UK Practice Statement on Advance Pricing Agreements
HM Revenue and Customs ("HMRC") issued a Statement of Practice on Advance Pricing Agreements. It is intended as general guidance on how HMRC interprets the APA legislation and operates the UK APA Program. Annex 1 to the Statement of Practice provides a list of the information to be included in the formal application, and Annex 2 provides a sample APA agreement.
November 8, 2016
European Commission Decision on Apple
The European Commission released a summary of its decision relating to Apple in August 2016 and released its full public decision in December 2016. The Commission found that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991, and that the rulings endorsed a way to establish the taxable profits for two Irish incorporated companies of the Apple group that did not correspond to economic reality. Per the European Commission, this selective tax treatment of Apple in Ireland is illegal under EU state aid rules, because it gives Apple a significant advantage over other businesses that are subject to the same national taxation rules. Ireland must now recover the unpaid taxes in Ireland from Apple for the years 2003 to 2014 of up to €13 billion, plus interest.
August 2016 and December 2016
European Commission Decision on Fiat
The public version of a European Commission decision relating to Fiat from October 2015 has become publicly available. The tax ruling issued by Luxembourg on 3 September 2012 in favor of Fiat Finance and Trade Ltd., which enables the latter to determine its tax liability in Luxembourg on a yearly basis for a period of five years, constitutes aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union that is incompatible with the internal market and that was unlawfully put into effect by Luxembourg in breach of Article 108(3) of the Treaty.
Switzerland Initiates Consultation on Exchange of CbC Reports
The Swiss Federal Council initiated the consultation on the multilateral agreement on the exchange of country-by-country reports and the federal act required for its implementation on April 13, 2016. The objective of the proposal is to improve transparency regarding the taxation of multinationals and establish a uniform framework for exchanging the reports. If approved, the legislation would enter into effect in 2018, with the first automatic exchange of country-by-country reports happening in 2020. For periods before 2018, groups may voluntarily submit a country-by-country report to the Federal Tax Administration (FTA), which the FTA may also voluntarily transmit to individual countries.
European Commission Decision on Starbucks
The public version of a European Commission decision relating to Starbucks from October 2015 has become publicly-available. The Commission found that the advanced pricing arrangement entered into by the Netherlands on 28 April 2008 with Starbucks Manufacturing EMEA B.V., which enables the latter to determine its corporate income tax liability in the Netherlands on a yearly basis for a period of ten years, constitutes aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union that is incompatible with the internal market and that was unlawfully put into effect by the Netherlands in breach of Article 108(3) of the Treaty.
EU JTPF Report on Compensating Adjustments
Report provides practical guidance on avoiding double taxation and double non-taxation in the application of compensating adjustments in spite of the different practices of Member States.
EU Transfer Pricing Forum
The EU Transfer Pricing Forum was formally established by the Commission in June 2002 and consists of one expert from
the tax administrations of each Member State plus 10 experts from business.
Representatives from applicant countries and the OECD Secretariat attend as
observers. The above link provides background on the Forum, latest
information, meetings of the Forum, key documents, and names and CVs of the
Chairman and the business members of the Forum.
Transfer Pricing and the Arbitration Convention
The origin of the Arbitration Convention was the European Commission’s 1976 proposal for a directive to eliminate double
taxation in the case of transfers of profits between associated enterprises
in different Member States and the White Paper of 1985 on the completion of
the Internal Market.
JTPF Report on Compensating Adjustments
Member States have different practices with respect to compensating adjustments and the report provides practical
guidance on avoiding double taxation and double non-taxation in the
application of compensating adjustments in spite of the different practices
of Member States. The guidance is applicable to compensating adjustments
which are made in the taxpayer’s accounts and explained in the taxpayer’s
transfer pricing documentation.
JTPF Report on Transfer Pricing Risk Management
The report recognizes the need for tax administrations and taxpayers to allocate their transfer pricing resources
effectively. It makes recommendations on managing transfer pricing risk in
each of the three phases of examining a transfer pricing file. The report
also contains an example of a work plan for a transfer pricing audit.
