Weekly transfer pricing roundup – 29 October

If you not sure whether you are compliant or not, feel free to reach out to me and we can have a quick chat to find out.

Just to give everyone a heads up, the next roundup may be published a day or two later as usual because I am on leave. Yes, even I need to take a break from the fascinating transfer pricing world and just recharge.

The first article below is very relevant and I wanted to write something similar but as luck would have it, someone else discussed the topic this week in a great article. In short, transfer pricing is not only applicable to big listed companies but anyone with material cross border related party transactions should consider its transfer pricing exposure.

Why SMB CFOs Should Care About Transfer Pricing (CFO)

“Small and mid-tier manufacturers [or other companies] incorrectly assume that because they’re small, their transfer-pricing policy won’t be audited. They’re wrong…

Small and mid-tier manufacturers across verticals incorrectly assume that because they’re small, their transfer-pricing policy won’t be audited. This isn’t the case.

Although it has not been officially announced, the IRS has shared informally that even small taxpayers with less than $25 million in revenue might be targets, because agents are finding easy adjustments with utterly unprepared companies.

In fact, the IRS is now expanding its scope to include mid-sized and smaller companies. Late last year, David Varley, the acting director of the IRS’s transfer pricing group, noted that this initiative includes middle-market foreign-owned businesses, foreign parent companies that operate limited-risk distributors in the United States, and entities based in the United States with assets that range between $10 million and $250 million.

Unfortunately, this topic is barely on small and mid-sized company leadership’s radar…

Even what may appear to be a harmless intracompany management fee may attract the attention of the tax authorities who could challenge the amount of the fee or even its deductibility if it’s not adequately priced and/or documented,. The significant penalties and interest on overdue tax that follow, potentially in addition to double taxation (where income has already been taxed elsewhere), make transfer pricing a risk worth managing…”

The same is true for South Africa where the tax authorities are asking more questions in relation to transfer pricing, and not just from the big JSE listed companies. If you not sure whether you are compliant or not, feel free to reach out to me and we can have a quick chat to find out.

Brazil, Guernsey, Jersey, Isle of Man, Latvia sign agreement for exchange of tax reports on multinationals (MNE Tax)

And more countries are signing up.

“Brazil, Guernsey, Jersey, the Isle of Man, and Latvia have signed a multilateral agreement which sets out the parameters for the automatic exchange between tax administrations of country-by-country tax reports on multinational enterprises.

The agreement, called the Multilateral Competent Authority Agreement for the Automatic Exchange of Country-by-Country Reports, has now been signed by 49 nations…”

Luxembourg transfer pricing bill would adopt some BEPS changes (MNE Tax)

“Luxembourg’s government has submitted a draft bill to Parliament to introduce into law some of the key principles set out in the OECD Transfer Pricing Guidelines as rewritten in the framework of the OECD/G20 base erosion profit shifting (BEPS) project…”

 

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