Our transfer pricing seminars went well last week, both in Kenya and South Africa. Thanks for those of you who attended, it was great catching up. If you missed them, check out my twitter feed for some quick updates.
This week the OECD released a new discussion draft providing guidance on hard-to-value intangibles (HTVI). The approach to HTVI was previously agreed to and is published in the BEPS Action 8-10 final report. You may remember the whole ex post and ex ante discussion.
The new draft should improve consistency among tax administrations and reduce the risk of economic double double taxation. Furthermore, the new draft introduces the principles for implementation of HTVI, provides relevant examples, and addresses the interaction between the approach and the mutual agreement procedure under the tax treaties.
Importantly, the OECD noted that the draft does not yet represent a consensus position of the Committee on Fiscal Affairs or its subsidiary bodies.
“Tax experts agree that the number of disputes between taxpayers and the tax authority in South Africa has seen a marked increase in recent years…
Joon Chong, tax partner at law firm Webber Wentzel, says their practice has seen an increase in ordinary disputes and audits, interviews and enquiries from Sars.
“We are also seeing a lot of transfer pricing disputes between multinationals and Sars… Sars is reluctant to settle disputes or to accept settlement agreements.”
There is a need to collect more revenue to fill the expenditure gaps. More audits and disputes coupled with an unwillingness to settle makes for a more contentious tax environment, says Chong…”
The article gives further examples on SARS’ increased scrutiny. The article also mentions a modernised process that identifies risks. Keep in mind, SARS has already indicated that it uses data analytics to identify risk in the transfer pricing space. This is done by giving ratings to the different disclosures. The higher the rating, the more likely a taxpayer is to be selected for additional questioning.
“… The government said it expected to raise at least $250 million over the next three years, with gains expected to come from several initiatives proposed in the last nine months, however Retail NZ’s Greg Harford said the move did not go far enough.
“The Government is rightly looking at ways of cracking down on multinational tax avoidance in relation to transfer pricing, debt and hybrid financial instruments,” Harford said.
“But it’s missing out on a much bigger revenue stream in relation to low value goods sold from foreign websites to New Zealanders.”…”
Looks as if every country is trying to make a little more money. Surely there is only so much that can go around?