June 6, 2013
JTPF Report on Secondary Adjustments
The report addresses the issue of secondary adjustments in general and puts it in the context of the EU Parent
Subsidiary Directive. It includes several recommendations aiming to avoid
double taxation and to solve disputes.
January 18, 2013
JTPF Report on Cost Contribution Arrangements on Services Not Creating Intangible Property
The report elaborates on the different concepts
underlying Cost Contribution Arrangements (CCAs) on services and Intra Group
Services (IGS). It describes the general features for determining whether
the arm's length principle has been applied to CCAs on services not creating
IP and gives concrete recommendations to achieve a uniform treatment within
June 7, 2012
JTPF Releases Report on Small and Medium Enterprises and Transfer Pricing
The JTPF, as part of its agreed work program,
considered the impact of transfer pricing on Small and Medium Enterprises.
March 4, 2011
Union Extends Mandate of Transfer Pricing Forum
The European Commission has decided to extend the mandate of
the European Union Joint Transfer Pricing Forum until March 2015.
January 25, 2011
European Union Releases Communication on Two Technical Issues
For its work in the period between April 2009 and June 2010,
the JTPF states that its discussions were concluded on two subjects. The EC
has accepted both conclusions, which will now be put before the European
Council for their endorsement. One conclusion is associated with the
application of the arm’s length principle to value-adding intra-group
services, and the other deals with double tax dispute resolutions when a
non-EU associate enterprise is involved in a transaction
January 25, 2011
Summary Report on Penalties
Most EU Member States have rules which aim at enforcing taxpayers' compliance. These rules are regulated by national
legislation and, therefore, can vary widely. This paper concentrates on
adjustment related penalties, i.e. penalties imposed for failure to comply
with the arm's length principle usually levied in the form of a surcharge at
a fixed amount or a certain percentage of the transfer pricing adjustment or
the tax understatement.
Proposal for a
Revised Code of Conduct for the Effective Implementation of the Arbitration
This Communication reports on the work of the JTPF during the March 2007 to March 2009 period and presents in annex a
revised Code of Conduct for the Arbitration Convention. As a result of a
monitoring exercise on the application of the existing Code of Conduct, it
was recognized that the three-year target for resolution specified within
the Code of Conduct was difficult to achieve and further work was needed to
clarify the process to facilitate resolution within the three-year time
frame. Consequently, some revisions are proposed to provide the necessary
clarification on specific provisions of the Arbitration Convention.
September 14, 2009
Discussion Paper on Draft JTPF Recommendations Related to Interest Charges
in the Context of Mutual Agreement Procedures
According to the EU JTPF, EU tax agencies should freeze interest charges on disputed tax liabilities while competent
authorities negotiate double taxation relief or provide other interest
relief during competent authority talks.
February 21, 2008
JTPF, Contributions on Centralised Intercompany-Group Services
Proposal of adopting a margin of between 5 and 8
percent on costs for standard intercompany services and further
recommendation that the JTPF create a uniform European standard for
documenting those charges.
December 21, 2007
Commission Communication on Dispute Avoidance and Resolution Procedures
Including Guidelines for Advance Pricing Agreements within the EU
This Communication aims to prevent transfer pricing disputes and associated double taxation from arising by introducing
Guidelines for Advance Pricing Agreements (APAs) within the EU.
February 26, 2007
Report on the Activities of the EU Joint Transfer Pricing Forum in the Field
of Dispute Avoidance and Resolution Procedures
The report from the Forum suggests some best practices for APAs. The Forum does not propose any best practices in
this report for the other areas examined for Dispute Avoidance and
Resolution – voluntary or mandatory consultation, simultaneous tax
examinations and expert opinion or mediation. This lack of proposals for
these areas does not necessarily mean that the ideas do not possess any
merit at all but more that the Forum considered that developing best
practices for APAs would be most beneficial for taxpayers and tax
administrations in the internal market.
