. , 1 2 A p r il 2 0 1 5 ) a nd is a p p l ica b l e f or a l l outs ta nding a nd f utur e A P A a p p l ica tions .

44 4 4 4

4 4a r e ef f ectiv e p r ior to, on or a f ter th is da te.


r eg a r ding th e ty p e of a dditiona l docum ents / inf or m a tion th a t is m a nda tor y to b e k ep t b y ta x p a y er w h o conducts tr a ns a ctions w ith r el a ted p a r ties a nd its p r ocedur es . T h e r el ea s e of th is r eg ul a tion m a r k s th e im p l em enta tion of th e th r ee- tier ed docum enta tion s tr uctur e a s

p r icing docum enta tion a s w el l a s th e tim el ine f or a v a il a b il ity a nd s ub m is s ion of th e docum enta tion. T h e new r eg ul a tion is ef f ectiv e f or

I r aq




I r a q ’ s incom e ta x l a w does not cur r entl y f ol l ow O E C D G uidel ines . H ow ev er , th e G C T ex p ects th a t a l l tr a ns a ctions w ith r el a ted p a r ties s h oul d b e enter ed under th e us ua l com m er cia l r a tes th a t a p p l y to contr a cts w ith unr el a ted th ir d p a r ties .

a nd a ta x r etur n f or m ) a nd w il l a s k f or a ny s up p or ting docum enta tion it deem s neces s a r y .

I r a q h a s enter ed into a b il a ter a l doub l e ta x a tion tr ea ty w ith E g y p t a nd a m ul til a ter a l doub l e ta x a tion tr ea ty w ith th e s ta tes of th e A r a b

b etw een I r a q a nd a noth er countr y , a s th e G C T does not l ook to th e tr ea ties , nor does it a p p l y th eir p r ov is ions .













2 0 5

I r aq (continued)




Penalty relief





APA opportunity




I r el and




if th os e a r r a ng em ents a r e enter ed into or a m ended on or a f ter 1 J ul y 2 0 1 0 . T h e r eg ul a tions a p p l y to b oth dom es tic a nd cr os s - b or der tr a ns a ctions w h er e I r is h tr a ding r eceip ts a r e under s ta ted or tr a ding ex p ens es a r e ov er s ta ted.

T h er e a r e ex em p tions f r om th es e r eg ul a tions f or s m a l l a nd m edium enter p r is es w h en a com p a ny h a s f ew er th a n 2 5 0 em p l oy ees a nd 4

8 3 5 C . T r a ns f er p r icing docum enta tion is f unda m enta l to v a l ida ting a nd ex p l a ining th e p r icing of th e intr a g r oup tr a ns a ctions a nd, if

s a tis f a ction.


G uidel ines (th e O E C D r ul es a p p l y onl y ins of a r a s th ey r el a te to tr a ding tr a ns a ctions ).

g ener a l r ev iew of I r el a nd’ s cor p or a te ta x r eg im e, w h ich is ex p ected to b e concl uded in th e m iddl e of 2 0 1 7 .


a nd cir cum s ta nces of th e tr a ns a ctions . T h e cos t of p r oducing th e docum enta tion s h oul d b e com m ens ur a te w ith th e r is k inv ol v ed. I t w oul d b e ex p ected th a t com p l ex a nd h ig h - v a l ue tr a ns a ctions g ener a l l y w oul d r eq uir e m or e deta il ed docum enta tion th a n s im p l e, h ig h -v ol um e tr a ns a ctions .

T h e tr a ns f er p r icing docum enta tion m a y b e k ep t in th e f or m of th e com p a ny ’ s ow n ch oos ing , a nd th e com p a ny is not r eq uir ed to p r ep a r e

E ng l is h or I r is h ).

2 0 7

I r el and (continued)


• T h e a s s ocia ted p a r ties inv ol v ed in th e tr a ns a ction

• T h e na tur e a nd ter m s of th e tr a ns a ction

• T h e ter m s of r el ev a nt tr a ns a ctions w ith b oth th ir d p a r ties a nd a s s ocia tes

• T h e m eth od, or m eth ods , b y w h ich th e p r icing of th e tr a ns a ctions w a s der iv ed, incl uding a ny com p a r a b il ity a na l y s is a nd a ny f unctiona l a na l y s is under ta k en

• T h e a p p l ica tion of th e tr a ns f er p r icing m eth od

• A ny b udg ets , f or eca s ts or oth er r el ev a nt p a p er s r el ied on in a r r iv ing a t a n a r m ’ s - l eng th r es ul t

T h e tr a ns f er p r icing docum enta tion r eq uir em ents a r e ex p ected to b e a m ended p os t a g ener a l r ev iew of I r el a nd’ s cor p or a te ta x r eg im e

•p r icing p ol icies

•tr a ns a ctions , a nd th e com p a ny ’ s tr a ns f er p r icing s up p or ting a na l y s is w ith r eg a r d to th os e tr a ns a ctions

docum enta tion r eq uir em ent. A t th is p oint in tim e th e intr oduction of a nd up da te to th e docum enta tion r eq uir em ents in l ine w ith A ction


a s s ocia ted enter p r is es in I r el a nd’ s doub l e ta x a tion tr ea ties . T o es ta b l is h a n a r m ’ s - l eng th p r ice, th e O E C D G uidel ines w il l b e r ef er enced. T h e a r m ’ s - l eng th p r incip l e a s s er ts th a t intr a g r oup tr a ns f er p r ices s h oul d b e eq uiv a l ent to th os e th a t w oul d b e ch a r g ed b etw een indep endent p er s ons dea l ing a t a r m ’ s - l eng th in oth er w is e s im il a r cir cum s ta nces .

T r a ns f er p r ices s h oul d b e r ev iew ed a t r eg ul a r inter v a l s to deter m ine th a t p r icing r em a ins a t a r m ’ s - l eng th .


C ur r entl y , th er e a r e no ta x r etur n dis cl os ur es . H ow ev er , cer ta in m ul tina tiona l s m a y b e ob l ig a ted to s ub m it a C b C r ep or t in a ccor da nce



2 0 8




p r a ctice th a t s om e tr a ns f er p r icing a na l y s is b e p r ep a r ed w h en th e ter m s of th e tr a ns a ction a r e a g r eed to, a nd th a t f or a com p a ny to b e in

due nine m onth s a f ter th e end of a n a ccounting p er iod.

• T h e ter m s of th e a g r eem ent cl ea r l y env is a g e th e tr a ns a ction.

• A p p l ica tion of th es e ter m s del iv er s th e p r ice of th e tr a ns a ction.

• A n a g r eem ent to enter into a f ur th er a g r eem ent w oul d not m eet th es e conditions .

H ow ev er , inter com p a ny a r r a ng em ents th a t w er e a g r eed to p r ior to 1 J ul y 2 0 1 0 , a nd th a t a r e r eneg otia ted a nd r e- s ig ned a f ter 1 J ul y 2 0 1 0 , a r e w ith in th e s cop e of th e r eg ul a tions .


T h er e is no s ep a r a te s ta tutor y r eg im e f or tr a ns f er p r icing p ena l ties . H ow ev er , s ta nda r d ta x - g ea r ed cor p or a te ta x p ena l ties th a t a p p l y to

Penalty relief

tr a ns f er p r icing docum enta tion w il l b e a k ey f a ctor in deter m ining th e l ev el of p ena l ties a p p l ica b l e to a tr a ns f er p r icing a dj us tm ent, if a ny .


T h e s ta tute of l im ita tions is cur r entl y f our y ea r s a f ter th e end of th e ta x y ea r or th e a ccounting p er iod in w h ich th e r etur n is m a de.


eq uip p ed to dea l w ith th e com p l ex ities inv ol v ed in a p p l y ing th e a r m ’ s - l eng th p r incip l e.

•r eg ul a tions .

•

•

•

2 0 9



APA opportunity

p r a ctice, w h ich h a d p r ev ious l y op er a ted on a n inf or m a l b a s is .


ef f ectiv e in I r el a nd until a t l ea s t th e b eg inning of 2 0 1 8 .

I s r ael




of a ta x ins p ector ), w h ich s h if ts th e b ur den of p r oof to th e ta x ing a uth or ity if th e l a tter ch a l l eng es th e tr a ns f er p r icing .

•intel l ectua l p r op er ty (I P ) m ig r a tion f ol l ow ing s uch r es tr uctur ing s .

•

•a p p r oa ch h a s r ecentl y b een r einf or ced b y th e I s r a el i cour t’ s r ul ing in tw o ca s es a ddr es s ing th is is s ue. T h es e ca s es a r e cur r entl y b eing a p p ea l ed.

• 4


T h e I T A cons ider s its tr a ns f er p r icing r ul es a nd r eg ul a tions to b e cons is tent w ith th e O E C D G uidel ines .


• T h e ta x p a y er ’ s g r oup s tr uctur e, th e p a r ties to th e inter na tiona l tr a ns a ction, th eir r es idency , a nd a ny s p ecia l r el a tions b etw een th e ta x p a y er a nd th e oth er p a r ties

•g ua r a ntees

• T h e ta x p a y er ’ s a r ea of a ctiv ity a nd a ny r el ev a nt dev el op m ents

• T h e econom ic env ir onm ent in w h ich th e ta x p a y er op er a tes a nd th e r el a ted r is k s

• D eta il s of a l l tr a ns a ctions enter ed into b y th e ta x p a y er w ith a r el a ted- p a r ty

• A n econom ic a na l y s is

2 1 1

I s r ael (continued)


T h e ta x p a y er is a l s o r eq uir ed to a tta ch a dditiona l docum ents th a t cor r ob or a te th e da ta s ub m itted, s uch a s tr a ns a ction contr a cts a nd a ny


•

•

• C os t- p l us or r es a l e p r ice

•

•

• O th er m eth ods

inter q ua r til e r a ng e.

p er f or m ed. I f th e inter na tiona l tr a ns a ction’ s r es ul t is outs ide th e r a ng e, th e m edia n s h oul d b e a p p l ied a s th e a r m ’ s - l eng th p r ice f or th e tr a ns a ction.

• A cos t- p l us m a r k up m a y b e a p p l ied to a com p a ny ’ s dir ect cos ts

•

•

•

• O th er m ea s ur es cons ider ed a p p r op r ia te under th e cir cum s ta nces


• A s h or t des cr ip tion of th e inter com p a ny tr a ns a ction deta il s of th e oth er p a r ty a nd its r es idency

• T r a ns a ction v ol um e a nd r es idency of oth er p a r ty

•

A ccor ding to th e ta x ing a uth or ity , s uch decl a r a tion m us t b e s up p or ted b y docum enta tion th a t m eets th e r eq uir em ents .


2 1 2





Penalty relief

T h er e is no p ena l ty r el ief r eg im e a p p l ica b l e in I s r a el .


T h e I s r a el i I ncom e T a x O r dina nce h a s g ener a l r ul es f or a uditing a ta x r etur n. A s s uch , th e s ta tute of l im ita tions us ua l l y is th r ee y ea r s (or


T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h . T r a ditiona l l y , ta x p a y er s op er a ting in th e inter na tiona l a r ena or s ub s idia r ies of f or eig n com p a nies h a v e a h ig h er l ik el ih ood of b eing a udited.

T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h . I n th e p a s t, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w oul d b e ch a l l eng ed in a tr a ns f er p r icing r ev iew h a d b een m oder a te, if s up p or ted b y r ob us t tr a ns f er p r icing

ex is ts , th e m eth odol og y is ev en m or e l ik el y to b e ch a l l eng ed.

F ol l ow ing th e r ecent cir cul a r s on r es tr uctur ing , s tock op tion ex p ens es a nd th e dig ita l econom y a s des cr ib ed a b ov e, th es e is s ues a r e m or e

a udits is I P m ig r a tions a nd b us ines s r es tr uctur ing s . T h er e a r e cur r entl y s ev er a l s uch ca s es b eing deb a ted in cour t.

APA opportunity

w h ich a n A P A m a y b e concl uded a nd del inea tes th e s cop e of a n A P A .

th e ta x p a y er ’ s a p p l ica tion w ith in 1 2 0 da y s (th oug h th e tim e ca n b e ex tended up to 1 8 0 da y s ), oth er w is e th e a p p l ica tion w il l b e a p p r ov ed a utom a tica l l y a nd th e inter com p a ny p ol icy w il l b e deem ed a s p r ov iding r ea s ona b l e a r m ’ s - l eng th p r ices . I n p r a ctice, a com p l ete A P A p r ocedur e m a y ta k e 1 2 m onth s .

2 1 3




D ur ing th e p a s t s ev er a l m onth s , th e I s r a el i ta x a uth or ities h a v e b een w or k ing on a m ending th e I s r a el i tr a ns f er p r icing r eg ul a tions , in l ig h t

th e f r a m ew or k f or th e ta x a tion of f or eig n enter p r is es r ecor ding incom e f r om th e s a l e of p r oducts or s er v ices in I s r a el v ia th e inter net. 4

w oul d im p a ct m a ny dig ita l b us ines s es s el l ing in I s r a el . T h is im p a ct w il l a l s o incl ude a dded docum enta tion r eq uir em ents w h er e new


I tal y

2 1 4


Agenzia delle Entrate, or A dE )

44


4

l a w . A r ticl e 2 6 outl ines th a t if th e ta x p a y er p r ov ides ta x a uth or ities w ith p r op er tr a ns f er p r icing docum enta tion dur ing a ta x a s s es s m ent, no ta x p ena l ties w il l b e a p p l ied on p os s ib l e ta x a dj us tm ents ; cur r entl y , th e ta x p ena l ties a r e 9 0 % to 1 8 0 % of th e a dditiona l ta x es if th e ta x a uth or ity deter m ines th a t th e inter com p a ny tr a ns a ctions do not com p l y w ith th e a r m ’ s - l eng th s ta nda r d.

(C ir cul a r 5 8 / E ).

C om p l ia nce w ith th e I ta l ia n tr a ns f er p r icing docum enta tion r eg im e is not m a nda tor y . I n th is r es p ect, ta x p a y er s a r e ex p ected to m a k e a s tr a teg ic m a na g em ent decis ion, ta k ing into cons ider a tion th a t th e p ena l ty p r otection is a f f or ded onl y if com p l ete a nd a p p r op r ia te tr a ns f er p r icing docum enta tion is in p l a ce. T h e tr a ns f er p r icing docum enta tion m us t f ol l ow th e f or m a t p r ov ided b y th e l a w , b e in

• A s s es s th e I ta l ia n entity ’ s ty p e to deter m ine th e p r op er docum enta tion to b e p r ep a r ed f or p ena l ty a v oida nce

•

Corte di Cassazione) D ecis ion N o. 2 2 0 2 3 of 1 3 O ctob er 2 0 0 6 notes th a t th e b ur den of p r oof r es ts on th e ta x

w h er e th e b ur den of p r oof is on th e ta x a uth or ity , th e ta x p a y er is not ob l ig ed to g iv e ev idence th a t th e tr a ns f er p r ices com p l y w ith th e a r m ’ s - l eng th p r incip l e unl es s th e ta x a uth or ity h a s a l r ea dy p r ov ed (prima facie) th a t th e ta x p a y er h a s not com p l ied w ith th e a r m ’ s - l eng th p r incip l e.

4 4

in I ta l y .

2 1 5

I tal y (continued)



I ta l ia n tr a ns f er p r icing r ul es a r e l a r g el y cons is tent w ith th e O E C D G uidel ines . I ndir ect r ef er ence to th e a p p l ica b il ity of th e 2 0 1 0 O E C D G uidel ines ca n b e f ound in th e a b ov em entioned r eg ul a tions on th e op tiona l tr a ns f er p r icing r eg im e f or p ena l ty p r otection. N o ex p l icit


P r op er docum enta tion f or p ena l ty p r otection p ur p os es (op tiona l r eg im e) m us t b e dr a f ted on a y ea r l y b a s is , a nd it m us t b e a v a il a b l e in ea ch of th e ta x a b l e p er iods s ub j ect to a udit.

D ocum enta tion r eq uir em ents (continued)

• N otw ith s ta nding com p l ia nce w ith th e f or m a l s tr uctur e, th e docum enta tion del iv er ed dur ing th e cour s e of a n a udit is neith er com p l ete nor cons is tent w ith th e p r ov is ions endor s ed b y th e op er a tiona l ins tr uctions .

• T h e inf or m a tion p r ov ided in th e docum enta tion is not cons is tent, w h ol l y or p a r tl y , w ith th e r ea l ity . O m is s ions or p a r tia l ina ccur a cies do

•

•

•

A dditiona l g uida nce r eg a r ding op er a tiona l ins tr uctions w a s ex p ected to b e is s ued in 2 0 1 6 .


T h e s el ection of th e tr a ns f er p r icing m eth od enta il s a n ex p l a na tion of th e r ea s ons f or us ing a p a r ticul a r m eth od th a t p r oduces r es ul ts

in a n eq ua l l y r el ia b l e m a nner , th e ta x p a y er s h oul d ex p l a in w h y th e l a tter h a d b een ex cl uded. T h e s a m e ex p l a na tion a p p l ies w h en a

A n a ccur a te des cr ip tion of th e ta x p a y er ’ s p r ocedur e f or s el ecting com p a r a b l e tr a ns a ctions w il l h a v e to b e p r ov ided (incl us iv e of deta il ed com p a r a b il ity a na l y s is ), a s w el l a s a cl ea r des cr ip tion of th e under l y ing s tep s in a r r iv ing a t a n a r m ’ s - l eng th r a ng e, if needed.

b ench m a r k s ev er y y ea r .

4th e new r ul es p r ov ide th a t entities inv ol v ed in th e col l ection of onl ine a dv er tis em ents a nd in r el a ted a ux il ia r y s er v ices on b eh a l f of f or eig n

2 1 6

I tal y (continued)


4

f ol l ow ing s ections ).


a nd contr ol l ed b y a noth er com p a ny , a s w el l a s th e na m e of th e r el a ted com p a ny (A r ticl e 2 4 9 7 - b is of th e I ta l ia n C iv il C ode). F ina ncia l

p a r ties (A r ticl es 2 4 2 4 , 2 4 2 7 , 2 4 2 8 a nd 2 4 9 7 - b is of th e I ta l ia n C iv il C ode). T h e ta x r etur n s h oul d dis cl os e tr a ns a ctions w ith ta x h a v ens

cos ts v er s us r ev enues .


ta x p a y er s th a t intend to a dh er e to s uch r eg im e s h a l l com m unica te th e a v a il a b il ity of p r op er docum enta tion on th e a nnua l incom e ta x


(i. e. , in a dedica ted b ox ) in ca s e th ey decide to op t f or th e p ena l ty p r otection r eg im e.

s up p l em enta r y inf or m a tion is needed dur ing a n a udit or a ny oth er a s s es s m ent a ctiv ity , it m us t b e p r ov ided w ith in s ev en da y s of a r eq ues t (or w ith in a l ong er tim e p er iod, dep ending on th e com p l ex ity of th e tr a ns a ctions under a na l y s is ), to th e ex tent th a t th e p er iod is cons is tent w ith th e tim e of th e a udit. O nce th e tim e p er iods h a v e el a p s ed, th e ta x a uth or ities a r e not b ound b y th e a p p l ica tion of th e p ena l ty r el ief .


I f a nd w h en th e a b ov em entioned op tiona l tr a ns f er p r icing docum enta tion r eg im e f or p ena l ty p r otection p ur p os es is deem ed ina p p l ica b l e (w ith v a r ious deg r ees of j udg m ent), g ener a l p ena l ties f or under p a y m ent a p p l y (D ecr ee 4 7 1 ).

5 8 / E , h ig h er p ena l ties m a y b e, in p r incip l e, a p p l ica b l e w h en th e docum enta tion is not deem ed com p l ete a nd a p p r op r ia te.

• T h e ta x a b l e incom e decl a r ed is l ow er th a n a s s es s ed.

• T h e ta x es decl a r ed a r e l ow er th a n th os e due.

• T h e ta x cr edit decl a r ed is g r ea ter th a n th a t due to th e ta x p a y er .

T h e s a m e p ena l ties a p p l y w h er e undue ta x a l l ow a nces or deductions f r om th e ta x a b l e incom e h a v e b een decl a r ed in th e ta x r etur n. I nter es t on ta x es or a dditiona l ta x es due a l s o a p p l ies . N o p ena l ties a p p l y in ca s e of l os s es .

2 1 7

I tal y (continued)


L a w D ecr ee N o. 1 5 8 / 2 0 1 5 a m ended th e I ta l ia n p r ov is ions on th e cr im ina l im p a cts of unf a ith f ul ta x r etur ns , p r ov iding th a t ta x p a y er s th a t

oth er docum enta tion r el ev a nt f or ta x p ur p os es (e. g . tr a ns f er p r icing docum enta tion f or p ena l ty p r otection) a r e not s ub j ect to p otentia l

Penalty relief

P l ea s e r ef er to th e s ection a b ov e f or th e a p p l ica tion of th e new p ena l ty p r otection r eg im e.


a p p l ies . T h er ef or e, ta x p a y er s m us t r eceiv e a notice of ta x a s s es s m ents b y 3 1 D ecem b er of th e f our th y ea r f ol l ow ing th e y ea r f or w h ich

is ex tended b y a n a dditiona l y ea r .

com m unica ted b y th e A dE to th e cr im ina l a uth or ities w ith in th e s ta nda r d s ta tute of l im ita tions .

I n ca s e of ta x ins p ections r el a ting to F is ca l Y ea r 2 0 1 6 onw a r d, th e m entioned ter m s a r e incr ea s ed b y one y ea r f or unf a ith f ul ta x r etur ns , a nd b y tw o y ea r s f or om itted ta x r etur ns .


onl y th e m eth odol og y , b ut a l s o th e f unctiona l a na l y s is a nd com p a r a b l es .

I n a ddition, th e I ta l ia n ta x a uth or ities g ener a l l y p a y p a r ticul a r a ttention a nd dir ect g r ea ter ta x a udit a ctiv ity to l a r g e ta x p a y er s , a nd th ey a r e dev oting g r ea ter r es our ces in intel l ig ence a nd m onitor ing th e a ctiv ities of m ul tina tiona l s .

a uth or ities in r el a tion to p r ev enting a nd com b a ting ta x a v oida nce, a nd a m ong th e m os t cr ucia l a r ea s to b e a s s es s ed, it m entions inter com p a ny tr a ns a ctions a nd tr a ns f er p r ices a ccor ding to th e p r ov is ions of A r ticl e 1 1 0 (7 ) of D ecr ee 9 1 7 . L eg is l a tiv e D ecr ee N o. 1 8 5

com p a r ed w ith a b out 2 , 0 0 0 tutor ia l s in 2 0 1 1 ). A s p a r t of th e tutor s h ip a ctiv ities , th e need to m a inta in a h ig h l ev el of a ttention is

cons ider ed. T r a ns f er p r icing is ex p r es s l y m entioned a m ong s uch p h enom ena .

2 1 8

I tal y (continued)


G uida nce on tr a ns f er p r icing a s s es s m ents is incl uded in C ir cul a r L etter s th a t a r e g ener a l l y is s ued on a y ea r l y b a s is a nd r el a te to g ener a l

of tr a ns p a r ency a nd coop er a tion w ith th e ta x a dm inis tr a tion w ith in th e r is k - m onitor ing a ctiv ities .

APA opportunity

4m a inl y r el a ting to tr a ns f er p r icing , div idends a nd r oy a l ties . T h e l a w w a s ena cted w ith th e Provvedimento del Direttore dell’Agenzia delle Entrate, da ted 2 3 J ul y 2 0 0 4 . T h is docum ent p r ov ides a num b er of p r a ctica l g uidel ines f or th e r ul ing p r og r a m .

O n 2 3 D ecem b er 2 0 1 3 , th e I ta l ia n G ov er nm ent is s ued L a w D ecr ee N o. 1 4 5 / 2 0 1 3 (th e D es tina tion I ta l y D ecr ee), w h ich ex tends th e s cop e of A P A s to p r el im ina r y a s s es s m ents of I ta l ia n p er m a nent es ta b l is h m ents of f or eig n entities a nd p r ov ides th a t th e v a l idity of a g r eem ents

b e a b l e to us e r ul ing r es ul ts (e. g . , in th e ca s e of a n A P A ) to a dj us t p a s t y ea r s b ut not b ey ond th e y ea r in w h ich th e r ul ing r eq ues t w a s s ub m itted (r ol l b a ck s y s tem ).

4 41 9 7 3 , w h ich ex p a nds th e s cop e of th e A P A . I t w il l a l s o b e a v a il a b l e to deter m ine a s s et ta x b a s es in th e ca s e of inb ound a nd outb ound m ig r a tions .

Pat ent b ox regim e

L a w (L a w N o. 1 9 0 of 2 3 D ecem b er 2 0 1 4 ) a nd s ub s eq uentl y a m ended b y L a w D ecr ee N o. 3 of 2 4 J a nua r y 2 0 1 5 . T h e s a id p r ov is ions intr oduce a n el ectiv e r eg im e th a t g r a nts a n ex em p tion f r om cor p or a te incom e ta x a nd l oca l ta x on incom e der iv ed f r om q ua l if y ing inta ng ib l e a s s ets (s uch a s p a tents , b r a nds , k now - h ow a nd oth er intel l ectua l p r op er ties ). T h e r eg im e is el ig ib l e f or ta x p a y er s th a t p er f or m

r eq uir ed to deter m ine th e r el ev a nt incom e a ttr ib uta b l e to th e q ua l if y ing intel l ectua l p r op er ty w h en it is dir ectl y ex p l oited b y th e ta x p a y er s . A dditiona l op er a tiona l g uida nce w a s p r ov ided b y v a r ious ins tr uctions r el ea s ed f r om N ov em b er 2 0 1 5 to A p r il 2 0 1 6 .

M ut ual agreem ent p rocedures

O n 5 J une 2 0 1 2 , th e I ta l ia n ta x a uth or ities is s ued a C ir cul a r L etter p er ta ining to th e s ettl em ent of inter na tiona l ta x dis p utes a nd, m or e

a l l ow ed onl y if th e ta x p a y er r enounces th e op tion to p ur s ue th e dom es tic l itig a tion p r ocedur e.


p r oj ect) ex is ts , a l th oug h ex p er ience s h ow s th a t th e I ta l ia n T a x A uth or ities a r e in p r a ctice a l r ea dy r ef er encing to cer ta in up da ted p r ov is ions .

J ap an



• C or p or a tion ta x

•

• P r ef ectur a l a nd m unicip a l inh a b ita nt ta x es (l oca l ta x )


• 4 4 4 4 4 4

•P er s ons

• 4

• 4 4

• 4 4 4 4

•G uidel ines )

•C or p or a tions (A dm inis tr a tiv e G uidel ines f or C ons ol ida ted C or p or a tions )

•


T h e N T A r ef er s to th e O E C D G uidel ines f or dir ection, a nd th e J a p a nes e T r a ns f er P r icing A dm inis tr a tiv e G uidel ines conta in th e f ol l ow ing

a uth or ities f or th e r es ol ution of inter na tiona l doub l e ta x a tion th a t a r is es due to ta x a tion p ur s ua nt to th e tr a ns f er p r icing ta x s y s tem , a p p r op r ia te a dm inis tr a tion s h a l l b e ca r r ied out b y r ef er r ing to th e O E C D G uidel ines to th e ex tent neces s a r y in ex a m ina tions a nd in


4 44 4

2 2 0

J ap an (continued)


C b C rep ort

(l im ited to th os e th a t f a l l into th e ca teg or y of ul tim a te or s ur r og a te p a r ent entities ) m us t s ub m it a C b C r ep or t to th e D is tr ict D ir ector

is tr a ns m itted to th e ta x a uth or ities in th e countr y w h er e th e cons tituent entity r es ides a ccor ding to th e inf or m a tion ex ch a ng e s y s tem

I f th e ul tim a te or s ur r og a te p a r ent entity is l oca ted in a f or eig n county , a J a p a nes e cor p or a tion or f or eig n cor p or a tion w ith a P E th a t is

ul tim a te or s ur r og a te p a r ent entity to th e ta x a uth or ities in th e countr y w h er e it r es ides is tr a ns m itted b y th e ta x a uth or ities to th e N T A in J a p a n. A s a n ex cep tion, under cer ta in conditions , J a p a nes e cor p or a tions or f or eig n cor p or a tions w ith a P E th a t is a cons tituent entity of

b y th e r ep or t ends .

Master file

Local file

C or p or a tions eng a g ed in contr ol l ed tr a ns a ctions m us t p r ep a r e or ob ta in a nd s tor e docum ents cons ider ed a s neces s a r y to ca l cul a te

a nd 2 2 - 7 4 .

F a il ur e to p r ov ide a p p r op r ia te m a ter ia l s b y a da y des ig na ted b y a ta x ex a m iner th a t com es w ith in 4 5 da y s ca n tr ig g er th e ta x ex a m iner ’ s

out s im il a r a ctiv ities .

I f a ny f or eig n r el a ted tr a ns a ctions a r e ex em p t f r om contem p or a neous docum enta tion, th e ta x p a y er is r eq uir ed to s ub m it docum ents 4

th e da y des ig na ted b y th e ta x ex a m iner th a t com es w ith in 6 0 da y s .

2 2 1

J ap an (continued)



4 4th e m os t- a p p r op r ia te- m eth od a p p r oa ch f or ta x y ea r s b eg inning on or a f ter 1 O ctob er 2 0 1 1 .


44

l eng th p r ices of f or eig n r el a ted- p a r ty tr a ns a ctions .

4

• T h e num b er of em p l oy ees of th e f or eig n r el a ted- p a r ty

• T h e a m ount of r eta ined ea r ning s of th e f or eig n r el a ted- p a r ty f or th e p r eceding y ea r

• A ny A P A b etw een th e ta x p a y er a nd th e f or eig n com p etent a uth or ity


4



T r a ns f er p r icing a s s es s m ents a r e s ub j ect to th e s a m e p ena l ties th a t a p p l y to g ener a l cor p or a te ta x a s s es s m ents . T h er e a r e tw o ty p es of

• T h e under p a y m ent p ena l ty ta x is com p uted a s eith er 1 0 % of th e a dditiona l a s s es s ed ta x (up to J P Y 5 0 0 , 0 0 0 ) or 1 5 % of th e a dditiona l ta x , dep ending on th e a m ount of under p a y m ent.

•

• 44

r a te is deter m ined b y a dding 1 % to th e a v er a g e contr a ctua l inter es t r a te on s h or t- ter m b a nk l oa ns f or th e p er iod f r om O ctob er (tw o

ex a m p l e, th is tr a ns l a tes to a del inq uency ta x r a te of 2 . 8 % f or th e p er iod f r om 1 J a nua r y 2 0 1 5 to 3 1 D ecem b er 2 0 1 5 .

2 2 2

J ap an (continued)


T h e s econd p a r t of del inq uency ta x a ccr ues f r om th e da te f ol l ow ing th e da te of th e a s s es s m ent notice until th e da te th e a dditiona l ta x is

44

th e a b ov e p a r a g r a p h a p p l ies . F or a ny del inq uency ta x a ccr uing a f ter th is p er iod, th e r a te incr ea s es to th e l ow er of 1 4 . 6 % or th e r a te com p uted b y a dding 7 . 3 % to th e a v er a g e contr a ctua l inter es t r a te on s h or t- ter m b a nk l oa ns f or th e p er iod f r om O ctob er (tw o y ea r s p r ior )

tr a ns l a tes to a del inq uency ta x r a te of 2 . 8 % f or th e p er iod f r om 1 J a nua r y 2 0 1 5 to 3 1 D ecem b er 2 0 1 5 .

dea dl ine w ith out g ood r ea s on.

Penalty relief

T h e g r a ce p er iod is th e p er iod s ta r ting on th e initia l p a y m ent due da te of a s s es s ed ta x es (if th e a p p l ica tion s ub m is s ion da te is l a ter th a n

4p os tp onem ent of ta x p a y m ent), th e ta x a uth or ity r eq uir es th e ta x p a y er to p r ov ide s ecur ity eq uiv a l ent to th e a m ount of th e ta x p a y m ent (i. e. , col l a ter a l ). T h is new tr a ns f er p r icing r ul e a p p l ies to a p p l ica tions f or a g r a ce p er iod m a de on or a f ter 1 A p r il 2 0 0 7 .


4


ta x a udit in J a p a n is m edium to h ig h , com p a r ed w ith oth er j ur is dictions . T h e J a p a nes e ta x a uth or ities h a v e a r ob us t enf or cem ent

l ik el ih ood h a s incr ea s ed w ith th e intr oduction of th e N ew G ener a l T a x L a w , w h ich p r oh ib its tw o or m or e s ep a r a te ta x a udits of th e s a m e

s im ul ta neous conduct of a tr a ns f er p r icing a udit a l ong w ith th e g ener a l ta x a udit.

2 2 3

J ap an (continued)


T a x p a y er s m a y a l s o b e a udited f or tr a ns f er p r icing onl y (not p a r t of a ta x a udit) w h en th ey cons ent to a s ep a r a te tr a ns f er p r icing a udit. I n g ener a l , th e J a p a nes e ta x a uth or ities r eq ues t th a t ta x p a y er s p r ov ide w r itten cons ent p r ior to th e s ta r t of a n ex tens iv e tr a ns f er p r icing a udit. T h e N T A a nd th e m a j or r eg iona l ta x b ur ea us tog eth er em p l oy a l a r g e cor p s of dedica ted tr a ns f er p r icing s p ecia l is ts to enf or ce

• I n indus tr ies ta r g eted b y th e N T A

•

• 4

•

•

• I n indus tr ies w ith h ig h m a r g ins (th e N T A is l ik el y to s eek a p p l y ing its ow n com p a r a b l es , incl uding p os s ib l y s ecr et com p a r a b l es a v a il a b l e onl y to th e N T A , a l th oug h s ecr et com p a r a b l es h a v e b ecom e l es s com m on in r ecent y ea r s )

th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h if th e ta x p a y er a p p ea r s unp r ep a r ed to def end its tr a ns f er p r icing p ol icies a nd m eth ods .

APA opportunity

A P A g uidel ines a r e incl uded in th e A dm inis tr a tiv e G uidel ines . A r ol l b a ck of up to s ix y ea r s is p os s ib l e in th e ca s e of a b il a ter a l A P A ; h ow ev er , a r ol l b a ck is not p er m itted in unil a ter a l ca s es .


ex p ected to b e p r ep a r ed.

J o r d an



4 4


J or da n’ s I ncom e T a x L a w does not cur r entl y f ol l ow O E C D G uidel ines . T h e onl y g uida nce r eg a r ding tr a ns f er p r icing r ul es in J or da n is

contr a cts w ith unr el a ted th ir d p a r ties b a s ed on th e s ta nda r d m a r k et p r a ctice.

J or da n h a s enter ed into doub l e ta x tr ea ties w ith a num b er of f or eig n countr ies w h er ein th e l a ng ua g e conta ins a n a r ticl e th a t r es em b l es

tr ea ties .















2 2 5

J o r d an (continued)


Penalty relief





4a b ov e.

APA opportunity



K az ak h s tan




•

• 4

•

• 42 0 1 5 )

•

•


b us ines s tr a ns a ctions , r eg a r dl es s of w h eth er th e p a r ties a r e r el a ted.


• T r a ns a ctions w ith g oods (w or k s , s er v ices ) th a t a r e s ub j ect to m onitor ing

• A l l oth er tr a ns a ctions w ith g oods (w or k s , s er v ices ) s ub j ect to tr a ns f er p r icing contr ol

r ep or ts incl ude inf or m a tion on th e a p p l ied p r ices , r el a tions h ip s of th e p a r ties , indus tr ies a nd m a r k et conditions , b us ines s s tr a teg y , tr a ns f er p r icing m eth odol og y , f unctiona l a nd r is k a na l y s is , ta ng ib l e a nd inta ng ib l e a s s ets , m eth od, s our ce of inf or m a tion us ed f or deter m ina tion of a m a r k et p r ice, a nd oth er r el a ted inf or m a tion.

T r a ns a ction p a r ticip a nts ex ecuting tr a ns a ctions w ith oth er g oods (w or k s , s er v ices ) th a t a r e s ub j ect to tr a ns f er p r icing contr ol s h oul d m a inta in docum enta tion s up p or ting th e a p p l ied p r ices , b ut th is docum enta tion m us t not b e a s deta il ed a s th a t r eq uir ed f or m onitor ing


G uidel ines .

2 2 7

K az ak h s tan (continued)




A p a r t f r om th e g ener a l tr a ns f er p r icing docum enta tion r eq uir em ents (a s des cr ib ed a b ov e), no oth er tr a ns f er p r icing r etur n is r eq uir ed to


y ea r .

T h e docum enta tion s up p or ting th e a p p l ied tr a ns a ction p r ices m us t b e s ub m itted w ith in 9 0 da y s of th e da te of th e com p etent a uth or ity ’ s r eq ues t.


(i. e. , m onitor ing r ep or ting a nd docum enta tion s up p or ting th e tr a ns a ction p r ice). T h e m a x im um a m ount of p ena l ty is s et a t a p p r ox im a tel y 4

T h e p ena l ty f or a n under s ta tem ent of ta x r es ul ting f r om a tr a ns f er p r icing a dj us tm ent is up to 5 0 % of th e a dditiona l a ccr ued ta x a m ount. I n a ddition, inter es t f or th e del a y ed p a y m ent of th e a dditiona l l y a s s es s ed ta x r es ul ting f r om th e tr a ns f er p r icing a dj us tm ent is ca l cul a ted

T r a ns f er p r icing p ena l ties a r e a l s o im p os ed on indiv idua l s f or p er s ona l l ia b il ity of a n a dm inis tr a tiv e v iol a tion, incl uding cr im ina l l ia b il ity if 4 4

Penalty relief

a m ong oth er s , incl ude ex p ir a tion of th e s ta tute of l im ita tions , ex em p tion on th e b a s is of a n a ct of a m nes ty a nd r econcil ia tion of th e p a r ties . D es p ite l eg a l p r ov is ions a l l ow ing f or ex em p tion, im p l em enta tion is q uite r a r e in p r a ctice.


ta x r ep or ting .

2 2 8

K az ak h s tan (continued)



T h e l ik el ih ood of a ta x a udit dep ends on th e ta x r is k l ev el a s s ig ned to a p a r ticul a r ta x p a y er . T h er e a r e s ev er a l cr iter ia f or deter m ining th e

•

•

•

inter p r eta tion of inf or m a tion on m a r k et p r ices of ten r es ul ts in tr a ns f er p r icing a dj us tm ents th a t a r e of ten contes ted b y ta x p a y er s .

APA opportunity

T r a ns a ction p a r ticip a nts a r e a l l ow ed to concl ude a n a g r eem ent on th e a p p l ica tion of tr a ns f er p r ices . T h e p r ocedur e f or r eq ues ting s uch

• L is t of docum ents r eq uir ed f or concl uding th e a g r eem ent

•

• D ur a tion of th e a g r eem ent (e. g . , not m or e th a n th r ee y ea r s f r om th e da te of s ig ning )

• O th er


T h er e h a s not b een a ny im p a ct f r om th e new O E C D G uidel ines y et.

K eny a




• T r a ns a ctions b etw een a s s ocia ted enter p r is es w ith in a m ul tina tiona l com p a ny w h er e one enter p r is e is l oca ted in, a nd is s ub j ect to ta x in, K eny a a nd th e oth er is l oca ted outs ide K eny a

•



T h e C om m is s ioner f or D om es tic T a x es m a y , w h er e neces s a r y , r eq ues t inf or m a tion, incl uding b ook s of a ccounts a nd oth er docum ents

• T h e s el ection of th e tr a ns f er p r icing m eth od a nd th e r ea s ons f or th e s el ection

• T h e a p p l ica tion of th e m eth od, incl uding th e ca l cul a tions m a de a nd p r ice a dj us tm ent f a ctor s cons ider ed

•

• T h e deta il s of th e tr a ns a ction under cons ider a tion

• T h e a s s um p tions , s tr a teg ies a nd p ol icies a p p l ied in s el ecting th e m eth od

• O th er b a ck g r ound inf or m a tion r eg a r ding th e tr a ns a ction

T h e b ook s of a ccounts a nd oth er docum ents s h a l l b e p r ep a r ed in, or tr a ns l a ted into, E ng l is h a t th e tim e th e tr a ns f er p r ice is es ta b l is h ed.

• D ev el op a n a p p r op r ia te tr a ns f er p r icing p ol icy

• D eter m ine th e a r m ’ s - l eng th p r ice a s p r es cr ib ed under th e g uidel ines p r ov ided b y th es e r ul es

• F ur nis h docum enta tion ev idencing th eir a na l y s is up on r eq ues t b y th e C om m is s ioner f or D om es tic T a x es


4

I n 2 0 1 2 , th e tr a ns f er p r icing r ul es w er e a m ended to g iv e th e C om m is s ioner f or D om es tic T a x es p ow er to p r es cr ib e th e a p p l ica tion of th e

2 3 0

K eny a (continued)



A ccor ding to th e cor p or a te ta x r etur n f or m a t, th e ta x p a y er is r eq uir ed to decl a r e th e na m es a nd a ddr es s es of r el a ted p a r ties outs ide of K eny a .



A p p r op r ia te docum enta tion m us t b e p r ov ided up on r eq ues t.


4

•due da te.

• 4a m ount, incl uding th e p ena l ty r em a ining unp a id f or m or e th a n one m onth a f ter th e due da te, until th e f ul l a m ount is r ecov er ed.

•ch a r g ea b l e ta x on th e ta x p a y er ’ s p r ov is iona l incom e ta x r etur n f or th a t y ea r , inter es t a t th e r a te of 2 % p er m onth s h a l l b e p a y a b l e on th e entir e dif f er ence b etw een th e ta x a s s es s ed a nd th e ta x es tim a ted.

Penalty relief

C ur r entl y , th er e is no p ena l ty r el ief a v a il a b l e.


y ea r of incom e, unl es s th e C om m is s ioner f or D om es tic T a x es h a s r ea s ona b l e ca us e to b el iev e th a t f r a ud or g r os s or w il l f ul neg l ect h a s b een com m itted in connection w ith , or in r el a tion to, ta x f or a y ea r of incom e.


p r icing p ol icies . T h e l ik el ih ood of occur r ence of ta x a udits is h ig h , a s is th e l ik el ih ood of a tr a ns f er p r icing r ev iew a s p a r t of a g ener a l ta x a udit. T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed in a tr a ns f er p r icing r ev iew is h ig h .

2 3 1

K eny a (continued)


APA opportunity


K eny a is not a m em b er s ta te of th e O E C D , a nd tr a ns f er p r icing r eg ul a tions do not h a v e ex p l icit r ef er ence to th e l a tes t a p p r ov ed O E C D v er s ion. T h us , th e a m endm ents w il l not a p p l y a utom a tica l l y , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

K o s o v o




• L a w N o. 0 5 / L - 0 2 9 , da ted 2 2 J ul y 2 0 1 5 , on C I T

•

•

•

• L a w N o. 0 3 / 2 2 2 , da ted 1 2 J ul y 2 0 1 0 , on ta x p r ocedur es

•

• 4

• D oub l e ta x a tion tr ea ties ena cted b y K os ov o

• 4a dm inis tr a tiv e ins tr uction is ex p ected to b e is s ued f ol l ow ing th e a b r og a tion of L a w 0 3 / L - 1 6 2 on C I T )

•

•

•


T h e K os ov a r l eg is l a tion on tr a ns f er p r icing m a k es r ef er ence to th e O E C D G uidel ines . T h e r el ev a nt r eg ul a tor y f r a m ew or k f or tr a ns f er p r icing incl udes p r ov is ions of th e C I T l a w a nd ta x p r ocedur es l a w a nd th e r el a ted ins tr uctions .


m eth odol og y us ed in a r r iv ing a t th e tr a ns f er p r ices a p p l ied.


