Weekly transfer pricing roundup – 10 April 2017

On 6 April 2017, the OECD released additional guidance on the implementation of CbCR (find the full report here).  The additional guidance addresses some of the uncertainties raised by different organisations, including:

  • The definition of revenue
  • The accounting principles for determining the existence of and membership in a group
  • The definition of total consolidated group revenue and the treatment of major shareholdings
  • The definition of related party for purposes of completing table 1 of the CbCR

But that wasn’t enough in the transfer pricing world to wrap up this week. See more news/developments below:

German related-party royalty proposal conflicts with BEPS agreement, OECD tax official says (MNE Tax)

“…Under the proposal, deductions would be denied for a royalty payment made to a related group company when the same payment is taxed as income to the group member at a low rate and through a preferential tax regime that does not require substantial business activity, as provided for in the OECD/G20 base erosion profit shifting (BEPS) Action 5 modified nexus approach.

The proposed rule would apply to expenses arising from 1 January 2018, even though, through the BEPS project, OECD and G20 countries agreed to protect patent boxes created before 30 June 2016 up to 30 June 2021…”

As you will see in the full article, it seems a little odd that Germany is trying to introduce something that should be address through BEPS. Maybe the Germans don’t trust that everyone will implement BEPS accordingly or soon. Let’s just hope that such a move does not create more compliance issues and potential double tax. Then again this is all in a proposal stage and may not come in as it currently stands. Time will tell.

Q&A: OECD’s Grace Perez-Navarro talks BEPS ahead of ITR’s Global Transfer Pricing Forum (TP Week)

“Grace Perez-Navarro, deputy director of the OECD’s Centre for Tax Policy and Administration, speaks to TP Week about the intricacies of BEPS implementation ahead of her keynote address at International Tax Review’s Global Transfer Pricing Forum in New York on May 8…”

These interviews are great to get into the minds of the people that steer our current tax environment. If you want to find out more about:

  • Have you heard from companies with any concerns about BEPS?
  • How are you allaying corporate fears?
  • What is the OECD doing to reduce the compliance burden BEPS places on multinational companies?
  • What’s next on the OECD’s TP horizon?

make sure to read the article.

Rio Tinto to fight $447 million Australian tax bill (Mining.com)

“Rio Tinto (ASX, LON:RIO), the world’s second-biggest miner by market value, will fight a A$447 million tax bill it received from the Australian government Wednesday, adding that the new assessment is not related to any tax avoidance scheme.

The amount, consisting of A$379 million plus interest of A$68 million, is linked to what is known as “transfer pricing” between Rio Tinto’s Australian operations and its Singapore office for the calendar years 2010 to 2013…”

I don’t think this is a surprise, any taxpayer would fight such adjustments. What is more interesting is that taxpayers have actually been quite successful in fighting these adjustments, Amazon is just one current example. As you know the ATO is also currently going after Chevron for a finance transaction and these two cases are very different, but I do think this case (or vice versa) may provide some insight into the ATO’s thinking. Let’s wait and see.

What are your thoughts?

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