Not surprisingly, Chevron slammed the Australian ruling against its loan arrangement. The ruling will have consequences for Chevron’s other projects which use debt financing and as such Chevron may take the ruling on appeal (I think I have mentioned this now every week but this time Chevron actually said they are thinking about it too). The adjusted interest rate from the ruling must also have Continue reading “Weekly transfer pricing roundup – 08 May 2017”
The Chevron case is still discussed in many articles around the world. This Chevron article provides more of a technical analysis of the case and even though a long read, it is a good read. It touches on many aspects that should be considered when pricing a cross border related party loan, such as:
- Should the borrower’s credit rating be analysed on a stand-alone basis? Spoiler alert, the case concluded that it should not, but there are countries where the tax authorities would look at the borrower in isolation (just a heads up)
- Should a comparable loan arrangement be exactly the same or is there some flexibility?
- How should the lender be treated in a loan arrangement?
- How much impact does a guarantee have on pricing in a loan arrangement?
- Should the currency be AUD or USD for the loan arrangement? This is interesting and arguably Chevron won this argument as the court agreed to AUD. A USD loan would arguably carry a lower rate which would have made an adjustment easier for the ATO.
As you probably know already, the deadline for the comments on the draft toolkit assisting developing countries in transfer pricing analyses has been extended to 7 April 2017. It seems it wasn’t just me who had a huge pile of readings and couldn’t get to all the commenting.
MNE Tax published an article last week which provides comments on the draft tool kit from Andrew Hickman dealing with: Continue reading “Weekly transfer pricing roundup – 20 March 2017”
Always consider local country rules and practices when doing transfer pricing!
Having been away from home you do start missing the little things, like your bed or home cooked food. Those of you who follow me on twitter already know, I have been at an international TP conference and learnt a lot of things. If I had to give you the most important bits in one sentence: Always consider local country rules and practices when doing transfer pricing. It seems obvious, but I don’t think everyone is doing it. There were many eye opening stories, and I would have expected some of them to be out of Africa, but they are actually out of Europe. For example, Italian tax authorities prefer a certain benchmarking study software (and might not accept other software), Russia may need some adjustments to its IFRS numbers (which is interesting for both tested parties and comparables) or even though most countries in Eastern Europe know about the OECD, these may not always blindly accept them (for example low value-adding services). European countries, similarly to other countries also have logistical issues, for example translation of transfer pricing documentation and so forth.
I received your comments re my next topic, and to those of you who took their time, it is much appreciated. I am trying to make this blog relevant and at the same time learn from my research. So yes, I am being a little selfish. I will try finish this in the next week or two.
Now to the purpose of this blog post:
ATO investigates 35 e-commerce multinationals for sending income offshore (The Canberra Times)
“Thirty-five e-commerce companies are under review or audit by the Australian Taxation Office for routing income through low-tax nations such as Singapore to avoid paying tax locally.
The move comes as more companies challenge the ATO’s right to tax their profits by appealing directly to international tax authorities…”
What is interesting here is that the following companies were listed: Apple, Microsoft, Google, Uber and Airbnb. I wonder if the US will now also ask Australia to stop only investigating US companies. To be fair, I have not seen the full list.
“US presidential candidate Donald Trump’s revamped tax plan, unveiled today, reiterates his earlier call for a deemed repatriation of all corporate profits held offshore at a one-time tax rate of 10 percent.
“We will bring back trillions in business wealth, and this is wealth that is parked overseas,” Trump said during at speech at the Economic Club of New York…”
Looks to me like everyone is after Apple’s cash pile.
“African countries lose billions of dollars in tax evasion schemes, which are undermining the growth of economies on the continent, scaring away investors and creating unequal opportunities across the continent.
The continent, which is the least developed globally, loses about $14 billion in tax evasion annually, according to a report published by Oxfam…”
This article is based on older articles and I just wanted to show it here to ask the question, how did we get to the USD14 billion? The Oxfam article also refers to USD170 billion and USD50 billion. I have not seen evidence of these numbers but they are referenced a lot. They are also used very loosely and I am not sure if this refers to pre-tax revenue or actual cash? Not saying this is not an issue, but the amount divided by 54 countries (for Africa), times approx. 30% tax rate (for pre-tax numbers) over say 5 years all of a sudden becomes much less. The number will still be a big number, but nowhere near the billions referenced.
And what would the roundup be without another country requiring transfer pricing documentation.
“A resolution (Resolución No. DGT-R-44-2016) has been published in the official gazette to finalize the rules concerning the filing of an annual transfer pricing return in Costa Rica…”