T h e ta x a uth or ities g ener a l l y f ol l ow th e O E C D G uidel ines in ex a m ining r el a ted- p a r ty tr a ns a ctions a nd tr a ns f er p r ices ch a r g ed. H ow ev er ,

2 3 3

K o s o v o (continued)



T h e cur r ent l eg is l a tion does not p r ov ide f or a ny r etur n dis cl os ur es or r el a ted- p a r ty dis cl os ur es . A ccor ding to th e K os ov a r ta x l eg is l a tion,






a dj us tm ent, th e g ener a l ta x p ena l ties w oul d a p p l y . H ence, a p ena l ty of 5 0 % w oul d a p p l y on th e a m ount of unp a id ta x l ia b il ity due to

m inim um , 0 . 5 % h ig h er th a n th e b a nk l ending inter es t r a te in K os ov o.

Penalty relief




T r a ns f er p r icing is a udited in th e g ener a l cour s e of a cor p or a te incom e ta x a udit. T h e l ik el ih ood of a ta x a udit in K os ov o is h ig h f or

not p r ov ide deta il s on th e contents of th e docum enta tion r eq uir ed to b e k ep t b y th e ta x p a y er to s ub s ta ntia te th e g r ounds on w h ich th e tr a ns f er p r ices a p p l ied a r e in l ine w ith th e a r m ’ s - l eng th p r incip l e. T h e ta x a dm inis tr a tion is unl ik el y to ch a l l eng e th e m eth odol og y a p p l ied. I n p r incip l e, in ex a m ining th e a r m ’ s - l eng th ch a r a cter of a tr a ns a ction, th e ta x a dm inis tr a tion s h oul d us e th e s a m e tr a ns f er p r icing m eth od a p p l ied b y th e ta x p a y er , to th e ex tent th a t it is th e m os t a p p r op r ia te one f or th a t tr a ns a ction.

2 3 4

K o s o v o (continued)


APA opportunity

K os ov a r l eg is l a tion does not p r ov ide f or th e p os s ib il ity of a n A P A .


K u w ait



Relevant regulations and rulings1

4

•

• I ncor p or a tes th e a r m ’ s - l eng th p r incip l e into K uw a iti dom es tic r eg ul a tions

• P r ov ides a cl ea r b a s is f or th e ta x a uth or ity to ins p ect com p a nies dea l ing w ith r el a ted p a r ties a nd v er if y w h eth er th e a r m ’ s - l eng th p r incip l es w a s ob s er v ed

•

cr iter ia .

p er ta ining to ta x a s s es s m ents a p p l y .

T h e r eg ul a tions do not l is t th e m eth ods th a t th e ta x a uth or ities s h oul d f ol l ow , oth er th a n th e g ener a l g uida nce th a t r el a ted- p a r ty

a v oida nce a nd s a f e- h a r b or r eg ul a tions a p p l ica b l e in r el a ted- p a r ty tr a ns a ctions . T h e m ech a nis m s a p p l ied b y th e l eg is l a tur e h er e v a r y . A

l im ita tions on deducting cos ts .

•

•

•

•

1

2 3 6

K u w ait (continued)


•

•

•

•

•

•

•

•

cus tom s docum ents ev idencing th e v a l ue of th e a s s ets a r e p r es ented to th e D I T . T h e l ea s e ex p ens es w il l b e l im ited to th e a m ount of dep r ecia tion nor m a l l y ch a r g ed on th e a s s et f or its us e in K uw a it. I n th e ev ent th a t it is not p os s ib l e to deter m ine th e a s s et’ s v a l ue on w h ich dep r ecia tion is ca l cul a ted, th e r enta l v a l ue of th e l ea s ed a s s ets m a y not b e a p p r ov ed a nd th e ex p ens e is f ul l y dis a l l ow ed.

ca n b e ca p p ed.

s up p or ting docum ents .

b e r ev ok ed in conj unction w ith th e ta x tr ea ty r eg ul a tions .


T h e dom es tic r eg ul a tions do not ex p l icitl y r ef er to th e O E C D G uidel ines .

I n p r a ctice, h ow ev er , th e l ik el ih ood of contr ov er s y a nd ta x a s s es s m ent decr ea s es if th e ta x p a y er r ef er s to inter na tiona l l y a ccep ted s ta nda r ds a nd th e p r op er a p p l ica tion of th e m eth od in a p a r ticul a r ca s e is w el l - docum ented.


C ur r entl y , K uw a iti ta x r eg ul a tions do not s et a ny f or m a l tr a ns f er p r icing docum enta tion r eq uir em ents . T r a ns f er p r icing docum enta tion s h oul d b e dr a w n up a nd up da ted to l im it th e contr ov er s y ex p os ur e.


D om es tic l a w s do not r eg ul a te th e p r icing m eth ods . A s m entioned a b ov e, th e r eg ul a tions of f er g ener a l g uida nce in th is r es p ect. I n p r a ctice, it m a y b e us ef ul in dis cus s ions w ith th e D I T if th e tr a ns f er p r icing m eth od us ed is b a s ed on inter na tiona l l y a ccep ted p r incip l es a nd s ta nda r ds a nd th e tr a ns f er p r icing docum enta tion s h ow s th a t th e ta x p a y er a dh er ed to th e m eth od.

2 3 7




tr a ns p a r ency in th is r eg a r d.

T h e dis cl os ur e duties b a s ed on ta x l a w s a r e v er y b r oa d under th e K uw a iti r eg ul a tions . T h er e is a g ener a l ob l ig a tion to dis cl os e th e tr a ns a ctions (ob v ious l y incl uding th e r el a ted- p a r ty tr a ns a ctions ) in connection w ith ta x r etention duties . T h is im p l ies th a t th e ta x a uth or ities h a v e a cces s to a b r oa d b a s e of inf or m a tion p er ta ining to th e l ev el of p r ices a g r eed up on l oca l l y , b oth b etw een r el a ted a nd

cor p or a te incom e ta x r etur n w ith r es p ect to m a ter ia l cos t, des ig n a nd cons ul ta ncy f ees incur r ed; r el a ted- p a r ty l ea s es ; intr a g r oup


p a r ty tr a ns a ctions m us t b e dis cl os ed, tog eth er w ith th e a nnua l ta x r etur n.


C ur r entl y , K uw a it does not h a v e a ny f or m a l docum enta tion r eq uir em ents a nd, h ence, no dea dl ines .

I n p r a ctice, it is a dv is a b l e to p r ep a r e a nd up da te th e docum enta tion b ef or e th e a nnua l ins p ection s o th a t it ca n b e a dm itted a s ev idence in th e p r oceeding s in a tim el y m a nner .


th e a p p r op r ia te docum enta tion. P ena l ty inter es t (1 % p er m onth ) is im p os ed in th e ca s e of tr a ns f er p r icing a dj us tm ents r es ul ting in a n a s s es s m ent of a dditiona l incom e.

Penalty relief

K uw a iti ta x r eg ul a tions do not of f er a ny p ena l ty r el ief m ech a nis m s .


Frequency of the tax audit and transfer pricing scrutiny by the tax authority

T h e K uw a iti ta x s y s tem is b a s ed on initia l s el f - a s s es s m ent f ol l ow ed b y th e m a nda tor y a udit of th e ta x r etur n b y th e ta x a uth or ity . T h is im p l ies th a t, in es s ence, th e D I T a udits ev er y s ub m itted ta x r etur n, incl uding a ny r el a ted- p a r ty tr a ns a ctions .

2 3 8



T h e ta x ing a uth or ity a dds s p ecia l s cr utiny f or inter com p a ny tr a ns a ctions r el a ting to m a ter ia l s up p l y cos t, des ig n a nd cons ul ta ncy f ees

th e a ttention of th e ta x a uth or ity . T h e s a m e a p p l ies w h en entities decl a r e m idter m a nd l ong - ter m l os s es f r om th eir K uw a iti op er a tions .

APA opportunity


K uw a it h a s not ta k en a ny p os ition w ith r es p ect to th e a p p l ica b il ity of th e a m ended O E C D T r a ns f er P r icing G uidel ines 2 0 1 6 th a t w er e

L ao s




T h er e a r e no tr a ns f er p r icing r eg ul a tions in L a os .

L ux em b our g .






s uch a s a v er a g ed or m a r k et p r ices .









Penalty relief


2 4 0

L ao s (continued)





APA opportunity



L atv ia




T h e a r m ’ s - l eng th p r incip l e is es ta b l is h ed in th e L a w on C or p or a te I ncom e T a x . A r ticl e 1 2 of th e L a w on C or p or a te I ncom e T a x deter m ines th a t th e ta x a b l e incom e of th e ta x p a y er m a y b e a dj us ted up w a r d if r el a ted- p a r ty tr a ns a ctions a r e not a t a r m ’ s - l eng th . T r a ns f er p r icing docum enta tion r eq uir em ents a r e l a id dow n in A r ticl e 1 5 2 of th e L a w on T a x es a nd D uties .

4

r eg a r ding th e concl us ion of A P A s .


L a tv ia n tr a ns f er p r icing l eg is l a tiv e a cts conta in a r ef er ence to th e O E C D G uidel ines in a p p l y ing th e tr a ns f er p r icing m eth ods . I n m os t

docum enta tion.


44

•

•

•m a na g em ent s tr a teg y th a t m a y a f f ect th e p r icing p ol icy of inter com p a ny tr a ns a ctions

•

•em p l oy ed; th e r ol e a nd r es p ons ib il ity of ea ch g r oup m em b er inv ol v ed in th e tr a ns a ctions ; a nd inf or m a tion r eg a r ding r es tr uctur ing th e ta x p a y er ’ s op er a tions r es ul ting in th e tr a ns f er (a cq uis ition) of b us ines s f unctions , a s s ets or r is k s to (f r om ) a r el a ted- p a r ty f or a p r ice com p l ia nt w ith th e m a r k et p r ice

•

•

•

2 4 2

L atv ia (continued)


•th e m a r k et p r ice (cos t)

•a p p l ied to com p a r a b l e tr a ns a ctions b etw een unr el a ted com p a nies a nd com p l ia nce w ith th e m a r k et p r ice (cos t)

•docum ents j us tif y ing ex p ens es ; w r itten r es ol utions ; a nd decis ions m a de in b oa r d, council , s h a r eh ol der a nd oth er inter na l m eeting s

a nd r el a ted- p a r ty tr a ns a ction w ith a n a nnua l v a l ue l es s th a n th e s ta tutor y th r es h ol d), p r ep a r a tion of tr a ns f er p r icing docum enta tion is op tiona l . H ow ev er , th ey s til l s h oul d com p l y w ith th e s ta tutor y r eq uir em ent th a t contr ol l ed p r ices a r e a t a r m ’ s - l eng th . I n p r a ctice, it m ea ns

a p p l ied to inter com p a ny tr a ns a ctions a r e a t a r m ’ s - l eng th .


deem ed a s th e p r ef er entia l tr a ns f er p r icing m eth od.


tr a ns f er p r icing m eth ods a p p l ied.


C or p or a te I ncom e T a x r etur n.


T h er e is no dea dl ine s et f or th e p r ep a r a tion of th e tr a ns f er p r icing docum enta tion, b ut th e r el ev a nt docum enta tion coul d b e r eq uir ed


p a r ties a r e not a t a r m ’ s - l eng th , th e ta x a b l e incom e of th e ta x p a y er m a y b e a dj us ted up w a r d, a nd a p ena l ty of 2 0 % to 3 0 % a nd a l a te p a y m ent p ena l ty (a nnua l r a te of 1 8 % ) on th e a dditiona l l y p a y a b l e cor p or a te incom e ta x m a y b e a p p l ied. F or r ecur r ing tr a ns f er p r icing a dj us tm ents , th e p ena l ty r a tes a r e doub l ed (i. e. , a r e f r om 4 0 % to 6 0 % ).

2 4 3

L atv ia (continued)


Penalty relief

of a ta x a udit m a y b e r educed b y 5 0 % . I n p r a ctice, h a v ing p r op er tr a ns f er p r icing docum enta tion r educes th e r is k of tr a ns f er p r icing a dj us tm ents .



h ig h r is k of a udit. A l l ta x p a y er s a r e ex p os ed to a h ig h r is k th a t tr a ns f er p r icing w il l b e r ev iew ed a s a p a r t

of a n a udit. I n a ddition, th er e is a m edium r is k f or a l l ta x p a y er s th a t if tr a ns f er p r icing is r ev iew ed a s a p a r t of th e a udit, th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed.

APA opportunity

4


G uidel ines a nd a ccor ding to th e a dm inis tr a tiv e p r oces s l a w , a ny a m endm ents th a t m a y im p a ct ta x p a y er s s h oul d not h a v e r etr oa ctiv e ef f ect.

L eb ano n



44


T h e L eb a nes e ta x r eg ul a tion r eg a r ding tr a ns f er p r icing is s til l neith er el a b or a ted up on nor cl ea r .

A r ticl e 1 5 of th e I ncom e T a x L a w s ta tes th a t if it a p p ea r s th a t es ta b l is h m ents b el ong ing to es ta b l is h m ents l oca ted outs ide L eb a non

I n a ddition, th e L eb a nes e P a r l ia m ent r a is ed th e ta x p r ocedur es l a w in 2 0 0 8 . A r ticl e 1 0 of th a t l a w s ta tes th a t th e ta x a uth or ity h a s th e

•

• L eg a l tr a ns a ction in f or m b ut f or th e p ur p os e of ta x ev a s ion

• T r a ns a ctions b etw een r el a ted p a r ties if th es e tr a ns a ctions a r e not a t a r m ’ s - l eng th

V irt ual t ransact ion

A ccor ding to A r ticl e 1 2 of th e l eg is l a tiv e decr ee N o. 2 4 8 8 da ted 3 J ul y 2 0 0 9 , w h ich deter m ines th e a p p l ica tion of A r ticl e 1 0 m entioned a b ov e, a tr a ns a ction is cons ider ed v ir tua l w h en its v a l ue dif f er s b y 2 0 % f r om th e a r m ’ s - l eng th v a l ue of a s im il a r tr a ns a ction occur r ing b etw een tw o non- r el a ted p a r ties w ith th e s a m e com p eting conditions .

A rm ’ s- lengt h v alue

4tr a ns a ction th a t occur s b etw een indep endent p er s ons a nd under com p l ete com p etitiv e conditions th a t took p l a ce on th e da y of th e tr a ns a ction.

I ndiv idua l s a r e cons ider ed r el a ted if a ny of th em h ol ds th e a uth or ity of s up er v is ion, m a na g em ent or contr ol ov er th e oth er , or if th ey a r e r el a ted b y oth er m ea ns s uch th a t one p a r ty is a n em p l oy ee of th e oth er or if a ny one of th em is a g ua r dia n f or th e oth er .

I ndiv idua l s a nd entities a r e cons ider ed r el a ted w h en a ny one of th em h a s th e a uth or ity of s up er v is ion a nd m a na g em ent ov er th e oth er .

E ntities a r e cons ider ed r el a ted if one entity h a s th e a uth or ity of s up er v is ion a nd m a na g em ent ov er one or s ev er a l oth er entities .

Tax ev asion

da tes , or to incr ea s e th e a m ount of deductib l e or r ef unda b l e ta x w h en it is p r oh ib ited.



2 4 5

L eb ano n (continued)














Penalty relief






APA opportunity



L ib y a




C ur r entl y , th er e a r e no l oca l tr a ns f er p r icing r eg ul a tions in L ib y a , b ut L ib y a h a s concl uded a b out 1 7 ta x tr ea ties th a t conta in a n a r ticl e















Penalty relief


2 4 7

L ib y a (continued)






APA opportunity



L ith u ania




T h e a r m ’ s - l eng th p r incip l e is es ta b l is h ed in th e L a w on C or p or a te I ncom e T a x of L ith ua nia a nd its im p l em enta tion r ul es , intr oduced in 2 0 0 4 .

• A r ticl e 4 0 of th e L a w on C or p or a te I ncom e T a x of L ith ua nia

• 4

•a nnua l cor p or a te incom e ta x r etur n


T h e us e of th e O E C D G uidel ines is ex p l icitl y a dv oca ted in th e r eg ul a tions a nd r ul ing s a p p l ica b l e in L ith ua nia .

im p l em ented in th e L ith ua nia n l eg is l a tion.


T h e tr a ns f er p r icing docum enta tion r eq uir em ents a r e b inding f or r es ident a nd nonr es ident l eg a l entities r eg is ter ed a s cor p or a te incom e

s er v ices (e. g . , ins ur a nce com p a nies ), r eg a r dl es s of th eir r ev enue a m ount.

• D eta il s of th e tr a ns a ctions

• T er m s a nd conditions of th e tr a ns a ctions

•

• F unctions p er f or m ed, p r op er ty us ed or contr ib uted, a nd th e r is k s a s s um ed b y th e p a r ties

• D a ta a nd m eth ods cons ider ed a nd th e a na l y s es p er f or m ed to deter m ine th e tr a ns f er p r ices

•

I n g ener a l , th e p r incip l es in th e O E C D G uidel ines a r e to b e f ol l ow ed.

2 4 9

L ith u ania (continued)



b a s ed m eth ods , s uch a s r es a l e p r ice or cos t- p l us , s h a l l b e us ed.

to us e m or e th a n one m eth od; h ow ev er , a com b ina tion of m eth ods m a y b e us ed in a l l ca s es , p r ov ided th e decis ion to a p p l y a ny p a r ticul a r m eth od is a deq ua tel y s up p or ted.


a nd oth er s er v ices , s ecur ities a nd der iv a tiv es , r ent of p r op er ty a nd l oa ns . T h e ta x p a y er s a r e a l s o r eq uir ed to inf or m th e ta x a uth or ities w h eth er a ny tr a ns f er p r icing m eth od p r es cr ib ed in th e tr a ns f er p r icing r ul es h a v e b een us ed in th e tr a ns a ctions dis cl os ed.



p r icing docum enta tion w ith in 3 0 da y s of th e cor r es p onding notice b y th e ta x a uth or ities .


T h er e a r e no s p ecia l p ena l ties r el a ted to not p r ov iding tr a ns f er p r icing docum enta tion a t th e r eq ues t of th e ta x a uth or ities .

Penalty relief

T r a ns f er p r icing p ena l ties a r e s ub j ect to g ener a l p ena l ty r el ief r ul es .


2 5 0

L ith u ania (continued)



APA opportunity

or m ul til a ter a l A P A s m a y b e concl uded b a s ed on ex is ting ta x tr ea ties f or a v oiding doub l e ta x a tion.


L u x emb o u r g



Administration des Contributions Directes)


4

p a r ties .

into tr a ns a ctions th a t do not m eet th e a r m ’ s - l eng th p r incip l e w il l b e deter m ined a ccor ding to nor m a l m a r k et conditions a nd ta x ed

dom es tic a nd cr os s - b or der tr a ns a ctions .

H ow ev er , non- L ux em b our g r es idents (unl es s th ey h a v e a p er m a nent es ta b l is h m ent in L ux em b our g ) or tr a ns p a r ent entities (s uch a s F C P ,

T h e com m enta r ies of th e l a w s p ecif y th a t th e a r m ’ s - l eng th p r incip l e is a p p l ica b l e to a ny ta x p a y er , r eg a r dl es s of th e l eg a l f or m under w h ich it ex er cis es its a ctiv ities in L ux em b our g . T h er ef or e, not onl y w il l th is p r ov is ion cov er ta x op a q ue col l ectiv e under ta k ing s a nd ta x tr a ns p a r ent p a r tner s h ip s , b ut a l s o indiv idua l a nd col l ectiv e under ta k ing s w ith out l eg a l f or m .

of a contr ol l ed tr a ns a ction (i. e. , a tr a ns a ction b etw een a s s ocia ted enter p r is es ) a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e a nd w h a t q ua ntum of a dj us tm ent h a s to b e m a de to a ch iev e th e a r m ’ s - l eng th p r incip l e. T o a s s es s th is , a com p r eh ens iv e econom ic com p a r a b il ity a na l y s is / b ench m a r k , w h ich cons is ts of com p a r ing contr ol l ed tr a ns a ctions w ith uncontr ol l ed tr a ns a ctions (i. e. , tr a ns a ctions b etw een

com m enta r ies to th e l a w a l s o r ef er to th e O E C D G uidel ines , des ig ned to b e ob s er v ed b y m ul tina tiona l s a s w el l a s ta x a uth or ities in m a tter s of tr a ns f er p r icing b etw een r el a ted p a r ties inv ol v ed in cr os s - b or der tr a ns a ctions .

44

4

4 4

4

2 5 2

L u x emb o u r g (continued)


I n a ddition, on 1 2 O ctob er 2 0 1 6 , a dr a f t l a w w a s intr oduced in th e L ux em b our g P a r l ia m ent, a dding a new tr a ns f er p r icing a r ticl e in th e

cl a r if y ing th a t th e m eth ods to b e us ed f or th e deter m ina tion of th e a p p r op r ia te a r m ’ s - l eng th p r ice m us t ta k e into a ccount th e f a ctor s of


L a w m odif y ing A r ticl e 5 6 I T L r ef er to th e O E C D G uidel ines b eing des ig ned to b e ob s er v ed b y m ul tina tiona l s , a s w el l a s ta x a uth or ities , in m a tter s of tr a ns f er p r icing b etw een r el a ted p a r ties inv ol v ed in cr os s - b or der tr a ns a ctions . I n a ddition, th e com m enta r ies to th e 2 0 1 7

P r incip l e. T h e r ef er ence to th e O E C D G uidel ines f or a s s es s ing th e a r m ’ s - l eng th ch a r a cter of inter com p a ny tr a ns a ctions h a d a l r ea dy b een 4

C ons ider ing th a t O E C D G uidel ines a r e not incor p or a ted into L ux em b our g ’ s incom e ta x l a w , th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions m a y a l s o b e es ta b l is h ed w ith r ef er ence to oth er g ener a l l y a ccep ted tr a ns f er p r icing g uidel ines or r eg ul a tions .

Documentation Requirements

r eg ul a tions . T h e G ener a l T a x L a w h a s b een a m ended to ex tend th e ex is ting g ener a l ob l ig a tion of ta x p a y er s s o th ey ca n j us tif y th e da ta

p r icing m a tter s . T h is p r ov is ion is r einf or ced b y a th ir d p a r a g r a p h cl a r if y ing th a t th e g ener a l docum enta tion r eq uir em ents s et f or th b y th is p r ov is ion a l s o a p p l y to tr a ns a ctions b etw een a s s ocia ted enter p r is es .

I n th e a b s ence of f ur th er g uida nce, one coul d r el y on th e O E C D G uidel ines (r ef er r ed to in th e com m enta r y to th e l a w ) a nd th e Practical Manual on Transfer Pricing for Developing Countries

docum enta tion th a t m ul tina tiona l s h a v e to p r ov ide to ta x a uth or ities .


m eth ods to b e us ed f or th e deter m ina tion of th e a p p r op r ia te a r m ’ s - l eng th com p ens a tion m us t ta k e into a ccount th e O E C D com p a r a b il ity f a ctor s a nd b e coh er ent w ith th e na tur e of th e a ccur a tel y del inea ted tr a ns a ctions . A l l m eth ods a dv oca ted b y th e O E C D a r e a ccep ta b l e

es ta b l is h ed a m ong th e dif f er ent m eth ods .


a r e deta il ed b y na tur e a nd b y r el a ted- p a r ty in a s ch edul e a tta ch ed to th e ta x r etur ns .

2 5 3





A s a g ener a l r ul e, contem p or a neous docum enta tion s h oul d ex is t w h en tr a ns a ctions a r e ca r r ied out. T h a t r ul e a l s o a p p l ies to tr a ns f er

dea dl ine to p r oduce tr a ns f er p r icing docum enta tion. A s m entioned a b ov e, ta x p a y er s m us t b e a b l e to j us tif y th e da ta conta ined in th eir ta x r etur ns w ith a p p r op r ia te inf or m a tion a nd docum enta tion. T h e ta x a uth or ity m a y r eq ues t, in th e contex t of a s s es s ing th e ta x r etur n

s h or t a s 1 4 da y s b ut m a y b e ex tended up on r eq ues t.

A ny cons tituent entity of a g r oup th a t is r es ident f or ta x p ur p os es in L ux em b our g s h a l l notif y th e L ux em b our g ta x a uth or ities a b out w h eth er it is th e ul tim a te p a r ent entity , th e s ur r og a te p a r ent entity or th e cons tituent entity no l a ter th a n th e l a s t da y of th e r ep or ting

D ecem b er 2 0 1 6 ).


T o th e ex tent th a t th e a r m ’ s - l eng th s ta nda r d is not r es p ected, th e ta x a uth or ity m a y r ea s s es s or a dj us t th e ta x a b l e r es ul t, b ut no p ena l ties a r e s et f or th in th e ta x l a w f or ca s es in w h ich s uch a dj us tm ents a r e m a de.

decl a r ing entity . T h is p ena l ty is im p os ed a t th e dis cr etion of th e com p etent ta x a uth or ity . A g a ins t th e decis ion im p os ing th e p ena l ty , th e decl a r ing entity ca n a p p ea l a t th e a dm inis tr a tiv e cour t.

Penalty relief


h a s b een a s s es s ed f or incom e a nd net w ea l th ta x p ur p os es f or a p a r ticul a r y ea r , th e ta x a uth or ities m a y not r ea s s es s th e r el ev a nt ta x y ea r unl es s th ey h a v e ob ta ined new inf or m a tion a nd th e s ta tute of l im ita tions h a s not y et ex p ir ed. A s l ong a s th e ta x a uth or ities h a v e is s ued a p r ov is iona l ta x a s s es s m ent, th e ta x a b l e b a s e m a y s til l b e a dj us ted a f ter th e p r ov is iona l a s s es s m ent is is s ued, until th e s ta tute of l im ita tions h a s ex p ir ed.

2 5 4




APA opportunity

T h e G ener a l T a x L a w (Abgabenordnung) incl udes a p r ov is ion (P a r a g r a p h 2 9 a ) dedica ted to th e ta x r ul ing p r a ctice (procedure des décisions anticipées

4(i. e. , a ctiv ities cons is ting of g r a nting l oa ns or a dv a nces to a s s ocia ted enter p r is es f unded th r oug h th e is s ua nce of p ub l ic or p r iv a te l oa ns , a dv a nces or b a nk l oa ns ).

D ir ectiv e 2 0 1 5 / 2 3 7 6 of 8 D ecem b er 2 0 1 5 ) w a s intr oduced into L ux em b our g ia n l eg is l a tion on 2 3 J ul y 2 0 1 6 . T h e l a w f or es ees th e

r ul ing s is s ued b ef or e 1 J a nua r y 2 0 1 7 .

ex ch a ng e inf or m a tion on cer ta in ty p es of ta x r ul ing s a nd A P A s th a t w er e is s ued on or a f ter 1 J a nua r y 2 0 1 0 a nd th a t w er e s til l in ef f ect a s f r om 1 J a nua r y 2 0 1 4 .


l eg is l a tion. T h e a im of th e new a r ticl e (cur r entl y in dr a f t f or m ) is to im p l em ent th e r ecom m enda tions p r ov ided in th e G uida nce f or

env is a g ed th a t th es e up da ted ch a p ter s w oul d a p p l y to tr a ns a ctions v a l id a f ter th e da te w h en th e dr a f t l a w is ena cted (b oth new tr a ns a ctions a nd ong oing ones , cons ider ing a l s o th e tr a ns a ction ty p e).

R ep u b l ic o f M ac ed o nia




• C I T L a w

•

•

• 4

•

• T a x P r ocedur es L a w

•

• C us tom s L a w

•

•

• 4 4tr a ns f er p r ices a p p l ied a r e cons ider ed to b e a t a r m ’ s - l eng th

• 4 4

•


N o r ef er ence is m a de in th e l a w or in th e a dm inis tr a tiv e g uidel ines to th e O E C D G uidel ines . H ow ev er , in th e a b s ence of a ny g uida nce outl ining w h a t th e contents of a deq ua te docum enta tion s h oul d l ook l ik e, th e O E C D G uidel ines ca n ef f ectiv el y s er v e a s a m odel .


C I T L a w s tip ul a te th a t a ta x p a y er th a t is inv ol v ed in inter com p a ny tr a ns a ctions is ob l ig a ted to p r es ent, up on th e ta x a uth or ity ’ s r eq ues t,

2 5 6

R ep u b l ic o f M ac ed o nia (continued)



m a de to th e oth er tr a ns f er p r icing m eth ods of th e O E C D G uidel ines . H ow ev er , us ing one of th e oth er O E C D tr a ns f er p r icing m eth ods

a p p r op r ia te one, in l ine w ith th e O E C D G uidel ines .




H ow ev er , in p r a ctice, th e tim e f r a m e is v er y s h or t; h ence, it is a dv is a b l e th a t th e docum enta tion b e com p il ed a s s oon a s p r a ctica b l e a f ter th e cl os e of th e ta x y ea r .


F a il ur e to r ep or t th e cor r ect a m ount of ta x l ia b il ity r es ul ts in a p ena l ty of up to 1 0 tim es th e a m ount of th e under s ta tem ent of ta x . A dditiona l l y , def a ul t inter es t of 0 . 0 3 % a p p l ies on th e a m ount of th e a dditiona l ta x l ia b il ity f or ea ch da y of del a y in s ettl ing s uch l ia b il ity .

s us p end th e ta x p a y er ’ s b us ines s a ctiv ity f or 3 to 3 0 da y s .

Penalty relief



th e C I T r etur ns , a f ter w h ich th e ta x a uth or ities m a y not a udit th e ta x p a y er ’ s r ep or ted p os ition a nd r ea s s es s ta x l ia b il ities . A udited ta x

2 5 7

R ep u b l ic o f M ac ed o nia (continued)



T h er e is no m a nda tor y f r eq uency f or p er f or m ing ta x a udits . T h e ta x a uth or ity h a s th e dis cr etion to initia te a ta x a udit in a ccor da nce

APA opportunity

N o b inding r ul ing or A P A op p or tunities a r e cur r entl y a v a il a b l e.

a s p ect is v er y l im ited b eca us e th e ta x a uth or ities r ef us e to p r ov ide a ny op inion a b out tr a ns a ctions th a t h a v e not y et b een im p l em ented.


im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

M ad ag as c ar



Direction Générale des Impôts)


•ex p ens es ), 2 0 . 0 6 . 0 8 (docum enta tion r eq uir em ents a nd dea dl ines ), 2 0 . 0 1 . 5 6 . 8 (p ena l ties ) a nd 2 0 . 0 6 . 2 3 (on- s ite ta x a udit r eg im e a nd dea dl ines )

• 4


p r icing , a l th oug h th er e a r e no dir ect r ef er ences .


A ccor ding to th e G ener a l T a x C ode A r ticl e 2 0 . 0 6 . 0 8 , in th e ev ent of a ta x a udit, ta x a uth or ities a r e entitl ed to r eq ues t f r om l oca l

• N a tur e of connections l ink ing th e l oca l com p a ny to f or eig n ones

•counter p a r ties

• K now n a ctiv ities of f or eig n b us ines s p a r tner s

• T a x tr ea tm ent of com m er cia l ex ch a ng es b etw een th e l oca l com p a ny a nd a contr ol l ed f or eig n cor p or a tion.


4

•

•

• C os t- p l us

•

•

I t is up to th e ta x p a y er to s el ect a nd j us tif y th e m os t s uita b l e a p p r oa ch .

2 5 9

M ad ag as c ar (continued)



A s p r ev ious l y m entioned, in th e f r a m ew or k of ta x a udits , th er e is a n ob l ig a tion f or th e l oca l com p a ny to dis cl os e th e na tur e of its connections to a l l r el a ted f or eig n com p a nies , th eir a ctiv ities , th e s el ected m eth od f or deter m ining th eir p r ices a nd th e ta x tr ea tm ent of th eir tr a ns a ctions .




A l l a f or em entioned docum ents a nd inf or m a tion r eq uir ed b y ta x a uth or ities h a v e to b e p r ov ided up on r eq ues t f r om th e ta x a uth or ities w ith in tw o m onth s (ex tenda b l e to th r ee m onth s ).


ev ent of a tr a ns f er p r icing r ea s s es s m ent.

Penalty relief

tr a ns a ction, a p r ocedur e p r ov ided b y th e G ener a l T a x C ode, w ith ta x a uth or ities .


T h e s ta tute of l im ita tions f or tr a ns f er p r icing a s s es s m ents is th e s a m e a s f or a l l cor p or a te ta x a s s es s m ents , i. e. , th r ee y ea r s f ol l ow ing th e

is is s ued dur ing th e r ea s s es s m ent, w h ich th ey us ua l l y do.


its p r incip l es or p r icing m eth ods .

2 6 0

M ad ag as c ar (continued)


APA opportunity


M al aw i




•

• N o r ul ing s a r e a v a il a b l e.


G uidel ines .


r el a ted docum enta tion, a nd s o it is a dv is a b l e th a t th e p er s on eng a g ed in tr a ns f er p r icing s h oul d m a inta in a l l th e r el ev a nt docum enta tion.


•

•

• C os t- p l us

•

•

• A ny oth er s uch m eth od a s m a y b e p r es cr ib ed b y th e C om m is s ioner G ener a l f r om tim e to tim e


p a r ty tr a ns a ctions .



2 6 2

M al aw i (continued)



D ocum enta tion dea dl ines a r e not s tip ul a ted, b ut th e C om m is s ioner G ener a l m a y r eq uir e a ta x p a y er to p r ov ide th e neces s a r y docum enta tion in a p r es cr ib ed p er iod.


nor m a l l y , 1 0 0 % of th e ta x es inv ol v ed or 2 0 0 % of th e ta x es inv ol v ed if th e ca s e is cons ider ed f r a udul ent in na tur e.

Penalty relief

P ena l ty r el ief is a v a il a b l e a t th e C om m is s ioner G ener a l ’ s dis cr etion.



T h es e a r e conducted b y th e ta x a uth or ity f r om tim e to tim e, th oug h not on a r eg ul a r b a s is .

APA opportunity


th e l etter a m endm ents in th e O E C D G uidel ines to r a is e a dditiona l a s s es s m ents f or ea r l ier y ea r s .

M al ay s ia




Transfer p ricing p rov ision

• 4

•

•

•

•

•

General ant i- av oidance p rov ision

• 4

Transact ions b y nonresident

• 4

Tim e b ar p eriod

•

g uidel ines is s ued in 2 0 0 3 . T h e tr a ns f er p r icing g uidel ines s et out f ur th er g uida nce in r el a tion to a p p l y ing th e tr a ns f er p r icing l eg is l a tion 4

T h es e 2 0 1 2 tr a ns f er p r icing G uidel ines a nd A P A r ul es h a d a r etr oa ctiv e ef f ectiv e da te of 1 J a nua r y 2 0 0 9 .


2 6 4

M al ay s ia (continued)



C ontem p or a neous docum enta tion p er ta ining to tr a ns f er p r icing need not b e s ub m itted w ith th e ta x r etur n, b ut it s h oul d b e m a de

E ng l is h .

•

• N a tur e of th e b us ines s or indus tr y a nd m a r k et conditions

• T h e contr ol l ed tr a ns a ction

•

• C om p a r a b il ity , f unctiona l a nd r is k a na l y s is

•

• A p p l ica tion of th e tr a ns f er p r icing m eth od

• D ocum ents th a t p r ov ide th e f ounda tion f or , or oth er w is e s up p or t or w er e r ef er r ed to in, dev el op ing th e tr a ns f er p r icing a na l y s is

• I ndex to docum ents

• A ny oth er inf or m a tion, da ta or docum ent cons ider ed r el ev a nt b y th e p er s on to deter m ine a n a r m ’ s - l eng th p r ice


m eth ods ca nnot b e r el ia b l y a p p l ied or ca nnot b e a p p l ied a t a l l .


T a x p a y er s a r e r eq uir ed to dis cl os e in a ta x r etur n if tr a ns f er p r icing docum enta tion h a s b een p r ep a r ed. T h is com p l ia nce r eq uir em ent is ef f ectiv e f r om th e y ea r of a s s es s m ent in 2 0 1 4 .

•

• P ur ch a s es f r om r el a ted com p a nies

• O th er p a y m ents to r el a ted com p a nies , l ending to a nd b or r ow ing f r om r el a ted com p a nies

•


•

• A ch a r t of th e g l ob a l cor p or a te s tr uctur e to w h ich th e ta x p a y er b el ong s , incl uding ul tim a te h ol ding com p a nies , dir ect a nd indir ect s ub s idia r ies , a s s ocia ted com p a nies a nd oth er r el a ted p a r ties , indica ting th e com p a nies w ith w h om th e ta x p a y er conducts r el a ted- p a r ty tr a ns a ctions

2 6 5



•

•

•

•

•

•

• I nter es t

• G ua r a ntee f ees

• O th er s er v ices not f a l l ing under a ny of th e a b ov e ca teg or ies

•

• I nter es t- b ea r ing l oa ns

• I nter es t- b ea r ing tr a de cr edit

• I nter es t- f r ee l oa ns

Transfer pricing-specific returns (continued)

•

•

•

•

• O th er s (ta x p a y er to s p ecif y )

•

•

cor p or a te ta x p a y er s to g a th er inf or m a tion a b out th e b a s is p er iod f or th e 2 0 1 0 y ea r of a s s es s m ent, a nd ta x p a y er s w il l b e g iv en 3 0 da y s


•

•docum enta tion s h a l l b e up da ted p r ior to th e due da te f or f ur nis h ing a r etur n f or th a t b a s is p er iod f or th a t y ea r of a s s es s m ent

2 6 6




Penalty for incorrect return, incorrect information, is a p p l ied w ith p ena l ties th a t a r e 1 0 0 % of th e under ch a r g ed ta x .

Penalty relief

th e b a l a nce of ta x under ch a r g ed w h er e no tr a ns f er p r icing docum enta tion is p r ep a r ed, a nd 2 5 % w h er e docum enta tion is not p r ep a r ed in


T h er e is a s ev en- y ea r s ta tute of l im ita tions f or a dditiona l a s s es s m ent is s ued p ur s ua nt to tr a ns f er p r icing a dj us tm ents , a nd docum enta tion m us t b e k ep t f or s ev en y ea r s . T h er e is no s ta tute of l im ita tions in ins ta nces of f r a ud, w il l f ul def a ul t or neg l ig ence.


ch a l l eng ed is h ig h .

APA opportunity

neg otia tions h a s b een es ta b l is h ed.


m onitor f ur th er dev el op m ents in th is a r ea .

M al d iv es




indir ectl y b etw een th a t p er s on a nd a noth er p er s on a nd th os e tw o p er s ons a r e a s s ocia ted w ith ea ch oth er .

• O ne contr ol s th e oth er or b oth a r e contr ol l ed b y th e s a m e p er s on

• O ne is a r el a tiv e of th e oth er

• T h e indiv idua l ’ s s p ous e

• A b r oth er , s is ter , p a r ent, g r a ndp a r ent or ch il d of th e indiv idua l or th e indiv idua l ’ s s p ous e

• A s p ous e of a p er s on l is ted a b ov e, a nd a ch il d incl udes a s tep ch il d


I n g ener a l , th e tr a ns f er p r icing r eq uir em ents f ol l ow th e O E C D G uidel ines .



T h e a r m ’ s - l eng th p r ice is deter m ined on th e b a s is of a com p a r is on w ith s im il a r g oods or s er v ices p r ov ided b etw een unr el a ted p a r ties .


•

• L oa n inter es t p a y a b l e to r el a ted p a r ties f or th e p er iod

2 6 8

M al d iv es (continued)



T h er e cur r entl y is no r eq uir em ent to p r ep a r e a s ep a r a te ta x r etur n f or r el a ted- p a r ty tr a ns a ctions .


T h er e a r e no docum enta tion dea dl ines .


Penalty relief

T h er e a r e no p ena l ty r el ief p r ov is ions in p l a ce.


ta x es a nd coul d conduct ta x a s s es s m ents up to th r ee y ea r s f r om th e da te of th e s er v ice of th e notice of inq uir y .

com p l eted, a ta x a s s es s m ent is is s ued. H ow ev er , if new r el ev a nt da ta or inf or m a tion s ub s eq uentl y is dis cov er ed a f ter a n a s s es s m ent h a s

dur ing th e ta x a udit p r oces s w oul d b e cons ider ed new da ta or inf or m a tion.

I n ca s es w h er e a ta x p a y er h a s del ib er a tel y or f r a udul entl y ev a ded ta x , a notice of inq uir y m a y b e s er v ed w ith in th r ee y ea r s of th e da te on


tr a ns a ctions .

2 6 9

M al d iv es (continued)


APA opportunity

T h er e is no A P A p r og r a m a v a il a b l e.


M al ta





deta il ed.




m eth od.



incl udes inf or m a tion a b out r el a ted- p a r ty tr a ns a ctions .




A n incor r ect tr a ns f er p r icing s tr uctur e coul d r es ul t in a ta x a s s es s m ent. P l ea s e r ef er to th e s ection b el ow f or m or e deta il s r eg a r ding p ena l ties f or om is s ion.

2 7 1

M al ta (continued)


Penalty relief

w ith in 1 2 m onth s a f ter th e r el a tiv e ta x r etur n da te, s uch ta x p a y er is not s ub j ect to a ny a dditiona l ta x oth er th a n th e inter es t p a y a b l e on th e l a te s ettl em ent of th e enda ng er ed ta x . 1

w r iting , th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 0 . 1 % p er m onth of th e enda ng er ed ta x .

w h ich a dditiona l ta x is ch a r g ed f or th a t om is s ion, th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 0 . 7 5 % p er m onth of th e enda ng er ed ta x .

w h ich a dditiona l ta x is ch a r g ed f or th a t om is s ion, th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 1 . 5 % p er m onth of th e enda ng er ed ta x .


ev a s ion or f r a ud, th e tim e l im it f or r a is ing a n a s s es s m ent is op en- ended.


T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is l ow . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit a nd th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed a r e l ow .

APA opportunity


1

to w h ich th e ta x p a y er m a y b e entitl ed a nd th e ta x a ctua l l y ch a r g ea b l e a f ter cons ider ing th e s a m e, b ut s h a l l not incl ude a ny a dditiona l ta x .

M au r itiu s





th e O E C D G uidel ines h a v e b een us ed to deter m ine th e a r m ’ s - l eng th p r ice.





T h e ta x p a y er s h oul d a dv is e onl y if r el a ted- p a r ty tr a ns a ctions h a v e b een m a de a t a r m ’ s - l eng th .




r ecor ds f or s ev en y ea r s .

2 7 3

M au r itiu s (continued)



l a te p a y m ent of ta x is 5 % , a nd m onth l y inter es t a t th e r a te of 1 % a p p l ies .

Penalty relief

a ttr ib uta b l e to a j us t or r ea s ona b l e ca us e.


a p p l y .


T h e l ik el ih ood of a n a nnua l ta x a udit is m edium . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is a l s o m edium . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h .

