Weekly transfer pricing roundup – 12 June 2017

Last week was a very historic week for transfer pricing enthusiasts all around the world. 67 jurisdictions signed MLIs in line with the BEPS framework to reduce the opportunity for tax avoidance. The signing of the MLIs is likely to result in 1100 tax treaties being amended, which usually would take decades.

It was mentioned during the gathering that the BEPS inclusive framework members account for 93% of global GDP. Botswana has also just signed up to the inclusive framework as the 99th member. I wonder who will get number 100. At this speed we will find out next week.

If you are interested in seeing what the signing ‘party’ looked like, I have some photos re-tweeted on my twitter feed here.

Tax officials crafting plan to jointly identify large multinationals with low risk of tax avoidance (MNE TAX)

“Eight countries are working on a new program to jointly review large multinationals’ tax affairs and, if appropriate, provide assurances to the multinational that it will not likely be audited in those jurisdictions with respect to specific tax risks, officials said June 6 in Washington at a conference sponsored by the OECD, USCIB, and BIAC.

The International Compliance Assurance Program or ICAP will be voluntary program designed to benefit multinationals that must file a country-by-country report and do not engage in tax avoidance, said Achim Pross, Head, International Cooperation and Tax Administration Division at the OECD Centre for Tax Policy and Administration.

The program, which will be piloted by Italy, US, UK, Spain, Austria, Germany, Netherlands, and Canada, could eventually be offered by all 47 countries participating in the Forum on Tax Administration, namely, all OECD and G20 countries plus a few others…”

This is a brilliant idea. With the BEPS project seeming to give tax authorities more ammunition and taxpayers may feel they are on the back foot with an increased burden, this process would at least level the playing field somewhat. 

Disputed U.K. Tax From Transfer Pricing Up by 60 Percent (BNA)

“The amount of disputed tax relating to the transfer pricing of the U.K.’s largest businesses has risen 60 percent in the past year, according to law firm Pinsent Masons.

Her Majesty’s Revenue and Customs, the U.K.’s tax authority, is reviewing as much as 3.8 billion pounds ($4.9 billion) of large U.K. businesses’ transfer pricing…

The latest figures come as HMRC aims to raise an additional 5 billion pounds a year by 2020 through tackling abusive tax arrangements, aggressive planning, and tax system imbalances.

Transfer pricing, defined as the price at which divisions of a business transact with each other, is an area of focus for tax authorities amid efforts to clamp down on multinational companies exploiting legal loopholes to avoid tax…”

If you look through the actual numbers you will notice that the amount of reviews has declined since last year, but the value amount has increased. There are different theories to why the reviews have declined, one being that the HMRC is focusing on the bigger transactions others say the HMRC is focusing on the new diverted profits tax. Regardless, the HMRC is looking to get more money. 

CBDT notifies relaxed safe harbour regime for cross-border transactions (Domain-B)

“The Central Board of Direct Taxes (CBDT) has notified a new, relaxed, safe harbour regime in order to reduce transfer pricing disputes. The new safe harbour regime is available for transactions of up to Rs200 crore.

The move is aimed at providing certainty to taxpayers…

The new safe harbour regime, which is based on the report of a committee set up in this regard, has come into effect from 1 April 2017, ie, Assessment Year 2017-18 and shall continue to remain in force for two immediately succeeding years thereafter, ie, up to AY 2019-2020.

Assessees eligible under the present safe harbour regime up to AY 2017-18 shall also have the right to choose the safe harbour option most beneficial to them.”

The safe harbour rates seem high to me but I have not really benchmarked these rates with Indian local comparables. Should the rates be high, and a taxpayer applies the safe harbour rate for India, this doesn’t mean the overall transaction will be acceptable to other tax authorities. Just something to keep in mind 

Armenian taxpayers to start submitting transfer pricing papers to tax agencies soon (KPMG)

“In 2018, Armenian taxpayers will start submitting transfer pricing papers to tax agencies, Nerses Nersisyan, head of KPMG Armenia department in charge of tax and legal consulting, told journalists on Tuesday…

The law comes into force on January 1, 2018, and tax agencies can demand the first transfer pricing papers only in 2019…”

On top of Armenia introducing documentation requirements Pakistan also introduced draft legislation for transfer pricing documentation and CBCr requirements – see more here.

TAJ Receives First Connected Party Filings, Audits Begin (The Gleaner)

“Local companies for the first time have submitted returns which disclose their connected parties to Tax Administration Jamaica (TAJ) a requirement under the new transfer pricing law which aims to reduce revenue leakage…

Companies were required to file their first connected party returns by March 15 of this year, TAJ director of communications Meris Haughton said on Friday.

“Our auditors are now doing the audits of these returns,” she said.

TAJ is being assisted with the task by the Organisation for Economic Cooperation and Development, which is providing technical support…”


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