RESOURCES FROM OTHER WORLD REGIONS AND ORGANIZATIONS
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
EU JTPF Report on the Use of Comparables in the EU
The EU Joint Transfer Pricing Forum (JTPF) issued a report on conducting comparables searches for purposes of a transfer pricing analysis. The report contains recommendations for taxpayers and tax administrations and aims to increase the objectivity and transparency of comparables searches in the EU. The purpose is to make progress towards best practices and to find pragmatic solutions for companies doing business in the EU.
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.
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 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.
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
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.
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
ASIA - PACIFIC
Australian Taxation Office Draft Practical Compliance Guideline on Taxation Issues Associated with Cross-Border Related Party Financing Arrangements and Related Transactions
This Practical Compliance Guideline sets out the Australian Taxation Office’s compliance approach to taxation outcomes associated with a 'financing arrangement', as defined in section 995-1 of the Income Tax Assessment Act 1997, or a related transaction or contract, entered into with a crossborder related party. The ATO uses the framework in this draft Guideline to differentiate risk and tailor its engagement with taxpayers. The ATO notes that if the related party arrangement is rated as being low risk, taxpayers can expect the Commissioner will generally not apply compliance resources to review the taxation outcomes, other than to fact-check the appropriate risk rating. If the related party financing arrangement falls outside the low risk category, taxpayers can expect that the Commissioner will monitor, test and/or verify the taxation outcomes of the related party financing arrangement. The higher the risk rating, the more likely the arrangement will be reviewed as a matter of priority.
Effective July 2017
Australian Taxation Office Practical Compliance Guideline on Simplified Transfer Pricing 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 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)
Costa Rican Tax Authority Publishes Resolution to Regulate the Transfer Pricing Declaration
On June 8, 2016 the Costa Rican tax authority published a proposed resolution on the Informative Transfer Pricing Declaration, which applies to companies qualifying as large taxpayers as well as those operating under the Free Trade Zone regime. The proposed format would be completed electronically and filed on the last working day of June each year, for the preceding tax year. It includes information on the relevant parties, the type of transaction, the amount of the transaction, and the method used to establish the transfer price, among other details.
WORLD CUSTOMS ORGANIZATION
World Customs Organization Case Study
The Technical Committee on Customs Valuation (TCCV) of the World Customs Organization issued a Case Study describing the steps taken in an analysis of intercompany transactions involving the sale of tangible goods from a manufacturer located in one country to a distributor located in another country. The TCCV determined that, in this case, the company's transfer pricing documentation, which relied upon the Transactional Net Margin Method and which was also used as the basis for a bilateral Advance Pricing Agreement, could be used to satisfy the requirement that the transfer prices were settled in a manner consistent with the normal pricing practices of the industry. Thus, the relationship between the parties did not influence the price, and transaction value was acceptable for Customs valuation purposes.
World Customs Organization Guide on Customs Valuation and Transfer Pricing
The World Customs Organization issued a Guide on the relationship between Customs valuation and transfer pricing. It is designed primarily to assist Customs officials responsible for Customs valuation policy or who are conducting audits and controls on multi-national enterprises. It is also recommended reading for the private sector and tax administrations. The Guide does not provide a definitive approach to dealing with this issue, but provides technical background and offers possible solutions for the way forward, and shares ideas and national practices.
The Platform for Collaboration on Tax Issues Tool Kit on Accessing Comparables
The IMF, OECD, UN, and World Bank are participating organizations in the Platform for Collaboration on Tax. The group issued a report entitled "A Toolkit for Addressing Difficulties in Accessing Comparables Data for Transfer Pricing Analyses." The toolkit provides an outline of the comparability analysis process, including the importance of accurately delineating the transaction under review, which in turn drives the selection of the most appropriate transfer pricing method and the subsequent criteria for the search for comparables. Examples and case studies are provided to illustrate these principles.
The toolkit also sets out policy options that developing economies could consider, together with additional initiatives that could be taken on by countries, or international or regional organizations, to mitigate the problems caused by poor availability of or access to relevant data.
World Bank Report on Transfer Pricing and Developing Economies
The World Bank issued a report entitled "Transfer Pricing and Developing Economies: A Handbook for Policy Makers and Practitioners." The report defines transfer pricing, and provides information on the international legal framework, applying the arm's length principle, and resolving transfer pricing disputes, as well as other related topics.