APA opportunity


M ex ic o




I ncr ea s ing l y , m or e r eg ul a tions dea l w ith inter com p a ny tr a ns a ctions .

•

• 4

•

•

•

•b or der ), tr a ns f er p r icing dis cl os ur e (cr os s - b or der ), I T L (A r ticl e 1 8 0 ) m eth od a p p l ica tion (a l l ), a ccounting r ecor ds (a l l )

•

• 4 4 4 4 4

•a nd O E C D G uidel ines

•

• maquiladoras

• maquiladoras

• 4

•

• 4

•

• 4a ccounting r ecor ds

2 7 5

M ex ic o (continued)


4

tr a ns f er p r icing a s p ects th a t s h oul d b e cons ider ed b y ev er y contr a ctor .

•

•

•


T h e I T L , A r ticl e 1 8 0 , s ta tes th a t th e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es a s l ong a s th ey do not contr a dict th e I T L or inter na tiona l ta x tr ea ties .


C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to cr os s - b or der inter com p a ny tr a ns a ctions m us t b e m a inta ined. D ocum enta tion m us t incl ude th e na m e, a ddr es s a nd ta x r es idency of th e nonr es ident r el a ted p er s ons w ith w h om tr a ns a ctions a r e ca r r ied out, a s w el l a s ev idence of dir ect a nd indir ect p a r ticip a tion b etw een r el a ted p a r ties a nd cor r ect a p p l ica tion of a m eth od a s s ta ted in A r ticl e 1 8 0 of th e I T L , f ol l ow ing th e h ier a r ch y es ta b l is h ed th er ein. I t is neces s a r y to incl ude in th e docum enta tion inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er a nd its r el a ted p a r ties inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion of com p a r a b l e tr a ns a ctions or com p a nies b y ty p e of tr a ns a ction m us t a l s o b e incl uded.

A r el a ted- p a r ty is cons ider ed if th er e is dir ect or indir ect p a r ticip a tion in m a na g em ent, s up er v is ion, contr ol or ca p ita l / ow ner s h ip . O n th e oth er h a nd, th e p a r ent com p a ny of a p er m a nent es ta b l is h m ent a nd a l l oth er p er m a nent es ta b l is h m ents of th a t com p a ny a r e a l s o cons ider ed r el a ted p a r ties .

m a intena nce, p r otection a nd ex p l oita tion of th e inta ng ib l es a s w el l a s to incl ude th e new a na l y tica l f r a m ew or k to deter m ine w h ich a s s ocia ted enter p r is e a s s um es th e r is k s f or tr a ns f er p r icing p ur p os es .

T a x p a y er s a r e r eq uir ed to identif y r el a ted- p a r ty tr a ns a ctions cl ea r l y in th eir a ccounting r ecor ds . A l s o, dom es tic inter com p a ny tr a ns a ctions a r e r eq uir ed to b e docum ented b y dem ons tr a ting th a t a n a ccep ted p r icing m eth od (i. e. , one th a t is l is ted in th e I T L ) h a s b een a p p l ied a nd th a t th e a r m ’ s - l eng th s ta nda r d h a s b een m et.

a r e p er f or m ing h y dr oca r b ons ex p l or a tion a nd ex tr a ction a ctiv ities in tr a ns a ctions conducted w ith r el a ted p a r ties , contr a ctor s w il l b e r eq uir ed to deter m ine th eir incom e a nd cos ts , cons ider ing th e p r ices a nd a m ount of cons ider a tion th a t w oul d h a v e b een us ed w ith or b etw een indep endent p a r ties in com p a r a b l e tr a ns a ctions on th e ter m s , m eth ods a nd conditions s et f or th in th e a p p l ica b l e l a w . T o dem ons tr a te th a t th e tr a ns a ctions w er e a g r eed to a t m a r k et p r ices , th e contr a ctor s h a l l m a k e us e of th e tr a ns f er p r icing m eth ods incl uded in th e I T L a nd th e O E C D G uidel ines .

entities th a t conduct inter com p a ny tr a ns a ctions w ith dom es tic r el a ted p a r ties to op t out of p r ep a r ing contem p or a neous tr a ns f er p r icing

2 7 6





of inf or m a tion r el a ted to inter com p a ny tr a ns a ctions w ith f or eig n r el a ted p a r ties , incl uding inf or m a tion r eg a r ding 5 7 concep ts b y ty p e of

•

• T y p es of tr a ns a ctions a nd cor r es p onding a m ounts

• T r a ns f er p r icing m eth ods a p p l ied

• G r os s or op er a ting m a r g ins ea r ned on ea ch tr a ns a ction (a p p l ica b l e onl y f or cer ta in ty p es of tr a ns a ctions )

•

maquiladorar enew ed in 2 0 1 6 . T h e new f or m r eq ues ts m or e inf or m a tion, com p a r ed w ith th e p r ev ious f or m us ed, a nd h ig h l ig h ts th e f ol l ow ing r eq uir ed

•

• F ina ncia l inf or m a tion f or deter m ining cos ts a nd op er a ting ex p ens es , s uch a s incom e on contr a ct m a nuf a ctur ing a nd th os e th a t a r e dis tinct f r om m a nuf a ctur ing , w a g es a nd s a l a r ies , l oa ns , a m ong oth er s

•

•

• P er centa g e th a t r ep r es ents m a ch iner y a nd eq uip m ent th a t is th e p r op er ty of th e f or eig n r es ident w ith r es p ect to a l l m a ch iner y a nd eq uip m ent th a t is us ed in contr a ct m a nuf a ctur ing , a s w el l a s th e a m ounts th a t s er v e a s a b a s is f or deter m ining s uch a p er centa g e

•

•

•

• T a x na m e

• C ountr y of r es idence

• T y p e of inter com p a ny tr a ns a ction

• A m ount of inter com p a ny tr a ns a ction

2 7 7



• T r a ns f er p r icing m eth odol og y a p p l ied

• A s s es s m ent r eg a r ding tr a ns f er p r icing com p l ia nce

T h is inf or m a tion is r eq uir ed f or a l l inter com p a ny tr a ns a ctions (i. e. , w ith f or eig n a nd dom es tic r el a ted p a r ties f or ea ch r el a ted- p a r ty a nd ty p e of tr a ns a ction). T h is q ues tionna ir e is intended to v er if y com p l ia nce w ith th e I T L , not onl y w ith r es p ect to tr a ns f er p r icing a s p ects , b ut a l s o w ith r es p ect to th e deductib il ity r eq uir em ents of a l l ta x p os itions .

•

• A P A s (if a p p l ica b l e)

•

• A p p l ica tion of p r im a r y or cor r es p onding a dj us tm ents

•

•

•

•

• Maquiladora r ul es com p l ia nce

• T r a ns f er p r icing q ues tionna ir e r el a ted to th e r ev iew conducted b y th e ex ter na l a uditor (not incl uded in th e A l ter na tiv e I nf or m a tion to th e

•

in nondeductib il ity of th e p a y m ents to r el a ted p a r ties .

4

F ina nce th e tr a ns f er p r icing s tudy dem ons tr a ting th a t th e tr a ns a ctions th a t h a v e occur r ed w ith r el a ted p a r ties a r e a t a n a r m ’ s - l eng th .

p a r ties to th e contr a ctor to s ub m it docum enta tion a nd inf or m a tion r el a ting to th eir op er a tions w ith th e contr a ctor or r el a ting to th e

w ith w h ich it is ch a r g ed.


Maquiladoras maquiladora

2 7 8




(Dictamen Fiscal), th e ta x p a y er ’ s ex ter na l a uditor is r eq uir ed to dis cl os e th e com p a ny ’ s com p l ia nce w ith a l l ta x ob l ig a tions , incl uding 4

Dictamen Fiscal

th e f ol l ow ing y ea r . C or r es p onding f or m a ts a nd ins tr uctions a r e s til l p ending .


r educes th e net op er a ting l os s (N O L ), th e p ena l ty r a ng es f r om 3 0 % to 4 0 % of th e dif f er ence b etw een th e deter m ined N O L a nd th e N O L in

T h er e a r e no p ena l ties if th e ta x p a y er s el f - cor r ects its ta x r es ul ts b ef or e a n a udit, a nd r educed p ena l ties a p p l y if s el f - cor r ection is m a de

4

if th e r el a ted- p a r ty r eceiv ing th e p a y m ent is tr a ns p a r ent f or ta x p ur p os es , th e p a y m ent is not cons ider ed ta x a b l e r ev enue f or th e counter p a r t or it is tr ea ted a s nonex is tent f or th e f or eig n r el a ted- p a r ty .

Penalty relief

C ontem p or a neous docum enta tion m ig h t r educe ta x p ena l ties b y 5 0 % , a s l ong a s th e ta x p a y er com p l ies w ith th e f or m a l r eq uir em ents

N O L .


2 7 9




m a na g em ent f ees .

a udits , in a ddition to s ub s ta ntiv e a nd tech nica l is s ues r eg a r ding com p l ia nce, p l a nning a nd tr a ns f er p r icing docum enta tion.

APA opportunity

4

4 maquiladoras

of a p p l y ing a 6 . 5 % r etur n ov er tota l cos ts or a 6 . 9 % r etur n ov er tota l a s s ets , incl uding a s s ets a nd inv entor ies of cons ig nm ent p r op er ty

ob l ig a tion.

4p r oces s es of th e inf or m a tion, da ta a nd docum enta tion, f or p ur p os es of identif y ing a nd s p ecif y ing p er f or m ed f unctions , a s s ets us ed a nd


im m edia te a nd m a nda tor y (I T L , A r ticl e 7 9 ). T h e a m endm ents w il l a p p l y to tr a ns a ctions th a t w er e in ef f ect dur ing 2 0 1 6 . N ew dis cl os ur e

M o ng o l ia




th is , th e ta x a uth or ities m a y s eek to a dj us t th e tr a ns a ction to a f a ir m a r k et v a l ue.

•

b ench m a r k p r ice us ed in tr a ns a ctions b etw een non- r el a ted p a r ties .

• 44

s ta nda r d p r ice m eth od) to b e us ed if th is is not th e ca s e.

• A r ticl e 4 8 . 5 of th e G T L notes th a t if m a r k et p r ices ca nnot b e a p p l ied, th en r etur ns ea r ned b y com p a r a b l e indep endent com p a nies w ith s im il a r b us ines s op er a tions s h oul d b e us ed to deter m ine th e a p p r op r ia te r etur n to b e ea r ned in r el a ted- p a r ty tr a ns a ctions .

•

• 4 4

•m or e of th e com m on s tock of th e oth er entity , (2 ) h a s th e r ig h t to r eceiv e 2 0 % or m or e of th e div idends or dis tr ib utions f r om th e oth er entity , or (3 ) h a s th e r ig h t to a p p oint 2 0 % or m or e of th e m a na g em ent of th e oth er entity or is oth er w is e a b l e to deter m ine its p ol icies .

•

a nd s er v ices .

• 2 5 D ecem b er 2 0 1 4 )

T a x p a y er s s h oul d us e th is new g uidel ine im p l icitl y f or tr a ns f er p r icing p ur p os es .


p ur p os es , th e O E C D G uidel ines m a y p r ov ide s up p or t f or a p p l y ing a ny p r icing m eth ods dem ons tr a ting com p l ia nce w ith inter na tiona l p r incip l es .

2 8 1

M o ng o l ia (continued)



T h e tr a ns f er p r icing docum enta tion s h oul d s ub s ta ntia te a ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e ch os en m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

• N a m e of th e r el a ted p a r ties , r el a tions h ip s b etw een th e tr a ns a cting p a r ties , incor p or a tion docum ents th er eof

• G r oup ow ner s h ip a nd l eg a l s tr uctur e

•

• D es cr ip tion of th e g oods or s er v ices

• K ey ter m s a nd conditions of th e contr a ctua l a g r eem ents

• F unctions p er f or m ed a nd r is k s b or ne b y ea ch p a r ty


•b es t- m eth od a na l y s is )

• A na l y s is a nd ev a l ua tion of ex ter na l a nd inter na l econom ic a nd l eg a l f a ctor s , incl uding cons ider a tions of m a r k et conditions , econom ic cir cum s ta nces a nd b us ines s s tr a teg y


inter com p a ny tr a ns a ction.


A l is t of r el a ted- p a r ty tr a ns a ctions f or th e r el ev a nt ta x y ea r concer ned m us t b e dis cl os ed in cor p or a te incom e ta x r etur ns , incl uding inf or m a tion a b out th e na m e of th e r el a ted p a r ties , p r op er ty or g oods a nd s er v ices , a nd v a l ue of th e tr a ns a ction.



a nd m us t b e p r ov ided to th e G D N T up on r eq ues t.

2 8 2

M o ng o l ia (continued)



G ener a l noncom p l ia nce p ena l ty r ul es a p p l y to tr a ns f er p r icing a dj us tm ents . T r a ns f er p r icing a dj us tm ents a r e s ub j ect to a 3 0 % p ena l ty 4

4ex ceed 5 0 % of th e ta x p a y a b l e a m ount (A r ticl e 7 4 . 3 of th e G T L ).

Penalty relief


us ua l l y occur ev er y tw o to th r ee y ea r s f or dom es tic com p a nies , w h ich incl ude tr a ns f er p r icing a udits . D ur ing th is tim e, m ul tip l e op en y ea r s a r e of ten inv es tig a ted s im ul ta neous l y .


incr ea s ing l y f ocus ing on tr a ns f er p r icing inv es tig a tions .

s tr eng th en tr a ns f er p r icing a udit s k il l s .

a s p ecia l g r oup of tr a ns f er p r icing s p ecia l is ts , dev el op ing a m or e O E C D - b a s ed tr a ns f er p r icing f r a m ew or k .

APA opportunity

A n A P A r eg im e is not a v a il a b l e a t th e m om ent.

Impact of new OECD guidelines

M o nteneg r o








A ccor ding to A r ticl e 3 8 of th e C I T L a w , ta x p a y er s a r e ob l ig a ted to dis cl os e in th eir a nnua l C I T r etur n th e r ev enues a nd ex p ens es r es ul ting f r om th e tr a ns a ctions w ith r el a ted p a r ties , a s w el l a s p r es ent a nd com p a r e th es e w ith r ev enues a nd ex p ens es th a t w oul d h a v e b een

th e ta x a b l e b a s is .





2 8 4

M o nteneg r o (continued)


Penalty relief



y ea r p er iod s ta r ts a t th e b eg inning of th e y ea r f ol l ow ing th e y ea r in w h ich th e r es p ectiv e ta x l ia b il ity w a s to b e a s s es s ed.


of s op h is tica tion s h oul d not b e ex p ected a t th is s ta g e w ith r es p ect to r ev iew ing r el a ted- p a r ty tr a ns a ctions .

APA opportunity


M o r o c c o



Direction Générale des Impôts, or D G I )


4

•

A dm inis tr a tion.

• 4

•

• T h e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d

•

• T h e f or eig n com p a ny ’ s ta x r eg im e a nd ta x r a tes

undul y tr a ns f er of p a y m ents a b r oa d.


r eg a r ding tr a ns f er p r icing .

es ta b l is h m ents .


4

•


•


2 8 6

M o r o c c o (continued)




4

a udited entity a nd th e r el a ted p a r ties ), th e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d, th e m eth od of deter m ining th e p r ices f or



4s h oul d b e p r ov ided w ith in 3 0 da y s .

I n a ddition, a b es t p r a ctice is to h a v e tr a ns f er p r icing docum enta tion r ea dy , in ca s e of a tr a ns f er p r icing r ea s s es s m ent dur ing a ta x a udit

4

•


•


G ener a l l y , p ena l ties a p p l y a s a r es ul t of a tr a ns f er p r icing r ea s s es s m ent (r eg a r dl es s of com p l ia nce w ith a ny tr a ns f er p r icing

• I n ter m s of cor p or a te incom e ta x (C I T ), th e a m ounts r ea s s es s ed a r e r eins ta ted in th e ta x a b l e incom e of th e com p a ny a nd ta x ed a t th e

• 2 0 % f or r ea s s es s m ent of th e ta x a b l e b a s is , a nd a 1 0 0 % p ena l ty a p p l ies in ca s es w h er e b a d f a ith is dem ons tr a ted

• 1 0 % f or l a te p a y m ent

•

2 8 7



•

• 3 0 % p ena l ty f or r ea s s es s m ent of th e ta x a b l e b a s is , a nd a 1 0 0 % p ena l ty a p p l ies in ca s es w h er e b a d f a ith is dem ons tr a ted

• 2 0 % p ena l ty f or l a te p a y m ent

•

Penalty relief

I n th e ca s e of a r ea s s es s m ent r eg a r ding p ena l ties , a r eduction m ig h t b e g r a nted to ta x p a y er s th a t intr oduce a ta x cl a im b ef or e th e

H a v ing tr a ns f er p r icing docum enta tion does not g r a nt ta x p a y er s w ith a ny p ena l ty r el ief . H ow ev er , it coul d h el p dur ing a ta x a udit to s up p or t th e com p a ny ’ s p r icing p ol icy .

ta x a udit.



T h e l ik el ih ood of tr a ns f er p r icing is s ues b eing r a is ed w ith in a ta x a udit is h ig h . I n f a ct, th e num b er of ta x a udits r a is ing tr a ns f er p r icing

• P r oduct s a l e p r ices (under es tim a ted or ov er es tim a ted p r ices ), es p ecia l l y (b ut not onl y ) in ca s e of l os s es

•

• C os t a l l oca tions

•h ide a ch a ng e in th e tr a ns f er p r icing p ol icy a p p l ied

APA opportunity

4 4

• 4f r om th e a dm inis tr a tion th e concl us ion of a n A P A on th e m eth od us ed to deter m ine th e p r ices of tr a ns a ctions m entioned in A r ticl e 2 1 4 -

• 4in A r ticl e 2 1 4 - I I I if s uch a tr a ns a ction is cov er ed b y a n a dv a nced tr a ns f er p r icing a g r eem ent in a ccor da nce w ith th e a b ov e- m entioned A r ticl e 2 3 4 b is .

2 8 8



•

• N oncom p l ia nce w ith th e m eth odol og y a nd ob l ig a tions s et out in th e a g r eem ent b y th e com p a ny , or th e us e of f r a udul ent m ea ns . T h e ca s es r ef er r ed to a b ov e m a y b e inv ok ed b y th e a dm inis tr a tion onl y in th e contex t of a ta x a udit

F ur th er m or e, th e decr ee deta il ing th e m oda l ities of concl us ion of A P A s h oul d h a v e b een p ub l is h ed no l a ter th a n th e end of 2 0 1 6 . I n f a ct,

Impact of new OECD 8–10 guidelines

O E C D G uidel ines r eg a r ding tr a ns f er p r icing is s ues .

M y anmar

















T h er e is no ex p l icit p ena l ty f or tr a ns f er p r icing a s s es s m ents , nor is th er e a n ex p l icit p ena l ty f or not h a v ing tr a ns f er p r icing docum enta tion.

H ow ev er , f or ta x s h or tf a l l s in g ener a l , a p ena l ty not ex ceeding 1 0 % of th e ta x m a y b e im p os ed.

Penalty relief


2 9 0

M y anmar (continued)




s uch a s s es s m ent. H ence, a ta x a udit of th e p a s t y ea r r a r el y h a p p ens .

APA opportunity



N amib ia



4


ca l cul a ting th e N a m ib ia n ta x a b l e incom e of a p er s on.


G uidel ines w il l p r ev a il in r es ol v ing a ny dis p ute.


C ur r entl y , th er e is no s ta tutor y r eq uir em ent to p r ep a r e tr a ns f er p r icing docum enta tion.

inf or m a tion.



C ur r entl y , th er e a r e no dis cl os ur e r eq uir em ents .



2 9 2

N amib ia (continued)



C ur r entl y , th er e is no ob l ig a tion to s ub m it tr a ns f er p r icing docum enta tion.


• A dditiona l ta x of up to 1 0 0 % of th e p r ov is iona l ta x a m ount under p a id

• 2 0 0 % of th e a dditiona l ta x r es ul ting f r om a n a dj us tm ent (in th e ev ent of def a ul t, om is s ion, incor r ect dis cl os ur e or m is r ep r es enta tion)

• I nter es t of 2 0 % p er y ea r

Penalty relief



APA opportunity

N a m ib ia does not cur r entl y h a v e a n A P A p r og r a m .

Impact of new OECD BEPS Action 8–10 Guidelines


N eth er l and s

2 9 3


Belastingdienst)

• D utch I ncom e T a x A ct 2 0 0 1

• D utch C or p or a te I ncom e T a x A ct 1 9 6 9

•

•


• A r ticl es 3 . 8 a nd 3 . 2 5 of th e D utch I ncom e T a x A ct 2 0 0 1

• A r ticl es 8 a nd 8 b of th e D utch C or p or a te I ncom e T a x A ct 1 9 6 9

•l eng th p r incip l e.

•

•

4w h ich b oth up da ted a nd ex p a nded th e decr ees p ub l is h ed in 2 0 0 1 , incl uding a dj us tm ents a nd im p r ov em ents in th e r ul es f or ob ta ining

4

44

p ub l is h ed in th e Government Gazette on 3 0 D ecem b er 2 0 1 5 .

• 4

• 4

• 4

• 4

• 4

• 4

• 4

• 4

2 9 4

N eth er l and s (continued)


•4

• 4a nd h ol ding com p a nies , a nd ex ch a ng e of inf or m a tion, w a s a m ended; th e im p a ct of th e ch a ng es h a s b een dea l t w ith in th e decr ees

4 4

• 4docum enta tion r eq uir em ents f or m ul tina tiona l com p a nies


T h e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D G uidel ines .

r eg a r ding h ow th e a r m ’ s - l eng th p r incip l e is inter p r eted a nd a p p l ied. A ccor ding to th is decr ee, th e O E C D G uidel ines l ea v e r oom f or

A dm inis tr a tion r eg a r ding th es e is s ues .

s er v ices , contr a ct r es ea r ch , cos t contr ib ution a r r a ng em ents , a r m ’ s - l eng th p r ice deter m ina tion w h en th e v a l ue a t th e tim e of th e

H ow ev er , th e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D g uida nce on th is s ub j ect.


Articles 29b–29h, Dutch Corporate Income Tax Act 1969

T h e r eq uir em ent to p r ep a r e a C b C r ep or t is a p p l ica b l e to D utch ta x r es ident entities , m em b er s of a m ul tina tiona l com p a nies g r oup , w ith

•

• T h e countr y in w h ich th e ul tim a te/ s ur r og a te p a r ent entity is a ta x r es ident does not h a v e a s ig ned a g r eem ent in p l a ce f or a utom a tic

O r

• T h e ins p ector h a s inf or m ed th e g r oup entity th a t th e countr y in w h ich th e ul tim a te/ s ur r og a te p a r ent entity is a ta x r es ident h a s s y s tem a tica l l y f a il ed to com p l y

incl ude a ch a r t il l us tr a ting th e m ul tina tiona l com p a nies g r oup ’ s l eg a l a nd ow ner s h ip s tr uctur e a nd g eog r a p h ica l l oca tion of op er a ting entities , a des cr ip tion of th e m ul tina tiona l com p a nies g r oup ’ s b us ines s or b us ines s es , inf or m a tion r eg a r ding th e m ul tina tiona l com p a nies

2 9 5



4

th e ta x r etur n a p p l ies , th e a l r ea dy ex is ting D utch docum enta tion r eq uir em ents under A r ticl e 8 b (3 ) of th e C or p or a te I ncom e T a x A ct 1 9 6 9 a r e a p p l ica b l e.

Article 8b(3), Dutch Corporate Income Tax Act 1969

T a x p a y er s a r e ob l ig a ted to p r ep a r e docum enta tion th a t des cr ib es h ow th e tr a ns f er p r ices h a v e b een es ta b l is h ed, a nd th is m us t b e

ta x a uth or ity to ev a l ua te th e a r m ’ s - l eng th na tur e of th e tr a ns f er p r ices a p p l ied b etw een a s s ocia ted enter p r is es . T h e P a r l ia m enta r y ex p l a na tions to A r ticl e 8 b do not p r ov ide a n ex h a us tiv e l is t of inf or m a tion th a t s h oul d b e docum ented.

• I nf or m a tion a b out th e a s s ocia ted enter p r is es inv ol v ed

• I nf or m a tion a b out th e inter com p a ny tr a ns a ctions b etw een th es e a s s ocia ted enter p r is es

•

• A s ub s ta ntia tion of th e ch oice of th e tr a ns f er p r icing m eth od a p p l ied

• A s ub s ta ntia tion of th e tr a ns f er p r ice ch a r g ed

• O th er docum ents , s uch a s m a na g em ent a ccounts , b udg ets a nd m inutes of s h a r eh ol der a nd b oa r d m eeting s


ch os en r es ul ts in a r m ’ s - l eng th p r icing f or th e tr a ns a ction.

to tes t a l l of th e m eth ods , th oug h th ey m us t s ub s ta ntia te th e m eth od ch os en.


2 9 6




ta x r etur n.


D ocum enta tion is g ener a l l y ex p ected to b e com p l ete w h en th e ta x p a y er enter s into a tr a ns a ction. D utch ta x r es ident entities of a

w ith in th e ter m s et f or s ub m itting th eir r es p ectiv e cor p or a te incom e ta x r etur ns .

of th e C or p or a te I ncom e T a x A ct 1 9 6 9 a r e g r a nted f our w eek s to p r ep a r e th e tr a ns f er p r icing docum enta tion if s uch docum enta tion is not a v a il a b l e up on th e r eq ues t of th e ta x a uth or ity . T h is p er iod m a y b e ex tended up to th r ee m onth s , dep ending on th e com p l ex ity of th e inter com p a ny tr a ns a ctions in w h ich th e ta x p a y er is eng a g ed.


T h e D utch g ener a l p ena l ty r eg im e is a l s o a p p l ica b l e f or tr a ns f er p r icing . A ccor ding to th is r eg im e, a n a dm inis tr a tiv e a nd, under cer ta in

D ur ing th e P a r l ia m enta r y dis cus s ions r eg a r ding th e intr oduction of th e a r m ’ s - l eng th p r incip l e a nd tr a ns f er p r icing docum enta tion r eq uir em ents (i. e. , A r ticl e 8 b ) into th e D utch C or p or a te I ncom e T a x A ct 1 9 6 9 , a q ues tion w a s r a is ed r eg a r ding th e D utch p ol icy in

th a t p ena l ties in s uch ins ta nces s h oul d b e l im ited to ca s es in w h ich it is p l a us ib l e th a t th e a g r eed- up on tr a ns f er p r ice is not r eg a r ded a s a r m ’ s - l eng th a s a r es ul t of a p ur el y intentiona l a ct. T h er ef or e, a n a dm inis tr a tiv e p ena l ty w il l not b e im p os ed, ev en in th e ev ent of g r os s neg l ig ence or a conditiona l intentiona l a ct under th is p ol icy a nnouncem ent.

I n ca s e of a p ur el y intentiona l a ct, a s s et f or th a b ov e, th e ta x m a y b e incr ea s ed w ith a m a x im um p ena l ty of 1 0 0 % of th e (a dditiona l ) ta x due, p l us inter es t.

T h e l a ck of tr a ns f er p r icing docum enta tion w il l s h if t th e b ur den of p r oof r eg a r ding th e a r m ’ s - l eng th na tur e of th e tr a ns f er p r ice us ed b y th e ta x p a y er .

r eg a r ded a s a cr im ina l of f ens e f or w h ich a cr im ina l p ena l ty ca n b e im p os ed. H ow ev er , under cer ta in cir cum s ta nces , a s a n a l ter na tiv e, a n a dm inis tr a tiv e p ena l ty ca n b e im p os ed. D ur ing th e P a r l ia m enta r y dis cus s ion r el a ted to th is p r op os a l , it w a s m entioned th a t cr im ina l ch a r g es w il l b e r es er v ed f or th e m os t s ev er e ca s es .

Penalty relief

T r a ns f er p r icing p ena l ties a r e unl ik el y if th e ta x p a y er p r ep a r es p r op er tr a ns f er p r icing docum enta tion th a t a deq ua tel y s ub s ta ntia tes th e a r m ’ s - l eng th na tur e of th e ta x p a y er ’ s inter com p a ny tr a ns a ctions .

2 9 7




T h e s ta tute of l im ita tions on tr a ns f er p r icing a s s es s m ents is th e s a m e a s th e s ta tute of l im ita tions on ta x a s s es s m ents (a s cov er ed b y th e

•

O r

• T h e ta x p a y er a cted in b a d f a ith

A n a dditiona l a s s es s m ent is p os s ib l e onl y up to tw o y ea r s a f ter th e ta x a s s es s m ent h a s b een is s ued in th e ca s e of a m is ta k e, w h ich is

deem ed to h a v e b een a w a r e of th e m is ta k e).


T h e l ik el ih ood of b eing a udited b y th e ta x a uth or ity is cons ider ed m oder a te. H ow ev er , dur ing a n a udit, th e l ik el ih ood of tr a ns f er p r icing

T r a ns f er p r icing is a k ey is s ue in a ny ta x a udit, a nd m a ny com p a nies a r e s ub j ect to s ep a r a te tr a ns f er p r icing a udits . A f unctiona l a na l y s is is incor p or a ted into m a ny of th es e a udits a nd f or m s th e b a s is of th e tr a ns f er p r icing r is k a na l y s is of ta x p a y er s .

tr a ns a ction.

T h e ta x a uth or ity h a s a l s o f ocus ed, a s a na tur a l r es ul t of th e r is k a na l y s is , on tr a ns a ctions w ith entities in countr ies w ith l ow ef f ectiv e ta x r a tes .

APA opportunity

r eg a r ding econom ic a na l y s is th a t is a v a il a b l e to s m a l l ta x p a y er s .

2 9 8



r eceip t a nd p a y m ent of inter com p a ny inter es t) a nd l icens ing (m er e r eceip t a nd p a y m ent of inter com p a ny r oy a l ties ) com p a nies .

T h e D utch ta x a uth or ities p r oces s m a ny unil a ter a l a nd b il a ter a l A P A s on a nnua l b a s is . T h e D utch com p etent a uth or ity h a s b il a ter a l A P A ex p er ience a cr os s a l l continents .

M ut ual agreem ent p rocedures ( M A Ps)

4

ta x p a y er s . K ey f ea tur es of th e new decr ee a r e f or m a l l y intr oducing a n A ccel er a ted C om p etent A uth or ity P r ocedur e (A C A P ), endor s ing

m or e tr a ditiona l doub l e ta x a tion ca s es .

Attribution of profits to permanent establishments

4p er m a nent es ta b l is h m ents (P E D ecr ee). T h is P E D ecr ee p r ov ides f ur th er ins ig h ts into th e ta x a uth or ity ’ s p os ition on p er m a nent

Impact of new OECD BEPS Action 8–10 Guidelines

2 0 1 6 ; y es

T h e D utch P a r l ia m ent is of th e b el ief th a t th e g uida nce of th e O E C D ca n b e com p a r ed w ith th e v iew of a uth or ita tiv e w r iter s a nd concl us ions of th e A ttor ney - G ener a l . T h e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D G uidel ines . T h e D utch tr a ns f er p r icing decr ee p r ov ides f ur th er g uida nce on h ow th e a r m ’ s - l eng th p r incip l e is inter p r eted a nd a p p l ied. I n a l etter to th e P a r l ia m ent on 5 O ctob er 2 0 1 5 , th e D utch

N ew Z eal and



• 4

• T a x A dm inis tr a tion A ct 1 9 9 4 (T A A )

•



1 0 q ues tions th a t s h oul d b e a ddr es s ed b y com p a nies under ta k ing cr os s - b or der b us ines s r es tr uctur ing s . T h es e q ues tions a im to h el p a s cer ta in th e com m er cia l r a tiona l e of th e r es tr uctur ing .


4

h a s b een us ed to es ta b l is h th a t th e ta x p a y er ’ s tr a ns f er p r ices a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e, in l ig h t of th e r el ev a nt f a cts a nd cir cum s ta nces .


3 0 0

N ew Z eal and (continued)



•

•

•


th eir tr a ns f er p r icing r is k a s s es s m ent a ctiv ities (s ee th e nex t s ection f or f ur th er deta il s ).


G uidel ines indica te th a t ta x p a y er s th a t p r ep a r e a nd m a inta in tr a ns f er p r icing docum enta tion a r e m or e l ik el y to ens ur e th a t th e b ur den

g ener a l l y is g iv en 2 0 w or k ing da y s to s ub m it th e docum enta tion up on r eq ues t.


4

• A 2 0 % p ena l ty f or not ta k ing r ea s ona b l e ca r e

• A 2 0 % p ena l ty f or a n una ccep ta b l e ta x p os ition

• A 4 0 % p ena l ty f or g r os s ca r el es s nes s

• A 1 0 0 % p ena l ty f or a n a b us iv e ta x p os ition

• A 1 5 0 % p ena l ty f or ev a s ion or a s im il a r a ct

Penalty relief

•una ccep ta b l e ta x p os ition ca teg or ies ) or 7 5 % f or oth er s h or tf a l l p ena l ties .

• 4

3 0 1

N ew Z eal and (continued)



T h e C om m is s ioner ’ s p ow er to is s ue a m ended a s s es s m ents is s ub j ect to a f our - y ea r tim e l im it f r om th e end of th e y ea r in w h ich th e ta x

a r is es w h en a dis p ute is not r es ol v ed, a nd m or e tim e w oul d a l l ow eith er com p l etion of th e dis p ute p r oces s b y m utua l a g r eem ent of b oth p a r ties or w h er e a noth er ca s e b ef or e th e cour t is l ik el y to r es ol v e th e is s ue in cur r ent dis p ute.


y ea r s .

q ues tionna ir e f or b r a nch es .

T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed dep ends on th e com p l ex ity of th e cr os s - b or der a s s ocia ted- p a r ty

deta il ed tr a ns f er p r icing r ev iew .

APA opportunity

a p p l ica tion conf er ences to m a k e th e A P A a p p l ica tion p r oces s l es s tim e- cons um ing .


p r icing l eg is l a tion.

N ic ar ag u a



Dirección General de Ingresos (D G I )


C ur r entl y , th er e a r e no l oca l tr a ns f er p r icing r eg ul a tions in N ica r a g ua . H ow ev er , r eg ul a tions w il l b e in ef f ect a s of 3 0 J une 2 0 1 7 .















Penalty relief




3 0 3

N ic ar ag u a (continued)



a udit is cons ider ed l ow . T h e D G I h a s not y et initia ted a ny ta x a udits r eg a r ding tr a ns f er p r icing b eca us e th e r eg ul a tions w il l com e into

unk now n.

APA opportunity



N ig er ia




f r om s uch tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e.

•

•

• T r a ns f er , p ur ch a s e, l icens e or us e of inta ng ib l e a s s ets


• L ending or b or r ow ing of m oney

•

•


G uidel ines a s b eing a p p r op r ia te.

ca n b e ex p ected to a p p l y .


ta x r etur ns . T h e ta x r etur ns a r e due s ix m onth s a f ter th e y ea r - end. T h e tr a ns f er p r icing docum enta tion ca n b e r eq ues ted w ith 2 1 da y s ’

th e docum enta tion s h oul d b e p r ep a r ed ta k ing into a ccount th e com p l ex ity a nd v ol um e of th e a p p l ica b l e tr a ns a ctions .

3 0 5

N ig er ia (continued)



m eth ods to b e us ed in deter m ining w h eth er th e r es ul t of a tr a ns a ction or s er ies of tr a ns a ctions is cons is tent w ith th e a r m ’ s - l eng th

•

•

• C os t- p l us

•

•

•

m eth ods ca n b e r ea s ona b l y a p p l ied a nd (ii) th e m eth od us ed g iv es r is e to a r es ul t th a t is cons is tent w ith th e a r m ’ s - l eng th p r incip l e.


T a x p a y er s a r e r eq uir ed to com p l ete a nd a tta ch a T r a ns f er P r icing D ecl a r a tion f or m to th e a nnua l ta x r etur n a s w el l a s a T r a ns f er P r icing D is cl os ur e f or m . T h e T r a ns f er P r icing D is cl os ur e F or m r eq uir es th e ta x p a y er to indica te w h eth er it h a s com p l ied w ith th e T r a ns f er P r icing

a b out inter com p a ny tr a ns a ctions a nd b us ines s r es tr uctur ing .


T a x p a y er s a r e r eq uir ed to com p l ete T r a ns f er P r icing D ecl a r a tion a nd D is cl os ur e f or m s , w h ich a r e to b e s ub m itted a s p a r t of a n a nnua l

T P r etur n. F or cl a r ity , th e T P r etur n cons is ts of (i) th e T r a ns f er P r icing D is cl os ur e F or m , (ii) th e T r a ns f er P r icing D ecl a r a tion F or m (f or th e

com p uta tion a nd a l l r el ev a nt s ch edul es .

p ol icy docum ents a r e a uniq ue r eq uir em ent of th e N ig er ia n r eg im e a nd s h oul d incl ude inf or m a tion s uch a s th e na m e of th e m em b er s of

tr a ns a ctions , a nd th e tr a ns f er p r icing m eth od th a t m a y b e a dop ted f or th e p r icing f or ea ch ty p e of contr ol l ed tr a ns a ction. F or cl a r ity , th e tr a ns f er p r icing p ol icy docum ent is not th e s a m e a s tr a ns f er p r icing docum enta tion b ut r a th er is a condens ed f or m of k ey inf or m a tion a b out th e com p a ny ’ s tr a ns f er p r icing p ol icies .

3 0 6




tr a ns a ctions occur r ed.

T h e T r a ns f er P r icing D ecl a r a tion a nd T r a ns f er P r icing D is cl os ur e f or m s , a s w el l a s th e tr a ns f er p r icing p ol icy docum ents , s h oul d b e


A ta x a b l e p er s on w h o f a il s to com p l y w ith a ny of th e p r ov is ions of th e r eg ul a tions w il l b e l ia b l e f or a p ena l ty a s p r es cr ib ed in th e r el ev a nt

m onth in w h ich th e f a il ur e occur s a nd N G N 5 , 0 0 0 f or ea ch s ub s eq uent m onth . L a te p a y m ent of ta x es due a ttr a cts a p ena l ty of 1 0 % , p l us inter es t a t th e b a nk l ending r a te.

Penalty relief

p ena l ties th r oug h a p p r op r ia te docum enta tion of contr ol l ed tr a ns a ctions . I n th is r eg a r d, th e b ur den of p r oof l ies w ith th e ta x p a y er .


f or th e ta x p a y er ’ s r etur ns h a s to b e r eta ined f or s ix y ea r s . I n ca s es of cr im ina l tendencies , s uch a s f r a ud or w il l f ul def a ul t, th er e is no s ta tute of l im ita tions .


th e ta x a uth or ities f or th e p ur p os es of r is k a s s es s m ent, a nd inf or m a tion r eq ues ts a r e s ent to ta x p a y er s s el ected f or tr a ns f er p r icing

r eq ues t.

r is k s th a n dom es tic tr a ns a ctions a nd a s s uch a r e g iv en m or e s cr utiny .

3 0 7



APA opportunity

a p p r op r ia te s et of cr iter ia f or deter m ining w h eth er th e ta x p a y er h a s com p l ied w ith th e a r m ’ s - l eng th p r incip l e f or cer ta in f utur e contr ol l ed


(A ction 1 4 ). H ow ev er , th er e is no p ub l ic p r onouncem ent on th e dev el op m ents y et.

N o r w ay



• T a x a tion A ct (1 9 9 9 )

• T a x A dm inis tr a tion A ct (1 9 8 0 )


4

4

E f f ectiv e in 2 0 1 4 , new inter es t deductib il ity r es tr ictions on r el a ted- p a r ty deb t ca m e into ef f ect. A ccor ding to th e new l eg is l a tion, th e net inter es t ex p ens e p a id to a r el a ted- p a r ty ca n b e deducted onl y to th e ex tent th a t inter na l a nd ex ter na l inter es t ex p ens e com b ined

th ir d- p a r ty inter es t ex p ens es , w h er e a r el a ted- p a r ty h a s p r ov ided a g ua r a ntee. C er ta in ex em p tions a r e ex p ected to a p p l y in r el a tion to ex ter na l deb t g ua r a nteed b y a r el a ted- p a r ty . E x em p tions to th e inter es t deductib il ity r es tr ictions r ul e a p p l y if th e tota l a m ount of net

r ep or t. N o da te h a s b een s et f or im p l em enta tion of th e l a w , b ut it is a nticip a ted th a t th e l a w w il l b e ef f ectiv e f or th e incom e y ea r 2 0 1 6 ,


T h e N T A h a s a l ong h is tor y of f ol l ow ing th e O E C D G uidel ines . T h e N or w eg ia n r eg ul a tions f ol l ow O E C D p r incip l es , a nd docum enta tion p r ep a r ed in l ine w ith th e O E C D G uidel ines w il l g ener a l l y m eet th e N or w eg ia n r eq uir em ents .

a r e not incl uded. T h e s ta tus of th e O E C D G uidel ines is l im ited to th a t of g uida nce, a nd th ey do not cons titute b inding r ul es .

p r a ctice.

3 0 9

N o r w ay (continued)



tr a ns a ctions r ep or ted in th e ta x r etur n.

I n a ddition, cov er ed ta x p a y er s a r e ob l ig ed to p r ep a r e tr a ns f er p r icing docum enta tion th a t des cr ib es h ow th e tr a ns f er p r ices h a v e b een

•N or w eg ia n entity dur ing th e cov er ed incom e y ea r , m us t b e incl uded, a nd a ny l os s es incur r ed b y th e N or w eg ia n entity m us t b e ex p l a ined.

• A g r eem ents f or th e r el a ted- p a r ty tr a ns a ctions m us t b e a tta ch ed to th e docum enta tion.

• A des cr ip tion of h ow th e tr a ns f er p r ice in a tr a ns a ction is a ctua l l y com p uted m us t b e p r ov ided.

• T h e l ev el of deta il r eq uir ed dep ends on th e com p l ex ity of th e tr a ns a ction a nd, in p a r ticul a r , if th e tr a ns a ction is of h ig h v a l ue, inta ng ib l es a r e inv ol v ed or if th er e m a y b e a ta x m otiv a tion f or p r icing th e tr a ns a ction a t non- a r m ’ s - l eng th conditions , th e l ev el of deta il r eq uir ed is h ig h er .

•a nd m a ter ia l ch a ng es to th e f unctions p er f or m ed b y th e enter p r is e, a nd th e p r op er ty it us es in its b us ines s a ctiv ities a nd th e r is k it a s s um es m us t b e incl uded.

•

•


m eth ods under cer ta in cir cum s ta nces is incr ea s ing . T h e N T A g ener a l l y does not a ccep t th e us e of P a n- E ur op ea n s ea r ch es a ny m or e

m eth ods p r ov ide a r m ’ s - l eng th r es ul ts .

T h e N T A tends to p r ef er l oca l com p a r a b l es ov er f or eig n com p a r a b l es . H ow ev er , in th e a b s ence of l oca l com p a r a b l es , it is g ener a l l y r ecom m ended to p r ov ide inf or m a tion on f or eig n com p a r a b l es .

T h er e h a v e b een incidents in w h ich th e N T A h a s m a de us e of s ecr et com p a r a b l es , a l th oug h th is is not deem ed com m on p r a ctice.

3 1 0




r ep or ted in th e ta x r etur n.