February 26, 2007
Code of Conduct on Transfer Pricing Documentation for Associated Enterprises
in the European Union
This Code of Conduct concerns the implementation of standardized and partially centralized transfer pricing documentation for
associated enterprises in the European Union. It is addressed to Member
States but is also intended to encourage multinational enterprises to apply
the EU TPD approach.
June 27, 2006
Australian Taxation Office Practical Compliance Guideline on Simplified Transfer Pricing Issues Record Keeping Options
This Guideline describes the types of transactions or activities that the Australian Taxation Office believes are low risk in the context of international related party dealings. It specifies the criteria for taxpayers to self-assess their eligibility to use one or more of eight simplification options. This allows taxpayers to use a simplified record keeping option in documenting the eligible transactions.
For example, the eligibility criteria for distributors are: turnover under A$50 million for the Australian economic group, and the taxpayer (i) does not have a profit-before-tax ratio of less than 3%, (ii) has not made sustained losses, (iii) does not have related-party dealings with entities in specified countries, (iv) has not undergone a restructure within the year, (v) does not have related-party dealings involving royalties, license fees or research and development arrangements, and (vi) has assessed its compliance with the transfer pricing rules.
Australian Taxation Office Practical Compliance Guideline on Transfer Pricing Issues Related to Centralized Operating Models
This Practical Compliance Guideline sets out the Australian Taxation Office’s compliance approach to transfer pricing issues related to the location and relocation of certain business activities and operating risks into a centralized operating model. The type of activities commonly centralized include marketing, sales and distribution functions although centralized operating models are not necessarily limited to these functions. The Guideline is designed to help taxpayers manage the compliance risk and costs associated with their centralized operating models (also referred to as "hubs").
China Public Notice on APAs
China's State Administration of Taxation issued Public Notice 64, which addresses the process for Advance Pricing Agreements and the information to be provided by the taxpayer. The Public Notice becomes effective on December 1, 2016.
October 11, 2016
Australian Taxation Office Guidance on Local File
The Australian Taxation Office (ATO) has issued guidance on the information to be provided in a company's Local File. The Local File, the Master File, and the Country-by-Country Report comprise the three elements of the standardized approach to transfer pricing documentation that resulted from Action 13 of the OECD's BEPS initiative. The ATO's guidance includes two tiers for the Local File, the first of which is a Short Form that can be used by companies that meet certain criteria, and the second of which requires the reporting of additional information.
Japan Guidance on Transfer Pricing Documentation
Japan's National Tax Agency issued an "Outline of the Revision of the Transfer Pricing Documentation," which provides guidance on the three tiers of documentation specified in Action 13 of the OECD's BEPS initiative (Master File, Local File, Country by Country report). Multinational enterprise groups with total consolidated revenue of 100 billion yen or more in the prior fiscal year must file a Notification for Ultimate Parent Entity report. Size thresholds are also provided for determining which controlled transactions should be included in the Local File.
India Rules Relating to Transfer Pricing Analyses
India's Central Board of Direct Taxes issued final rules that address the use of ranges and multiple year data in conducting transfer pricing analyses.
October 19, 2015
Japan Guidelines on Transfer Pricing
Japan's National Tax Agency's Administrative Guidelines on Transfer Pricing can be found here. The Guidelines address examination policies and points to be noted when examining various types of intercompany transactions, provide guidance on calculating arm's length prices, discuss the treatment of foreign transferred income, and discuss advance pricing arrangements. A supplement provides case studies on the application of transfer pricing methodologies.
June 2001, amended June 2013
Australian Taxation Office: Taxation Rulings & Practice Statements
Taxation Ruling 2014/6: Income tax: transfer pricing – the application of section 815-130 of the Income Tax Assessment Act 1997 (November 12, 2014)
Taxation Ruling 2011/1: Income tax: application of the transfer pricing provisions to business restructuring by multinational enterprises (February 9, 2011)
Taxation Ruling 2004/1: Income tax: international transfer pricing – cost contribution arrangements (January 21, 2004)
Taxation Ruling 97/20: Income tax: arm's length transfer pricing methodologies for international dealings (November 5, 1997)