Practical aspects on transfer pricing

Transfer pricing and the inherent arm’s length principle has been around for some time now and many African countries have implemented transfer pricing regulations. In Africa, only about five countries had transfer pricing legislation in place before 2000, now in 2019, only about five countries do not have any arm’s length or anti-avoidance provisions in place dealing with transfer pricing. Out of these countries approximately 40 countries in Africa have some sort of formal transfer pricing documentation requirements, be it in the form of formal submission or retention requirements. 

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Forex gains and losses a no brainer?

Hi all – given that this is my first blog on transferpricing.co.za, a short introduction may be apt. More importantly, given that this is my first blog EVER, please bear with me as I make the transition from formal writing to being BLOGGY. As far as intro’s go, I am a Partner at Grant Thornton in South Africa, heading up the Transfer Pricing practice. I have been consulting on tax matters since 2001, having spent the last 11 years at Grant Thornton and the earlier years at KPMG and EY. Prior to embarking on my tax consulting career, I spent 7 years “on the other side” working in cost and financial accounting and reporting environments the manufacturing and the financial services sectors. More to the topic, I have been involved in TP for 10 years and for so many reasons, love every minute of it…even when people think that a one-pager will suffice as a TP report or policy. Continue reading “Forex gains and losses a no brainer?”

Weekly transfer pricing roundup – 10 June

What is the latest in the transfer pricing world? See below:

Romania joins countries leading BEPS plan implementation to fight MNE tax avoidance (MNE Tax)

The Romanian government, on June 2, announced that it will join countries working on the next phase of the OECD/G20 base erosion and profit shifting (BEPS) project as an associate, developing standards and monitoring the implementation of BEPS international tax measures, which are designed to combat multinational corporation tax avoidance…

HMRC investigations into transfer pricing down 15% (Economia)

The number of HMRC investigations into high-value big companies suspected of using transfer pricing to avoid tax has fallen by 15% in a year, according to UHY Hacker Young

The research found that HMRC opened 391 transfer pricing reviews in the year ended 31 March 2015, down from 450 in 2013/14…

Ahmedabad gets special bench for international taxation (The Times of India)

Ahmedabad: The Income Tax Apellate Tribunal (ITAT) of Ahmedabad is getting a new bench to hear cases on matters of international taxation. This will be the third bench of international taxation in the country, with Delhi and Mumbai already having one each…

EU State aid probe into tax rulings extends to group financing companies, TNMM use (MNE Tax)

The EU Commission on June 3 released a working paper identifying several categories of Member State transfer pricing rulings that raise potential State aid concerns because they sanction profit allocations that deviate from the arm’s length standard…

…The paper identifies particular concern with APAs that use the TNMM with operating expenses as an indicator. “Where the TNMM is used, operating expenses are often retained when the taxable base is determined as a mark-up on a performance indicator. In some cases, it seems that this choice of operating expenses as a performance indicator is made systematically, without necessarily representing the commercial value of the functions of the company”…

EU Competition Arm to Stick To OECD Transfer Pricing Guidelines (LexisNexis)

Despite concerns that the European Commission wants to reinvent the OECD’s transfer pricing guidelines, EU Competition Commissioner Margrethe Vestager recently reassured the OECD that the EU will continue to follow the guidelines…

BEPS Will Raise Taxes and Cost Worldwide (Taxation)

Mid-sized international businesses around the world are afraid that upcoming international tax rules will hike their taxes, increase compliance costs, and interfere with their business strategies…

Draft German tax law adopts low threshold for transfer pricing master file, combats MNE tax avoidance (MNE Tax)

The German Finance Ministry on June 1 released a draft law proposing further measures combating multinational profit shifting, including implementation of transfer pricing documentation and country-by-country reporting and exchange of tax rulings. The proposal is notable because it will likely require the filing of a master file by a majority of German multinationals…

The German draft law also includes a provision to implement OECD recommendations regarding the master file (new article 90 para 3 fiscal code (AO)). The master file is to be submitted upon request to the tax authorities by multinational groups that, in the previous year, had turnover exceeding €100 million (USD 136 million). A multinational group is defined as two or more connected/related companies in different countries or one company that has at least one permanent establishment in another country…

Cyprus team to negotiate revisions in tax treaty with India (livemint)

A delegation from Cyprus is expected to visit India soon to negotiate changes to its double taxation avoidance agreement (DTAA) with India.

Cyprus has agreed to give India the right to tax capital gains similar to the provision in the revised India-Mauritius tax treaty, but wants to be removed from an Indian blacklist, said two government officials who did not want to be identified…

U.K. Tax Official Sees No Substitute for Transfer Pricing (BNA)

Mike Williams, director of business and international tax with Her Majesty’s Revenue and Customs, was a keynote speaker June 8 at an international tax conference co-sponsored by Bloomberg BNA and Baker & McKenzie LLP.

“There are aspects to transfer pricing that need to be improved, updated to make it fit for purpose,” Williams said.

“I think the message I want to leave with you is I am a critical friend of transfer pricing,” he said. While there are aspects to transfer pricing that need to be improved, it is still the best method to allocate profits of a multinational group among the countries where it does business, Williams said.

“A core advantage of the way it works is that, having divvied up the profits, it is then up to individual countries to decide whether and at what rate to tax the profits that are attributed to them—and that is important in terms of sovereignty. By dividing the profits between countries in a sensible way, it enables countries to exercise their sovereignty in a way that benefits them…”