T h e tr a ns f er p r icing docum enta tion m us t b e s ub m itted w ith in 4 5 da y s of a r eq ues t b y th e N T A . A l l docum enta tion m us t b e r eta ined f or 1 0 y ea r s . T h e ta x a uth or ity a s s um es th a t docum enta tion is m a de on a contem p or a neous b a s is a nd, a ccor ding l y , does not a l l ow f or ex tens ions .


T h e tr a ns f er p r icing p ena l ty (s ur ta x ) is 3 0 % of th e ta x a dj us tm ents , p r ov ided th a t th e ta x a uth or ity concl udes th a t th e ta x p a y er p r ov ided

im p os ed. I n th e ca s e of g r os s neg l ig ence, a s ur ta x of up to 6 0 % m a y b e l ev ied. H ow ev er , th e nor m a l s ur ta x r a te is 3 0 % . A dditiona l l y , a nondeductib l e a nnua l inter es t ch a r g e w il l a p p l y .

T h e s a m e is a p p l ica b l e if th e docum enta tion is not s ub m itted b y th e dea dl ine.

Penalty relief

A 3 0 % p ena l ty is nor m a l ; h ow ev er , th e r is k of a p ena l ty b eing im p os ed m a y b e r educed if p r op er docum enta tion is p r ep a r ed. D is cl os ur e in th e ta x r etur n m a y , in p r incip l e, r el iev e p ena l ties b eca us e th e ta x a uth or ity tech nica l l y w il l h a v e b een inf or m ed a nd m a y f ur th er inv es tig a te th e tr a ns f er p r icing ca s e. T h e a s s es s m ent of p ena l ties is b ecom ing incr ea s ing l y com m on.


T h e g ener a l s ta tute of l im ita tions f or ta x a s s es s m ents in N or w a y s ta tes th a t is s ues r eg a r ding th e ta x r etur n ca nnot b e r a is ed a f ter 1 0 y ea r s f r om th e end of th e incom e y ea r . T r a ns f er p r icing docum enta tion m us t, th er ef or e, b e r eta ined a nd s tor ed f or a t l ea s t 1 0 y ea r s .

T h e s ta tute of l im ita tions is th r ee y ea r s if th e a m endm ent is b a s ed on th e ta x a uth or ity ’ s dis cr etiona r y a s s es s m ents or th e inter p r eta tion

end, th e s ta tute of l im ita tions w il l cea s e 3 1 D ecem b er 2 0 1 9 .

T h e s ta tute of l im ita tions is tw o y ea r s if a ny ta x a dj us tm ent is a g a ins t th e ta x p a y er , p r ov ided th a t th e ta x p a y er h a s not g iv en incor r ect or incom p l ete inf or m a tion in th e ta x r etur n. A s s um ing th e ta x p a y er h a s 3 1 D ecem b er a s its 2 0 1 6 incom e y ea r - end, th e s ta tute of l im ita tions w il l cea s e 3 1 D ecem b er 2 0 1 8 .

3 1 1




T h e l ik el ih ood of a f ul l cor p or a te ta x a udit is , in g ener a l , l ow . H ow ev er , th e l ik el ih ood of a s ep a r a te tr a ns f er p r icing ta x ex a m ina tion is cons ider ed h ig h . F or b oth s ep a r a te tr a ns f er p r icing ta x ex a m ina tions a nd f ul l cor p or a te ta x a udits , th e ta x p a y er ’ s r el a ted- p a r ty

b eing ch a l l eng ed is cons ider ed h ig h .

T h e N T A h a s a s tr ong f ocus on inter com p a ny tr a ns a ctions a nd h a s es ta b l is h ed a na tiona l tr a ns f er p r icing p r oj ect com p os ed of a l l of th e

tr a ns f er p r icing ta x ins p ector s w ith in th e N T A .

C ur r entl y , a ny com p a ny w ith a l ow or neg a tiv e m a r g in tr a ns a cting w ith a f or eig n r el a ted- p a r ty h a s a h ig h r is k of a ta x a udit. I n a ddition, y ea r - end a dj us tm ents a r e of ten ch a l l eng ed. T h e N T A of ten us es th is a s a n a r g um ent to cl a im th a t th e r es ul t is not a t a n a r m ’ s - l eng th .

APA opportunity

r eg a r ding p r ocedur e f or th e a p p l ica tion. H ow ev er , it w il l not b e p os s ib l e to eng a g e th e A P A unit on a no- na m e b a s is . T h e A P A p r oces s is f r ee.


4

on docum enta tion.

O man




A r ticl es 1 2 6 to 1 2 8 of th e I T L conta in th e tr a ns f er p r icing r eg ul a tions .



p r icing f or r el a ted- p a r ty tr a ns a ctions .


N o p r icing m eth ods h a v e b een p r es cr ib ed in th e l a w or under th e ex is ting r eg ul a tions . T h e l a w m entions th a t p r icing s h a l l b e ta k en into


a dditiona l r el a ted- p a r ty tr a ns a ction dis cl os ur es , a l ong w ith th e ta x r etur ns .


ta x p a y er a b out r el a ted- p a r ty tr a ns a ctions . T h e dis cl os ur e r eq uir em ent h a s b een ef f ectiv e s ince 2 0 1 2 .


3 1 3

O man (continued)



Penalty relief


T h er e a r e no s ep a r a te tr a ns f er p r icing a s s es s m ents conducted in O m a n. T h e tr a ns f er p r icing a s s es s m ent w il l b e conducted a s p a r t of th e

y ea r f or w h ich a ta x r etur n is s ub m itted.


T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h , a nd ta x a s s es s m ents a r e conducted a nnua l l y . A r ev iew of tr a ns f er p r icing is one of th e m a in p r oces s es dur ing th e a nnua l ta x a s s es s m ent. T h er ef or e, r el a ted- p a r ty tr a ns a ctions , f r om a tr a ns f er p r icing p er s p ectiv e,

a p p r op r ia te tr a ns f er p r icing m eth odol og y us ed is deter m ined on a ca s e- b y - ca s e b a s is . A ccor ding l y , th e l ik el ih ood of th e m eth odol og y b eing ch a l l eng ed in a tr a ns f er p r icing a udit is a l s o h ig h .

APA opportunity

T h er e is no op p or tunity to concl ude a n A P A .

ca s e a nd ca nnot b e a p p l ied g ener a l l y to a ny oth er ca s e.


l a w y et; h ow ev er , it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

P ak is tan




deter m ine th e s our ce of incom e a nd th e na tur e of a ny p a y m ent or l os s a s r ev enue, ca p ita l or oth er w is e.

•

• D is r eg a r d a tr a ns a ction th a t does not h a v e s ub s ta ntia l econom ic ef f ect

•

4


T h e m eth ods us ed b y th e com m is s ioner to deter m ine th e a r m ’ s - l eng th r es ul t a r e identica l to th e m eth ods a v a il a b l e under th e O E C D G uidel ines .

C onv ention (on a s s ocia ted E nter p r is es ).


T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in


deter m ining w h eth er th e tr a ns a ction b etw een contr ol l ed p a r ties is on a n a r m ’ s - l eng th b a s is .

s im il a r tr a ns a ction b etw een contr ol l ed p a r ties is on a n a r m ’ s - l eng th b a s is .

3 1 5

P ak is tan (continued)


4

b etw een indep endent p er s ons f or m ing a n a s s ocia tion w oul d b e cons ider ed.

cir cum s ta nces , in th e op inion of th e com m is s ioner , s h a l l b e a p p l ied. T h e f our th m eth od s h a l l a p p l y onl y if th e oth er m eth ods ca nnot b e r el ia b l y a p p l ied.




a p p l ica b l e.


Penalty relief


T h er e a r e no s ep a r a te tr a ns f er p r icing a s s es s m ents conducted in P a k is ta n. A tr a ns f er p r icing a s s es s m ent, if a ny , w il l b e conducted a s p a r t of th e r eg ul a r ta x a s s es s m ent f or a ta x y ea r .


b eing dev el op ed. G ener a l l y , th e tr a ns f er p r icing a s p ect is cov er ed in th e ta x a udit p r oceeding s conducted b y th e com m is s ioner once th e r etur n of incom e is s el ected f or a ta x a udit.

3 1 6

P ak is tan (continued)


APA opportunity

T h er e is no op p or tunity to concl ude a n A P A . H ow ev er , a n a dv a nce r ul ing is p os s ib l e.

on th e ta x a uth or ities r eg a r ding th e a p p l ica tion of th e tr a ns a ction a nd a ccor ding to th e l a w a s it s tood a t th e tim e of s uch r ul ing . T h e

a nd docum ents .


P anama



Dirección General de Ingresos, or D G I )


•

•

•


T h e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es , a s l ong a s th ey do not contr a dict th e T a x C ode.


C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to cr os s - b or der inter com p a ny tr a ns a ctions m us t b e k ep t a nd m a inta ined in

•ev idence of dir ect a nd indir ect p a r ticip a tion b etw een r el a ted p a r ties

• A deta il ed des cr ip tion of th e na tur e, ch a r a cter is tics a nd a m ount of a l l inter com p a ny tr a ns a ctions of th e ta x p a y er , incl uding th e tr a ns f er p r icing m eth od em p l oy ed

I t is a l s o neces s a r y to incl ude th e m eth od s el ection p r oces s a nd s p ecif y th e p r ice or m a r g in, or a r a ng e of p r ices or m a r g ins , a p p l ied b y th e ta x p a y er in its inter com p a ny tr a ns a ctions . I n a ddition, it is neces s a r y to incl ude in th e docum enta tion inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion a b out com p a r a b l e tr a ns a ctions or com p a nies b y ty p e of tr a ns a ction m us t a l s o b e incl uded. I nter na l com p a r a b l es a r e p r ef er r ed ov er ex ter na l com p a r a b l es , a nd th e r ea s ons f or not a p p l y ing inter na l com p a r a b l es m us t b e dul y docum ented.

T h e docum enta tion m us t b e p r ep a r ed cons ider ing th e com p l ex ity a nd v ol um e of th e tr a ns a ctions a nd s h oul d incl ude th e inf or m a tion th a t th e ta x p a y er us ed in its ev a l ua tion of th e inter com p a ny tr a ns a ctions , cons is ting of inf or m a tion p er ta ining to b oth th e m ul tina tiona l g r oup to w h ich th e ta x p a y er b el ong s a nd th e ta x p a y er its el f .

3 1 8

P anama (continued)


•

•

• T h e tr a ns f er p r icing p ol icy of th e m ul tina tiona l g r oup , if a ny


m eth od s h oul d b e b a s ed on th e ch a r a cter is tics of th e tr a ns a ction under a na l y s is a nd th e cir cum s ta nces of th e ca s e a nd s h oul d a im to b e th e one th a t b es t r es p ects th e a r m ’ s - l eng th p r incip l e.


T a x p a y er s m us t r ep or t on th e incom e ta x r etur n w h eth er th ey conducted r el a ted- p a r ty tr a ns a ctions a nd dis cl os e th e tota l a m ount of



D ocum enta tion m us t b e r ea dil y a v a il a b l e b y th e da te on w h ich th e tr a ns f er p r icing inf or m a tion r etur n is due a nd m us t b e k ep t a l ong w ith 4


r eg a r dl es s of th eir na tur e (i. e. , r eg a r dl es s of w h eth er th ey a r e item s of incom e, ex p ens e or deduction).

I n a ddition, tr a ns f er p r icing incom e a dj us tm ents im p os ed b y th e D G I ca n r es ul t in s ur ch a r g es a nd p ena l ty inter es t.

Penalty relief

T h er e is cur r entl y no p ena l ty r el ief r eg im e in p l a ce.

3 1 9

P anama (continued)



of a n a m ended r etur n.


g ener a l ta x a udit is m edium . I n th e p a s t coup l e of y ea r s , th e D G I h a s r eq ues ted tr a ns f er p r icing docum enta tion f r om ta x p a y er s r eg a r ding 4

APA opportunity

C ur r entl y , no A P A p r og r a m h a s b een es ta b l is h ed.


m a nda tor y f or ta x p a y er s .

a m end th e cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur . T h us , it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

P ap u a N ew G u inea (continued)P ap u a N ew G u inea




P a p ua N ew G uinea ’ s doub l e ta x a g r eem ents (D iv is ion 1 5 ).

I T A 1 9 5 9 (th e C ir cul a r ).


A l th oug h P a p ua N ew G uinea (P N G ) is not a m em b er countr y of th e O E C D , th e O E C D G uidel ines a r e a ck now l edg ed a s a n im p or ta nt,

w ith indus tr y a nd ta x p r a ctitioner s in m a ny countr ies . T h e C ir cul a r s ta tes th a t th e O E C D G uidel ines s h oul d b e f ol l ow ed in th e a b s ence of g uida nce in ter m s of th e C ir cul a r , th e p r ov is ions of D iv is ion 1 5 or th e doub l e ta x a g r eem ents enter ed into b y P N G .

to b e r el ev a nt a nd r ecom m ends th a t ta x p a y er s f ol l ow th e g uida nce in es ta b l is h ing a r m ’ s - l eng th conditions in inter na tiona l a g r eem ents

th is is s ue.


T h e g ener a l r eq uir em ents of th e A ct r eq uir e ta x p a y er s to k eep p r op er r ecor ds r el a ting to th eir tr a ns f er p r icing . H ow ev er , th er e is no


D iv is ion 1 5 a nd th e doub l e ta x a g r eem ents enter ed into b y P N G do not p r es cr ib e a ny p a r ticul a r m eth odol og y f or a s cer ta ining a n a r m ’ s -l eng th cons ider a tion. G iv en th a t th er e is no p r es cr ib ed l eg is l a tiv e p r ef er ence, th e C om m is s ioner G ener a l g ener a l l y w oul d s eek to us e th e m os t a p p r op r ia te m eth od, p er th e O E C D G uidel ines .


ex ceeded P a p ua N ew G uinea n k ina (P G K ) 1 0 0 , 0 0 0 in v a l ue (ex cl uding th e ca p ita l v a l ue of a ny r el a ted- p a r ty l oa ns ) or w h en l oa ns w ith r el a ted p a r ties h a v e a n a g g r eg a te ca p ita l v a l ue ex ceeding P G K 2 m il l ion a t a ny tim e dur ing th e y ea r .

3 2 1

P ap u a N ew G u inea (continued) P ap u a N ew G u inea (continued)


• I nter na tiona l r el a ted- p a r ty tr a ns a ction ty p es a nd q ua ntum

• C ountr ies w ith w h ich th e ta x p a y er h a s inter na tiona l r el a ted- p a r ty tr a ns a ctions

• P er centa g e of tr a ns a ctions cov er ed b y contem p or a neous docum enta tion

• T r a ns f er p r icing m eth odol og ies s el ected a nd a p p l ied f or ea ch inter na tiona l r el a ted- p a r ty ty p e

• D eta il s of b r a nch op er a tions


P G K 1 0 0 , 0 0 0 in v a l ue (ex cl uding th e ca p ita l v a l ue of a ny r el a ted- p a r ty l oa ns ) or w h en l oa ns w ith r el a ted p a r ties h a v e a n a g g r eg a te ca p ita l v a l ue ex ceeding P G K 2 m il l ion a t a ny tim e dur ing th e y ea r .


A s a g ener a l r ul e, th e C om m is s ioner G ener a l cons ider s th a t ta x p a y er s s h oul d contem p or a neous l y docum ent th e p r oces s th ey h a v e f ol l ow ed a nd th eir a na l y s is in deter m ining tr a ns f er p r ices in th eir ef f or ts to com p l y w ith th e a r m ’ s - l eng th p r incip l e. T h is s h oul d incl ude

C ir cul a r b y no l a ter th a n th e da te of l odg m ent of th e ta x r etur n a f f ected b y th os e tr a ns a ctions .


p r ov is ions w il l a p p l y to def a ul t, ev a s ion or om is s ion r el a ting to tr a ns f er p r icing .

T h e p ena l ty , a dditiona l ta x a nd of f ens e p r ov is ions a p p l ica b l e in th e ev ent of def a ul t or om is s ion in th e com p l etion of th e ta x r etur n or ev a s ion of ta x a tion conta ined in th e A ct s tip ul a te a l ia b il ity f or a dditiona l ta x or p ena l ty of doub l e th e dif f er ence b etw een th e ta x p r op er l y p a y a b l e a nd th e ta x th a t w oul d b e p a y a b l e b a s ed on th e r etur n a s l odg ed. T h e C om m is s ioner G ener a l h a s th e dis cr etion to r em it th e

P G K 1 , 0 0 0 a nd not ex ceeding P G K 5 0 , 0 0 0 . I n a ddition, th e cour t m a y or der th e ta x p a y er to p a y to th e C om m is s ioner G ener a l a s um not ex ceeding doub l e th e a m ount of incom e ta x or div idend (w ith h ol ding ) ta x th a t w oul d h a v e b een a v oided if th e s ta tem ent in th e r etur n h a d

a dditiona l ta x im p os ed b y th e C om m is s ioner G ener a l .

Penalty relief


T h er e g ener a l l y is no s ta tute of l im ita tions w ith r es p ect to tr a ns f er p r icing a dj us tm ents .

3 2 2

P ap u a N ew G u inea (continued)



th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit is h ig h . I f tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e m eth odol og y w il l b e ch a l l eng ed w oul d dep end on th e docum enta tion a v a il a b l e a nd th e a p p r op r ia tenes s of th e m eth odol og y ch os en.

T h e C om m is s ioner G ener a l , a s a r ul e, a l l oca tes r es our ces f or tr a ns f er p r icing ca s es a ccor ding to th e p er ceiv ed r is k to r ev enue f r om

cons ta ntl y r etur ning l os s es a r e a t th e g r ea tes t r is k of a tr a ns f er p r icing r ev iew .

T a x p a y er s s h oul d b e a w a r e th a t th e C om m is s ioner G ener a l m a y p a y cl os er a ttention to a tr a ns a ction inv ol v ing a n a s s ocia ted entity r es ident in a countr y w ith l ow er ta x r a tes th a n P N G . T h e p er cep tion ex is ts th a t tr a ns a ctions inv ol v ing l ow - ta x j ur is dictions a r e of ten m otiv a ted b y ta x , r a th er th a n s tr ictl y com m er cia l r ea s ons . T h is w il l b e th e ca s e p a r ticul a r l y w h en th e P N G entity h a s ong oing ta x l os s es a s a r es ul t of its dea l ing s w ith a r el a ted- p a r ty in a l ow er - ta x j ur is diction.

APA opportunity

T h e C om m is s ioner G ener a l s up p or ts h a v ing a n A P A p r og r a m op er a ting in P N G b ut no cur r ent A P A p r og r a m ex is ts .


H ow w il l y our j ur is diction f r om a dom es tic p er s p ectiv e (i. e. not in a tr ea ty contex t) a p p l y th e a m ended O E C D T P G uidel ines 2 0 1 6 w h ich

I f p os s ib l e, p l ea s e incl ude a s h or t r ef er ence ex p l a ining h ow y ou com e to y our a ns w er (e. g . , y our countr y h a s a n ex p l icit r ef er ence in its dom es tic l a w to th e l a tes t a p p r ov ed v er s ion of th e O E C D g uidel ines )

G uidel ines s h oul d b e f ol l ow ed in th e a b s ence of g uida nce in ter m s of th e C ir cul a r , th e p r ov is ions of D iv is ion 1 5 or th e doub l e ta x a g r eem ents enter ed into b y P N G .

P ar ag u ay



Subsecretaría de Estado de Tributación)

4 4


s ta tes a g ener a l dis p os ition r el a ted to s a l e p r ice a dj us tm ent (L a w N o. 5 0 6 1 / 1 3 ). T h is new dis p os ition is cons ider ed a s a k ind of tr a ns f er p r icing r eg ul a tion a nd a l l ow s th e P a r a g ua y T a x A uth or ity to a m end p r ices r el a ted to ex p or ta tion op er a tions f or cor p or a te incom e ta x p ur p os es onl y . D ecr ee N o. 1 . 8 3 2 / 2 0 1 4 es ta b l is h es th e s a l e p r ice a dj us tm ents on s oy b ea ns a nd th eir der iv a tiv es . T h e P a r a g ua y a n T a x A uth or ity coul d incl ude oth er p r oducts in th e f utur e.















3 2 4

P ar ag u ay (continued)


Penalty relief






APA opportunity



P er u



Superintendencia Nacional de Administración Tributaria


4 4r eg ul a tions in P er u.

T r a ns f er p r icing r ul es h a v e b een ef f ectiv e in P er u s ince 1 J a nua r y 2 0 0 1 . O v er th e y ea r s , th es e r ul es h a v e under g one s ev er a l ch a ng es

P er uv ia n T r a ns f er p r icing r ul es a p p l y b oth to cr os s - b or der a nd dom es tic tr a ns a ctions b etw een r el a ted p a r ties a nd a l l tr a ns a ctions w ith r es idents in ta x h a v en j ur is dictions .

T h e tr a ns f er p r icing a dj us tm ents a r e a p p l ica b l e s ol el y w h en (1 ) th e v a l ue a g r eed up on b y th e r el a ted p a r ties deter m ines a l ow er ta x a b l e incom e th a n th e one a t a r m ’ s - l eng th or (2 ) in a ny oth er ca s e, if th e ta x a uth or ity cons ider s th a t th e tr a ns f er p r icing a dj us tm ent a f f ects th e ta x deter m ined in P er u f or a noth er r el a ted- p a r ty tr a ns a ction. T h e r eg ul a tions cons ider th a t a l ow er a m ount of incom e ta x is

• A def er r a l of incom e is ev idenced.

• H ig h er ta x l os s es h a v e b een deter m ined th a n th os e th a t w oul d h a v e a ccr ued a t a r m ’ s - l eng th .


T h e P I T L r ef er s to th e O E C D G uidel ines a s a s our ce of inter p r eta tion f or tr a ns f er p r icing a na l y s is , a s l ong a s th ey do not contr a dict th e P I T L .


• 4inf or m a tiv e r etur n

•

p ol icies .

•

indiv idua l tr a ns a ctions .

3 2 6

P er u (continued)



F or cr os s - b or der tr a ns a ctions inv ol v ing com m odities a nd oth er p r oducts , w h os e p r ices a r e s et b y r ef er ence to com m odity p r ices , th e

th e a r m ’ s - l eng th p r ice f or P er uv ia n incom e ta x p ur p os es s h a l l b e deter m ined b y r ef er ence to th e q uoted p r ice of (i) th e da te of s h ip m ent of th e com m odities ex p or ted or (ii) th e da te of dis em b a r k a tion of th e com m odities im p or ted.

b y th es e new tr a ns f er p r icing r ul es , th e com m odity p r ices a nd q uotes to b e cons ider ed, th e inter na tiona l m a r k et, th e com m odity

com m odity f ea tur es a nd th e econom ica l l y r el ev a nt ch a r a cter is tics of th e p a r ticul a r tr a ns a ction.


T h e m a in deta il s to b e dis cl os ed in th e tr a ns f er p r icing inf or m a tion r etur n incl ude th e a m ount of th e tr a ns a ctions , th e tr a ns f er p r icing m eth od s el ected a nd th e r el a ted- p a r ty w ith w h om th e tr a ns a ctions w er e m a de, a s w el l a s th e r es ul ts of th e tes ted p a r ty , th e inter q ua r til e r a ng e of s el ected com p a r a b l es a nd th e a m ount of th e tr a ns f er p r icing a dj us tm ents .


• T h e a m ount of inter com p a ny tr a ns a ctions ex ceeds P E N 2 0 0 , 0 0 0 .

• T h e com p a ny h a s b een eng a g ed in tr a ns a ctions f r om , to or th r oug h a l ow - ta x j ur is diction f or w h ich th e m a r k et v a l ue is l es s th a n th e com p uta b l e cos t.

• 4

•

•


th e cor r es p onding tr a ns f er p r icing r etur n.

3 2 7

P er u (continued)



1

T h e a dj us tm ents to a nnua l ta x a b l e incom e r es ul ting f r om th e ta x a uth or ity ’ s a p p l ica tion of th e tr a ns f er p r icing p r ov is ions w il l b e s ub j ect

Penalty relief

T h e p ena l ty r eductions th a t a ta x p a y er ca n b e s ub j ect to f or not com p l y ing w ith th e ob l ig a tion to h a v e a tr a ns f er p r icing tech nica l s tudy

•

•

•


A ccor ding to A r ticl es 8 7 - 7 a nd 4 3 of th e P er uv ia n T a x C ode, th e s ta tute of l im ita tions f or incom e ta x a s s es s m ents is f our y ea r s a f ter 1


g ener a l a udit.

T h e P er uv ia n ta x a dm inis tr a tion h a s a l r ea dy initia ted tr a ns f er p r icing a udits . A l s o, it h a s is s ued l etter s r eq ues ting th a t ta x p a y er s a m end th eir ta x r etur ns b a s ed on th e r es ul ts of th e tr a ns f er p r icing s tudies p r ev ious l y p r es ented. T h e l ik el ih ood th a t th e tr a ns f er p r icing

1

3 2 8

P er u (continued)


APA opportunity


G uidel ines w il l b ecom e ef f ectiv e f or l oca l p ur p os es , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

P h il ip p ines




r eg ul a tions a r e is s ued, a l l concer ns of tr a ns f er p r icing s h a l l b e r es ol v ed in a ccor da nce w ith th em .

tr a ns a ctions b etw een a s s ocia ted enter p r is es .

T r a ns a ctions enter ed into b ef or e th e tr a ns f er p r icing r eg ul a tions b eca m e ef f ectiv e s h a l l b e g ov er ned b y th e l a w s a nd oth er a dm inis tr a tiv e is s ua nces p r ev a il ing a t th e tim e th e contr ol l ed tr a ns a ctions w er e enter ed into.

T h e tr a ns f er p r icing r eg ul a tions took ef f ect on F eb r ua r y 9 , 2 0 1 3 .

a s th e us e of ta x - ex em p t entities or th os e w ith s p ecia l ta x p r iv il eg es , inter com p a ny l oa ns a nd a dv a nces , cos t s h a r ing , a nd th e s up p l y of g oods a nd s er v ices . D ur ing a n a udit, p a r ticul a r a ttention s h a l l b e g iv en to tr a ns f er p r icing is s ues , w h ich w il l b e f a ctor ed into th e a udit

cov er s a l l inter na l r ev enue ta x es f or ta x a b l e y ea r 2 0 0 9 a nd h a s to b e com p l eted no l a ter th a n s ix m onth s f r om th e is s ua nce of th e l etter of a uth or ity .

ta x p a y er s a s h ig h - r is k (m or e th a n 3 0 % b el ow th e b ench m a r k ), m edium - r is k (1 6 % to 3 0 % b el ow th e b ench m a r k ) a nd l ow - r is k (1 5 % or l es s


T h e tr a ns f er p r icing r eg ul a tions a r e l a r g el y b a s ed on th e O E C D G uidel ines a nd r ef er to th em f or f ur th er g uida nce a nd ex a m p l es .

3 3 0

P h il ip p ines (continued)



T h e tr a ns f er p r icing r eg ul a tions r eq uir e contem p or a neous docum enta tion to b e m a inta ined a nd r eta ined. I t is contem p or a neous if it ex is ts or is b r oug h t into ex is tence a t th e tim e th e a s s ocia ted enter p r is es dev el op or im p l em ent a ny a r r a ng em ent th a t m ig h t r a is e tr a ns f er p r icing is s ues . T h es e a r r a ng em ents s h oul d b e r ev iew ed w h en p r ep a r ing ta x r etur ns .

ex a m ina tion.

•


• C ontr ol l ed tr a ns a ctions

• A s s um p tions , s tr a teg ies , p ol icies

• C os t contr ib ution a r r a ng em ents (C C A s )


•

• A p p l ica tion of th e tr a ns f er p r icing m eth od

•

• I ndex to docum ents


ca s e s h a l l b e us ed.


incom e ta x r etur n.



T h e tr a ns f er p r icing r eg ul a tions r eq uir e contem p or a neous docum enta tion. H ow ev er , th e docum enta tion is not r eq uir ed to b e s ub m itted

3 3 1

P h il ip p ines (continued)



T h e tr a ns f er p r icing r eg ul a tions a dop t th e p r ov is ions of th e T a x C ode a nd oth er a p p l ica b l e l a w s in th e im p os ition of p ena l ties on a ny

Penalty relief

T h er e is no p ena l ty r el ief r eg im e in th e tr a ns f er p r icing r eg ul a tions .


f r a ud w ith th e intent to ev a de ta x , in w h ich ca s e th e s ta tute of l im ita tions is 1 0 y ea r s f r om th e dis cov er y of f r a ud.


T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is h ig h . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a n a udit is h ig h . T h e l ik el ih ood is a l s o h ig h th a t if tr a ns f er p r icing is r ev iew ed, th en th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed.

APA opportunity


a r ea .

P o l and



•

•s up er v is ion of th e unif or m a p p l ica tion of th e ta x l a w

• C or p or a te I ncom e T a x A ct (C I T A ct)

• P er s ona l I ncom e T a x A ct (P I T A ct)

• T a x O r dina nce A ct

• D ecr ees


• 4 4

•

•

•p ur p os e of cor p or a te incom e ta x (J our na l of L a w s 2 0 1 5 , N o. 6 0 0 )

•p ur p os e of p er s ona l incom e ta x (J our na l of L a w s 2 0 1 5 , N o. 5 9 9 )

•es tim a ting th e p r ices in tr a ns a ctions conducted b y th es e ta x p a y er s , a nd r eg a r ding th e m eth od a nd p r ocedur e f or el im ina ting doub l e ta x a tion of ta x p a y er s in ca s e of r el a ted p a r ties ’ incom e a dj us tm ent (J our na l of L a w s 2 0 1 4 , I tem 1 1 8 6 , a s a m ended)

•es tim a ting th e p r ices in tr a ns a ctions conducted b y th es e ta x p a y er s , a nd r eg a r ding th e m eth od a nd p r ocedur e f or el im ina ting doub l e

4r ef er r ed to a s th e T P D ecr ee

43 0 d of th e P I T A ct.

A r ticl e 9 a of th e C I T A ct a nd A r ticl e 2 5 a of th e P I T A ct p r ov ide deta il ed g uida nce r eg a r ding tr a ns a ctions th a t a r e s ub j ect to docum enta tion r eq uir em ents , incl uding th e v a l ue l im its a nd ca teg or ies of s uch tr a ns a ctions .

A ccor ding to A r ticl e 9 a of th e C I T A ct a nd A r ticl e 2 5 a of th e P I T A ct, th e docum enta tion r eq uir em ents a l s o encom p a s s tr a ns a ctions in w h ich p a y m ent is m a de dir ectl y or indir ectl y to a n entity cons ider ed to b e in a ta x h a v en. T h e l is t of th es e ter r itor ies a nd countr ies is

r ul es . T h e decr ee w a s is s ued s ep a r a tel y f or p er s ona l a nd cor p or a te ta x a tion p ur p os es .

3 3 3

P o l and (continued)


A s of 1 J a nua r y 2 0 0 7 , docum enta tion r eq uir em ents a l s o a p p l y to P ol a nd- b a s ed p er m a nent es ta b l is h m ents of f or eig n com p a nies .

es ta b l is h ing p a r tner s h ip s .

incr ea s ed tr a ns f er p r icing r eq uir em ents (a s m entioned b el ow ).

decr ees m or e p r ecis el y des cr ib e th e tr a ns f er p r icing m eth ods a nd intr oduce th e cor r es p onding a dj us tm ent p r ocedur e (b a s ed on th e O E C D G uidel ines ), th e A r b itr a tion C onv ention a nd th e C ode of C onduct f or th e A r b itr a tion C onv ention. P r ov is ions of th e decr ees a l s o a p p l y to P ol is h p er m a nent es ta b l is h m ents of f or eig n com p a nies a nd P ol is h ta x p a y er s ’ f or eig n p er m a nent es ta b l is h m ents .

Th e am ended decrees im p lem ent ed in J uly 2 0 1 3 :

•

•

•

•th a t ty p e

• E x p r es s l y indica te th a t th e cos t b a s e us ed f or es tim a ting th e f ee f or l ow - v a l ue- a dded s er v ices s h oul d ex cl ude s h a r eh ol der ex p ens es

•

s ub m it, a l ong w ith th eir a nnua l C I T r etur n, a p r og r es s r ep or t on th e im p l em enta tion of th e m eth od s tip ul a ted in th e A P A decis ion. A P A s m a y a l s o b e concl uded b y p er m a nent es ta b l is h m ents of f or eig n com p a nies in P ol a nd, a s w el l a s p er m a nent es ta b l is h m ents of P ol is h ta x p a y er s b a s ed a b r oa d.

Definition of “related parties”

• T h e dom es tic entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing th e f or eig n entity or h a s a s h a r e in its ca p ita l .

• T h e f or eig n entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing a dom es tic entity or h a s a s h a r e in its ca p ita l .

• T h e s a m e l eg a l a nd na tur a l p er s ons p a r ticip a te dir ectl y or indir ectl y a t th e s a m e tim e in m a na g ing or contr ol l ing a dom es tic entity a nd f or eig n entity or h a v e s h a r es of th eir ca p ita l .

• T h e dom es tic entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing a noth er dom es tic entity or h a s a s h a r e of its ca p ita l .

• T h e s a m e l eg a l a nd na tur a l p er s ons p a r ticip a te a t th e s a m e tim e dir ectl y or indir ectl y in m a na g ing or contr ol l ing dom es tic entities or h a v e s h a r es of th eir ca p ita l .

C a p ita l r el a tions ex is t if one of th e entities or contr a cting p a r ties h ol ds a t l ea s t a 5 % s h a r e of th e oth er entity ’ s ca p ita l , dir ectl y or indir ectl y . D om es tic entities a r e a l s o cons ider ed r el a ted f or ta x p ur p os es b y v ir tue of f a m il y , p r op er ty or em p l oy m ent r el a tions b etw een th em or b etw een th eir m a na g em ent, s up er v is ion or contr ol p er s onnel , or if th e s a m e p er s on ca r r ies out m a na g em ent, s up er v is ion or contr ol f unctions in b oth of th es e entities .

3 3 4



ca p ita l r el a tions th r es h ol d f r om 5 % to 2 5 % .

I f th e p a r ties to a tr a ns a ction, due to th eir r el a tions h ip , a g r ee to or im p os e ter m s a nd conditions th a t dif f er f r om th os e th a t w oul d b e a g r eed to b y unr el a ted p a r ties , r es ul ting in th e dom es tic entity not r ep or ting incom e f r om th e tr a ns a ction or r ep or ting l ow er incom e th a n w oul d b e ex p ected if th e r el a tions h ip did not ex is t, th e ta x ing a uth or ities m a y a s s es s a dditiona l incom e a nd deter m ine th e ta x due on s uch incom e f or th e dom es tic entity .

ta x p a y er s ca r r y ing out tr a ns a ctions w ith th eir p er m a nent es ta b l is h m ents a b r oa d.

D om es tic entities tr a ns a cting w ith f or eig n r el a ted p a r ties a r e a l l ow ed to a dj us t th eir incom e if th e f or eig n ta x a uth or ities a s s er t th a t th e tr a ns a ctiona l p r ices do not m eet th e a r m ’ s - l eng th p r incip l e. C ons eq uentl y , a dditiona l incom e of th e f or eig n entity is a s s es s ed, a nd th e ta x due on s uch incom e is deter m ined (th e s o- ca l l ed cor r es p onding a dj us tm ent). H ow ev er , th e P ol is h ta x a uth or ities m us t j us tif y a nd a ccep t p r er eq uis ites f or m a k ing th e a dj us tm ent.

A dj us tm ents to th e dom es tic entities ’ incom e w il l b e a l l ow ed on th e b a s is of th e a g r eem ent f or th e a v oida nce of doub l e ta x a tion b etw een P ol a nd a nd th e countr y (i. e. , countr y of th e dom es tic entity ’ s r el a ted- p a r ty ), or on th e b a s is of th e conv ention of 2 3 J ul y 1 9 9 0 f or th e

r el a ted- p a r ty .

I n a ddition, r eg ul a tions r el a ting to incom e a dj us tm ent a l s o a p p l y to p er m a nent es ta b l is h m ents .

P ol is h r eg ul a tions do not a l l ow f or a na l og ous el im ina tion of doub l e ta x a tion in tr a ns a ctions b etw een dom es tic r el a ted entities .


T h e P ol is h tr a ns f er p r icing r eg ul a tions do not r ef er to th e O E C D G uidel ines dir ectl y . N ev er th el es s , th e ta x a uth or ities s om etim es r ef er to th e O E C D G uidel ines w h en a p p l y ing tr a ns f er p r icing p r incip l es (e. g . , dur ing A P A neg otia tions ). A l s o, r ef er ence to th e O E C D G uidel ines is m a de w ith r es p ect to ta x h a v ens . A ccor ding to A r ticl e 9 a , C l a us e 6 of th e C I T A ct (a nd A r ticl e 2 5 a , C l a us e 6 of th e P I T A ct), th e l is t of

inv ol v ing s h if ts of r is k s a m ong g r oup com p a nies (th e r eg ul a tions a r e des ig ned to im p l em ent th e O E C D G uidel ines in th e l oca l l eg is l a tion a nd cov er not onl y f or eig n b ut a l s o l oca l r es tr uctur ing p r oj ects ).


T a x p a y er s ca r r y ing out tr a ns a ctions w ith r el a ted p a r ties a nd p er m a nent es ta b l is h m ents of f or eig n com p a nies f unctioning in P ol a nd, a s

•

•

•

3 3 5



a ta x h a v en a r e ob l ig a ted to p r ep a r e ta x docum enta tion f or s uch tr a ns a ctions w h en th e tota l tr a ns a ction a m ount in a ta x y ea r ex ceeds

N ew tr a ns f er p r icing r eg ul a tions (b inding f r om J a nua r y 2 0 1 7 ) p r ov ide a n ex em p tion f r om th e docum enta tion r eq uir em ent f or entities

•

•4 4

•

• F unctions p er f or m ed b y th e p a r ties to th e tr a ns a ction (w ith cons ider a tion of a s s ets em p l oy ed a nd r is k s b or ne)

• E x p ected tr a ns a ctiona l cos ts a nd th e m eth od a nd p a y m ent due da tes

•

•

•

•

T h es e el em ents a r e m a nda tor y , s o if th e docum enta tion does not incl ude a ny of th es e r eq uir em ents , th e ta x a uth or ities m a y dis r eg a r d it.

I n a ddition, ta x p a y er s a r e ob l ig ed to p r ep a r e s ta tutor y P ol is h tr a ns f er p r icing docum enta tion a nd p r ov ide it to th e P ol is h ta x a uth or ities a t th eir r eq ues t.

•

•

•

• A l is t p r ov iding th e des cr ip tion a nd a na l y s is of th e r el a ted p a r ties ’ ex p ens es a r is ing f r om th e s er v ice

• A l is t of s h a r eh ol der ex p ens es

• A des cr ip tion of th e cos t- s h a r ing k ey

• A l is t of s er v ices a v a il a b l e on dem a nd

•

• D ocum enta tion of a g iv en s er v ice, w h ich ca n b e s ub m itted to th e ta x a uth or ities

3 3 6



•

•

•

•

•

•r ep or t


T h e a m ended decr ees g iv e tr a ditiona l m eth ods p r ior ity f or th e p ur p os e of a s s es s ing incom e in r el a ted- p a r ty tr a ns a ctions (p r ev ious l y ,

•

• A cces s to r el ia b l e da ta a b out s im il a r tr a ns a ctions a nd com p a nies in th e m a r k et

• C om p a r a b il ity of th e r es p ectiv e tr a ns a ctions a nd com p a nies

a uth or ities .


I nf or m a tion a b out r el a ted- p a r ty tr a ns a ctions is one of th e el em ents of th e a nnua l incom e ta x r etur n. T h e ta x p a y er is r eq uir ed to indica te in th e r etur n w h eth er it w a s r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion.

• D is cl os ing in a nnua l incom e ta x r etur ns w h eth er th e ta x p a y er w a s r eq uir ed to p r ep a r e s ta tutor y tr a ns f er p r icing docum enta tion of tr a ns a ctions w ith r el a ted entities

•

•

• T h e tota l a m ount of l ia b il ities or r eceiv a b l es r es ul ting f r om a l l a g r eem ents concl uded w ith th e s a m e nonr es ident in th e ta x y ea r

3 3 7



• O ne p a r ty to th e a g r eem ent p a r ticip a tes dir ectl y or indir ectl y in th e m a na g em ent or contr ol of th e oth er p a r ty to th e a g r eem ent or h a s a s h a r e in its ca p ita l entitl ing it to a t l ea s t 5 % of a l l v oting r ig h ts

• A noth er entity , not b eing p a r ty to a n a g r eem ent, a t th e s a m e tim e p a r ticip a tes dir ectl y or indir ectl y in th e m a na g em ent or contr ol of ea ch p a r ty to th e a g r eem ent or h a s a s h a r e in th eir ca p ita l entitl ing it to a t l ea s t 5 % of a l l v oting r ig h ts in ea ch of th e p a r ties to th e a g r eem ent

•

th e ta x y ea r in w h ich w ith h ol ding ta x w a s p a id (I F T - 2 / I F T - 2 f or m ); m or eov er , th e ta x p a y er is r eq uir ed to (a t th e r el a ted- p a r ty ’ s r eq ues t) 4

r etur n, a p r og r es s r ep or t on th e im p l em enta tion of th e m eth od s tip ul a ted in th e A P A decis ion. T h e f or m a t of th is r ep or t is deta il ed in

m eth od f or cor p or a te incom e ta x p ur p os es (J our na l of L a w s N o. 9 9 , I tem 6 8 7 ).


docum ent w il l b e s ig ned b y a m em b er of th e m a na g em ent b oa r d.


T h er e is no dea dl ine f or p r ep a r ing th e tr a ns f er p r icing docum enta tion; h ow ev er , ta x p a y er s a r e r eq uir ed to s ub m it th e docum enta tion w ith in s ev en da y s of th e ta x a uth or ities ’ r eq ues t.

N ew tr a ns f er p r icing r eg ul a tions (b inding f r om J a nua r y 2 0 1 7 ) intr oduce a dea dl ine f or p r ep a r a tion of th e docum en¬ ta tion no l a ter th a n


I f th e ta x p a y er does not s ub m it tr a ns f er p r icing docum enta tion a t th e r eq ues t of th e P ol is h ta x a uth or ities , a 5 0 % ta x r a te p ena l ty is

Penalty relief

th e da te of a r eq ues t), th e p ena l ty r a te f or incom e a s s es s ed ca n b e r educed to th e nor m a l ta x r a te (i. e. , 1 9 % ).

3 3 8




T h er e a r e no s p ecia l tim e l im it p r ov is ions a p p l ica b l e to inter com p a ny tr a ns a ctions . T h e g ener a l s ta tute of l im ita tions f or ta x a s s es s m ent

f r om th e end of th e ca l enda r y ea r in w h ich th e ta x f el l due.


I n a utum n 2 0 1 5 , a new r ig h t- w ing g ov er nm ent ca m e into p ow er ; th e a dm inis tr a tion is f ocus ed on incr ea s ing ta x r ev enues . A m ong oth er

a r ea .

