Weekly transfer pricing roundup – 16 Jan 2017

The traffic is starting to increase in Johannesburg, which means things are getting back to normal and so is this blog. Obviously I have more content planned for 2017 but I won’t promise too much upfront.

On another note, you will see below that CbCR has formally been introduced in South Africa. Once you open the ITR14 you will see the tax return has also been amended to ask for additional information but no space has yet been provided to actually notify SARS about the reporting entity. Hopefully SARS will introduce a painless notification process that doesn’t require additional registrations or more admin for taxpayers.

Updated Singapore transfer pricing guidance allows simplified method for related party loans (MNE Tax)

“Singapore’s Inland Revenue Authority (IRAS) on January 12 published the fourth edition of its e-Tax Guide on transfer pricing.

The new guidance includes a discussion of risk analysis and adds new provisions allowing taxpayers to optionally use an indicative margin for related party loans instead of preparing a detailed transfer pricing analysis. The new procedure can be applied to related party loans obtained or provided from January 1…”

It is a great idea to introduce something like this for cross border related party loans as a proper thin capitalisation analysis/study (or TP work for credit ratings and arm’s length interest rates) can be rather costly. The issue with introducing something like this is similar to that of safe harbours. The difference here is that the tax authorities can manage the risk by making sure the indicative margin is low enough to keep profit stripping via high interest deductions at bay but yet keep it high enough to for taxpayers to not ‘create’ other transactions to shift profits.

SA finalised specific regulations for CbC reporting (Grant Thornton)

“The final South African regulations for country-by-country (CbC) reporting were gazetted on 23 December 2016. With the release of the final regulations, South African multinational group companies are now obliged to report certain information in line with the Base Erosion and Profit Shifting (BEPS) project, directed by the Organization for Economic Co-operation and Development (OECD)…”

Indonesia revises tax rules on transfer pricing (The Straits Times)

“Indonesia has revised tax rules for transfer pricing documentation to match global standards and curb practices of tax avoidance, an official with the tax office said yesterday.

A finance minister’s decree signed last year but made available to the public only last week called for firms doing cross-border transactions with affiliates to prepare transfer pricing documents detailing global structure and payments…”

Tax Department Signs Advance Pricing Pact With Japanese Firm (Profit NDTV)

“The [Indian] tax department on Friday signed a Bilateral Advance Pricing Agreement (BAPA) with Indian subsidiary of a Japanese trading company as the department looks to reduce litigations by providing certainty in transfer pricing.

Recently, the Central Board of Direct Taxes (CBDT) has also modified an existing Bilateral Advance Pricing Agreement with another Indian subsidiary of a Japanese company to include rollback provisions, an official statement said.

In all, three Bilateral Advance Pricing Agreements are now signed with Indian subsidiaries of Japanese companies, all including rollbacks. The total number of Bilateral Advance Pricing Agreements entered into by CBDT now stands at eight, it added…”

What are your thoughts?

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