Weekly transfer pricing roundup – 30 Jan 2017

The OECD signed up a few more countries to the Multilateral Competent Authority Agreement making it 57 countries and the inclusive framework now has more than 100 countries. As you know, countries signing up to the inclusive framework agree to implement the minimum standards which include CbCR (the minimum standards include a total of 4 action points).

It has been a busy week and I am still trying to catch up with all the reading. The draft transfer pricing toolkit for developing countries was also released and comments on the draft are due on 21 February. If you have any comments but don’t want to go through the hassle of sending something through formally, please send me your rough thoughts and I will merge them with my comments. Depending on the outcome I will either post them via Grant Thornton or the SAIT/SAICA transfer pricing sub committee which I am part of.

Happy reading, and don’t forget to comment.

Updated UN manual reveals India’s transfer pricing positions (MNE Tax)

“The new India chapter demonstrates that the tax authority has accepted several transfer pricing positions in OECD BEPS guidelines that had previously been the subject of significant litigation, revealing some light at the end of the tunnel.

However, there are certain inconsistencies, from which one can infer that there is some road to travel, such as the discussion on low value intra-group services and the approach towards marketing intangibles.

It will be necessary for Indian taxpayers to acid test their transfer pricing documentation in view of the discussion in the India chapter to strengthen their positions and ward off potential disputes arising from intra-group transactions.”

Find out more about India’s approach on the following aspects in the article, if you do business in India it’s a must read:

  • Low value adding intra-group services
  • Country-by-country reporting
  • Marketing intangibles
  • Location savings, location specific factors
  • Intangibles generated through research and development services
Transfer pricing toolkit for developing countries jointly released by IMF, OECD, UN, World Bank Group (MNE Tax)

“The Platform for Collaboration on Tax – a joint initiative of the IMF, OECD, UN, and World Bank Group – on 24 January released a draft toolkit addressing ways that emerging economies can overcome lack of comparable data or market prices for goods and services in the area of transfer pricing. The Platform has asked for comments and input on the draft by 21 February from interested stakeholders to finalise the toolkit…

The toolkit is designed to help emerging countries foster strong and credible transfer pricing regimes applying the principles developed in the OECD/G20 BEPS project and, hence, protect their tax bases from aggressive or inappropriate tax planning by multinational corporations.

The toolkit addresses some of the challenges associated accessing comparables data. It also focuses on how to make the best use of available data and on the importance of the choice of the most appropriate transfer pricing method.

It also describes issues and possible solutions when adequate data on transactions between independent parties are not available, including the potential for developing safe harbours or prescriptive approaches. Finally, due to the complexity of the topic, the toolkit sets out areas where further work is planned, and summarises a number of conclusions.

In addition, in recognition of the importance of the extractive industries and other commodities sectors to the economies of many developing countries, the draft toolkit addresses the information gap on prices of minerals sold in an intermediate form.”

New transfer pricing requirements in Latin America under BEPS (JDSUPRA)

“Several countries in Latin America have established new transfer pricing documentation obligations associated with the OECD’s BEPS initiative.

In this new year, Mexico, Colombia and Peru have included in their local legislation new documentation requirements that follow a three-tiered approach: CBC report, master file, and local file. These requirements are based on the revised Chapter V of the OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration…”

Seven more jurisdictions sign tax co-operation agreement to enable automatic sharing of country-by-country information (OECD)

“As part of continuing efforts to boost transparency by MNEs, Gabon, Hungary, Indonesia, Lithuania, Malta, Mauritius and the Russian Federation have now signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbC MCAA), bringing the total number of signatories to 57. Lithuania and Hungary joined the Agreement in October and December 2016 respectively…

Gabon, Indonesia, Malta, Mauritius and the Russian Federation signed the Agreement at a signing ceremony held during the second meeting of the Inclusive Framework on BEPS on 26-27 January 2017. The inclusive framework brings together over 100 countries and jurisdictions to collaborate on the implementation of the OECD/G20 BEPS package.”

Information on the Potential Impact on IRS and U.S. Multinationals of Revised International Guidance on Transfer Pricing (United States Government Accountability Office)

In short the report states: “The Revised Guidelines Effect on IRS Administrative Costs is Likely Small, But The Effect on Compliance Costs for U.S. MNEs is Uncertain”.

There is much more to it, but I won’t try and summarise the 50 page report here.

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