T h us , th e l ik el ih ood of a n a nnua l tr a ns f er p r icing a udit, in g ener a l , h a s b een h ig h s ta r ting f r om th e b eg inning of 2 0 1 6 . T h e deep es t

a cces s to th e O r b is da ta b a s e (p ur ch a s ed m or e l icens es ). T h is inf or m a tion w il l a l l ow th em to conduct m or e deta il ed s cr eening s of entities b ef or e s ta r ting ta x a udits , a s w el l a s m or e p r ecis e s el ection of entities f or a udits .

T h e l ik el ih ood is h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit. T h e ta x a uth or ities us ua l l y eng a g e in a dedica ted tr a ns f er p r icing a udit if th ey notice ir r eg ul a r ities in inter com p a ny s ettl em ents or b el iev e th a t

A l th oug h th e a ccep ta nce of th e O E C D G uidel ines a nd inter na tiona l p r a ctices h a s incr ea s ed, th e l oca l a p p r oa ch tends to p r ev a il dur ing a udits . L oca l b ench m a r k s a r e p r ef er r ed ov er P a n- E ur op ea n ones (new tr a ns f er p r icing r ul es cr ea te a n ob l ig a tion f or ta x p a y er s w h os e

countr ies .

T h e com p l ia nce r eg im e is s til l r ig or ous in P ol a nd. C our t r ul ing s f ocus m a inl y on l eg a l r a th er th a n econom ic is s ues . T h e m os t f r eq uentl y

of ta x a v oida nce, A P A s , unif or m a p p l ica tion of th e ta x l a w in w r itten ta x inter p r eta tions a nd a p p l ica tion of th e new l a w cir cum v ention cl a us e.

O n 1 5 J ul y 2 0 1 6 , new r eg ul a tions w er e intr oduced to th e T a x O r dina nce A ct a im ing a t l im iting a g g r es s iv e ta x p l a nning (th e s o- ca l l ed l a w cir cum v ention cl a us e). T h es e r eg ul a tions a l l ow a uth or ities to dis r eg a r d th e a ctions ta k en b y a ta x p a y er if its m a in a im w a s to a ch iev e

3 3 9



APA opportunity

A ct.

A n A P A concl uded f or a p a r ticul a r tr a ns a ction is b inding on th e ta x a uth or ities w ith r eg a r d to th e m eth od s el ected b y th e ta x p a y er . A P A s in P ol a nd m a y a p p l y to tr a ns a ctions th a t h a v e not y et b een ex ecuted or tr a ns a ctions th a t a r e in p r og r es s a t th e tim e th e ta x p a y er

•

•

• A dom es tic entity a nd its r el a ted f or eig n p a r ty

• A dom es tic entity r el a ted to a f or eig n entity a nd a noth er dom es tic entity r el a ted to th e s a m e f or eig n entity

•of a dom es tic entity , b ut onl y a f ter cons ul ta tions a nd up on ob ta ining cons ent is s ued b y th e ta x a uth or ities of th e r el a ted f or eig n entity .

•th e cons ent of a l l f or eig n entities ’ ta x a uth or ities is r eq uir ed to concl ude s uch a n a g r eem ent.

T h er e a r e no tr a ns a ction v a l ue l im its to b e cov er ed b y th e A P A s . T o s ub m it a n a p p l ica tion f or a n A P A , th e ta x p a y er m us t p a y a f ee,

•

•

•

•

• A des cr ip tion of th e m a nner of a p p l ica tion of th e s ug g es ted m eth od, w ith a n indica tion of th e p r incip l es f or p r ice ca l cul a tion, f or eca s ts a nd a na l y s es up on w h ich th e ca l cul a tion is b a s ed

• A des cr ip tion of th e cir cum s ta nces th a t m a y a f f ect th e p r ices

• T h e docum ents th a t m a y deter m ine th e tr a ns a ction p r ice (a g r eem ents , a r r a ng em ents a nd oth er docum ents indica ting th e intentions of th e p a r ties to th e tr a ns a ction)

• T h e s ug g es ted l eng th of th e A P A a r r a ng em ent

• A l is t of entities w ith w h ich th e tr a ns a ction w il l b e concl uded, incl uding th eir a g r eem ent to s ub m it to th e ta x ing a uth or ities a l l docum ents a nd p r ov ide neces s a r y ex p l a na tions w ith r eg a r d to th e r el ev a nt tr a ns a ction; th e a p p l ica tion m us t b e s ub m itted in P ol is h

• T h e unil a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in s ix m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e.

• T h e b il a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in 1 2 m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e.

• T h e m ul til a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in 1 8 m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e.

f r om th e T a x O r dina nce A ct a p p l ies to th e A P A . I n cons eq uence, th e a b ov e tim e l im its f or th e A P A p r ocedur e m a y b e ex tended, if neces s a r y .

3 4 0



cr iter ia a p p l ied in concl uding th e A P A h a v e not ch a ng ed, or th e entity a p p l ies f or a n ex tens ion of th e A P A no l a ter th a n s ix m onth s b ef or e it ex p ir es . T h e decis ion is v a l id f r om th e da te of its del iv er y to a l l p a r ties (incl uding P ol is h a nd f or eig n, if a p p l ica b l e, ta x a uth or ities ).

• P os s ib il ity to a p p l y f or A P A f or a f ew tr a ns a ctions cov er ed b y one a p p l ica tion (f ee is p r op or tiona l l y incr ea s ed dep ending on th e num b er of tr a ns a ctions )

• A P A cov er ing C C A s

•

•dis continua nce of th e p r oceeding s is to b e p r ov ided to ta x a uth or ities

•

•


tr a ns a ctions th ey s h oul d b e a p p l ied to, a nd th is is l ik el y to b e deter m ined b a s ed on f utur e p r a ctice.

P o r tu g al



Autoridade Tributária e Aduaneira)


A r ticl e 6 3 of th e C or p or a te I ncom e T a x C ode a r ticul a tes th e a r m ’ s - l eng th p r incip l e a nd p r ov ides g uida nce a b out tr a ns f er p r icing in P or tug a l . A n up da ted w r ite- up of A r ticl e 6 3 of th e C or p or a te I ncom e T a x C ode ca m e into f or ce on 1 6 J a nua r y 2 0 1 5 f ol l ow ing th e p ub l ica tion of L a w N o. 2 / 2 0 1 4 .

44

a g r eem ents , docum enta tion r eq uir em ents a nd th e cor r es p onding a dj us tm ents p r ocedur e.

A / 2 0 0 8 on 1 6 J ul y 2 0 1 5 (w h ich ca m e into f or ce on 1 7 J ul y ) a nd is cur r entl y f or es een in A r ticl e 1 3 8 of th e C or p or a te I ncom e T a x C ode.

C F C s a nd a nti- ta x - h a v en r eg im es m a y b e us ed in th e g ener a l contex t of tr a ns f er p r icing .

T h e new A r ticl e 1 2 1 - A a dded to th e C or p or a te I ncom e T a x C ode intr oduced a n ob l ig a tion f or th e m ul tina tiona l g r oup s to s ub m it C b C r ep or ts .


T h e P or tug ues e r eg ul a tions a nd ta x p r a ctice f ol l ow th e O E C D G uidel ines .

a ctiv ity .

is not y et a dop ted in th e P or tug ues e l eg is l a tion; h ow ev er , th e tr a ns f er p r icing docum enta tion p r ep a r ed l oca l l y a ddr es s es a l l of th e r el ev a nt top ics conta ined th er ein a nd is m or e r ig or ous in ter m s of th e content.


p r ep a r e contem p or a neous docum enta tion in th e P or tug ues e l a ng ua g e, w h ich s h oul d p r ov ide ev idence of m a r k et p a r ity r eg a r ding th e ter m s a nd conditions a g r eed to, a ccep ted a nd p r a cticed in th e op er a tions m a de w ith r el a ted p a r ties , a s w el l a s ev idence of s el ecting a nd us ing th e b es t m eth od.

T h e r eg ul a tions div ide th e docum enta tion b etw een r el ev a nt, s up p or ting docum enta tion a nd th a t w h ich is a p p l ica b l e to C C A s a nd

•s ub s ta ntia l l y f a v or a b l e ta x r eg im e or incl uded in th e P or tug ues e of f s h or e b l a ck l is t is a l s o cons ider ed to b e a r el a ted- p a r ty , r eg a r dl es s of a ny oth er r el a ted- p a r ty cr iter ia )

3 4 2

P o r tu g al (continued)


•

•tw o y ea r s , or f or th e p er iod in w h ich th ey occur r ed (if l es s )

• A f unctiona l a na l y s is of ea ch r el ev a nt tr a ns a ction

• T ech nica l s tudies f ocus ing on es s entia l a r ea s of b us ines s

• A des cr ip tion of th e m eth od us ed a nd ev idence of h ow th e p r ices a r e ca l cul a ted

• I nf or m a tion a b out P or tug ues e com p a r a b l es (g eog r a p h ica l com p a r a b il ity r eq uir em ent)

•

• A l l inter com p a ny contr a ctua l a g r eem ents a nd unr el a ted- p a r ty a g r eem ents


T h e tr a ns f er p r icing m eth ods des cr ib ed in th e P or tug ues e l eg is l a tion a r e b a s ed on th e O E C D G uidel ines a nd th er ef or e do not intr oduce

4m eth od s h oul d b e a p p l ied to a contr ol l ed tr a ns a ction or to a s er ies of tr a ns a ctions to deter m ine w h eth er th os e tr a ns a ctions com p l y w ith th e a r m ’ s - l eng th p r incip l e.

ca s e, ex p l a ining not onl y th e r ea s on a cer ta in m eth od is cons ider ed a s th e m os t a p p r op r ia te to tes t w h eth er th e contr ol l ed tr a ns a ctions com p l y w ith th e tr a ns f er p r icing r ul es , b ut a l s o w h y oth er m eth ods a r e r ej ected.

a p p l ica b l e.


Informação Empresarial Simplificada

• I dentity of th e r el a ted entities

• A m ount of tr a ns a ctions conducted w ith ea ch of th e r el a ted p a r ties

•r eta ined

T h e dea dl ine f or th e s ub m is s ion of s uch r etur n cor r es p onds to th e 1 5 th da y of th e 7 th m onth a f ter th e cor r es p onding ta x y ea r -end. T a x p a y er s h a v e to s ta te in g ood f a ith in th is a nnua l r etur n th a t th ey h a v e com p l ied w ith th e contem p or a neous docum enta tion

s h oul d conta in inf or m a tion a b out a l l oca tion of r ev enues (s ep a r a ting th os e r eceiv ed in intr a g r oup tr a ns a ctions f r om th os e r eceiv ed in

s h oul d b e s ub m itted to th e ta x a uth or ities until th e end of th e 1 2 th m onth of th e y ea r f ol l ow ing th e r ep or ting y ea r .

3 4 3



A ny entity , r es ident or w ith a p er m a nent es ta b l is h m ent in P or tug a l , w h ich is p a r t of a g r oup in w h ich one of th e entities is s ub j ect to th e p r es enta tion of a C b C r ep or t in l ine w ith th e one f or es een in A r ticl e 1 2 1 - A . 1 or 1 2 1 - A . 2 of th e C I T C , s h a l l com m unica te el ectr onica l l y ,

g r oup ’ s r ep or ting entity .


p r icing a nnex es .


I n P or tug a l , th e docum enta tion m us t b e p r ep a r ed b y th e 1 5 th da y of th e 7 th m onth a f ter th e cor r es p onding ta x y ea r - end. H ow ev er , th e ta x a uth or ity m a y , a nd does , a s k f or docum enta tion of tr a ns a ctions a t a ny tim e a f ter th ey ta k e p l a ce.


F a il ur e to com p l y w ith docum enta tion r eq uir em ents m a y r es ul t in a p os s ib l e s h if t of th e b ur den of p r oof a nd th e a p p l ica tion of s ecr et com p a r a b l es .

•

•4

•

p er com p a ny .

•

y ea r a nd p er com p a ny .

T r a ns f er p r icing a dj us tm ents a r e s ub j ect to th e g ener a l ta x p ena l ty r eg im e. P ena l ties f or noncom p l ia nce w ith m a nda tor y

a p p l ica b l e f or tr a ns f er p r icing a dj us tm ents a t th e r a te of 4 % p er y ea r .

Penalty relief

T h e g ener a l ta x p ena l ty r eg im e a p p l ies in P or tug a l . T h e deter m ina tion of p ena l ties w il l b e m a de on a ca s e- b y - ca s e b a s is .

3 4 4




I n P or tug a l , a s s es s m ent is p os s ib l e dur ing th e f our y ea r s a f ter th e end of th e a s s es s m ent y ea r . A l l P or tug a l - b a s ed com p a nies h a v e a s ta tutor y ob l ig a tion to k eep th eir tr a ns f er p r icing docum enta tion a v a il a b l e (a t th e P or tug ues e es ta b l is h m ent or p r em is es ) a nd in g ood or der f or th e r el ev a nt y ea r f or a 1 0 - y ea r p er iod.


T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium , a s is th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit. T h e l ik el ih ood is h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit.

4

•

•

• A tr a ns a ction is cons ider ed a r m ’ s - l eng th onl y if it is w ith in th e com p uted inter q ua r til e r a ng e.

• O nl y th e m edia n of th e inter q ua r til e r a ng e of th e b ench m a r k is cons ider ed w h en ta x a dj us tm ents a r e m a de.

ch a r g ed to b r a nch es is th e m os t r ecent a r ea of s cr utiny a nd a dj us tm ent. C r os s - b or der r es tr uctur ing s a r e a l s o under intens e s cr utiny , a s

APA opportunity

•

•ta x p a y er s now a l s o m a y ch oos e to s ig n a n a g r eem ent w ith one or s ev er a l ta x a uth or ities in j ur is dictions w h er e a doub l e ta x a tion

A PA negot iat ion t im e fram e

•

•b ef or e th e b eg inning of th e a p p l ica b l e ta x y ea r ; ta x a uth or ities ’ tim e f r a m e to ev a l ua te th e content of a n A P A p r op os a l is w ith in 1 8 0 da y s in th e ca s e of unil a ter a l a g r eem ents a nd ex tends to a 3 6 0 - da y p er iod in ca s e of b il a ter a l a nd m ul til a ter a l a g r eem ents

• C oncl us ion of th e A P A p r oces s

3 4 5



A P A s m a y not ex ceed a th r ee- y ea r p er iod, w h ich m a y b e r enew a b l e up on a w r itten r eq ues t to th e ta x a uth or ity .

A p p licat ion fee

tur nov er (f ees a r e r educed b y 5 0 % f or r enew a l s or r ev is ions of ex is ting A P A s ).

A PA com p liance resp onsib ilit y

a g r eed to in th e p r op os a l .

inv a l ida ted.

H ow ev er , it s h oul d a l s o b e noted th a t th e b ur den of m onitor ing th e com p l ia nce of th e ter m s a g r eed to in th e A P A r es ts w ith th e ta x a uth or ity .

I n th is contex t, th e ta x p a y er is r eq uir ed to p r ep a r e a n a nnua l r ep or t on th e im p l em enta tion of th e a g r eem ent, env is a g ing th e v a l ida tion

T a x a nd C us tom s A uth or ity up on th e dea dl ine es ta b l is h ed f or th e s ub m is s ion of a n a nnua l ta x a nd a ccounting r etur n.

A PA p ub lic dat a

P or tug ues e ta x a uth or ities do not dis cl os e inf or m a tion a b out A P A s s ub m itted or concl uded. D es p ite th e f a ct th a t s om e inf or m a tion is p ub l icl y k now n, ta x a uth or ities a r e k een to incr ea s e th e tr a ns p a r ency of th e A P A p r oces s in P or tug a l . H ence, ta x p a y er s a r e encour a g ed to s ub m it p r op os a l s .


Q atar



•

•

•to ta x p a y er s in Q a ta r , ex cep t f or th os e r eg is ter ed in th e Q a ta r F ina ncia l C entr e (Q F C ) (s ee b el ow ).

•

r eg is ter ed entities .

•

•

I ns titutions (A A O I F I ).

Relevant regulations and rulings State tax regime

T h e Q a ta r I ncom e T a x L a w intr oduced tr a ns f er p r icing p r ov is ions w ith in th e g ener a l a nti- ta x - a v oida nce f r a m ew or k , w h ich s ta tes th a t,

• A p p l y th e a r m ’ s - l eng th v a l ue to a deed or a n econom ic ev ent s ub j ected to a dif f er ent v a l ue b y th e ta x p a y er .

•

• A dj us t th e a m ount of th e ta x due b y th e ta x p a y er or a ny oth er p er s on inv ol v ed in th e ty p e of a r r a ng em ents , op er a tions or tr a ns a ctions .

• F or na tur a l p er s ons , w h er e one of th em is a s p ous e, a n in- l a w or a r el a tiv e of th e oth er , up to th e f our th deg r ee

• F or na tur a l a nd l eg a l p er s ons , w h er e th e na tur a l p er s on ow ns , a l one or w ith a noth er r el a ted p er s on or p er s ons , dir ectl y or indir ectl y , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of th e l eg a l p er s on

• F or l eg a l p er s ons , w h er e one of th em ow ns , a l one or w ith a noth er r el a ted p er s on or p er s ons , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of th e oth er , or w h er e a noth er p er s on or oth er r el a ted p er s ons ow ns , dir ectl y or indir ectl y , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of b oth l eg a l p er s ons

3 4 7

Q atar (continued)


QFC tax regime

l eng th b a s is .

•


State tax regime

QFC tax regime


State tax regime

docum enta tion in p l a ce.

th e r el a ted- p a r ty tr a ns a ctions ta k e p l a ce. I n th e a p p l ica tion, a tr a ns f er p r icing s tudy s h oul d b e s ub m itted, a l ong w ith a n ex p l a na tion of

I n p r a ctice, ta x p a y er s a r e r ecom m ended to m a inta in a nnua l tr a ns f er p r icing docum enta tion, w h ich s h oul d b e r ea dil y a v a il a b l e in th e

QFC tax regime

T h e b ur den of p r oof is on th e Q F C - r eg is ter ed ta x p a y er to es ta b l is h th a t th e a ctua l conditions a r e cons is tent w ith th e a r m ’ s - l eng th

• P r im a r y a ccounting r ecor ds

• T a x a dj us tm ent r ecor ds

•

• E v idence to dem ons tr a te a n a r m ’ s - l eng th r es ul t (th is incl udes a des cr ip tion of th e inter com p a ny tr a ns a ctions a nd a f unctiona l a na l y s is )

inter com p a ny tr a ns a ctions a r e not b a s ed on th e a r m ’ s - l eng th p r incip l e (e. g . , th e ta x p a y er is incur r ing l os s es dur ing th e ta x a b l e y ea r or

3 4 8

Q atar (continued)



State tax regime

T h is p r ice is deter m ined on th e b a s is of a com p a r is on w ith s im il a r g oods or s er v ices p r ov ided b etw een unr el a ted p a r ties , p a r ticul a r l y

• C h a r a cter is tics of th e g oods or s er v ice

• C ontr a ctua l ter m s

• F unctions p er f or m ed, a s s ets us ed a nd r is k s incur r ed

• E conom ic cir cum s ta nces

com p a r a b l es s h oul d a l s o b e a ccep ta b l e.

QFC tax regime

s h oul d b e incl uded in th e docum enta tion a b out th e a p p r op r ia tenes s of th e s el ected m eth od.

E ur op ea n com p a r a b l es .


State tax regime

decl a r a tion.

QFC tax regime


F or b oth th e s ta te a nd Q F C ta x r eg im es , th er e cur r entl y is no r eq uir em ent to p r ep a r e a s ep a r a te ta x r etur n f or r el a ted- p a r ty tr a ns a ctions .


State tax regime

3 4 9

Q atar (continued)


QFC tax regime

H ow ev er , th e Q F C A T a x D ep a r tm ent a s s um es th a t th e Q F C ta x p a y er w il l a s s es s its inter com p a ny tr a ns a ctions to b e a t a n a r m ’ s - l eng th b ef or e com p l eting its ta x r etur n, es s entia l l y r eq uir ing a n a na l y s is of its inter com p a ny p r icing to b e p r ep a r ed.


State tax regime

p ena l ties , in th e f or m of inter es t im p os ed f or noncom p l ia nce w ith incom e ta x r ul es under th e Q a ta r I ncom e T a x L a w , m a y a p p l y in th e

I nter es t on a ny a dditiona l incom e ta x due r es ul ting f r om a tr a ns f er p r icing a dj us tm ent m a y b e l ev ied a t a r a te of 1 . 5 % p er m onth of del a y (ca p p ed a t th e a m ount of incom e ta x due).

QFC tax regime

p er a nnum , ca l cul a ted f or th e p er iod f r om th e due da te of th e ta x to th e a ctua l p a y m ent da te.

I f a Q F C - r eg is ter ed ta x p a y er f a il s to m a inta in a deq ua te r ecor ds to s up p or t th e p r icing of tr a ns a ctions w ith a s s ocia tes , or cl a im s in its r etur n th a t no a dj us tm ent is r eq uir ed under th e tr a ns f er p r icing r eg ul a tions w ith out b eing a b l e to s ub s ta ntia te th a t cl a im , th en th er e

s a nctions not ex ceeding th e ta x under s ta ted).

Penalty relief

N o p ena l ty r el ief r eg im e is in p l a ce f or th e s ta te or Q F C ta x r eg im e.


State tax regime

QFC tax regime

T h e tim e l im it f or th e Q F C A T a x D ep a r tm ent to conduct a ta x a s s es s m ent is s ix y ea r s a f ter th e end of th e a ccounting p er iod to w h ich it r el a tes .

3 5 0

Q atar (continued)



State tax regime

tr a ns a ctions to b e p r oduced, w ith a g ener a l r eq uir em ent th a t a ny inf or m a tion r eq ues t is dea l t w ith in a p er iod of tw o w eek s .

T h e l ik el ih ood of a r ev iew of tr a ns f er p r icing a s p a r t of th e r eg ul a r a udit is m edium to h ig h .

tr a ns f er p r icing docum enta tion is a v a il a b l e.

4

QFC tax regime

I n g ener a l , th e Q F C T a x D ep a r tm ent conducts a ta x a udit of incom e ta x r etur ns th a t a r e s ub m itted (th e l ik el ih ood b eing m edium to h ig h ). T h e l ik el ih ood of a r ev iew of tr a ns f er p r icing a s p a r t of th e r eg ul a r a udit is h ig h .

T h e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y is m edium .

APA opportunity

C ur r entl y , th er e is no A P A p r ocedur e in p l a ce.

QFC tax regime

T h e Q F C A T a x D ep a r tm ent h a s a n a dv a nce r ul ing r eg im e a nd w el com es Q F C - r eg is ter ed entities to a p p l y f or a n A P A to ob ta in cer ta inty a b out th eir ta x p os ition.


State tax regime

QFC tax regime

ta k e into a ccount th e r ev is ions under th e 2 0 1 6 T P G uidel ines .

R o mania



• L a w 2 2 7 / 2 0 1 5 r eg a r ding th e F is ca l C ode, a s s ub s eq uentl y com p l eted a nd a m ended

• G ov er nm ent D ecis ion 1 / 2 0 1 6 f or th e a p p r ov a l of th e nor m s f or th e a p p l ica tion of L a w 2 2 7 / 2 0 1 5 r eg a r ding th e F is ca l C ode, a s s ub s eq uentl y com p l eted a nd a m ended


•1 J a nua r y 2 0 1 6

• 441 J a nua r y 2 0 1 6

• A N A F O r der 3 7 3 7 / 2 0 1 5 , a p p r ov ing th e f or m of th e decis ion is s ued b y th e ta x a uth or ity in a p p l ica tion of th e p r ocedur e f or el im ina tion of

• A N A F O r der 3 7 3 5 / 2 0 1 5 , a p p r ov ing th e p r ocedur e f or th e is s ua nce/ a m endm ent of A P A s a nd th e content of th e r es p ectiv e A P A r eq ues t

• A N A F O r der 3 7 3 6 / 2 0 1 5 , a p p r ov ing th e p r ocedur e f or th e is s ua nce of a dv a nce indiv idua l r ul ing s a nd th e content of th e r es p ectiv e r eq ues t

• L a w 2 0 7 / 2 0 1 5 , r eg a r ding th e F is ca l P r ocedur e C ode, a s s ub s eq uentl y com p l eted a nd a m ended



T h e tr a ns f er p r icing docum enta tion h a s to b e p r ep a r ed in th e l oca l l a ng ua g e. I f th e tr a ns f er p r icing docum enta tion is p r ep a r ed in a

a v a il a b l e up on th e r eq ues t of th e ta x a uth or ity a nd w ith in th e r eq uir ed ter m .

T a x p a y er s th a t enter ed into A P A s f or r el a ted- p a r ty tr a ns a ctions a r e not r eq uir ed to p r ep a r e a nd s ub m it a tr a ns f er p r icing docum enta tion

3 5 2

R o mania (continued)


T h e p r ov is ions of O r der 4 4 2 / 2 0 1 6 s tip ul a te th a t ta x p a y er s th a t q ua l if y a s l a r g e ta x p a y er s a nd ca r r y out tr a ns a ctions w ith r el a ted p a r ties of a tota l a nnua l v a l ue a b ov e cer ta in th r es h ol ds a r e r eq uir ed to p r ep a r e on a n a nnua l b a s is tr a ns f er p r icing docum enta tion w ith in th e

p r icing docum enta tion m a y b e r eq ues ted b y th e ta x a uth or ity dur ing or outs ide a ta x a udit (f or tr a ns a ctions under ta k en s ta r ting f r om 2 0 1 6 ).

T h e th r es h ol ds cons ider ed f or es ta b l is h ing th e r eq uir em ent of p r ep a r ing a nnua l tr a ns f er p r icing docum enta tion (a p p l ica b l e f or th e tota l

•

•

•

F ur th er m or e, th e l a r g e ta x p a y er s th a t ca r r y out tr a ns a ctions th a t do not ex ceed th e a b ov em entioned th r es h ol ds , a s w el l a s s m a l l a nd m edium ta x p a y er s , a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion onl y up on r eq ues t f r om th e ta x a uth or ity dur ing a ta x a udit

•

•

•

T h e ta x p a y er s th a t ca r r y out tr a ns a ctions w ith r el a ted p a r ties b ut do not ex ceed th e l ow er th r es h ol ds a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion dur ing a ta x a udit, a ccor ding to th e g ener a l r ul es es ta b l is h ed under th e a ccounting a nd ta x r eg ul a tions in f or ce.

T h e tr a ns f er p r icing docum enta tion s h oul d com p r is e inf or m a tion r eg a r ding th e ta x p a y er , th e g r oup a nd th e r el a ted- p a r ty tr a ns a ctions (incl uding a n a na l y s is of th e f unctions p er f or m ed a nd th e r is k s a s s um ed b y th e r el a ted p a r ties ), a s w el l a s inf or m a tion a b out th e tr a ns f er p r icing m eth ods us ed f or deter m ining th e v a l ue of r el a ted- p a r ty tr a ns a ctions . F ina l l y , it s h oul d conta in a s et of r el ev a nt s ta tis tica l com p a r a b l es .

A ccor ding to th e p r ov is ion of O r der 4 4 2 / 2 0 1 6 , th e inf or m a tion th a t s h oul d b e incl uded in th e tr a ns f er p r icing docum enta tion h a s b een


• T h e m eth od th a t is th e m os t a p p r op r ia te to th e cir cum s ta nces in w h ich th e p r ices th a t a r e s ub j ect to f r ee com p etition on th e com m er cia l com p a r a b l e m a r k ets a r e es ta b l is h ed

• T h e m eth od f or w h ich inf or m a tion r es ul ting f r om th e a ctua l r el a ted p a r ties inv ol v ed in th e tr a ns a ctions s ub j ect to f r ee com p etition is a v a il a b l e

• T h e deg r ee of a ccur a cy to w h ich a dj us tm ents ca n b e m a de in or der to a ch iev e com p a r a b il ity

3 5 3



• T h e cir cum s ta nces of th e indiv idua l ca s e

• T h e a ctiv ities ef f ectiv el y conducted b y v a r ious r el a ted p a r ties

• T h e docum enta tion th a t ca n b e m a de a v a il a b l e b y th e ta x p a y er

A ccor ding to th e p r ov is ions of O r der 4 4 2 / 2 0 1 6 , in th e ca s e of b ench m a r k ing a na l y s is p er f or m ed to deter m ine th e a r m ’ s - l eng th na tur e

E ur op ea n a nd inter na tiona l . I n th e a b s ence of l oca l com p a r a b l es , f or eig n com p a r a b l es a r e a ccep ted.


under ta k en w ith r el a ted p a r ties .

•ob l ig a tion to w ith h ol d ta x es

•

•



p r ov iding th e tr a ns f er p r icing docum enta tion is s et f or 1 0 da y s f r om th e r eq ues t da te, b ut not ea r l ier th a n 1 0 da y s f r om th e dea dl ine s et

dur ing or outs ide a ta x a udit.

F or th e l a r g e ta x p a y er s th a t ca r r y out tr a ns a ctions th a t do not ex ceed th e a b ov em entioned th r es h ol ds , a s w el l a s s m a l l a nd m edium

p r ov ided onl y up on th e r eq ues t of th e ta x a uth or ity dur ing a ta x a udit, a nd th e ter m f or p r ov iding th e tr a ns f er p r icing docum enta tion is

docum enta tion dea dl ine p r ov is ions l ea ds to ca ncel l a tion of th e A P A .

3 5 4




L a r g e, m edium a nd s m a l l ta x p a y er s f a il ing to p r ov ide th e tr a ns f er p r icing docum enta tion to th e ta x a uth or ity up on r eq ues t a r e

• I n th e ca s e of non- s ub m is s ion of th e tr a ns f er p r icing docum enta tion b y l a r g e ta x p a y er s (th a t h a v e th e ob l ig a tion to p r ep a r e th e tr a ns f er p r icing docum enta tion w ith in th e l eg a l dea dl ine f or s ub m is s ion of th e a nnua l cor p or a te incom e ta x r etur n) up on th e r eq ues t of th e ta x

• I n th e ca s e of non- s ub m is s ion of th e tr a ns f er p r icing docum enta tion up on th e r eq ues t of th e ta x a uth or ity dur ing a ta x a udit, a p ena l ty 4

4

I n th e ca s e of a tr a ns a ction b etw een r el a ted p a r ties , th e ta x a uth or ity m a y a dj us t/ es tim a te th e a m ount of th e r es p ectiv e incom e or

ca s e th a t th e ta x a uth or ity deter m ines th a t th e a r m ’ s - l eng th p r incip l e is not ob s er v ed f or th e r es p ectiv e tr a ns a ction or th a t th e ta x p a y er

a nd p ena l ties a ccor ding to th e p r ov is ions of th e l eg is l a tion. C ur r entl y , th e l a te p a y m ent inter es t is 0 . 0 2 % p er da y of del a y . L a te p a y m ent p ena l ties of 0 . 0 1 % p er da y of del a y ca n a l s o b e im p os ed.

I n a ddition, a p ena l ty f or undecl a r ed or incor r ectl y decl a r ed ta x l ia b il ities es ta b l is h ed b y ta x a uth or ities th r oug h ta x decis ions of 0 . 0 8 % f or ea ch da y of del a y ed p a y m ent ca n b e im p os ed. I f th is ty p e of p ena l ty is a p p l ica b l e, th en it is a s ub s titute f or th e l a te p a y m ent p ena l ty

is is s ued, th en th is p ena l ty is r educed b y 7 5 % ; h ow ev er , if th e ta x l ia b il ities a r e th e r es ul t of ta x ev a s ion, th en th is p ena l ty is incr ea s ed b y 1 0 0 % . T h is p ena l ty is a p p l ica b l e f or ta x l ia b il ities due s ta r ting f r om 2 0 1 6 onw a r d.

Penalty relief


ev a s ion or f r a ud).


op er a ting l os s es ov er a p er iod of tim e. T h e l ik el ih ood is h ig h th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit, a nd th e l ik el ih ood is m edium th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit.

3 5 5



APA opportunity

or m ul til a ter a l .

f or a ter m of 1 2 m onth s , w h il e b il a ter a l a nd m ul til a ter a l A P A s a r e is s ued f or a ter m of 1 8 m onth s .

•4

•


a uth or ities a nd ta x p a y er s a s w el l .

w ith in th e na tiona l ter r itor y .

R u s s ia




4C ode.

b inding f or th e ta x a uth or ities or com p a nies .

ta x p a y er s .

Relat ed p art ies

I n p a r ticul a r , com p a nies a r e cons ider ed r el a ted if one ow ns dir ectl y or indir ectl y m or e th a n 2 5 % of th e ca p ita l of th e oth er , or if th er e is a noth er com p a ny or p er s on th a t ow ns dir ectl y or indir ectl y m or e th a n 2 5 % of th e ca p ita l of th os e com p a nies .

th e ter m s a nd th e r es ul ts of th e tr a ns a ctions .


G uidel ines .


T h e T a x C ode env is a g es th a t ta x p a y er s m us t p r ep a r e a nd m a inta in a cer ta in s et of docum ents , in a ny s uita b l e f or m , j us tif y ing th e p r icing m eth od us ed in contr ol l ed tr a ns a ctions . T h e l ev el of deta il a nd com p r eh ens iv enes s of docum enta tion s h oul d b e cons is tent w ith th e com p l ex ity of th e tr a ns a ction or tr a ns a ctions . D ocum enta tion s h oul d, in p a r ticul a r , incl ude indus tr y a na l y s is , com p a ny a na l y s is , f unctiona l a na l y s is , th e ter m s a nd conditions of th e tr a ns a ction, th e r ea s oning f or th e s el ection of th e tr a ns f er p r icing m eth od a nd da ta s our ces us ed, th e com p uta tion of th e m a r k et p r ice r a ng e a nd a dj us tm ents , if a ny , to th e ta x b a s e m a de b y a ta x p a y er . I n a ddition to th e

contr ol l ed tr a ns a ction a r e cons is tent w ith th os e of com p a r a b l e uncontr ol l ed tr a ns a ctions .

D ocum enta tion is not r eq uir ed f or tr a ns a ctions in w h ich p r ices conf or m to a r eg ul a ted p r ice or a p r ice th a t is p r es cr ib ed b y th e a nti-

b y a n A P A .

3 5 7

R u s s ia (continued)


• A l l r el a ted- p a r ty tr a ns a ctions (no th r es h ol d)

• T h ir d- p a r ty tr a ns a ctions inv ol v ing g oods tr a ded on g l ob a l com m odity ex ch a ng es , s uch a s oil a nd oil p r oducts , f er r ous m eta l s , nonf er r ous

• T h ir d- p a r ty tr a ns a ctions w h er e th e counter p a r ty is l oca ted in cer ta in l ow - ta x j ur is dictions (s a m e th r es h ol d a s a b ov e)1

• T h e s ub j ect of th e tr a ns a ction is a n ob j ect of a s s es s m ent to m iner a l ex tr a ction ta x ca l cul a ted a t a n a d v a l or em ta x r a te.

•

•

•

m il l ion.

• O ne of th e p a r ties op er a tes dr il l ing or h ol ds a l icens e to ex p l or e new oil a nd g a s dep os its on th e continenta l s h el f .

C er ta in dom es tic tr a ns a ctions a r e ex em p t f r om tr a ns f er p r icing contr ol , e. g . , tr a ns a ctions b etw een m em b er s of a dom es tic cons ol ida ted

•

•r eg ions .

• N one of th e p a r ties h a v e ta x l os s es .

•


s p l it is a m eth od of l a s t r es or t.


D is cl os ur e of tr a ns a ctions w ith r el a ted p a r ties a nd th ir d- p a r ty tr a ns a ctions th a t a r e s ub j ect to tr a ns f er p r icing contr ol is r eq uir ed b y w a y

2 0 1 6 ).

1

3 5 8




C b C r ep or ts . 2

cur r entl y unk now n w h eth er a nd w h en th e dr a f t l a w w il l b e a dop ted.

Documentation deadlinesT r a ns f er p r icing docum enta tion m us t b e p r es ented w ith in 3 0 w or k ing da y s of th e ta x a uth or ities ’ r eq ues t. T h e r eq ues t ca n b e is s ued no ea r l ier th a n 1 J une of th e y ea r f ol l ow ing th e y ea r in w h ich th e contr ol l ed tr a ns a ction took p l a ce.

Transfer pricing penalties F r om 2 0 1 4 , tr a ns f er p r icing p ena l ties w er e 2 0 % of th e a dditiona l ta x p a y a b l e due to a tr a ns f er p r icing a dj us tm ent. F r om 2 0 1 7 , th e p ena l ties a r e b eing incr ea s ed to 4 0 % . N o p ena l ties a p p l y w ith r es p ect to tr a ns f er p r icing a dj us tm ents f or 2 0 1 2 a nd 2 0 1 3 .

Penalty relief P ena l ties w il l b e im p os ed if a ta x p a y er ’ s incom e is a dj us ted a s a r es ul t of a tr a ns f er p r icing a udit, a nd if th e ta x p a y er did not p r ov ide th e tr a ns f er p r icing docum enta tion s up p or ting th e p r ices in a contr ol l ed tr a ns a ction. P ena l ties ca nnot a p p l y if p r ices w er e es ta b l is h ed in a ccor da nce w ith a n a p p l ica b l e A P A .

Statute of limitations on transfer pricing assessments T h e g ener a l r ul e is th a t th e ta x a uth or ity m a y a udit th e ta x p a y er f or up to th r ee y ea r s p r eceding th e y ea r w h en th e a udit w a s initia ted.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T r a ns f er p r icing m a tter s in contr ol l ed tr a ns a ctions a r e s ub j ect to s p ecia l tr a ns f er p r icing a udits , w h ich a r e s ep a r a te f r om g ener a l ta x

b or der tr a ns a ctions w ith em p h a s is on l os s - m a k ing tr a ns a ctions , tr a ns a ctions inv ol v ing l ow - ta x j ur is dictions , ex p or ts in r es our ce- or iented

2 4 4

3 5 9



APA opportunity

f or a n A P A . T h e T a x C ode env is a g es a p os s ib il ity to concl ude m ul til a ter a l A P A s w h en th e tr a ns a ctiona l counter p a r ties a r e l oca ted in a


S au d i A r ab ia




4

in a ccor da nce w ith th e a g r eed- up on inter na tiona l s ta nda r ds .

•

•w oul d h a v e r es ul ted f r om a tr a ns a ction b etw een indep endent p er s ons

m or e s ub s idia r y of a ny ty p e of com p a ny .

Wit h h olding t ax

G ener a l l y , th e w ith h ol ding ta x r a tes r a ng e f r om 5 % to 2 0 % f or tr a ns a ctions b etw een unr el a ted p a r ties . E x cep t f or tr a ns a ctions w ith

Th in cap it aliz at ion rules

•

•

•

I nter es t (or l oa n f ee) in ex ces s of th e deductib il ity l im it s et out a b ov e is a p er m a nent dis a l l ow a nce under th e ta x l a w a nd its b y l a w s .

deduction in th e b r a nch ’ s ta x decl a r a tion.

3 6 1

S au d i A r ab ia (continued)


O E C D Guidelines t reat m ent

a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e.


decl a r a tions . H ow ev er , it is h ig h l y r ecom m ended th a t th e ta x p a y er m a inta in a deq ua te docum ents to s up p or t th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions .


th a t is b a s ed on th e com m onl y a ccep ted tr a ns f er p r icing m eth ods s et out in th e O E C D G uidel ines ,


th e dis cl os ur e is r es tr icted to m a ter ia l s a nd s er v ices onl y or a l l oth er r el a ted- p a r ty tr a ns a ctions of th e ta x p a y er . H ow ev er , a ta x p a y er th a t m a k es a dis cl os ur e th a t s uch p r ices a r e a s p er th e a r m ’ s - l eng th p r incip l e m ig h t b e ex p ected to b a ck it up w ith docum enta tion.

T a x p a y er s a r e a l s o r eq uir ed to dis cl os e th e a m ount due to a nd due f r om r el a ted p a r ties , a s p a r t of th e b a l a nce s h eet dis cl os ur es . I n a ddition, th e ta x p a y er s s h oul d dis cl os e th e na m e of th e r el a ted- p a r ty , na tur e of dea l ing s , op ening a nd cl os ing p a y a b l e/ r eceiv a b l e b a l a nce, a s w el l a s m ov em ents in th e r el a ted- p a r ty p a y a b l e/ r eceiv a b l e b a l a nce, a s p a r t of th e ex p l a na tor y s ch edul es a ccom p a ny ing th e b a l a nce s h eet dis cl os ur es .





3 6 2

S au d i A r ab ia (continued)


Penalty relief


incor r ect w ith th e intent of ta x ev a s ion.


l eng th b a s is . A m ong th es e, inter com p a ny r ech a r g e of cos ts b a s ed on a l l oca tion a nd p a y m ents m a de to r el a ted p a r ties b a s ed on m a r k up

APA opportunity

C ur r entl y , th er e is no A P A p r ocedur e in p l a ce.


a ction p oints m ig h t b e incl uded in th e nea r f utur e.

S eneg al




2 0 1 3 (a nd w ith r etr oa ctiv e ef f ect to 2 0 1 2 ).

T h e tr a ns f er p r icing r ul es f ol l ow th e a r m ’ s - l eng th p r incip l e a nd r eq uir e th e us e of th e m os t a p p r op r ia te m eth od to deter m ine th e p r ice a p p l ied in r el a ted p a r ties ’ tr a ns a ctions .

• L oca l com p a nies contr ol l ing or under th e contr ol of f or eig n com p a nies

• C om p a nies th a t a r e under th e com m on contr ol of a com p a ny or p a r t of a g r oup of com p a nies contr ol l ing or under th e contr ol of f or eig n com p a nies

• O ne com p a ny h ol ds , dir ectl y or indir ectl y , th e m a j or ity of th e s h a r es of th e oth er or h a s th er ein th e ef f ectiv e decis ion- m a k ing p ow er

•

•

•

•com p a ny m eeting th e tur nov er condition



in a ccor da nce w ith A r ticl e 1 7 of th e T a x C ode.

•

• A g ener a l des cr ip tion of a ctiv ities , incl uding ch a ng es dur ing th e y ea r s concer ned or under a udit

•tr a ns a ctions

3 6 4

S eneg al (continued)


•th a t s uch r is k a nd f unction a f f ect th e a udited com p a ny

• A l is t of th e m a in inta ng ib l e a s s ets h el d (na m el y p a tents , b r a nds , com m er cia l na m es a nd k now - h ow ) in connection w ith th e a udited com p a ny

• A g ener a l des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy

•

• A des cr ip tion of a ctiv ities , incl uding ch a ng es dur ing th e y ea r s concer ned or under a udit

•

• A l is t of th e cos t- s h a r ing a g r eem ents , a nd a cop y of p r ior a g r eem ents in r es p ect to tr a ns f er p r icing or docum ents r el a ting to th e

• A n intr oduction to th e m eth odol og y us ed to deter m ine th e a r m ’ s - l eng th ch a r a cter of th e tr a ns f er p r ices , incl uding a n a na l y s is of

• I f th e ch os en m eth odol og y r eq uir es s o, a n a na l y s is of com p a r a b l es cons ider ed r el ev a nt b y th e com p a ny

• T h e na tur e of th e r el a tions h ip b etw een th e a udited com p a ny a nd th e f or eig n com p a ny

•com p a nies ; s up p or ting el em ents th a t j us tif y th e a p p l ied p r ices ; a nd, if a p p l ica b l e, a g r eed- up on com p ens a tion

•a b ov e

•

com p a ny


ch a r a cter of th e p r ices a p p l ied in r el a ted- p a r ty tr a ns a ctions . T h e ta x l a w does not p r ov ide m eth ods f or p r icing r el a ted- p a r ty tr a ns a ctions .


r el a ted q ues tions .


