Global Transfer Pricing Updates - Tax and Legal blog

Global Transfer Pricing Updates_April18

Since BEPS, multinational companies are operating in an environment of unprecedented complexity. The rising volume and variety of intercompany transactions and transfer pricing regulations, coupled with increased tax authority collaboration across borders present both risks and opportunities. Our transfer pricing updates will provide you with the latest transfer pricing issues and developments worldwide that may affect your business.

India delays due date for filing country-by-country reports by Indian constituent entities of foreign MNEs

India has deferred the due date for filing the country-by-country (“CbC”) report in India by Indian constituent entities of foreign-headquartered multinational entity (“MNE”) groups from 31 March 2018 to a future yet-to-be determined date. 

The Indian CbC regulations prescribe secondary filing of the CbC report in India by an Indian constituent entity of a foreign MNE group under the following circumstances:

  • When there is no obligation to file the CbC report in the parent entity’s jurisdiction;
  • When the parent entity is resident of a country or territory with which India does not have an agreement for the exchange of CbC reports; or 
  • When there has been a systemic failure in the country or territory in which the parent entity is resident, and the failure has been notified to the constituent entity. 

We recommend that foreign MNE groups with affiliates in India monitor the future filing deadline in order to ensure compliance with the CbC reporting requirement.

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Irish Revenue releases guidelines on low-value intragroup services

The Irish Revenue issued guidelines in March 2018 on a simplified approach to low-value intragroup services, indicating that they are prepared to accept a five percent mark-up of the relevant costs without requiring a formal benchmarking study. The guidelines also set out the documentation requirements for taxpayers to avail themselves of this simplified approach.

The publication of the guidance notes by the Irish Revenue provides taxpayers with a level of support in terms of how to deal practically with related-party transactions that are routine in nature and fall within the ambit of the guidance. 

Interestingly, the guidance notes are drafted with reference to the 2010 version of the OECD transfer pricing guidelines, because Ireland’s domestic transfer pricing laws still align with the 2010 guidelines, although the 2017 OECD transfer pricing guidelines provide a more up-to-date framework for dealing with low-value intragroup services. As such, the new provisions contained in the 2017 OECD transfer pricing guidelines should still be read in conjunction with the guidance notes issued by the Irish Revenue when formulating a transfer pricing policy for low-value intragroup services.

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Japan releases revised transfer pricing administrative guidelines

Japan’s National Tax Agency recently released a revised version of the Commissioner’s Directive on the Operation of Transfer Pricing, known as the Administrative Guidelines. 

The Administrative Guidelines do not have force of law in Japan and are not binding on Japanese taxpayers. They are intended to encourage a consistent application of Japan’s transfer pricing rules at the various levels of the tax authorities.

The key changes for foreign multinationals operating in Japan include:

  1. Various changes to the advance pricing arrangement (“APA”) landscape in Japan (i.e. clarification on the relationship between audit and APA, deadlines for responding to information requests as well as considerations on the importance of pre-filing meeting); and 
  2. Revisions concerning intragroup service provision, in particular the implementation of a simplified approach for pricing low-value adding services.

The Transfer Pricing Administrative Guidelines are an important source of guidance for how the Japanese authorities are likely to interpret the transfer pricing rules in Japan. In that context, changes to the guidelines are significant.

For taxpayers considering an APA in Japan, it would be prudent to consider such changes at an early stage. This includes considering any potential impact on rollback years, timing of the APA process, being in a position to respond to information requests in a timely manner, and the importance of the decision whether to hold a pre-filing meeting.

Taxpayers providing or receiving certain low-value-adding intragroup services now have an additional, simplified method of calculating service fees. While the method is generally consistent with the OECD view, if the new method is to be used, taxpayers would be well advised to consider the consequences in the counterparty jurisdiction. For affected taxpayers, it would also be prudent to monitor additional guidance from the authorities clarifying the interaction of the simplified approach with the existing cost-based pricing method.

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Italy issues draft of new measures on implementation of domestic transfer pricing provisions for public consultation

Italy’s Ministry of Economy and Finance launched a public consultation, which ends on 21 March 2018, on several transfer pricing documents:

  1. A draft decree that contains measures aimed at implementing the OECD transfer pricing guidelines within the Italian tax system; 
  2. A draft of the regulations implementing the newly introduced unilateral corresponding adjustment procedure, which will provide Italian taxpayers with a new tool to avoid double taxation in case of transfer pricing adjustments made by foreign tax authorities under the arm’s length principle; and
  3. An Italian courtesy translation of the OECD transfer pricing guidelines, which has been issued with the goal of simplifying the implementation of the OECD transfer pricing guidelines.

Comments and proposals from trade associations, consultancies, law firms, multinational groups and subject matter experts are available in Italian on the Finance Ministry website and will be discussed with interested parties in a public meeting in May 2018.

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Hans Rudolf Habermacher - Partner, Transfer Pricing Leader Switzerland

Hans Rudolf has over 13 years’ of experience in advising clients in Transfer Pricing concepts. He successfully engages with MNCs in various industries in the planning, implementation, documentation & defence of TP concepts. Further he has significant experience in the design and implementation of principal & licensing structures. He is also highly successful in filing and negotiating bilateral APA's (Advanced Pricing Agreements) and mitigating double taxation issues through MAP procedures.

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Yan Hurdowar - Director, Transfer Pricing

Yan has over 10 years of experience advising clients on transfer pricing and business model optimization. He joined the Geneva practice in 2011 and has previously worked for the London and Stockholm transfer pricing teams of Deloitte. Before joining Deloitte in 2005, he has worked for an investment bank. Yan has been involved in a variety of projects including audit defence, permanent establishment risk assessments, valuation of intangibles, supply chain restructurings and debt pricing, amongst others.

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Jonathan Belet - Assistant Manager, Transfer Pricing

Jonathan is an Assistant Manager within the Transfer Pricing team of Deloitte in Geneva. He works on Swiss and international engagements covering both compliance and advisory issues. Jonathan also specialises in operational transfer pricing projects related to facilitating and overseeing the implementation of transfer pricing policies.

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