3 6 5

S eneg al (continued)



T h e com p a ny h a s to p r ov ide th e tr a ns f er p r icing docum enta tion up on th e ta x a uth or ities ’ r eq ues t. H ow ev er , if th e docum enta tion is not p r ov ided w h en r eq ues ted or is incom p l ete, th e ta x a uth or ities ca n a s k th e a udited com p a ny , b y m ea ns of a f or m a l r eq ues t, to p r ov ide or com p l ete th e docum enta tion w ith in 1 5 da y s .


f r om a n a dj us tm ent p er f or m ed b y th e ta x a uth or ities w il l b e deem ed a n a dditiona l ta x . A n a dditiona l p ena l ty ca n b e is s ued f or th e under p a y m ent of ta x .

F ur th er m or e, intr a g r oup p a y m ents a r e deductib l e onl y if th e deb tor ca n p r ov e to th e ta x a dm inis tr a tion th a t th e tr a ns a ctions a r e r ea l a nd r em uner a tions a r e not ex ces s iv e.

Penalty relief



T h e g ener a l s ta tute of l im ita tions a p p l ies to tr a ns f er p r icing a s s es s m ents . T h e p er iod f or th e ta x a uth or ities to a s s es s ta x a nd a ny a p p l ica b l e p ena l ties r eg a r ding tr a ns f er p r icing m a tter s is f our y ea r s .


T h e ta x a uth or ities m a y conduct a tr a ns f er p r icing a udit a ny tim e dur ing th e y ea r . I n g ener a l , th e ta x a uth or ities f r eq uentl y a udit tr a ns f er p r icing .

APA opportunity



S er b ia




intr a g r oup tr a ns a ctions p r ov ides f ur th er deta il s a b out th es e a nd p r es cr ib es ob l ig a tor y content of th e tr a ns f er p r icing docum enta tion.



• A na l y s is of th e g r oup

• I ndus tr y a na l y s is


•

•

•

• C oncl us ions r ea ch ed

• A p p endices

p a r ty a nd th e ty p e a nd a m ount of th e tr a ns a ction w ith out ob l ig a tion to ca r r y out a ny econom ic a na l y s is ) f or a l l tr a ns a ctions (ex cep t

•

•

3 6 7

S er b ia (continued)



T h er e is no p r ior ity in th e s el ection of m eth ods . T h e ta x p a y er is r eq uir ed to s el ect th e m os t a p p r op r ia te m eth od f or deter m ining th a t th e

• N a tur e of tr a ns a ctions th a t a r e s ub j ect to th e a na l y s is

• A v a il a b il ity a nd r el ia b il ity of da ta f or th e a na l y s is

• L ev el of com p a r a b il ity b etw een tr a ns a ctions a f f ected b y tr a ns f er p r ices a nd tr a ns a ctions ca r r ied out w ith or b etw een unr el a ted p a r ties

•tr a ns a ctions

• T h e na tur e a nd r el ia b il ity of a s s um p tions


T a x p a y er s a r e ob l ig a ted to dis cl os e in th eir a nnua l C I T r etur n r ev enues a nd ex p ens es r es ul ting f r om tr a ns a ctions w ith r el a ted p a r ties , a s w el l a s dis cl os e ta x - b a s ed a dj us tm ents b a s ed on th e tr a ns f er p r icing a na l y s is .

I n a ddition, r el a ted- p a r ty dis cl os ur es a nd deta il s of tr a ns a ctions a r e to b e docum ented th r oug h ob l ig a tor y tr a ns f er p r icing




I n a ddition, th e p os s ib l e a dj us tm ent of ta x a b l e incom e on a tr a ns f er p r icing b a s is m a y r es ul t in a p ena l ty of up to 3 0 % of th e under s ta ted ta x l ia b il ities a nd m a y f ur th er r es ul t in incr ea s ed inter es t f or l a te ta x p a y m ents .

3 6 8

S er b ia (continued)


Penalty relief

T h er e is no p ena l ty r el ief a v a il a b l e; h ow ev er , ta x p a y er s m a y b e a p p r ov ed f or a n a dditiona l p er iod of up to 9 0 da y s to com p l y w ith th e tr a ns f er p r icing docum enta tion r eq uir em ents (i. e. , to s ub m it to th e ta x a uth or ities th e p r es cr ib ed tr a ns f er p r icing docum ent).


s ta r ts f r om th e b eg inning of th e y ea r f ol l ow ing th e y ea r in w h ich th e r es p ectiv e ta x l ia b il ity a r os e.


p a r ty tr a ns a ctions .

APA opportunity


S ing ap o r e




4

• T r a ns f er p r icing g uidel ines , p ub l is h ed 2 3 F eb r ua r y 2 0 0 6

• T r a ns f er p r icing cons ul ta tion, p ub l is h ed 3 0 J ul y 2 0 0 8

•

• T r a ns f er p r icing g uidel ines f or r el a ted- p a r ty l oa ns a nd r el a ted- p a r ty s er v ices , p ub l is h ed 2 3 F eb r ua r y 2 0 0 9

4


• E a ch p a r ticip a nt’ s s h a r e of th e cos ts m us t b e b or ne in th e f or m of ca s h or oth er m oneta r y contr ib utions .

• T h e s er v ices a r e not p r ov ided to a ny unr el a ted- p a r ty .

• T h e p r ov is ion of th e s er v ices is not th e p r incip a l a ctiv ity of th e s er v ice p r ov ider . I f th e cos t of p r ov iding th e s er v ices does not ex ceed 1 5 %

•

• T h er e is docum enta tion s h ow ing th a t th e p a r ties intended to enter into th e cos t- p ool ing a r r a ng em ent b ef or e th e p r ov is ion of th e s er v ice.

P r icing G uidel ines a l s o conta in a tw o- tier ed a p p r oa ch in w h ich b oth g r oup - a nd entity - l ev el docum enta tion is r eq uir ed. T h er e is no

3 7 0

S ing ap o r e (continued)



docum enta tion to s ub s ta ntia te th e ta x p a y er ’ s tr a ns f er p r icing ins tea d of j us tif y ing p os itions onl y a f ter th e ev ent. C ontem p or a neous tr a ns f er p r icing docum enta tion r ef er s to docum enta tion a nd inf or m a tion th a t ta x p a y er s h a v e r el ied up on to deter m ine th e tr a ns f er p r ice

C ateg o r y o f r el ated - p ar ty tr ans ac tio ns Threshold (SGD) per financial year

P ur ch a s e of g oods f r om a l l r el a ted p a r ties 1 5 m il l ion

1 5 m il l ion

L oa ns ow ed to a l l r el a ted p a r ties 1 5 m il l ion

L oa ns ow ed b y a l l r el a ted p a r ties 1 5 m il l ion

•

•

•

•

•

•

1 m il l ion p er ca teg or y of tr a ns a ctions

•

•b or r ow ing a nd l ending

•

•

3 7 1




s tip ul a tes th a t th e tr a ns f er p r icing m eth od th a t p r oduces th e m os t r el ia b l e r es ul ts s h oul d b e s el ected a nd a p p l ied. H ow ev er , th er e is a n

f or s ub s ta ntia ting th e a r m ’ s - l eng th na tur e of inter es t ch a r g es .

•

•

•




T a x p a y er s a r e encour a g ed to up da te th eir tr a ns f er p r icing docum enta tion a t l ea s t once ev er y th r ee y ea r s , w h il e r el a ted- p a r ty tr a ns a ctions s h oul d b e tes ted a nnua l l y a g a ins t th e a r m ’ s - l eng th r es ul ts .


incom e, th e p ena l ty r a ng e is 1 0 0 % to 4 0 0 % of th e under p a id ta x .

4

Penalty relief

A deq ua te a nd contem p or a neous tr a ns f er p r icing docum enta tion to s up p or t th e p r icing of th e ta x p a y er ’ s r el a ted- p a r ty tr a ns a ctions w il l h el p in m itig a ting p ena l ties , p a r ticul a r l y r ecor d- k eep ing r eq uir em ents f or ta x .

3 7 2




• I f th e y ea r of a s s es s m ent is 2 0 0 7 or ea r l ier , th e s ta tute of l im ita tions is s ix y ea r s f r om th e end of th e y ea r of a s s es s m ent to w h ich th e tr a ns f er p r icing is s ue r el a tes .

• I f th e y ea r of a s s es s m ent is 2 0 0 8 or l a ter , th e s ta tute of l im ita tions is f our y ea r s f r om th e end of th e y ea r of a s s es s m ent to w h ich th e tr a ns f er p r icing is s ue r el a tes .

ta x r etur n b y 3 0 N ov em b er 2 0 1 6 . T h e a p p l ica b l e y ea r of a s s es s m ent in th is ca s e is 2 0 1 6 , w h ich cor r es p onds w ith th e b a s is p er iod th a t is


4p r icing . C ons eq uentl y , th e num b er of tr a ns f er p r icing cons ul ta tions (T P C s ) a nd tr a ns f er p r icing q uer ies h a s incr ea s ed. T h e T P C is

T a x p a y er s a r e s el ected b a s ed on r is k indica tor s , s uch a s th e v a l ue of r el a ted- p a r ty tr a ns a ctions , th e p er f or m a nce of th e ta x p a y er ’ s

• T r a ns a ctions w ith cr os s - b or der r el a ted p a r ties th a t a r e of a h ig h v a l ue r el a tiv e to th e ta x p a y er ’ s oth er tr a ns a ctions

• T r a ns a ctions w ith r el a ted p a r ties s ub j ect to a m or e f a v or a b l e ta x tr ea tm ent

•it a s s um ed

• O p er a ting r es ul ts th a t a r e not in l ine w ith b us ines s es in com p a r a b l e cir cum s ta nces

•

•

• I ndica tions (s uch a s th r oug h eng a g em ent w ith ta x a uth or ities , a countr y ’ s a udit f ocus , etc. ) th a t th e tr a ns a ctions a r e l ik el y to b e s ub j ect to tr a ns f er p r icing a udit b y ta x a uth or ities

tr a ns f er p r icing a udit, incl uding a r eq ues t f or tr a ns f er p r icing docum enta tion up f r ont up on th e com m encem ent of a n a udit.

3 7 3



APA opportunity

•A P A p er iod to initia te dis cus s ions r eg a r ding th e A P A r eq ues t

•

•

•

• T h e na tur e of ta x p a y er r es our ces a nd com m itm ents th a t s h oul d b e m a de w h en a n A P A is r eq ues ted

•


N ot A p p l ica b l e.

S l o v ak R ep u b l ic




•

•

w er e p ub l is h ed in th e Slovak Financial Newsletter b ut a r e not l eg a l l y b inding . N ev er th el es s , th e ta x a uth or ities g ener a l l y f ol l ow th em in p r a ctice.

contents of tr a ns f er p r icing docum enta tion.

•

• 4 44

• 4 4

• 4 4


T h e ta x a uth or ity us ua l l y f ol l ow s th e p r ov is ions of th e O E C D G uidel ines (e. g . , th e a ccep ta b l e m eth ods l is ted in th e I ncom e T a x A ct 4

of th e O E C D G uidel ines (e. g . , el im ina tion of p r ef er ence in a p p l y ing th e s el ected tr a ns f er p r icing m eth od).


3 7 5

S l o v ak R ep u b l ic (continued)


A s of 2 0 1 5 , tr a ns f er p r icing docum enta tion m us t b e p r ep a r ed f or a l l r el a ted- p a r ty tr a ns a ctions (b oth f or eig n a nd dom es tic) r eg a r dl es s

dep endent on oth er f a ctor s des cr ib ed f ur th er b el ow .

D ocum enta tion m us t b e p r ep a r ed s ep a r a tel y f or ea ch tr a ns a ction or h om og enous g r oup of tr a ns a ctions w ith th e s a m e r el a ted- p a r ty .

• E nter ed into w ith one entity

• tr a ns a ctions w ith th e s a m e conditions

• cl os el y connected tr a ns a ctions or tr a ns a ctions conditiona l to ea ch oth er

• com p a r a b l e in ter m s of a s s ets us ed, f unctions a nd r is k s

A g g r eg a tion s h oul d g iv e a b etter p ictur e on th e p a r ticul a r T P m eth ods us ed. I t g ener a l l y r eq uir es ex p l a na tion in th e docum enta tion.

“ F u l l ” d o c u mentatio n

F or th e f ol l ow ing ca teg or ies of ta x p a y er s , th e 2 0 1 5 G uida nce p r es cr ib es th e r eq uir ed contents of th e tr a ns f er p r icing docum enta tion,

•

• ta x p a y er s enter ing into tr a ns a ctions w ith r el a ted p a r ties w h o a r e ta x p a y er s of non- tr ea ty countr ies 1

• ta x p a y er s r eq ues ting b inding ta x a uth or ity decis ion w ith in th e A dv a nced P r icing A g r eem ent (A P A ) p r ocedur e

• ta x p a y er s r eq ues ting cor r es p onding tr a ns f er p r icing a dj us tm ents to th eir ta x b a s e (w ith th e ex cep tion of cor r es p onding a dj us tm ents r es ul ting f r om th eir dom es tic r el a ted- p a r ty tr a ns a ctions )

• 4tw o cons ecutiv e ta x p er iods

•

“Shortened” documentation

a m ounts , conditions of th e tr a ns a ction).

1

3 7 6



“Basic” documentation

im p or ta ntl y , th e b a s ic docum enta tion does not r eq uir e p r ov ing com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e, e. g . a b ench m a r k ing a na l y s is is not in th e s tip ul a ted contents of docum enta tion.

docum enta tions inf or m a tion on ca s h a nd in- k ind contr ib utions p r ov ided on th eir b eh a l f f r om th eir f or eig n r el a ted p a r ties .

4 44 4

• tr a ns f er p r icing r ul es a nd docum enta tion r eq uir em ents f or dom es tic r el a ted p a r ties

• intr oduction of univ er s a l docum enta tion ob l ig a tion a nd m inim um m a ter ia l ity th r es h ol d

•

•

•

4 4

s ta ted th a t docum enta tion p r es ented in E ng l is h , G er m a n or F r ench m a y a l s o b e a ccep ted. T h er e h a s b een p os itiv e ex p er ience in s ub m itting docum enta tion in E ng l is h .


th ey com p l y w ith th e a r m ’ s - l eng th p r incip l e.


r el a ted p a r ties a nd th e a r m ’ s - l eng th p r ices th a t decr ea s ed th e ta x b a s e / incr ea s ed th e ta x l os s . T h e ta x b a s e m us t b e incr ea s ed b y th is dif f er ence a t th e s a m e tim e. T h e cor p or a te incom e ta x r etur n incl udes a s um m a r y ta b l e w h er e th e a m ounts of v a r ious ty p es of r el a ted-p a r ty s a l es a nd p ur ch a s es m us t b e s ta ted (r eg a r dl es s of w h eth er th ey div er g e f r om a r m ’ s - l eng th p r ices ).

T r a ns f er p r icing docum enta tion does not need to b e encl os ed w ith th e ta x r etur n.

3 7 7





T r a ns f er p r icing docum enta tion does not h a v e to b e dis cl os ed unl es s th e ta x a uth or ities r eq ues t it, in w h ich ca s e it m us t b e s ub m itted w ith in 1 5 da y s up on th e r eq ues t. A s of J a nua r y 2 0 1 4 , s ub m is s ion of docum enta tion m a y b e r eq uir ed w ith out op ening a ta x a udit p r ior to th e r eq ues t.


or 1 0 % of a dditiona l ta x a s s es s m ent p er a nnum (p er ea ch y ea r of s ta tute of l im ita tion p er iod), w ith in th e a g r eed l im its f or a s s es s a b l e p ena l ties , i. e. b etw een th e m inim um p ena l ty ca p of 1 % a nd m a x im um p ena l ty ca p of 1 0 0 % of th e a dditiona l ta x a s s es s m ent.

h a v e to ta k e into a ccount a l l th e cir cum s ta nces th a t l ed to th e b r ea ch of non- m oneta r y ob l ig a tions (e. g . im p or ta nce, dur a tion a nd cons eq uences of th e b r ea ch ).

Penalty relief

A s of 2 0 1 6 , th er e is a g ener a l op tion to s ub m it a s up p l em enta r y ta x r etur n w ith in 1 5 da y s f r om th e b eg inning of th e ta x a udit, w h ich of f er s ta x p a y er s a p os s ib il ity to decr ea s e th e im p os ed p ena l ty , com p a r ed to ta x a udit deter m ina tion of th e ta x a s s es s m ent, i. e. , a p ena l ty



tr a ns a ctions w il l b e r ev iew ed a s p a r t of th a t a udit is m edium to h ig h .

is s ues th a t h a v e b een com m enced.

3 7 8



docum enta tion, tr a ns f er p r icing a udits do not f ocus onl y on s uch ta x p a y er s . T h e l ik el ih ood of a tr a ns f er p r icing a udit is r oug h l y th e s a m e

APA opportunity

4

T h e I ncom e T a x A ct does not ex p l icitl y s tip ul a te th a t th e ta x a uth or ity m a y a p p r ov e th e p a r ticul a r p r ice or m a r g in p er centa g e us ed.

com p a r a b l e tr a ns a ctions or entities ). G iv en th is , a n A P A s h oul d p r ov ide a r ea s ona b l e l ev el of com f or t f or ta x p a y er s .

4 4


S l o v enia



Finančna Uprava Republike Slovenije

• C or p or a te I ncom e T a x A ct (Zakon o davku od dohodkov pravnih oseb)

• Pravilnik o transfernih cenah)

• Pravilnik o priznani obrestni meri)

• T a x P r ocedur e A ct (Zakon o davčnem postopku)


r ul es on tr a ns f er p r icing m eth ods , com p a r a b il ity a na l y s is , us e of a r a ng e, g r oup ing of tr a ns a ctions , s er v ice a nd r oy a l ty ch a r g es , cos t contr ib ution a g r eem ents a nd r el a ted- p a r ty r el a tions h ip s .

A r ticl e 1 8 of th e C or p or a te I ncom e T a x A ct s ets th e b a s is f or docum enta tion r eq uir em ents , w h ich a r e th en el a b or a ted up on in th e T a x P r ocedur e A ct.

A r ticl e 1 9 of th e C or p or a te I ncom e T a x A ct p r ov ides th e g ener a l r ul es on th e a ck now l edg ed inter es t r a te on inter com p a ny l oa ns . T h e

s a f e h a r b or f or inter es t r a tes on inter com p a ny l oa ns .

A r ticl e 3 8 2 of th e T a x P r ocedur e A ct p r ov ides g ener a l inf or m a tion on tr a ns f er p r icing docum enta tion r eq uir em ents . P r ov ided th a t th e

p r ov ided under A r ticl e 2 5 5 .

A r ticl es 3 9 7 a nd 3 9 8 of th e T a x P r ocedur e A ct p r ov ide r eg ul a tions r eg a r ding tr a ns f er p r icing p ena l ties .



3 8 0

S l o v enia (continued)


The master file

• A des cr ip tion of th e ta x a b l e p er s on

•

• A n ex p l a na tion of th e ty p e of connections b etw een th e com p a nies in th e g r oup

• A n ex p l a na tion of th e m eth od us ed in th e deter m ina tion of tr a ns f er p r ices

• A des cr ip tion of th e b us ines s a ctiv ities a nd b us ines s s tr a teg ies (incl uding a ny g ener a l econom ic a nd oth er f a ctor s , a n a s s es s m ent of th e com p etitiv e env ir onm ent, a nd m or e)

Country-specific documentation

•

• A f unctiona l a na l y s is deter m ining th e m a in f unctions p er f or m ed a nd r is k s under ta k en b y th e ta x p a y er a nd outl ining w h ich a dj us tm ents m a y need to b e m a de in r el a tion to com p a r a b l e s itua tions

• A des cr ip tion of a ny com p a r a b l es s ea r ch p er f or m ed

• A des cr ip tion of b us ines s s tr a teg ies

• A des cr ip tion of g oods a nd s er v ices tr a ns f er r ed or r ender ed

• A des cr ip tion of th e m eth od a p p l ied f or es ta b l is h ing th e a r m ’ s - l eng th p r ice

• A ny oth er inf or m a tion th a t m ig h t b e r el ev a nt f r om a tr a ns f er p r icing p er s p ectiv e

C b C rep ort s

a f ter 1 J a nua r y 2 0 1 6 . P r ov ided th a t th e p r op os a l is a dop ted, s uch r ep or ts w il l h a v e to incl ude th e f ol l ow ing da ta , col l a ted f or ea ch ta x

•

•

• I ncom e ta x p a id a nd incom e ta x a ccr ued

•

•

• N um b er of em p l oy ees

• T a ng ib l e a s s ets oth er th a n ca s h a nd ca s h eq uiv a l ents

3 8 1



• T a x j ur is diction

• J ur is diction of es ta b l is h m ent (w h en not th e s a m e a s th e ta x j ur is diction)

•




A s m entioned a b ov e, r el a ted- p a r ty tr a ns a ctions m us t b e r ep or ted a s p a r t of th e inf or m a tion incl uded on th e a nnua l cor p or a te incom e

•m us t dis cl os e th e na m e of th e r el a ted- p a r ty , its s ta te of r es idence a nd ta x num b er , th e cum ul a tiv e a m ount of th e l oa n g iv en or r eceiv ed a nd th e r el a tions h ip w ith th e r el a ted- p a r ty .

•in a ta x p er iod, th e ta x p a y er m us t dis cl os e th e na m e of th e r el a ted- p a r ty , its s ta te of r es idence a nd ta x num b er , th e cum ul a tiv e a m ount of r eceiv a b l es or l ia b il ities tow a r d th e r el a ted- p a r ty a nd th e r el a tions h ip w ith th e r el a ted- p a r ty .

A s im il a r a tta ch m ent is r eq uir ed if th e r es ident ta x p a y er h a s ta x l os s es g ener a ted f r om p r ev ious p er iods , if it is ta x ed a t a 0 % cor p or a te incom e ta x r a te or a t a l ow er r a te th a n th e g ener a l one, or if th e r es ident r el a ted- p a r ty is ta x - ex em p t.


T h e docum enta tion s h oul d b e p r ov ided to th e ta x a uth or ity up on r eq ues t, us ua l l y m a de in th e cour s e of a ta x a udit. I f it is im p os s ib l e to s ub m it th e docum enta tion im m edia tel y , a n ex tens ion of up to 9 0 da y s (dep ending on th e ex tent a nd com p l ex ity of th e inf or m a tion) m a y

w ith a n ex tens ion of 6 0 da y s g r a nted to do s o.

I n l ine w ith th e p r op os ed a m endm ents of th e T a x P r ocedur e A ct, th e C b C r ep or t w oul d h a v e to b e s ub m itted to th e ta x a uth or ities w ith in

3 8 2




4

4

Penalty relief

dis cl os ur e, th e ta x p a y er s h oul d a dj us t th e ta x l ia b il ity a ccor ding l y .

p a y m ent inter es t a r e p a id s im ul ta neous l y w h il e m a k ing th e dis cl os ur e, th e ta x p a y er a v oids f a cing p ena l ties f or a ta x of f ens e.


r es et, w ith out ta k ing into a ccount a ny p r ev ious l a p s e of tim e. N ev er th el es s , th e r ig h t of th e ta x a uth or ities to a s s es s a nd col l ect ta x w il l cea s e a f ter 1 0 y ea r s . T h e tr a ns f er p r icing docum enta tion m us t b e a r ch iv ed f or 1 0 y ea r s .


I n g ener a l , th e r is k of a n a nnua l ta x a udit is m edium . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit is h ig h . A l s o, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e ta x a udit is h ig h .

• I ntr a g r oup s er v ices

• I nta ng ib l e g oods (e. g . , r oy a l ties a nd l icens ing )

• F ina ncia l tr a ns a ctions (e. g . , l oa ns a nd ca s h p ool ing )

APA opportunity

• T h e ta x a b l e entity a nd th e ta x a uth or ities h a v e m et b ef or eh a nd a nd a g r eed on th e f ea s ib il ity of a n A P A .

• T h e tr a ns a ction th a t is s ub j ect to th e A P A h a s econom ic s ub s ta nce.

3 8 3



• T h e ta x a b l e entity h a s a g enuine intention to p er f or m s uch a tr a ns a ction.

• T h e ta x a b l e entity a nd th e ta x a uth or ities a g r ee on concl uding a n A P A .

• T h e tr a ns a ction th a t is s ub j ect to th e A P A w il l b e p er f or m ed f or a l ong er p er iod of tim e a nd is not due to end s h or tl y a f ter th e A P A is concl uded.

T h e dur a tion of th e A P A w il l b e deter m ined a t th e ta x a uth or ities ’ dis cr etion. A dm inis tr a tiv e f ees w il l a p p l y .


S o u th A f r ic a




a g r eem ent or a r r a ng em ent b etw een connected p er s ons dif f er s f r om th e ter m s a nd conditions th a t w oul d h a v e b een a g r eed to if th e p a r ties to th e tr a ns a ction w er e indep endent. A ny dif f er ence in p r ice b etw een w h a t w a s ch a r g ed b etw een th e connected p er s ons a nd w h a t w oul d h a v e b een ch a r g ed b etw een indep endent p a r ties needs to b e a dj us ted in th e ta x r etur n of th e ta x p a y er . T h is is of ten r ef er r ed to a s th e p r im a r y a dj us tm ent.

T o th e ex tent th a t th e ta x p a y er h a s not r ecov er ed th e dif f er ence b etw een th e a r m ’ s - l eng th ch a r g e a nd th e a ctua l ch a r g e f r om th e f or eig n


Practical Manual on Transfer Pricing for Developing Countries.


C ur r entl y , th er e is no s ta tutor y r eq uir em ent to p r ep a r e tr a ns f er p r icing docum enta tion; h ow ev er , th e incom e ta x r etur n does r eq uir e

4

p er ta ining to r ecor d- k eep ing r eq uir em ents , f or y ea r s of a s s es s m ent s ta r ting on or a f ter 1 O ctob er 2 0 1 6 . T h is l eg is l a tion s ets out

th e l eg is l a tion.

3 8 5

S o u th A f r ic a (continued)



dif f er ences in r is k s a s s um ed b y entities op er a ting in a dif f er ent j ur is diction.

P r a ctice N ote 7 s ta tes th a t th e ex p ected im p a ct of g eog r a p h ic dif f er ences a nd oth er f a ctor s on th e p r ice w oul d need to b e a s s es s ed.


4to p r ov ide th e v a l ues of indiv idua l cr os s - b or der tr a ns a ctions enter ed into w ith f or eig n- connected p er s ons . T h is incl udes p r ov iding inf or m a tion, s uch a s th e a m ounts r eceiv ed/ r eceiv a b l e f r om f or eig n r el a ted p a r ties a nd a m ounts p a id/ p a y a b l e to f or eig n r el a ted p a r ties , w h eth er th er e h a v e b een a ny ch a ng es to th e com p a ny ’ s tr a ns f er p r icing m eth odol og ies . I n a ddition, ta x p a y er s a r e r eq uir ed to p r ov ide


4


4


a dditiona l ta x r es ul ting f r om a n a dj us tm ent (in th e ev ent of def a ul t, om is s ion, incor r ect dis cl os ur e or m is r ep r es enta tion).

Penalty relief

es ta b l is h tr a ns f er p r ices th a t com p l y w ith th e a r m ’ s - l eng th p r incip l e a nd h a v e p r ep a r ed docum enta tion a s ev idence of s uch com p l ia nce,

m itig a tion a g a ins t th e m a x im um p ena l ty f or th e under p a y m ent of incom e ta x of 2 0 0 % , a s p r ov ided b y th e T a x A dm inis tr a tion A ct.

3 8 6

S o u th A f r ic a (continued)



m a ter ia l f a cts .


4

T h e l ik el ih ood of a g ener a l a nnua l ta x a udit is cur r entl y a s s es s ed a s m edium , a nd th e l ik el ih ood of tr a ns f er p r icing f or m ing a p a r t of s uch a n a udit is h ig h . T h e m a j or f ocus f r om a n a udit p er s p ectiv e under th e ex is ting l eg is l a tion h a s b een im p l em enting s ta ted p ol icies ,

th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h , es p ecia l l y in a s itua tion in w h ich th e ta x p a y er ’ s tr a ns f er p r icing m eth odol og y is cons ider ed not to b e th e m os t a p p r op r ia te m eth odol og y , or in w h ich th e p r icing m eth odol og y h a s b een s el ected b ut p r a ctica l l y ca nnot b e tes ted or im p l em ented.

APA opportunity

f r om p r ov iding a n a dv a nce r ul ing to es ta b l is h a p r ice.


S o u th K o r ea




• P r es identia l E nf or cem ent D ecr ee (P E D )

•


a ccep t it in p r a ctice.


docum ents a r e r eq uir ed to b e s ub m itted in K or ea n, unl es s p r ea p p r ov a l is p r ov ided to s ub m it th em in E ng l is h .

p a r ent com p a ny is l oca ted in h a s not enter ed th e a g r eem ent on th e a utom a tic ex ch a ng e of C b C r ep or t. A p p l ica b l e ta x p a y er m us t

ta x p a y er .

3 8 8

S o u th K o r ea (continued)



p r icing m eth ods , th e ta x p a y er is to s el ect th e m os t r ea s ona b l e m eth od b a s ed on th e a v a il a b il ity a nd r el ia b il ity of da ta .


1 . A f or m s ta ting th e tr a ns f er p r icing m eth od s el ected a nd th e r ea s on f or s el ecting th e m eth od f or ea ch r el a ted- p a r ty tr a ns a ction; th er e

2 . A s um m a r y of cr os s - b or der tr a ns a ctions w ith f or eig n r el a ted p a r ties



to b e el ig ib l e f or a n under r ep or ting p ena l ty w a iv er f or p r ep a r ing th e contem p or a neous tr a ns f er p r icing docum enta tion, th e tr a ns f er

th a t ca s e, th e ta x p a y er m a y b e r eq ues ted to p r ov ide th e m a ter ia l s w ith no g r a ce p er iod (i. e. , it m a y b e r eq ues ted on da y one of th e ta x a udit).

y ea r - end.

3 8 9




• T h e under r ep or ting p ena l ty is a p p r ox im a tel y 1 0 % of th e a dditiona l ta x es r es ul ting f r om a tr a ns f er p r icing a dj us tm ent.

• T h e under p a y m ent p ena l ty , w h ich is a n inter es t p a y m ent in na tur e, is ca l cul a ted a s 0 . 0 3 % of th e a dditiona l ta x es on a tr a ns f er p r icing a dj us tm ent p er da y (1 0 . 9 5 % p er y ea r ) on th e cum ul a tiv e da y s . C ounting th e cum ul a tiv e da y s of th e under p a y m ent s ta r ts f r om th e da y

a s s es s m ent is m a de.

1 J a nua r y 2 0 1 6 .

Penalty relief

tr a ns f er p r icing m eth ods a p p l ied to th e cr os s - b or der r el a ted- p a r ty tr a ns a ctions r ep or ted in th e cor p or a te incom e ta x r etur n, a nd s uch docum enta tion s up p or ts th e r ea s ona b l enes s of th e tr a ns f er p r icing m eth ods r ep or ted, th e p ena l ty f or under r ep or ting w il l b e w a iv ed if a tr a ns f er p r icing a dj us tm ent is m a de. T o b e el ig ib l e f or a n under r ep or ting p ena l ty w a iv er , th e tr a ns f er p r icing docum enta tion m us t b e

neg l ig ence b y a ta x p a y er r eg a r ding th e r el a ted- p a r ty tr a ns a ctions (i. e. , contents of a contem p or a neous tr a ns f er p r icing docum enta tion). I n g ener a l , contem p or a neous tr a ns f er p r icing docum enta tion s h oul d incl ude inf or m a tion a b out th e ta x p a y er ’ s b us ines s (incl uding f unctions p er f or m ed a nd f a ctor s th a t ca n a f f ect th e p r icing of inter com p a ny tr a ns a ctions w ith r el a ted p a r ties ), deta il s a b out cr os s - b or der r el a ted- p a r ty tr a ns a ctions , a n ex p l a na tion of th e tr a ns f er p r icing m eth od s el ected a nd r ea s ons f or not s el ecting oth er tr a ns f er p r icing m eth ods p r es cr ib ed in th e r eg ul a tions , a nd deta il s a b out th e com p a r a b l e com p a ny or tr a ns a ction da ta us ed.

T h e r eg ul a tion a l s o s tip ul a tes th a t th e com p a r a b l e da ta us ed s h oul d b e r ep r es enta tiv e a nd s h oul d not h a v e b een s el ectiv el y ch os en to

a n A P A or s el ected b y ta x a uditor s in a ta x a udit, th e ta x p a y er needs to j us tif y th e us e of th e dif f er ent tr a ns f er p r icing m eth od.

m a inta ined s up p or ting docum enta tion, th en th er e is no neg l ig ence.

3 9 0




da te.


ta x a udits .

a l l oca tions f r om ov er s ea s r el a ted p a r ties . G ener a l l y , if tr a ns f er p r icing is r ev iew ed a s p a r t of a ta x a udit, th e ta x a uditor s a r e l ik el y to ch a l l eng e th e m eth od us ed b y th e ta x p a y er a nd m a y p r op os e a l ter na te m eth ods th a t a r e l es s f a v or a b l e to th e ta x p a y er .

APA opportunity

concl uded, th e countr ies th a t a r e counter p a r ties to A P A s , th e tim e ta k en to p r oces s A P A a p p l ica tions a nd oth er r el a ted inf or m a tion. T h e 4

T h e a nnua l r ep or t a l s o s h ow ed th a t 4 7 A P A s w er e a p p l ied f or in 2 0 1 3 . A s f or p r oces s ed A P A s in 2 0 1 3 , 1 8 w er e b il a ter a l A P A s a nd 2 0 w er e unil a ter a l A P A s .

h a s b een p r op os ed f or th e L C I T A a s A r ticl e 6 (3 ). A r es ident w h o a p p l ies f or a unil a ter a l A P A m a y a l s o a p p l y f or a n a dv a nce cus tom s

r es ul ts f r om tr a ns f er p r icing a l ig n w ith th e r es ul ts f r om cus tom s .


S p ain




T h e tr a ns f er p r icing r eg ul a tions a r e conta ined in L a w 2 7 / 2 0 1 4 , a p p r ov ed on 2 7 N ov em b er 2 0 1 4 , A r ticl e 1 8 of th e C I T L .

b eg inning a f ter 1 D ecem b er 2 0 0 6 ).

4

ob l ig a tions . T h e new tr a ns f er p r icing docum enta tion r eq uir em ents , a s w el l a s th e C b C r ep or ting ob l ig a tions , w il l need to b e com p l ied w ith



•

• D es cr ip tions of th e m a in a ctiv ities of th e g r oup , incl uding th e p r incip a l g eog r a p h ic m a r k ets w h er e it op er a tes , p r incip a l s our ces of r ev enue a nd s up p l y ch a in of a ctiv ities r ep r es enting a t l ea s t 1 0 % of th e g r oup tur nov er

•cor p or a te ta x p a y er , dir ectl y or indir ectl y

•

• G ener a l des cr ip tions of th e f unctions p er f or m ed a nd th e r is k s a s s um ed b y th e dif f er ent g r oup entities , to th e ex tent th a t th ey a f f ect th e

• L is t of inta ng ib l es (incl uding p a tents , tr a dem a r k s a nd com m er cia l b r a nds ) ow ned b y th e g r oup , to th e ex tent th a t th ey a f f ect th e

• O v er a l l des cr ip tion of th e g r oup ’ s f unding s tr uctur e, incl uding m a in a g r eem ents w ith entities outs ide th e g r oup

•l oca tion

3 9 2

S p ain (continued)


• D es cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icies , incl uding th e p r icing m eth odol og y us ed to j us tif y th e g r oup ’ s p ol icies ’ com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e

•

•

• C or p or a te g r oup ’ s a nnua l r ep or t or eq uiv a l ent

4

• A deta il ed des cr ip tion of th e ta x p a y er ’ s b us ines s a nd b us ines s s tr a teg y , incl uding ch a ng es in th e b us ines s s tr a teg y com p a r ed w ith th e p r ev ious ta x y ea r

• A deta il ed des cr ip tion of m a na g em ent s tr uctur e, incl uding g eog r a p h ica l s cop e of its f unctions a nd r ep or ting l ines .

•

•

• A m ounts of th e tr a ns a ctions

• C h a r a cter is tics of p r op er ty a nd s er v ices

• F unctiona l a na l y s is (f unctions p er f or m ed, a s s ets us ed, r is k s a s s um ed)

• C ontr a ctua l ter m s

• E conom ic cir cum s ta nces

•

• A n ex p l a na tion a b out th e s el ection a nd a p p l ica tion of th e tr a ns f er p r icing m eth ods , w h y th e m eth ods w er e s el ected a nd h ow th ey w er e a p p l ied

• A ny oth er r el ev a nt inf or m a tion us ed b y th e ta x p a y er to v a l ue r el a ted- p a r ty tr a ns a ctions , a s w el l a s a ny a g r eem ent enter ed into w ith s h a r eh ol der s th a t m a y a f f ect th e tr a ns a ction v a l ua tion

T h e ta x a dm inis tr a tion coul d r eq uir e f ur th er inf or m a tion dur ing a ta x a udit in r eg a r d to th e r el a ted- p a r ty tr a ns a ctions .

4

•

•m a r k et v a l ue (ta k ing into a ccount th e tota l tr a ns a ctions ca r r ied out w ith th e s a m e r el a ted- p a r ty )

•

• P er f or m ed b etw een entities w ith in ta x cons ol ida tion g r oup s

• P er f or m ed b etw een econom ic inter es t g r oup ing s or tem p or a r y b us ines s a l l ia nces a nd th eir s h a r eh ol der s

• C a r r ied out w ith in th e s cop e of a n initia l p ub l ic of f er ing

•

3 9 3

S p ain (continued)


com m er cia l l a w r ul es ) th a t a r e not a t th e s a m e tim e a dep endent of a ny oth er entity , to th e ex tent th a t th e cons ol ida ted g r oup ’ s net

•

O r

•

com p l y w ith th e ex ch a ng e of inf or m a tion


A l l of th es e m eth ods h a v e th e s a m e p r ef er entia l l ev el . T h e s el ection of th e tr a ns f er p r icing m eth ods s h oul d b e b a s ed on th e na tur e of r el a ted- p a r ty tr a ns a ctions , th e a v a il a b il ity of inf or m a tion a nd th e com p a r a b il ity a na l y s is .



ta x p a y er s .



r es ul t f r om not h a v ing cor r ect docum enta tion or f r om not a p p l y ing th e a r m ’ s - l eng th p r incip l e (m a r k et v a l ue).

ina ccur a te or f a l s e f a cts .

3 9 4

S p ain (continued)


T h er e w il l b e no p ena l ties if th e docum enta tion ob l ig a tion h a s b een com p l ied w ith , ev en if th e ta x a uth or ities r ea s s es s th e v a l ue of th e tr a ns a ctions .

• D iv idends , w h enev er s uch dif f er ence is in f a v or of th e s h a r eh ol der

• C ontr ib utions b y th e s h a r eh ol der to th e entity ’ s eq uity , w h enev er th e dif f er ence is in f a v or of th e entity

4of th e O E C D G uidel ines ).

T h e a b ov e s a nctions a r e com p a tib l e w ith a g g r a v a ting cir cum s ta nces , s uch a s r es is ting , ob s tr ucting , ex cus ing or neg a ting th e ta x a uth or ities ’ a ctions .

Penalty relief

ev en if th e ta x a uth or ities p r op os e a r ea s s es s m ent.


A g ener a l s ta tute of l im ita tions of f our y ea r s a p p l ies . T h e ter m w il l b e inter r up ted in th e ca s e of a ta x a udit. I f a new incom e ta x r etur n is


f or s uch com p a nies is h ig h .

l ik el ih ood of a udit f or oth er s is l ow . H ow ev er , th e ta x a uth or ities es ta b l is h th eir a nnua l a udit p l a ns b a s ed on th e r is k a s s es s m ent of ea ch ta x p a y er , s o com p a nies f or w h ich r is k f a ctor s a p p l y m a y b e ex p os ed to a n incr ea s ed r is k .

T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a n a udit is h ig h if th e ta x p a y er r eg ul a r l y enter s into cr os s - b or der r el a ted-p a r ty tr a ns a ctions . F or a l l oth er ca s es , th e l ik el ih ood of a tr a ns f er p r icing r ev iew dur ing a g ener a l a udit is m edium .

ta x a uth or ities m or e of ten a g g r es s iv el y ch a l l eng e th e com p a r a b il ity a na l y s is b y a p p l y ing th e m os t r ecent O E C D g uida nce to th e nine- s tep p r oces s a nd inter q ua r til e r a ng e a p p l ica tion. T h e ta x a uth or ities h a v e s ta ted th a t tr a ns f er p r icing a udits a r e a n a r ea of m a j or a ttention, p a r ticul a r l y w ith r eg a r d to b us ines s r es tr uctur ing s a nd inta ng ib l e tr a ns a ctions .

3 9 5

S p ain (continued)


APA opportunity

T a x p a y er s m a y r eq ues t th a t th e ta x a uth or ities is s ue r ul ing s on r el a ted- p a r ty tr a ns a ctions b ef or e th ey a r e ca r r ied out. T h is r eq ues t h a s

oth er ta x a uth or ities to deter m ine th e m a r k et v a l ue of th e tr a ns a ctions j ointl y (i. e. , b il a ter a l A P A s ).

T h e new r eg ul a tion h a s im p r ov ed th e p r ev ious r eg im e on A P A s b y ex tending th e v a l id ter m to a s ix - y ea r p er iod (encom p a s s ing th e

r ea s s es s m ent. T h is w a y , th e A P A m a y b r ing ta x p a y er s a n op p or tunity to s ettl e dis p utes w ith th e ta x a dm inis tr a tion.


S r i L ank a




T r a ns f er p r icing r eg ul a tions a r e conta ined in Extraordinary Gazette 44


G uidel ines .


T r a ns f er p r icing r eg ul a tions r eq uir e ex tens iv e contem p or a neous docum enta tion. T a x p a y er s a r e r eq uir ed to k eep a l l of it in E ng l is h , ev idencing th a t a s s ocia ted under ta k ing tr a ns a ctions h a v e b een es ta b l is h ed on a n a r m ’ s - l eng th b a s is . H ow ev er , s uch docum enta tion is

y ea r of a s s es s m ent.



•

•

•

s ta tem ents .

3 9 7

S r i L ank a (continued)



4 Extraordinary Gazettes Gazettes a l s o r eq uir e a n indep endent A p p r ov ed A ccounta nt

to cer tif y th a t th e dir ector ’ s dis cl os ur es h a v e b een m a de a nd th e neces s a r y docum enta tion h a s b een ex a m ined b y th e A p p r ov ed

or b ef or e 3 0 N ov em b er 2 0 1 6 .


T h e docum enta tion th a t is r eq uir ed if th e th r es h ol d m entioned a b ov e is ex ceeded s h oul d b e f ur nis h ed up on r eq ues t. T h e r eg ul a tions


b oth .

Penalty relief

P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s a p p l ica tion of th e a r m ’ s - l eng th p r incip l e.


I n th e ca s e of f r a ud or w il l f ul ev a s ion, th e s ta tute of l im ita tions w il l not a p p l y .


T h e l ik el ih ood of a n a nnua l ta x a udit dep ends on th e f a cts a nd cir cum s ta nces . I n g ener a l , th e l ik el ih ood of tr a ns f er p r icing s cr utiny dur ing a ta x a udit is h ig h .

tr a ns a ctions w ith a s s ocia ted under ta k ing s h a s b een ob s er v ed.

3 9 8

S r i L ank a (continued)


APA opportunity


S w ed en




• 4

• Skatteförfarandelagen (2011:1244)) incl ude docum enta tion r eq uir em ents r eg a r ding tr a ns f er p r icing

• om prissättningsbesked vid internationella transaktioner)

enter p r is es . I t a l s o is s ues g ener a l ta x a tion g uidel ines a nd op inions , incl uding inf or m a tion a b out tr a ns f er p r icing .


r es tr uctur ing s .


•

• I nf or m a tion r eg a r ding th e ch a r a cter is tics a nd s cop e of th e tr a ns a ctions

• A f unctiona l a na l y s is

• A des cr ip tion of th e ch os en p r icing m eth od

• A com p a r a b il ity a na l y s is

I n a ddition to identif y ing th e f unctions p er f or m ed, th e f unctiona l a na l y s is s h oul d r ev ea l th e r is k s a s s um ed a nd a s s ets us ed, a s w el l

com p a r a b il ity f a ctor s des cr ib ed in th e O E C D G uidel ines is h ig h l ig h ted.

N or w eg ia n or E ng l is h .

tr a ns a ctions inv ol v ing th e s a l e of inta ng ib l e a s s ets .

4 0 0

S w ed en (continued)


•

• T h e counter p a r ty to th e tr a ns a ction a nd inf or m a tion a b out th a t entity ’ s b us ines s op er a tions

• I nf or m a tion a b out th e inter com p a ny tr a ns a ctions , incl uding th e ty p e of tr a ns a ction, a m ounts a nd v a l ue

• T h e m eth od a p p l ied to th e tr a ns a ction to com p l y w ith th e a r m ’ s - l eng th p r incip l e

•



r etur n m a y el im ina te th e r is k of p ena l ties .




4im p os ed. I n tr a ns f er p r icing ca s es , p ena l ties a t a r a te of 4 0 % a r e g ener a l l y im p os ed.

Penalty relief

T h e r is k of p ena l ties m a y b e el im ina ted if th er e is f ul l dis cl os ur e of th e tr a ns a ctions under ta k en a nd th e m eth ods us ed, a nd a l l oth er r el ev a nt inf or m a tion is p r ov ided. I n th e p r ep a r a tor y w or k f or th e l a w th a t intr oduced tr a ns f er p r icing docum enta tion r eq uir em ents , it is s ta ted th a t if a n incom e a dj us tm ent is m a de b eca us e th e ta x p a y er ’ s p r ices a r e not deem ed to b e a t a r m ’ s - l eng th , th e p ena l ties m ig h t b e r educed or el im ina ted if th e ta x p a y er h a s p r ep a r ed p r op er tr a ns f er p r icing docum enta tion.

4 0 1

S w ed en (continued)




T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium to h ig h . T h e l ik el ih ood dep ends on a num b er of f a ctor s , s uch a s th e indus tr y in w h ich th e com p a ny op er a tes , th e occur r ence of cer ta in tr a ns a ctions , th e outcom e of p r ev ious ta x a udits a nd th e ch a ng es in tur nov er

f ocus onl y on tr a ns f er p r icing .

T h e l ik el ih ood is l ow to h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit. T h e l ik el ih ood dep ends , f or ex a m p l e, on th e tr a ns a ctions inv ol v ed, th e tr a ns f er p r icing m eth ods a p p l ied, w h eth er docum enta tion a nd a g r eem ents h a v e b een p r ep a r ed, a nd w h eth er th e docum enta tion a nd a g r eem ents a r e a dh er ed to in p r a ctice.

APA opportunity


S w itz er l and




is der iv ed f r om th e a r m ’ s - l eng th p r incip l e in A r ticl e 5 8 of th e F eder a l D ir ect T a x A ct on a f eder a l l ev el , a s w el l a s in A r ticl e 2 4 of th e

dev ia tions f r om th e a r m ’ s - l eng th p r incip l e.

A num b er of a dm inis tr a tiv e dir ectiv es (incl uding cir cul a r s a nd cir cul a r l etter s ) im p l icitl y or ex p l icitl y r ef er to th e deter m ina tion of tr a ns f er

•

• 4 4

• C ir cul a r L etter N o. 6 f r om 6 J une 1 9 9 7 , r eg a r ding h idden eq uity

• C ir cul a r f r om 2 3 F eb r ua r y 2 0 1 6 r eg a r ding inter es t p a y m ents b etw een r el a ted g r oup entities (up da ted a nnua l l y )

r el ea s ed b y th e F eder a l C ouncil .


4


4

4 0 3

S w itz er l and (continued)



4 4l eng th p r incip l e (i. e. , f or ea ch indiv idua l ta x p a y er on th e b a s is of com p a r a b l e uncontr ol l ed tr a ns a ctions cons ider ing a p p r op r ia te m a r g in r a ng es ). T h e cir cul a r l etter a l s o im p l icitl y s ta tes th a t th e cos t- p l us m eth od is th e m os t a p p r op r ia te m eth od f or s er v ice com p a nies to p r ice

cos t- p l us m eth od s h a l l b e a ccep ted onl y in ex cep tiona l ca s es .

a uth or ities .


T h er e a r e no f or m a l r el a ted- p a r ty dis cl os ur e r eq uir em ents . H ow ev er , in th e ca s e of a ta x a udit or r eq ues t f r om com p etent a uth or ities , th e ta x p a y er m us t p r ov ide th e r eq ues ted inf or m a tion, to a r ea s ona b l e ex tent.



T h er e a r e cur r entl y no s p ecia l p r ov is ions f or docum enta tion dea dl ines . H ow ev er , up on r eq ues t, p r oof of th e a r m ’ s - l eng th ch a r a cter of tr a ns a ctions ty p ica l l y h a s to b e p r ov ided w ith in 3 0 da y s .


in ca s es of f r a ud or neg l ig ence. A l th oug h g ener a l l y no p ena l ties a p p l y , in th e ev ent of a dj us tm ents , inter es t ch a r g es f or l a te p a y m ents a r e due in s uch ca s es .

Penalty relief

T h er e a r e no s p ecia l p r ov is ions f or p ena l ty r eductions .


T h e g ener a l r ul e p r ov ides f or up to 1 0 y ea r s f r om th e end of th e ta x y ea r if th e ta x a uth or ities dis cov er new f a cts or cir cum s ta nces .

4 0 4

S w itz er l and (continued)



a r r a ng em ents , a nd th e l ik el ih ood f or a n a udit ca n b e cons ider ed to b e m edium . I n th e ca s e of a n a udit, th er e is a h ig h l ik el ih ood th a t th e

APA opportunity


incr ea s ing l y a s k ing q ues tions on s ub s ta nce a nd r eq ues ting dis cl os ur e of th e entir e v a l ue ch a in.

T aiw an




• A r ticl e 4 3 - 1 of I T L

• A r ticl e 5 0 of th e F ina ncia l H ol ding C om p a ny L a w (F H C L )

• 4

g uidel ines ) b eca m e ef f ectiv e 3 0 D ecem b er 2 0 0 4 .



E x cep t f or im m a ter ia l r el a ted- p a r ty tr a ns a ctions , ex tens iv e contem p or a neous docum enta tion is r eq uir ed. A ccor ding to th e tr a ns f er p r icing g uidel ines , a n enter p r is e m us t h a v e th e tr a ns f er p r icing r ep or t a nd r el ev a nt docum enta tion p r ep a r ed w h en th e a nnua l incom e ta x

I f th e enter p r is e m eets th e s a f e- h a r b or th r es h ol d a nd does not p r ep a r e a tr a ns f er p r icing r ep or t, th e ta x a uth or ity m a y s til l r eq ues t

p r es ented in th e tr a ns f er p r icing g uidel ines .1

D ecem b er 2 0 0 8 a nd a f ter w a r d. T h e r ul ing s ta tes th a t th e enter p r is e is not r eq uir ed to p r ep a r e a tr a ns f er p r icing r ep or t if a ny of th e

•

O r

•

•m il l ion f or th e p r eceding 1 0 ta x y ea r s to r educe th e incom e ta x or undis tr ib uted ea r ning s s ur p l us ta x

•

1 4

4 0 6

T aiw an (continued)


•

O r

•

•

•

• D es cr ip tion of contr ol l ed tr a ns a ctions

•

• I ndus tr y a nd econom ic a na l y s is

• F unctions a nd r is k s a na l y s is

• A p p l ica tion of th e a r m ’ s - l eng th p r incip l e

•


• T r a ns f er p r icing m eth ods s el ected b y th e enter p r is es

• T r a ns f er p r icing m eth ods s el ected b y r el a ted p a r ties under th e s a m e contr ol

•

•

•


m os t- a p p r op r ia te- m eth od a p p r oa ch w ith in th e O E C D G uidel ines .


4

• T h e inv es ting s tr uctur e

•

• T h e r el a ted- p a r ty tr a ns a ction a m ounts b y ty p e, incl uding tr a ns f er of ta ng ib l e a s s ets , us e of ta ng ib l e a s s ets , tr a ns f er of inta ng ib l e a s s ets ,

• T h e r el a ted- p a r ty tr a ns a ction b a l a nces

•

•

4 0 7



T h e ta x a uth or ity h a s is s ued s a f e- h a r b or r ul es f or r el a ted- p a r ty tr a ns a ction dis cl os ur es in tw o r ul ing s . 2

enter p r is e m us t dis cl os e r el a ted- p a r ty tr a ns a ctions on its incom e ta x r etur n if th e s um of its a nnua l op er a ting a nd nonop er a ting r ev enue

• T h e enter p r is e h a s r el a ted p a r ties outs ide T a iw a n (incl uding th e h ea dq ua r ter s a nd b r a nch es )

•incom e ta x or undis tr ib uted ea r ning s s ur p l us ta x

•



A ccor ding to th e tr a ns f er p r icing g uidel ines , th e ta x p a y er m us t h a v e th e tr a ns f er p r icing r ep or t a nd r el ev a nt docum ents p r ep a r ed w h en

note on th e r etur n w h eth er th e enter p r is e h a s p r ep a r ed a tr a ns f er p r icing r ep or t in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines . T h e

I n a ccor da nce w ith th e tr a ns f er p r icing g uidel ines , up on a udit, th e enter p r is e h a s to p r ov ide th e N T A w ith th e r ep or t w ith in one m onth .


P ur s ua nt to th e tr a ns f er p r icing g uidel ines , up to 2 0 0 % of th e ta x s h or tf a l l coul d b e im p os ed if a s s es s ed b y th e ta x a uth or ity , under cer ta in cir cum s ta nces .

Penalty relief

C ur r entl y , th er e is no p ena l ty r el ief r eg im e in p l a ce.


Frequency of tax audit and transfer pricing scrutiny by the tax authority 3

•

2 4 4 43 4 4 4

4 0 8



•indus tr y a v er a g e.

•

• T h e enter p r is e f a il s to dis cl os e r el a ted- p a r ty tr a ns a ctions in a ccor da nce w ith th e r el a ted- p a r ty tr a ns a ctions dis cl os ur e r eq uir em ents .

• T h e enter p r is e f a il s to deter m ine w h eth er its r el a ted- p a r ty tr a ns a ctions a r e w ith in a n a r m ’ s - l eng th r a ng e a nd f a il s to p r ep a r e docum ents in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines .

• T h e enter p r is e f a il s to ch a r g e r el a ted p a r ties in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines or ch a r g es a n a b nor m a l a m ount.

• T h e enter p r is e f a il s to p r ov ide th e tr a ns f er p r icing r ep or t up on a ta x a udit.

• T h e ta x a uth or ity a dj us ted th e tr a ns f er p r icing of th e enter p r is e, in w h ich ca s e th e ta x y ea r s p r eceding a nd s ub s eq uent to th e y ea r of a tr a ns f er p r icing a udit a r e l ik el y to b e s el ected f or a udit.

•

•

• A ny oth er tr a ns a ction f a il s to m eet th e a r m ’ s - l eng th r eq uir em ents in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines .

a udits .

cor p or a te incom e ta x a udits m a y incl ude a r eq ues t a nd r ev iew of th e docum enta tion, a s w el l a s r el a ted s up p or ting m a ter ia l s . I n th e p a s t y ea r , th er e h a s b een incr ea s ed a ctiv ity b y th e N T A , es p ecia l l y w ith r es p ect to r eq ues ts to s ee docum enta tion r ep or ts . I n p a r ticul a r , com p a nies conducting b us ines s th r oug h ta x h a v ens h a v e a ttr a cted m or e s cr utiny , a l ong w ith th os e m a k ing l os s es .

T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e a udit is h ig h , b a s ed on a ny of th e f a ctor s or

•

•

•

•

•

•

a nd ex p ects inter es t incom e to b e p a id to th e l ender

•

APA opportunity

A P A s a r e a v a il a b l e under A r ticl es 2 3 th r oug h 3 2 of th e tr a ns f er p r icing g uidel ines .

•

•

4 0 9



• D ocum enta tion, a s r eq uir ed under s ub p a r a g r a p h s 1 to 4 a nd s ub p a r a g r a p h s 6 to 1 0 , p a r a g r a p h 1 of A r ticl e 2 4 , h a s b een w el l - p r ep a r ed.

• A tr a ns f er p r icing r ep or t, a s p r es cr ib ed under s ub p a r a g r a p h 5 , p a r a g r a p h 1 of A r ticl e 2 4 , h a s b een p r ep a r ed.

•

•

4 4 4

• T h e enter p r is e f a il s to p r ov ide th e ta x a uth or ity w ith th e a nnua l r ep or t r eg a r ding th e im p l em enta tion of th e A P A .

• T h e enter p r is e f a il s to k eep th e r el ev a nt docum ents in a ccor da nce w ith tr a ns f er p r icing g uidel ines .

• T h e enter p r is e f a il s to f ol l ow th e p r ov is ions of th e A P A .

• T h e enter p r is e concea l s m a ter ia l f a cts , p r ov ides f a l s e inf or m a tion or conducts w r ong f ul a cts .


4

l ow - v a l ue- a dded s er v ices w il l b e p r ov ided in th e tr a ns f er p r icing g uidel ines in th e nea r f utur e.

T anz ania



4 4


44 4


N ev er th el es s , th e I T A 2 0 0 4 a nd th e 2 0 1 4 tr a ns f er p r icing r eg ul a tions p r ev a il if th er e a r e a ny incons is tencies b etw een th em a nd th e


•


• T h e contr ol l ed tr a ns a ctions

•


•

• A p p l ica tion of tr a ns f er p r icing m eth od

• D ocum ents th a t p r ov ide th e f ounda tion f or or oth er w is e s up p or t or w er e r ef er r ed to in dev el op ing th e tr a ns f er p r icing a na l y s is

• I ndex a nd a ny oth er inf or m a tion, da ta or docum ent cons ider ed r el ev a nt b y th e C om m is s ioner


a p p l ied.

N otw ith s ta nding th e a b ov e, th e tr a ns f er p r icing r eg ul a tions r eiter a te th a t th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied w ith r eg a r d to


T h e ta x p a y er is r eq uir ed to dis cl os e th e a m ount of s a l es , p ur ch a s es a nd l oa ns m a de or r eceiv ed f r om a s s ocia tes in a nd outs ide of

4 1 1

T anz ania (continued)





s ub m itted to th e ta x a uth or ity w ith in 3 0 da y s .


T h e g ener a l r ul es of p ena l ties f or noncom p l ia nce a nd inter es t f or under p a y m ent of ta x under th e I T A 2 0 0 4 a p p l y .

Penalty relief

r ea s ona b l e ca us e.



T h er e a r e no s p ecia l tr a ns f er p r icing a udits s ta ted in th e l a w . H ow ev er , th e ta x a uth or ity s ta ted th a t th e inter com p a ny tr a ns a ctions w il l b e a udited in th e g ener a l ta x a udits , b ut a s p ecia l tr a ns f er p r icing tea m w il l b e inv ol v ed dur ing th e a udit. T h e ta x a uth or ity h a s r ecentl y r eq ues ted T P docum enta tion f or th e r ev iew . N o T P a dj us tm ent h a s b een m a de s o f a r .

APA opportunity

T h e tr a ns f er p r icing r eg ul a tions p r ov ide f or a n op p or tunity to enter into unil a ter a l , b il a ter a l or m ul til a ter a l A P A s . I n a s em ina r f or ta x p a y er s on tr a ns f er p r icing , th e ta x a uth or ities h a v e indica ted th a t, until f ur th er notice, no A P A s w il l b e s tip ul a ted until l oca l ex p er tis e h a s b een b uil t.


4

coop er a tion a m ong A f r ica n ta x a uth or ities , w h ich w or k s tow a r d incr ea s ing th e l ev el of v ol unta r y ta x com p l ia nce w h il e com b a ting ta x

w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

T h ail and




•

• 4

•

• 4

•

• D oub l e ta x a g r eem ents b etw een T h a il a nd a nd oth er countr ies

• 4

• 4

dis continue a b il a ter a l A P A a nd ta x p a y er com p l ia nce a f ter a b il a ter a l A P A is concl uded.

2 0 1 5 or ea r l y 2 0 1 6 .


T h e T h a i tr a ns f er p r icing g uidel ines g ener a l l y f ol l ow th e O E C D G uidel ines , incl uding a l l ow ing a l l of th e m eth ods a ccep ta b l e under th e O E C D G uidel ines . T h is incl udes s up p or ting m a ter ia l b ey ond th e s cop e of th e O E C D G uidel ines . T h e O E C D G uidel ines a r e not b inding on


• T h e s tr uctur e a nd r el a tions h ip s b etw een b us ines s entities w ith in th e s a m e g r oup , incl uding th e s tr uctur e a nd na tur e of b us ines s ca r r ied on b y ea ch entity

•

• T a x p a y er s ’ b us ines s s tr a teg ies a nd th e r ea s ons f or a dop ting th os e s tr a teg ies

•

4 1 3

T h ail and (continued)


•

•

•

•

•docum ented)

• E v idence s up p or ting th e neg otia tion p os itions ta k en b y th e ta x p a y er in r el a tion to th e tr a ns a ctions w ith b us ines s entities in th e s a m e g r oup a nd th e b a s is f or th os e neg otia ting p os itions

• O th er r el ev a nt docum enta tion (if a ny ) s up p or ting th e tr a ns f er p r ices



C ur r entl y , th er e is neith er dis cl os ur e of th e ex is tence nor nonex is tence th a t tr a ns f er p r icing docum enta tion is r eq uir ed to b e s ub m itted




4


T h er e is no ex p l icit p ena l ty f or tr a ns f er p r icing a s s es s m ents , nor is th er e a n ex p l icit p ena l ty f or not h a v ing tr a ns f er p r icing docum enta tion.

m onth s ur ch a r g e m a y b e im p os ed. T h e 1 . 5 % m onth l y s ur ch a r g e is ca p p ed a t 1 0 0 % of th e ta x s h or tf a l l a m ount.

4 1 4

T h ail and (continued)


Penalty relief

I n th e ev ent of a tr a ns f er p r icing a dj us tm ent, th er e is no f or m a l p ena l ty r el ief f or h a v ing tr a ns f er p r icing docum enta tion in p l a ce.

a f or m of inter es t a nd ca nnot b e r educed. C ontem p or a neous docum ents ca nnot b e us ed to r educe th e p ena l ty f or a tr a ns f er p r icing s h or tf a l l . H ow ev er , docum enta tion is a n im p or ta nt tool in th e def ens e of tr a ns f er p r icing , s h oul d a ta x a udit ta k e p l a ce.


y ea r s up on s us p icion of ta x ev a s ion or f r a ud.


docum enta tion. F a il ur e to do s o w il l l ik el y l ea d to a ta x a udit.

a r ea of tr a ns f er p r icing .

deductib il ity of ex p ens es a r is ing f r om inter com p a ny tr a ns a ctions ), a f ur th er inv es tig a tion w il l b e conducted.

I n m os t ca s es , th e ta x p a y er under inv es tig a tion w il l b e r eq uir ed to a dd th e ex p ens es (to th e ex tent deem ed ex ces s iv e) b a ck to its ta x a b l e

APA opportunity

deg r ee of cer ta inty a nd el im ina te doub l e ta x a tion, a s p r ov ided in doub l e ta x tr ea ties b etw een T h a il a nd a nd oth er j ur is dictions . C ur r entl y ,

concl uded to da te (2 2 b etw een T h a il a nd a nd J a p a n a nd 1 b etw een T h a il a nd a nd K or ea ). C ur r entl y , 2 0 b il a ter a l A P A s a r e b eing r ev iew ed a nd neg otia ted.


T u r k ey




T r a ns f er p r icing is r eg ul a ted b y A r ticl e 1 3 of th e C or p or a te T a x C ode num b er ed 5 5 2 0 , p ub l is h ed 2 1 J une 2 0 0 6 . A r ticl e 1 3 of th e

eng a g es in p ur ch a s e of g oods a nd s er v ices w ith r el a ted p a r ties a t p r ices or a t a m ounts w h ich th ey deter m ine do not com p l y w ith th e

T r a ns f er p r icing p r ov is ions h a v e b een ef f ectiv e s ince J a nua r y 2 0 0 7 . T h er e a r e tw o ca b inet decr ees , p ub l is h ed in D ecem b er 2 0 0 7 a nd


T h e p r ea m b l e to th e l a w s ta tes th a t th e p r ov is ions of inter na tiona l r eg ul a tions , es p ecia l l y th e O E C D G uidel ines , a r e ta k en a s r ef er ence. H ow ev er , th er e is no p a r ticul a r r ef er ence to th e O E C D G uidel ines in th e a ctua l content of th e r eg ul a tions , incl uding A r ticl e 1 3 of th e

I n l oca l tr a ns f er p r icing r ul es , b us ines s r es tr uctur ing s a r e not r ef er enced. H ow ev er , th er e a r e s tr ict p r ov is ions in l oca l ta x codes r eg a r ding a nti- a b us e r ul es a nd th e s ub s ta nce- ov er - f or m p r incip l e.

s ta te th a t th e ta x a uditor s a r e s til l not f ul l y a l ig ned w ith th e O E C D G uidel ines a nd th a t th er e is a v er y s tr ong tendency tow a r d us ing th e

l is ted in th e O E C D G uidel ines .


T a x p a y er s a r e r eq uir ed to s ub m it, a s a n a tta ch m ent to th e cor p or a te incom e ta x r etur n, a tr a ns f er p r icing f or m deta il ing r el a ted- p a r ty tr a ns a ctions .

4 1 6

T u r k ey (continued)


I n a ddition to th e tr a ns f er p r icing f or m , ta x p a y er s a r e r eq uir ed to p r ep a r e (a nd s ub m it up on r eq ues t b y th e ta x a uth or ity ) a n a nnua l

•r el a ted- p a r ty tr a ns a ctions

•w ith r el a ted p a r ties

• O th er ta x p a y er s to p r ep a r e th e r ep or t f or p ur p os es of dis cl os ing tr a ns a ctions conducted w ith f or eig n r el a ted p a r ties

A l l of th e docum enta tion a b ov e is to b e p r ep a r ed in T ur k is h .

th r oug h T r a ns f er P r icing .

•

g r oup ’ s b us ines s es .

•s er v ices , r oy a l ties a nd inter es ts .

•em p l oy ees a nd a s s ets .


T h er e is no p r ior ity a m ong th e m eth ods . H ow ev er , th er e is a p r ior ity a m ong com p a r a b l es , a nd if th er e a r e inter na l com p a r a b l es , th ey

enoug h ) ca n ex ter na l com p a r a b l es th en b e us ed.


T a x p a y er s a r e r eq uir ed to dis cl os e inf or m a tion a b out a l l r el a ted- p a r ty tr a ns a ctions (dom es tic a nd cr os s - b or der ) p er f or m ed w ith r el a ted p a r ties w ith m inim um 1 0 % s h a r e, r eg a r dl es s of th e m a g nitude, on th eir tr a ns f er p r icing f or m s . I n a ddition, ta x p a y er s a r e r eq uir ed to

• N a m e or titl e of th e l oca l r el a ted- p a r ty

•

• N a m e of th e f or eig n r el a ted- p a r ty a nd th e countr y in w h ich it r es ides

b or r ow ing f unds , m a r k eta b l e s ecur ities , ins ur a nce a nd oth er tr a ns a ctions ; a nd intr a g r oup s er v ices . T a x p a y er s m us t a l s o dis cl os e th e tr a ns f er p r icing m eth ods a p p l ied in th e r el a ted- p a r ty tr a ns a ctions .

4 1 7




T a x p a y er s a r e r eq uir ed to s ub m it a tr a ns f er p r icing f or m deta il ing r el a ted- p a r ty tr a ns a ctions . T h is f or m s h oul d b e s ub m itted a s a n a tta ch m ent to th e cor p or a te incom e ta x r etur n.

O n th e tr a ns f er p r icing f or m , th e ta x p a y er h a s to dis cl os e inf or m a tion a b out its r el a ted p a r ties (b oth dom es tic a nd inter na tiona l ) th a t eng a g e in inter com p a ny tr a ns a ctions w ith th e ta x p a y er , th e na tur e (p ur ch a s e of r a w m a ter ia l s , l icens ing of inta ng ib l e a s s ets , etc. ) a nd a m ounts of th e tr a ns a ctions , a nd th e tota l a m ount of inter com p a ny tr a ns a ctions p r iced a ccor ding to ea ch tr a ns f er p r icing m eth od a p p l ied b y th e ta x p a y er .

•

• 4

ta x r etur n.


•

•

•

•

4r etur n).

•


• F or cor p or a te incom e ta x p ur p os es , 2 0 % of cor p or a te incom e ta x is r eca l cul a ted a s if th e dis g uis ed dis tr ib ution h a d not b een m a de.

• D iv idend w ith h ol ding ta x of 1 5 % is ca l cul a ted f or th e net a m ount of th e dis g uis ed dis tr ib ution.

A dditiona l l y , a l a te- p a y m ent inter es t p ena l ty (1 . 4 % m onth l y ) a nd a ta x l os s p ena l ty (w h ich is th e s a m e a s th e ta x l os s a m ount) a r e ch a r g ed to th e ta x p a y er .

4 1 8



Penalty relief

p r op er tr a ns f er p r icing docum enta tion.

I t is a l s o p os s ib l e to com e to a s ettl em ent r eg a r ding th e ta x l os s a m ount a nd th e ta x p ena l ty a s s es s ed. I n s ettl em ent neg otia tions , ta x p a y er s m a y a s s er t a g ood- f a ith def ens e.



us ua l l y s ub j ect to cl os er ex a m ina tion.

T h e r is k of tr a ns f er p r icing s cr utiny dur ing a ta x a udit is h ig h , a s ta x ins p ector s g ener a l l y f ocus on r el a ted- p a r ty tr a ns a ctions .

T h e f r eq uency of tr a ns f er p r icing a udits h a s incr ea s ed, a nd th es e a udits a r e m a inl y f ocus ed on intr a g r oup ch a r g es , s uch a s m a na g em ent

m a na g em ent s er v ices (e. g . , p r ep a r a tion of a p r ocur em ent a g r eem ent, r edes ig n of a com p ens a tion p ol icy or l eg a l a dv is or y f or a cour t

a r e l ik el y to b e tr ea ted a s r oy a l ties (a nd th er ef or e s ub j ect to w ith h ol ding ta x ), b a s ed on th e cl a im th a t indus tr ia l or com m er cia l ex p er ience is us ed.

T h e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y is s im il a r l y h ig h . A m ong ta x ins p ector s , th er e is a s tr ong tendency f or

com p a r a b l es , w h ich th e ta x p a y er ca n ch a l l eng e if th e ca s e is ta k en to l itig a tion.

APA opportunity

C om p a nies ca n a p p l y f or th eir cr os s b or der inter com p a ny tr a ns a ctions to unil a ter a l , b il a ter a l or m ul til a ter a l A P A ’ s .

a r ea .

U g and a




4C a p 3 4 0 , a nd b eca m e ef f ectiv e 1 J ul y 2 0 1 1 .

“Where any person, not being an employee, acts in accordance with the directions, requests, suggestions, or wishes of another person whether or not they are in a business relationship and whether those directions, requests, suggestions, or wishes are communicated to the first-mentioned person, both persons are treated as associates of each other.”


w ith th e D om es tic T a x ing A cts , th e p r ov is ions in th e D om es tic T a x ing A cts ta k e p r ecedence.


inf or m a tion th a t s h oul d b e incl uded in tr a ns f er p r icing docum enta tion.

G ener a l l y , th e r eq uir ed inf or m a tion incl udes ;

• C om p a ny D eta il s

• T r a ns a ction D eta il s

• D eter m ina tion of a r m ’ s - l eng th p r ice

•

4 2 0

U g and a (continued)



a nd da ta a v a il a b l e.

•

•

•

•

•


•

• T h e deta il s of th e tr a ns a ction under cons ider a tion

• T h e tr a ns f er p r icing m eth od, incl uding th e r ea s ons f or its s el ection

• T h e a s s um p tions , s tr a teg ies a nd p ol icies a p p l ied in s el ecting th e m eth od

• T h e a p p l ica tion of th e m eth od, th e ca l cul a tions m a de a nd th e p r ice a dj us tm ent f a ctor s cons ider ed

• T h e tr a ns f er p r icing p ol icy a g r eem ent

•


com e up w ith a r el a ted- p a r ty dis cl os ur e f or m th a t h a s b een cir cul a ted to m os t m ul tina tiona l entities a s p a r t of th e initia l tr a ns f er p r icing a udit p r ocedur e.


to a dh er e to th is coul d r es ul t in im p r is onm ent or com m er cia l p ena l ty or b oth , a s h ig h l ig h ted b el ow .

4 2 1

U g and a (continued)



in p l a ce tr a ns f er p r icing docum enta tion under th e tr a ns f er p r icing r eg ul a tions , th e p er s on is l ia b l e, up on conv iction, to im p r is onm ent f or

ta x p a id is l es s th a n 9 0 % of th e a ctua l ta x l ia b il ity . T h e p ena l ty f or l a te p a y m ent is 2 % p er m onth of th e s h or tf a l l a nd 2 % of th e g r os s ta x

Penalty relief

a uth or ity or a p p ea l s of ta x decis ions m a de b ef or e th e T a x A p p ea l s T r ib una l or th e C our ts of l a w .


w il l f ul neg l ect b y or on b eh a l f of th e ta x p a y er or up on th e dis cov er y of new inf or m a tion.


a v oida nce r ul es .

APA opportunity

A p p l ica tions f or unil a ter a l a nd b il a ter a l A P A s a r e a l l ow ed.


U k r aine



Relevant regulations and rulings 1

G uidel ines .

•

• 4

tr a ns f er p r icing ).

• 4

•

•

tr a ns f er p r icing .

T h e ta x a uth or ities p r ov ide a dm inis tr a tiv e inter p r eta tion a nd g uida nce w ith r es p ect to th e a p p l ica tion of th e tr a ns f er p r icing r ul es , th e r el ea s e of cons ul ta tion l etter s , or der s a nd op inions ex p r es s ed in p r es s a nd a t p ub l ic ev ents .


th e a m ount of th eir ta x a b l e incom e p ur s ua nt to th e a r m ’ s - l eng th p r incip l e. T h e a r r a y of m eth ods a nd docum enta tion r eq uir em ents cl os el y f ol l ow s th e O E C D G uidel ines .


• 4

1

4 2 3

U k r aine (continued)


• A nonr es ident p er s on w h o is not a r el a ted- p a r ty , if th is p er s on is a cting a s a n inter m edia r y in a tr a ns a ction b etw een r el a ted p a r ties , does

• N onr es ident p er s ons , w h eth er r el a ted or not, if th ey a r e r eg is ter ed in s ta tes (ter r itor ies ) a p p r ov ed b y th e O r der of th e C a b inet of

• F or eig n tr a de tr a ns a ctions on s a l es of g oods th r oug h nonr es ident p er s ons under com m is s ion a g r eem ents

• T ota l incom e of th e ta x p a y er der iv ed f r om a l l ty p es of a ctiv ities , w h ich a r e a ccounted f or w h en deter m ining th e ob j ect of cor p or a te

•

F or rep ort ing y ears 2 0 1 3 and 2 0 1 4 :

• N onr es ident r el a ted p a r ties

•

•ta x es a t a l ow er r a te), or us e s ing l e ta x or a g r icul tur a l ta x r eg im es

m il l ion.

T r a ns f er p r icing docum enta tion r eq uir em ents a r e g ener a l l y b a s ed on O E C D p r incip l es . T h e tr a ns f er p r icing docum enta tion s h oul d

• C om p r eh ens iv e inf or m a tion a b out th e r el a ted p a r ties

• I nf or m a tion a b out th e g r oup (s tr uctur e, des cr ip tion of a ctiv ities , g r oup tr a ns f er p r icing p ol icies )

• D es cr ip tion of th e tr a ns a ction (ter m s a nd conditions )

• D es cr ip tion of th e g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , tr a dem a r k s

• T er m s a nd conditions of th e p a y m ents

• F a ctor s th a t im p a ct th e p r ice

• F unctiona l a na l y s is a nd r is k a na l y s is

•

•

• I nf or m a tion a b out cor r es p onding a dj us tm ents m a de b y th e ta x p a y er (if a ny )

4 2 4




oth er m eth ods in s uch s itua tions , a ta x p a y er s h a l l s ub m it to th e ta x a uth or ities a w r itten r ep or t th a t s h a l l incl ude da ta a b out P L I s of


T a x p a y er s s h a l l r ep or t a l l s el f - a dj us tm ents of ta x l ia b il ities a r is ing due to a p p l ica tion of tr a ns f er p r icing r ul es in a s p ecia l tr a ns f er p r icing



T a x p a y er s a r e ob l ig a ted to s ub m it tr a ns f er p r icing docum enta tion w ith in one m onth f r om th e da y f ol l ow ing th e da te of r eceip t of a

r ep or ting p er iod.


4 4

4 4

h a s one ca l enda r m onth to com p l y . T h e p ena l ty f or not s ub m itting th e tr a ns f er p r icing docum enta tion is 3 % of th e s um of th e contr ol l ed

4 2 5



T h e p ena l ty f or under s ta tem ent of ta x l ia b il ities a s a r es ul t of noncom p l ia nce w ith tr a ns f er p r icing r ul es is f r om 2 5 % up to 5 0 % of th e under s ta ted ta x (no p ena l ty is a p p l ica b l e f or th e 2 0 1 3 , 2 0 1 4 a nd 2 0 1 5 r ep or ting y ea r s ). I n a ddition, under s ta ted ta x is s ub j ect to a l a te

Penalty relief

4

2 0 1 5 . N o p ena l ty r el ief is p r ov ided f or p er iods a f ter 1 J a nua r y 2 0 1 6 .



A ccor ding to th e L a w , tr a ns f er p r icing a udits s h oul d b e p er f or m ed indep endentl y f r om oth er ta x a udits . T h e ta x a uth or ities s h a l l not h a v e th e r ig h t to conduct m or e th a n one a udit of a contr ol l ed tr a ns a ction of th e ta x p a y er dur ing a ca l enda r y ea r . I n g ener a l , th e l ik el ih ood of a n a nnua l ta x a udit m a y b e a s s es s ed a s h ig h , a nd s o is th e l ik el ih ood of a tr a ns f er p r icing r ev iew . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e cour s e of a n a udit is cur r entl y unk now n b eca us e of th e nov el ty of th e l eg is l a tion a nd a b s ence

C or r es p onding a dj us tm ents in ca s e of tr a ns a ctions w ith nonr es idents a r e not p r es cr ib ed b y th e L a w .

APA opportunity

4a uth or ities a nd th e ta x p a y er (b il a ter a l a nd m ul til a ter a l A P A s a r e p er m is s ib l e). C ur r entl y , th er e a r e no A P A s s ig ned b y th e ta x a uth or ities .


ex tent a nd p r a ctica l p ecul ia r ities of s uch im p l em enta tion r em a in uncl ea r .

U nited K ing d o m




4

in a w a y th a t w il l p r ev ent th er e b eing tr a ns a ctions f or tr a ns f er p r icing p ur p os es , ev en w h en a th ir d p a r ty is incl uded in th e ch a in.

Exemption for small and medium-sized enterprises (SME): 4p r ov ides a n ex em p tion f r om tr a ns f er p r icing r ul es f or th e v a s t m a j or ity of tr a ns a ctions ca r r ied out b y a b us ines s th a t is a s m a l l or

a nd one (or b oth ) of eith er th e a nnua l tur nov er l im it or th e b a l a nce s h eet tota l l im it. T h e a nnua l tur nov er l im it f or s m a l l enter p r is es is 4

Change to compensating adjustment rules in relation to UK/UK transactions: T h e r ul es now r es tr ict th e us e of th e com p ens a ting a dj us tm ent m ech a nis m in th e tr a ns f er p r icing l eg is l a tion. T h e l eg is l a tion p r ev ents a cl a im f or a com p ens a ting a dj us tm ent b eing m a de b y a p er s on (oth er th a n a com p a ny ) w ith in a ch a r g e f or incom e ta x , w h er e th e counter p a r ty to th e tr a ns a ction is a com p a ny .

th a t th e m a nua l w il l b e ch a ng ed in th is r eg a r d in 2 0 1 7 .


4

4 2 7

U nited K ing d o m (continued)


us ed f or a ccounting p er iods ending on or a f ter 1 A p r il 2 0 1 1 , w h il e th e 1 9 9 8 v er s ion a p p l ies to ea r l ier p er iods . F ur th er m or e, th e F ina nce

b eg inning on or a f ter 1 A p r il 2 0 1 6 , th e 2 0 1 6 v er s ion of th e O E C D T r a ns f er P r icing G uidel ines a r e to b e us ed in p l a ce of th e 2 0 1 0 v er s ion.


f ul l nondis cr im ina tion a r ticl e do not need to docum ent com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e f or th os e tr a ns a ctions .

g uida nce cur r entl y div ides docum enta tion into p r im a r y a ccounting r ecor ds , ta x a dj us tm ent r ecor ds a nd, m os t im p or ta ntl y , ev idence.

•

• A des cr ip tion of th e na tur e of th e b us ines s

• T h e contr a ctua l or oth er under s ta nding s b etw een th e p a r ties

• A des cr ip tion of th e m eth od us ed to es ta b l is h or tes t th e a r m ’ s - l eng th r es ul t, w ith a n ex p l a na tion of w h y th e m eth od is ch os en

• A n ex p l a na tion of com m er cia l a nd m a na g em ent s tr a teg ies , f or eca s ts f or th e b us ines s or tech nol og ica l env ir onm ent, com p etitiv e conditions a nd r eg ul a tor y f r a m ew or k

ex p ect m ul tina tiona l com p a nies to h a v e docum enta tion com p l ia nt w ith th a t f or m a nd a v a il a b l e on r eq ues t.


intel l ectua l p r op er ty l icens es ), unl es s th er e h a s b een a n a na l y s is a r ound th e r el ev a nt p a r ties ’ b a r g a ining p os itions in a g r eeing to th e

4 2 8








42 0 0 7 . T h es e p r ov is ions a r e couch ed in ter m s of ca r el es s or del ib er a te ina ccur a cies , r a th er th a n neg l ect. T h ey a r e ta x - g ea r ed a t up to

a dj us tm ent.

3 0 % ), a nd del ib er a te ina ccur a cies , f or w h ich th e p ena l ties w il l b e h ig h er (up to 7 0 % ).

E x am p les of negligence and carelessness include:

• N o a ttem p t to p r ice th e tr a ns a ction

•entity

• P ol icy , oth er w is e a r m ’ s - l eng th , not p r op er l y a p p l ied in p r a ctice

E x am p les of delib erat e inaccuracies include:

•

• A cos t- p l us r etur n to a com p a ny th a t h a s in r ea l ity contr ol l ed th e dev el op m ent of v a l ua b l e inta ng ib l es (not dem ons tr a b l e a s a s ub contr a ctor to g r oup m em b er s )

•

Penalty relief

th r oug h tr a ns f er p r icing docum enta tion th a t f ul l y ev idences th a t th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e w a s cons ider ed p r op er l y in p r ep a r ing th e r el ev a nt ta x r etur n.

4 2 9



S t at ut e of lim it at ions on t ransfer p ricing assessm ent s

E f f ectiv e 1 A p r il 2 0 1 0 , a s s es s m ents m a y b e m a de f our y ea r s f ol l ow ing th e end of th e r el ev a nt a ccounting p er iod f or ins ta nces of ca r el es s nes s , a nd th is is ex tended to 2 0 y ea r s if th er e h a v e b een del ib er a te under s ta tem ents . T h is is on th e b a s is th a t th e er r or w a s not f ul l y dis cl os ed in th e b ody of th e ta x r etur n or oth er docum ents s ub m itted.

T h e l eg is l a tion a p p l ica b l e b ef or e 1 9 9 9 op er a ted in a dif f er ent m a nner , a nd, a s a r es ul t, a n inv es tig a tion s ta r ted now w oul d not l ea d to tr a ns f er p r icing a dj us tm ents f or p er iods b ef or e 1 9 9 9 .


a s h ig h r is k in th is a r ea w il l th en b e s ub j ect to a n a udit. H ow ev er , th e l ik el ih ood th en of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y

a p p l ica tion.

th a t m a y neces s ita te a n inq uir y . T h e s p ecia l is t h el p s th e ca s e tea m p r ep a r e a r is k a s s es s m ent a nd a b us ines s ca s e f or s ub m is s ion to a p a nel f or s ig n- of f b ef or e a n inq uir y m a y b e com m enced. T h e r es p ons ib l e p a nel is th en r eq uir ed to s a nction, or not, th e op ening of a n inq uir y a s th e initia l s ta g e g a te. T h e p a nel a l s o th en r eg ul a r l y r ev iew s p r og r es s dur ing th e inq uir y a nd s ig ns of f on a l l s ettl em ent

•

•

•

• T r a ns a ctions th a t do not a p p ea r to h a v e a com m er cia l p ur p os e

• T r a ns a ction w ith r el a ted p a r ties in l ow - ta x ter r itor ies

•

•

I n contex t, a num b er of th es e f a ctor s ta k en tog eth er m a y p r ov ide a com p el l ing r is k a s s es s m ent a nd, w h er e th e s um s w a r r a nt, a b us ines s ca s e f or op ening a n inq uir y .

onl y th os e m ul tina tiona l com p a nies r a ted h ig h - r is k f or cr os s - b or der m a tter s (th us w a r r a nting a tr a ns f er p r icing inq uir y b ey ond a r is k a s s es s m ent) w il l b e s ub j ect to a f ul l inq uir y w h en th e r el ev a nt r etur n is s ub m itted. A s s uch , th e num b er of a ctua l inq uir ies h a s f a l l en ov er r ecent y ea r s , b ut h ig h - r is k ca s es a r e s ub j ect to a deta il ed a nd ex tens iv e inq uir y .

4 3 0



APA opportunity

A P A op p or tunities a r e a v a il a b l e, a nd a dm is s ions to th e p r og r a m a r e not ex p ected to incr ea s e b ey ond cur r ent l ev el s , g iv en r es our ce cons tr a ints . T h e l eg is l a tion g ov er ning th e A P A p r oces s is s et out in P a r t 5 of th e T I O P A 2 0 1 0 . A s ta tem ent of p r a ctice g ov er ning th e

4 4 4w er e a g r eed up on.

dir ectl y im p a ct th e A P A .

l ender s .

tr a ns f er p r icing on a cur r ent a nd p r os p ectiv e b a s is . H is tor ica l l y , a g r eem ents r ea ch ed f ol l ow ing s uch dis cus s ions w er e couch ed s ol el y in

p r incip l e. A l th oug h s til l s h or t of a n A P A a nd its contr a ctua l ter m s , s uch a g r eem ents nev er th el es s p r ov ide up - f r ont com f or t a s to m eeting

th e p r oces s .


T h e a m endm ents w il l a p p l y to a ccounting p er iods b eg inning on or a f ter 1 A p r il 2 0 1 6 a nd to tr a ns a ctions th a t w er e a l r ea dy in ef f ect on

4

des ig na ted a s s uch b y T r ea s ur y or der . C ur r entl y , a s noted a b ov e, th e 2 0 1 0 v er s ion is to b e us ed f or a ccounting p er iods b eg inning on

th is inter p r eta tion. T h is r eq uir es th a t f or a ccounting p er iods b eg inning on or a f ter 1 A p r il 2 0 1 6 , th e 2 0 1 6 v er s ion of th e O E C D T r a ns f er P r icing G uidel ines a r e to b e us ed in p l a ce of th e 2 0 1 0 v er s ion.

U nited S tates




• 4

• 4 42 0 0 5 - 4 6 .

• 4r eg ul a tions th a t w oul d dea l w ith th e tr a ns f er of intel l ectua l p r op er ty (I P ) th r oug h p a r tner s h ip s a m ong r el a ted p a r ties a nd a p p l y p r incip l es

4

•

•

44

•4 4

4


th e O E C D G uidel ines do not p r ov ide s up p or t a nd w oul d not b e dir ectl y r el ev a nt to th e a p p l ica tion of a ny p r icing m eth ods . H ow ev er , if ta x p a y er s p ur s ue com p etent a uth or ity r el ief f r om doub l e ta x a tion or a b il a ter a l A P A , th e O E C D G uidel ines a r e r el ev a nt a nd m a y b e us ed to dem ons tr a te com p l ia nce w ith inter na tiona l p r incip l es .


T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion to a v oid p ena l ties . T h e ex is tence of docum enta tion need not b e eith er dis cl os ed on, or p r ov ided w ith , th e r etur n.

docum enta tion (f ur th er des cr ib ed b el ow ) th a t s ub s ta ntia tes th e ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

4 3 2

U nited S tates (continued)


• A n ov er v iew of th e ta x p a y er ’ s b us ines s a nd a n a na l y s is of th e l eg a l a nd econom ic f a ctor s a f f ecting p r icing

•

•

• A des cr ip tion of th e p r icing m eth od a nd r ea s ons th e m eth od w a s s el ected (a b es t- m eth od a na l y s is )

• A des cr ip tion of a l ter na tiv e m eth ods a nd w h y th ey w er e not s el ected

•

• A des cr ip tion of com p a r a b l es us ed, h ow com p a r a b il ity w a s ev a l ua ted a nd a ny a dj us tm ents th a t w er e m a de

• A n ex p l a na tion of a ny econom ic a na l y s is a nd a ny p r oj ections us ed to dev el op th e p r icing m eth od

•

• A g ener a l index of th e p r incip a l a nd b a ck g r ound docum ents a nd a des cr ip tion of th e r ecor d- k eep ing s y s tem


T h e r eg ul a tions p r ov ide a b es t- m eth od r ul e f or deter m ining th e a p p r op r ia te m eth od to b e a p p l ied b y th e ta x p a y er f or ea ch inter com p a ny tr a ns a ction.


4


4 4


4 3 3

U nited S tates (continued)



4s ub s ta ntia l or g r os s v a l ua tion m is s ta tem ent, r es p ectiv el y . T h e p ena l ties a r e ca l cul a ted a s a p er centa g e of th e under ¬ p a y m ent, or th e p ena l ty m a y a p p l y to a v a l ua tion m is s ta tem ent. T h er e is no p ena l ty f or f a il ur e to h a v e docum enta tion; h ow ev er , docum enta tion m a y h el p a v oid a p ena l ty .

Penalty relief

P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia th e p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s 4


l im ita tions f or f r a ud- r el a ted a dj us tm ents .


T h e l ik el ih ood of a n a nnua l ta x a udit dep ends on th e f a cts a nd cir cum s ta nces . T h e intr oduction of w h a t th e O E C D r ef er s to in its A ction

h a v e b een h ir ed. A s a r es ul t of th is em p h a s is , docum enta tion f r eq uentl y is r eq ues ted a t th e outs et of a ny ex a m ina tion of ta x p a y er s tr a ns a cting w ith f or eig n r el a ted p a r ties .

T h e ov er a l l l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e initia l s ta g es of a ny a udit, w h er e th er e a r e inter na tiona l tr a ns a ctions , is h ig h . H ow ev er , ex p er ience h a s s h ow n th a t w el l - r ea s oned docum enta tion r educes th e l ik el ih ood of f ur th er s cr utiny .

APA opportunity

4ca s e m a na g em ent p r ocedur es , dis cl os ur e r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts .

4



U r u g u ay



Dirección Nacional Impositiva, or D G I )


4



4 1 4

•

(Impuesto a las Rentas de las Actividades Económicas

•

•

•p r icing s y s tem

•

• T h e tr a ns f er p r icing r ep or t

to th e ex p ir y s ch edul es p r ov ided f or ea ch g r oup of ta x p a y er s .

4

• A b r ea k dow n of a ctiv ities a nd duties p er f or m ed

• T h e r is k s under ta k en a nd a s s ets us ed to p er f or m th os e a ctiv ities a nd duties

• T h e b r ea k dow n of th e el em ents , docum enta tion, cir cum s ta nces a nd ev ents v a l ued f or th e a b ov em entioned r ep or t

•

1 4 4

4 3 5

U r u g u ay (continued)


•

• T h e m eth od us ed to deter m ine th e tr a ns a ction p r ices , indica ting th e r ea s ons a nd g r ounds j us tif y ing it a s th e m os t a p p r op r ia te m eth od, a s w el l a s th e r ea s ons f or r ul ing out oth er m eth od

•

•

• D eta il s of th e com p a r a b l es s el ected a nd s ub s eq uentl y r ej ected, s p ecif y ing th e r ej ection b a s es

•

• D eter m ina tion of th e m edia n a nd th e inter q ua r til e r a ng e

• A des cr ip tion of th e b us ines s a ctiv ity , b us ines s ch a r a cter is tics a nd oth er r el ev a nt el em ents of com p a r a b l e entities

•


tr a ns p a r ent m a r k ets , th os e p r ices m us t b e us ed. I f th e tr a ns a ctions a r e p er f or m ed th r oug h inter na tiona l inter m edia r ies th a t a r e not th e


• T h e tr a ns f er p r icing s tudy , incl uding th e k ey el em ents , s uch a s th e f unctions a nd a ctiv ities of th e com p a ny , r is k s a nd a s s ets us ed, th e m eth ods us ed, th e inter q ua r til e r a ng e, a nd deta il s of th e com p a r a b l es

• A nnua l tr a ns f er p r icing r etur n F or m 3 0 0 1


ta x a uth or ities .

I n th a t a nnua l r etur n, th e com p a ny m us t p r ov ide inf or m a tion a b out th e r el a ted- p a r ty tr a ns a ctions .


tr a ns f er p r icing a dj us tm ent is r eq uir ed to a ch iev e a n a r m ’ s - l eng th r es ul t in its tr a ns a ctions w ith b oth r el a ted p a r ties a nd unr el a ted p a r ties l oca ted in ta x h a v ens . I n s uch ca s es , th e tr a ns f er p r icing a na l y s is s h oul d b e p er f or m ed b y th a t tim e, ev en th oug h th e docum enta tion is

4 3 6



• T h e tr a ns f er p r icing a nnua l r etur n (F or m 3 0 0 1 ), incl uding deta il ed inf or m a tion r eg a r ding a l l cr os s - b or der inter com p a ny tr a ns a ctions a nd

• 4


tr a ns f er p r icing r ep or t a nd ta x r etur n) w il l b e a p p l ied on a g r a dua ted s ca l e, in a ccor da nce w ith th e s ev er ity of th e b r ea ch . T h e m a x im um

under p a y m ent if it is p a id b ef or e 5 da y s a f ter th e dea dl ine, 1 0 % if it is p a id b etw een 5 a nd 9 0 da y s a f ter th e dea dl ine, a nd 2 0 % if it is p a id m or e th a n 9 0 da y s p a s t th e dea dl ine. I n ea ch ca s e, cor r es p onding s ur ch a r g es a r e a dded.

b eing a b l e to im p or t g oods or ob ta in a b a nk l oa n.

Penalty relief

T h er e cur r entl y a r e no p r ov is ions f or r eductions in p ena l ties .


r a is ed 5 y ea r s a f ter th e com p a ny ’ s a ccounting p er iod ends , b ut th is is ex tended to 1 0 y ea r s w h en th e dif f er ence is due to f r a udul ent or neg l ig ent conduct b y th e ta x p a y er .


T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium , w h il e th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h . T h e l ik el ih ood th a t, if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h .

k now n, th e ta x ing a uth or ity h a s ch a l l eng ed th e m eth odol og y a nd th e com p a nies ’ com p a r a b l es s ets .

T h e ta x a uth or ity r el ies on a s p ecia l tea m of p r of es s iona l s w h o h a v e f ocus ed on p er f or m ing ta x a udits f or th e b ig g es t com p a nies , k now n


•

•identif y ing inter na l a nd ex ter na l com p a r a b l es

4 3 7



• C om p a r a b il ity a dj us tm ents m a de to th e s ta ted p a r ty

•

• O b s er v a tions of com p a nies th a t h a v e continuous l os s es f or m a ny y ea r s

APA opportunity

a l r ea dy p r ov ided inf or m a tion.

A s of th e tim e of th is p ub l ica tion, onl y one A P A ca s e h a s b een a nnounced p ub l icl y , a nd it w a s r el a ted to a ch em ica l com p a ny th a t w a s


r eq uir em ents r el a ted to tr a ns f er p r icing . G iv en th is , w h il e th er e a r e no ca s e l a w s y et, it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

Venez u el a



• 4

•

•


Official Gazette N o. 3 9 , 5 5 7 of 2 0 D ecem b er 2 0 1 0 . I t es ta b l is h es th e p r ocedur e f or th e ca l cul a tion a nd us e of th e a r m ’ s - l eng th r a ng e f or tr a ns f er p r icing p ur p os es . T h e m a in

• T h e us e of th e inter q ua r til e r a ng e a s th e a r m ’ s - l eng th r a ng e

•a g r eed- to b y indep endent p a r ties . I f , h ow ev er , it is not w ith in th e inter q ua r til e r a ng e, th e ta x p a y er m us t ta k e th e m edia n of th e r a ng e a s th e a r m ’ s - l eng th p r ice

Official Gazette N o.

• T a x p a y er s w il l h a v e th e l im ited p os s ib il ity of deducting inter es t ex p ens es r es ul ting f r om r el a ted p a r ties ’ l oa ns w h en th e a v er a g e

• T h e a m ount b y w h ich th e deb t ex ceeds th e ta x p a y er ’ s eq uity w il l b e tr ea ted a s eq uity f or incom e ta x p ur p os es .



E f f ectiv e s ince 2 0 0 2 , ta x p a y er s a r e r eq uir ed to p r ep a r e a nd m a inta in ex tens iv e s up p or ting a nd contem p or a neous docum enta tion. T h e

m eth od s el ection, inv entor y v a l ua tion m eth od (if a p p l ica b l e), a na l y s is r es ul ts a nd oth er r el ev a nt inf or m a tion.


p r ior ity ov er oth er s .

4 3 9

Venez u el a (continued)



N ot A p p l ica b l e



end.

Transfer pricing penalties 1 a nd a com p a ny cl os ur e f or 1 0

th er e is a tr a ns f er p r icing a s s es s m ent, l a te p a y m ent inter es t m a y a l s o b e a dded to th es e a m ounts .

Penalty relief

I f a ta x p a y er a p p l ies a l eg a l l y s a nctioned tr a ns f er p r icing m eth od, th is coul d b e cons ider ed a m itig a ting cir cum s ta nce in th e deter m ina tion of a n a s s es s m ent. T h is p ena l ty r el ief is b a s ed on p r ev ious ta x a udit p r ocedur es a nd a s s es s m ents , b ut th er e is no l eg a l p r ov is ion s up p or ting it.


r etur n, incl uding r etur ns f or incom e ta x . H ow ev er , th e P T - 9 9 is not cons ider ed a ta x r etur n f or p ena l ty p ur p os es .


r ev iew ed dur ing g ener a l ta x a udits . T h us f a r , a udits h a v e b een conducted on ta x p a y er s ir r es p ectiv e of indus tr y .

in th e deter m ina tion of p r op er ta x a b l e incom e in inter com p a ny tr a ns a ctions (i. e. , ch a l l eng e m eth odol og y , com p a r a b l es , us e of m ul tip l e

1

4 4 0

Venez u el a (continued)


• I ncons is tencies a m ong th e tr a ns f er p r icing r ep or t, incom e ta x r etur n a nd tr a ns f er p r icing inf or m a tion r etur n

•

• P L I s b el ow th e inter q ua r til e a r m ’ s - l eng th r a ng e

• L ow er op er a ting m a r g ins , com p a r ed w ith op er a ting m a r g ins f r om p r ior y ea r s or w ith op er a ting l os s es

•

C ur r entl y , in th e tr a ns f er p r icing r ev iew p r oces s , th e tim e f r a m e to s ub m it th e inf or m a tion r eq ues ted r a ng es f r om tw o to th r ee b us ines s da y s , a nd th er e is a r el ucta nce to g iv e ex tens ions .

T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h , a s is th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit. H ow ev er , th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit is l ow .

APA opportunity

4


Vietnam




• A r ticl e 3 7 of th e L a w on T a x A dm inis tr a tion1 a r ticul a tes th e a r m ’ s - l eng th p r incip l e, w h ich em p ow er s ta x a uth or ities to a dj us t th e v a l ue of p ur ch a s es , s a l es , ex ch a ng es a nd a ccounting r ecor ds of g oods a nd s er v ices of ta x p a y er s if th a t v a l ue is not in a ccor da nce w ith m a r k et p r ices .

•

incl udes A r ticl e 3 4 , s tip ul a ting th e a r m ’ s - l eng th p r incip l e.

• 4 42 0 1 5 .

• 2

6 6 ). 3 C ir cul a r 6 6 p r ov ides g uidel ines f or th e ca l cul a tion of m a r k et p r ices in b us ines s tr a ns a ctions b etw een r el a ted p a r ties .

• 4 p r ov ides g uida nce a b out s om e a r ticl es of th e L a w on T a x A dm inis tr a tion, th e A m ended L a w on T a x A dm inis tr a tion N o. 2 1 / 2 0 1 2 / Q H 1 3 a nd D ecr ee 8 3 / 2 0 1 3 .

• 5 p r ov ides deta il ed g uida nce a b out th e A P A a p p l ica tion p r oces s .

C ir cul a r 6 6 g ov er ns tr a ns a ctions b etw een r el a ted p a r ties th a t took p l a ce f r om 1 J a nua r y 2 0 1 0 . I t s ets f or th f or m a l a nd com p r eh ens iv e

th e a r m ’ s - l eng th r a ng e, b ench m a r k ing p r incip l es a nd a ccep ta b l e da ta b a s es , a s w el l a s r eiter a tes th e tw o m a nda tor y tr a ns f er p r icing

s ub m is s ion (if r eq ues ted) of th e contem p or a neous tr a ns f er p r icing docum enta tion.

(r ep l a cing F or m G C N - 0 1 / Q L T in A p p endix 1 - G C N / C C of C ir cul a r 6 6 ); F or m 0 3 is a p p l ica b l e f r om th e 2 0 1 4 ta x y ea r a nd a f ter w a r d. A s a p r a ctica l m a tter , ta x p a y er s w il l now b e r eq uir ed to p er f or m a n a nnua l b ench m a r k ing s tudy . T h is is s o a ctua l tr a ns f er p r ices us ed dur ing th e y ea r ca n b e com p a r ed w ith th e outcom e of th e b ench m a r k ing . A ny dif f er ence m us t b e dis cl os ed, a s r eq uir ed b y F or m 0 3 . F a il ur e to p er f or m s uch a s tudy w il l r es ul t in m uch incr ea s ed ex p os ur e to tr a ns f er p r icing a dj us tm ents a nd h ig h p ena l ties . T h e intr oduction

th a t th e b ur den of p r oof r es ts w ith th e ta x p a y er a nd th a t th e onl y ef f ectiv e def ens e r es ts w ith up - to- da te docum enta tion, incl uding b ench m a r k ing .

1 T h is l a w w a s ena cted b y th e N a tiona l A s s em b l y on 2 9 N ov em b er 2 0 0 6 a nd h a s b een ef f ectiv e s ince 2 0 0 7 .2

3

4

5

4 4 2

Vietnam (continued)


T h e N a tiona l A ction P l a n f or 2 0 1 2 to 2 0 1 5 , w h ich a im s to h a v e a t l ea s t 2 0 % of th e a nnua l ta x a udit ca s es dev oted to tr a ns f er p r icing

p r og r a m a r e to cr ea te a s tr ong er l eg a l f r a m ew or k f or tr a ns f er p r icing a nd ta x a dm inis tr a tion; p r ov ide tr a ining to b uil d h um a n r es our ces

ca p a city f or tr a ns f er p r icing a dm inis tr a tion.

F ur th er m or e, th e ta x a uth or ities noted s om e ina deq ua cies in th e docum enta tion p r ov ided b y th e ta x p a y er s (i. e. , th e docum ents p r ov ided

indus tr y a na l y s is a nd b ench m a r k ing ). N ota b l y , th oug h ta x r eg ul a tions a l l ow v a l id inv oices a nd inter com p a ny a g r eem ents a s s up p or ting

tr a ns f er p r icing docum enta tion under C ir cul a r 6 6 .

F ol l ow ing th e intr oduction of F or m 0 3 a nd th e a ctiv e im p l em enta tion of th e N a tiona l A ction P l a n, th e G D T h a s b een w or k ing on a dr a f t of th e decr ee on tr a ns f er p r icing , w h ich w il l r ep l a ce th e ex is ting C ir cul a r 6 6 once it is is s ued.


C ir cul a r s 1 1 7 a nd 6 6 a r e g ener a l l y b a s ed on th e O E C D G uidel ines . H ow th e G D T w il l a p p l y th e O E C D G uidel ines in inter p r eting th e


C ir cul a r 6 6 r eq uir es a n a v a il a b il ity of tr a ns f er p r icing docum enta tion th a t is p r ep a r ed contem p or a neous l y a nd m us t b e p r ov ided to th e ta x a uth or ity w ith in 3 0 w or k ing da y s of th e ta x a uth or ity ’ s r eq ues t. T h e docum enta tion is r eq uir ed to es ta b l is h w h en th e tr a ns a ction occur r ed a nd m us t b e up da ted th r oug h out th e p er f or m a nce of th e tr a ns a ction. F or com p l ia nce p ur p os es , a ta x p a y er is cons ider ed to

a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e m os t- a p p r op r ia te- m eth od r ul e.

• I nf or m a tion a b out tr a ns a ctions b etw een r el a ted p a r ties a nd th e ta x p a y er

• I nf or m a tion a nd up da ted r ep or ts a b out th e s tr a teg y f or dev el op m ent, a dm inis tr a tion a nd contr ol b etw een r el a ted p a r ties

• T h e p r icing p ol icy f or tr a ns a ctions in r el a tion to ea ch g r oup of p r oducts in a ccor da nce w ith th e g ener a l g uida nce of r el a ted p a r ties a nd th e ta x p a y er

• D ocum ents a nd r ep or ts a b out th e p r oces s of dev el op m ent, b us ines s s tr a teg y , p r oj ects , p r oduction, b us ines s or inv es tm ent p l a ns

•tr a ns a ctions

• A dia g r a m of tr a ns a ctions a nd docum ents des cr ib ing tr a ns a ctions , incl uding inf or m a tion a b out p a r ties to tr a ns a ctions a nd or der s a nd p r ocedur es f or p a y m ent a nd del iv er y of p r oducts

•of p r oducts , tota l a m ount of p r oducts p r oduced or tr a ded a nd s ol d in th e p er iod (s p ecif y ing s uch item s on th e b a s is of th e r el a ted tr a ns a ction a nd a n indep endent tr a ns a ction, if a ny ), a nd q ua ntity of p r oducts

• I nf or m a tion, docum ents a nd s our ce docum ents concer ning th e p r oces s of neg otia ting , s ig ning , p er f or m ing a nd l iq uida ting econom ic contr a cts a nd a g r eem ents r el a ted to tr a ns a ctions (us ua l l y incl uding a des cr ip tion of p r oducts , p l a ce of tr a ns a ction, f or m of tr a ns a ction, v a l ue of tr a ns a ction, ter m s of p a y m ent, p a y m ent docum enta tion, p er iod of p er f or m a nce, m inutes of m eeting s or ins tr uctions of m a na g em ent r eg a r ding th e p r oces s of neg otia tion a nd s ig ning , a nd p er f or m a nce of a tr a ns a ction)

4 4 3

Vietnam (continued)


• I nf or m a tion, docum ents a nd s our ce docum ents r el a ted to econom ic conditions of th e m a r k et a t th e tim e of th e r el a ted tr a ns a ctions a f f ecting th e m eth od of ca l cul a tion of a p r ice f or tr a ns a ctions (f or ex a m p l e, ch a ng es in ex ch a ng e r a tes a nd p ol icies of th e g ov er nm ent

• T h e p r icing p ol icy f or s el l ing a nd p ur ch a s ing p r oducts a nd th e p r ocedur es f or contr ol a nd a p p r ov a l of p r ices

• I nf or m a tion, docum ents a nd s our ce docum ents us ed to s el ect th e m os t a p p r op r ia te m eth od, incl uding da ta us ed f or com p a r a tiv e

• O th er inf or m a tion or docum ents us ed to s el ect a nd a p p l y th e m eth ods


to s el ect th e m os t a p p r op r ia te m eth od to deter m ine w h eth er th e p r icing a r r a ng em ent is a t a r m ’ s - l eng th under th e p r ev a il ing r eg ul a tions .


y ea r s f r om 2 0 1 0 to 2 0 1 3 a nd F or m 0 3 - 7 / T N D N (under C ir cul a r 1 5 6 ) a p p l ies f or th e ta x y ea r 2 0 1 4 a nd onw a r d.



T h e docum enta tion m us t b e es ta b l is h ed a t th e tim e of th e tr a ns a ction a r is en a nd up da ted th r oug h out th e p er f or m a nce of th e

I f enter p r is es h a v e p l a us ib l e r ea s ons , a one- tim e 3 0 - da y ex tens ion m a y b e g r a nted, a nd b e ef f ectiv e once th e initia l 3 0 - da y p er iod h a s p a s s ed.


•th e y ea r of s ettl em ent of enter p r is e incom e ta x , or f a il to p r oduce a nd s up p l y inf or m a tion, da ta a nd docum ents w ith in 3 0 w or k ing da y s of th e ta x a uth or ities ’ r eq ues t

4 4 4

Vietnam (continued)


• I f com p a nies h a v e b a s ed th em s el v es on unl a w f ul or inv a l id docum ents , da ta a nd ev idence, or f a il to s p ecif y th e s our ces of docum ents ,

•tr a ns a ctions a s unr el a ted tr a ns a ctions f or com p a r is on

•

F a il ur e to com p l y w ith th e a r m ’ s - l eng th p r incip l e a nd th e docum enta tion r eq uir em ent im p l ies a n ex p os ur e to th e r ea s s es s m ent of

I n a ddition, th e inter es t p ena l ty of 0 . 0 3 % p er da y ov er th e outs ta nding ta x due m a y a l s o b e im p os ed if a tr a ns ¬ f er p r icing a dj us tm ent is m a de. F ur th er , ta x p a y er s a r e a l s o s ub j ect to a ta x p ena l ty of 2 0 % of a dditiona l ta x in th e ca s e of a n incor r ect decl a r a tion. A dditiona l

ev a s ion. A ccor ding to th e l a tes t C r im ina l C ode ef f ectiv e on 1 J ul y 2 0 1 6 , f or th e a ct of ta x ev a s ion, th e ta x p a y er m a y b e s ub j ect to ta x p ena l ties under cr im ina l p r oceeding s .

Penalty relief

P ena l ties m a y b e m itig a ted b y tim el y a nd a deq ua te dis cl os ur e of th e r el a ted- p a r ty tr a ns a ctions on F or m G C N - 0 1 / T N D N (A p p endix 1 - G C N / H T Q T of C ir cul a r 1 1 7 ), or F or m G C N - 0 1 / Q L T (A p p endix 1 - G C N / C C of C ir cul a r 6 6 ), or F or m 0 3 - 7 / T N D N (a tta ch ed to C ir cul a r 1 5 6 ), a nd b y th e p r ep a r a tion a nd tim el y p r oduction of tr a ns f er p r icing docum enta tion.


• F or v iol a tions of ta x p r ocedur es , a dm inis tr a tiv e p ena l ties ca n b e im p os ed w ith in tw o y ea r s f r om th e da te com m itting v iol a tions .

• F or a cts cons tituting ta x ev a s ion or ta x f r a ud not s er ious enoug h f or p ena l l ia b il ity ex a m ina tion, a cts of l a te ta x p a y m ent a nd decl a r a tion

T h e da te of com m is s ion is th e s ta tutor y dea dl ine f or s ub m itting th e r eq uir ed ta x r etur n, or th e da te w h en th e ta x a uth or ity is s ues a ta x r ef und, ex em p tion or r eduction decis ion in th e ca s e of a ta x r ef und, ex em p tion or r eduction. N ote th a t b ey ond th e a b ov e p er iods (tw o

2 1 / 2 0 1 2 / Q H 1 3 , th e s ta tute of l im ita tions a p p l ica b l e f or ta x col l ection is 1 0 y ea r s .


g ener a l ta x a udit is m edium to h ig h . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is a s ub j ect

4 4 5

Vietnam (continued)


4

T h es e r ecent dev el op m ents w ith r es p ect to enh a nced l eg is l a tion, th e ta x a uth or ity ’ s ca p a city b uil ding , th e es ta b l is h m ent of dedica ted tr a ns f er p r icing ins p ection div is ions a t b oth th e G D T a nd l oca l ta x dep a r tm ents , a s w el l a s th e incr ea s ing l y s op h is tica ted ev idence in

APA opportunity

A f ter A P A s w er e intr oduced in th e A m ended L a w on T a x A dm inis tr a tion N o. 2 1 / 2 0 1 2 / Q H 3 , its im p l em enta tion r eg ul a tions w er e is s ued

F eb r ua r y 2 0 1 4 .

•

•

•

•

•P r ov incia l ta x dep a r tm ents h el p neg otia te, p r oces s a nd m onitor A P A a p p l ica tions w ith in th eir a uth or ity .

•p r ef er ence.

•dur ing th e A P A a p p l ica tion p r oces s s h a l l not b e us ed a s ev idence f or f ur th er ta x a udit, ta x ins p ection or ta x im p os ition on th e ta x p a y er s .

•

•

A dm inis tr a tion.

•p r oces s .

•

w ith in 3 0 w or k ing da y s of th e end of th e cons ul ta tion p r oces s .

4 4 6

Vietnam (continued)


•

a p p r ov a l f r om th e G D T . A n ex tens ion of 3 0 ca l enda r da y s is a v a il a b l e f or r ea s ona b l e cir cum s ta nces .

•

a p os s ib l e ex tens ion of 6 0 ca l enda r da y s under r ea s ona b l e cir cum s ta nces .

•

•

a g g r es s iv enes s in ens ur ing ta x p a y er s ’ com p l ia nce, th e num b er of com p a nies th a t a r e cur r entl y in th e p r oces s of or cons ider ing f or A P A


4

Z am b ia




•r el a tions

•or im p os ed if p er s ons w er e not a s s ocia ted w ith ea ch oth er

th e a ctua l conditions m a de or im p os ed in th a t tr a ns a ction or tr a ns a ctions a r e dif f er ent f r om th e a r m ’ s - l eng th conditions a nd th er e is , ex cep t f or th is s ection, a r eduction in th e a m ount of incom e ta k en into a ccount in com p uting th e incom e of one of th e a s s ocia ted p er s ons

ins tea d of th e a ctua l conditions , a nd a com p uta tion on th a t b a s is is r ef er r ed to a s a com p uta tion on th e a r m ’ s - l eng th b a s is .

I f in th e incom e y ea r a nd b y r ea s on of th e a ctua l conditions , a n a m ount of incom e r eceiv ed b y th a t oth er p er s on a s s ocia ted w ith th e

ta x p a y er to th e C om m is s ioner - G ener a l , th e s econd ta x p a y er ’ s incom e ch a r g ea b l e to ta x in th e incom e y ea r s h a l l b e com p uted on th e 4

F or th e p ur p os es of th is s ection, r ef er ences to a r eduction in a n a m ount of incom e incl ude r ef er ences to a r eduction to nil or to th e a ccr ua l of a l os s or a n incr ea s ed l os s , a nd r ef er ences to a n incr ea s e in incom e incl ude r ef er ences to th e r eduction in a l os s w h eth er to a s m a l l er a m ount or to nil .

4com p uting th e a m ount of th e s econd ta x p a y er ’ s incom e ch a r g ea b l e to ta x f or th e incom e y ea r .

F or th e p ur p os es of s ub s ection (6 ) in a ca s e w h er e no l os s a ccr ues or a s m a l l er l os s a ccr ues , a s m entioned in p a r a g r a p h (a ) of s ub s ection 4

into a ccount a dif f er ent a m ount of incom e f r om th a t on w h ich ea r l ier com p uta tions w er e b a s ed, th e s econd ta x p a y er m a y a m end a cl a im under s ub s ection (4 ) a ccor ding l y .

4

• 4 4

• I t is m a de w ith in th r ee y ea r s of th e da te on w h ich th a t r etur n or , if ea r l ier , th a t a s s es s m ent is m a de, or s uch l ong er p er iod a s th e C om m is s ioner - G ener a l m a y a l l ow .

4 4 8

Z am b ia (continued)


A cl a im m a y not b e a m ended under s ub s ection (8 ) b y r ea s on of a n a s s es s m ent or a m ended a s s es s m ent unl es s th e a m ended cl a im is m a de w ith in one y ea r of th e da te on w h ich th e a s s es s m ent or a m ended a s s es s m ent is m a de.

44

a m ount of th a t cr edit, th e f or eig n ta x to b e ta k en into a ccount a s h a v ing b een p a id or a s b eing p a y a b l e b y th e cl a im a nt s h a l l ex cl ude a ny a m ount of f or eig n ta x th a t w oul d not h a v e b een p a id or p a y a b l e if th e com p uta tion of th e incom e on w h ich th e f or eig n ta x is ch a r g ea b l e h a d, s o f a r a s it incl udes incom e to w h ich th e cl a im or a m ended cl a im r el a tes , b een m a de on th e a r m ’ s - l eng th b a s is ; a nd th e a m ount of incom e to b e ta k en into a ccount a s h a v ing b een r eceiv ed b y th e cl a im a nt a nd in r es p ect of w h ich th e cl a im a nt is or m a y b e g iv en cr edit f or f or eig n ta x s h a l l b e deter m ined, s o f a r a s it incl udes incom e to w h ich th e cl a im or a m ended cl a im r el a tes , on th e a r m ’ s - l eng th b a s is .

A ny a dj us tm ent r eq uir ed to b e m a de b y v ir tue of th is s ection s h a l l b e m a de b y w a y of dis ch a r g e or r ep a y m ent of ta x , b y a n a m ended a s s es s m ent or oth er w is e, a nd m a y b e m a de notw ith s ta nding th a t th e a dj us tm ent r el a tes to a ch a r g e y ea r th a t ended m or e th a n s ix y ea r s

4

N otw ith s ta nding a ny p r ov is ion in th e I ncom e T a x A ct, f or a ny tr a ns a ction f or th e s a l e of b a s e m eta l s or a ny s ub s ta nce conta ining b a s e m eta l s or p r ecious m eta l s , dir ectl y or indir ectl y , b etw een r el a ted or a s s ocia ted p a r ties , th e a p p l ica b l e s a l e p r ice of s uch m eta l s or

•

•

• T h e m onth l y a v er a g e ca s h p r ice of a ny oth er m eta l ex ch a ng e m a r k et a s a p p r ov ed b y th e C om m is s ioner - G ener a l to th e ex tent th a t th e

O r

•C om m is s ioner - G ener a l , l es s a ny dis counts on a ccount of p r oof or l ow q ua l ity or g r a de

• P a r ties connected dir ectl y or indir ectl y th r oug h s h a r eh ol ding , eq uity or p a r tner s h ip s

• A ny j oint v entur e ow ned or op er a ted j ointl y w ith or a n unr el a ted- p a r ty

• C onnected p er s ons

O r

• P a r ties connected th r oug h m a na g em ent a nd contr ol

• O ne of th em is a n indiv idua l a nd th e oth er is th a t p er s on’ s s p ous e, a r el a tiv e of th a t p er s on or of th a t p er s on’ s s p ous e, or th e s p ous e of s uch a r el a tiv e

O r

•

• A p er s on w h o, in r el a tion to th a t s ettl em ent, is a s ettl or

O r

• A p er s on w h o is connected w ith a p er s on f a l l ing w ith in s ub p a r a g r a p h (i)

4 4 9












Penalty relief

P ena l ty r el ief ca n b e a v a il ed th r oug h neg otia tions w ith th e ta x a uth or ity .


4 5 0




APA opportunity


Z im b ab we



Chapter 23:06)


dis a l l ow ed a nd is a l s o tr ea ted a s a div idend w h eth er th e p a y ee is l oca l or of f s h or e.

m a na g em ent ex p enditur es p a id b y a s ub s idia r y to th e h ol ding com p a ny or b y a h ol ding com p a ny to a s ub s idia r y or b y a b r a nch to its f or eig n p a r ent com p a ny to 1 % of th e r es t of th e com p a ny ’ s ex p enditur e q ua l if y ing f or deduction. T h e dis a l l ow ed a m ount is a l s o tr ea ted a s a div idend w h eth er th e p a y ee is l oca l or of f s h or e.

4r el a ted p a r ties , w h ich , in th e op inion of th e com m is s ioner , dif f er f r om th os e th a t w oul d b e m a de b etw een tw o p er s ons dea l ing w ith ea ch oth er a t a r m ’ s - l eng th .

•

• T h a t h a v e th e ef f ect of a v oiding , p os tp oning or r educing th e l ia b il ity f or incom e ta x

• T h a t h a v e b een enter ed into b y a b nor m a l m ea ns or in a n a b nor m a l m a nner

• C r ea ting a b nor m a l r ig h ts a nd ob l ig a tions th a t w oul d not nor m a l l y b e cr ea ted b y p er s ons dea l ing a t a r m ’ s - l eng th

• O f w h ich th e com m is s ioner is of th e op inion th a t a v oida nce, p os tp onem ent or r eduction of th e l ia b il ity w a s th e s ol e or one of th e m a in p ur p os es of th e tr a ns a ction, op er a tion or s ch em e

w h ich th e a s s ocia te r eceiv es or enj oy s incom e f r om th a t p r op er ty .

b etw een r el a ted p a r ties . T h e 3 5 th s ch edul e of th e I ncom e T a x A ct p r ov ides g uidel ines a nd m eth ods on h ow to deter m ine w h eth er a contr ol l ed tr a ns a ction m eets th e r eq uir em ents of th e a r m ’ s - l eng th p r incip l e.



T a x p a y er s a r e cur r entl y not ob l ig a ted to s ub m it tr a ns f er p r icing docum enta tion b ut a r e ex p ected to h a v e it p r ep a r ed a nd r ea dy up on

4 5 2

Z im b ab we (continued)



•

•

• C os t- p l us

•

•

F or eig n com p a r a b l es a r e a ccep ted in th e a b s ence of l oca l com p a r a b l es . C om p a r a b l e da ta us ed m us t b e a v a il a b l e to b oth th e ta x p a y er

T h er e is no p r a ctice of us ing s ecr et com p a r a b l es .




tea m .


P ena l ties r a ng e up to 1 0 0 % of th e ta x p a y a b l e.

Penalty relief

P ena l ties ca n b e w a iv ed or r educed th r oug h neg otia tion w ith th e ta x a uth or ity .

4 5 3

Z im b ab we (continued)



T h e s ta tute of l im ita tions is s ix y ea r s f r om th e r el ev a nt y ea r or da te of th e a s s es s m ent.


b r a nch es . T h er e is no a udit cy cl e.

APA opportunity

T h er e is cur r entl y no A P A p r og r a m in p l a ce.


G l o b al L ead er

A r ea c o ntac ts

• Americas • Asia-PacificC ur t K ins k y

• EMEIA

4

• Japan

4

T r ans f er P r ic ing E Y C o ntac ts

Worldwide Transfer Pricing Reference Guide 4 5 4

• AlbaniaA nis a J a s ini

4 4

• Algeria

• Angola

4

• Argentina

4 4 4

• ArmeniaK a m o K a r a p ety a n

4

• Australia

4 4

• Austria

4 4

• BahrainG uy T a y l or

4

4

• Bangladesh

4

• Belarus

4

• Belgium

4

• Bolivia

4 4

• Brazil

4

• Bulgaria

4

• Cameroon

4

• CanadaT om T s iop oul os

4 4 44

• Cape Verde

4

• Chile

4

4

• ChinaT r a v is Q iu

4

• ColombiaA ndr es P a r r a

4 4

• Costa Rica

4

P a ul D e H a a n

• Croatia

• Cyprus

4

• Czech Republic

4

J u r is d ic tio n c o ntac ts

Worldwide Transfer Pricing Reference Guide4 5 5

• DenmarkH enr ik A r h nung

4 4

• Dominican RepublicL uis O ca ndo

44

• Ecuador

4 4

• EgyptG uy T a y l or

4

• El Salvador

4

• Estonia

4

• Fiji

4

• FinlandK ennet P etter s s on

4

• France

• Gabon

4 4

• Georgia

4

• Germany

4

• Ghana

• Gibraltar

• Greece

C h r is tos K our ouniotis

• GuamL a nce K K a m ig a k i

4

• Guatemala

4

• HondurasP a ul D e H a a n

• Hong Kong (SAR)J us tin K y te

• Hungary

4

• Iceland

4

• India

4

• Indonesia

• Iraq

• Ireland

4

• Israel

4

• Italy

44

• Japan

4

• Jordan

• Kazakhstan

• KenyaF r a ncis N K a m a u

4


• Korea

4

• KosovoA nis a J a s ini

4 4

• KuwaitG uy T a y l or

4

• Laos

• Latvia

4

• LebanonG uy T a y l or

4

• LibyaG uy T a y l or

4

• LithuaniaL eona s L ing is

4

• LuxembourgN icol a s G il l et

4 4 4

• FYR of Macedonia

• Madagascar

• Malawi

4

• Malaysia

4 4

• Maldives

4

• Malta

4 4

• Mauritius

4 4

• Mexico

• Mongolia

• Montenegro

4

• MoroccoK a m a l H im m ich

• Myanmar

4

• Namibia

4

• Netherlands

4

• New Zealand

4

• NicaraguaP a ul D e H a a n

• NigeriaT om P h il ib er t

4 4

• Norway

4 4

• OmanA l k es h J os h i

4

• PakistanG uy T a y l or

4

• Panama

4

4

• Papua New Guinea

• ParaguayG us ta v o C ol m a n

4 4

Worldwide Transfer Pricing Reference Guide4 5 7

• Peru

4 44 4

• Philippines

4

• Poland

4

• Portugal

4

• Qatar

4 44 4 4

G uy T a y l or4

• Romania

4 4 4

• Russia

4 4

• Saudi ArabiaG uy T a y l or

4

• SenegalT om P h il ib er t

4 4

• Serbia

4

• SingaporeL uis C or ona do

• Slovak Republic

4

L ub ica L is ca k ov a 4

• Slovenia

• South AfricaJ us tin P L ieb enb er g

• Spain

4 4

• Sri LankaD um inda H ul a ng a m uw a

4 4

• Sweden

4

• Switzerland

4

• TaiwanG eor g e C h ou

• TanzaniaT om P h il ib er t

4 4

• ThailandP a p a tch a y a A k k a r a r ut

4

• Turkey

4

• Uganda

4 4 4

• UkraineI g or C h uf a r ov

44 4

• UK

44

44 4

• US

• Uruguay

4

• Venezuela

• VietnamP h a t T a n N g uy en

4 4

• Zambia

• ZimbabweN ig el F or s g a te

4


E Y | A s s ur a nce | T a x | T r a ns a ctions | A dv is or y

A b out E YE Y is a g l ob a l l ea der in a s s ur a nce, ta x , tr a ns a ction a nd a dv is or y s er v ices . T h e ins ig h ts a nd q ua l ity s er v ices w e del iv er h el p b uil d tr us t a nd conf idence

outs ta nding l ea der s w h o tea m to del iv er on our p r om is es to a l l of our s ta k eh ol der s . I n s o doing , w e p l a y a cr itica l r ol e in b uil ding a b etter w or k ing w or l d f or our p eop l e, f or our cl ients a nd f or our com m unities .

g ua r a ntee, does not p r ov ide s er v ices to cl ients . F or m or e inf or m a tion a b out

A b o u t E Y ’ s T ax S er v ic esY our b us ines s w il l onl y s ucceed if y ou b uil d it on a s tr ong f ounda tion a nd g r ow it in a s us ta ina b l e w a y . A t E Y , w e b el iev e th a t m a na g ing y our ta x ob l ig a tions r es p ons ib l y a nd p r oa ctiv el y ca n m a k e a cr itica l dif f er ence. O ur 5 0 , 0 0 0 ta l ented ta x p r of es s iona l s , in m or e th a n 1 5 0 countr ies , g iv e y ou tech nica l k now l edg e, b us ines s ex p er ience, cons is tency a nd a n unw a v er ing

s er v ices y ou need.

4

E D N one

T h is m a ter ia l h a s b een p r ep a r ed f or g ener a l inf or m a tiona l p ur p os es onl y a nd is not intended to b e r el ied up on a s a ccounting , ta x or oth er p r of es s iona l a dv ice. P l ea s e r ef er to y our a dv is or s f or s p ecif ic a dv ice.

ey . com

A ccess glob al t ax guidesE l ectr onic v er s ions of Worldwide Personal Tax Guide; Worldwide Corporate Tax Guide; a nd Worldwide VAT, GST and Sales Tax Guide, a s w el l a s oth er ta x g uides a nd p ub l ica tions , a r e a v a il a b l e on ey . com a nd ca n b e dow nl oa ded f r om th e a p p s tor e to y our ta b l et.

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