WORLDWIDE TRANSFER PRICING REFERENCE GUIDE

Worldwide Transfer Pricing Reference Guide 2016–17

Worldwide Transfer Pricing Reference Guide

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Worldwide Transfer Pricing Reference Guide T r a ns f er P r icing r ul es a nd r eg ul a tions a r ound th e w or l d continue to g r ow in num b er a nd in com p l ex ity . P r a ctitioner s need to h a v e cur r ent k now l edg e of a com p l ex w eb of countr y ta x l a w s , r eg ul a tions , r ul ing s , m eth ods a nd r eq uir em ents . T h e E Y World Transfer Pricing Global Reference Guide is a tool des ig ned to h el p inter na tiona l ta x ex ecutiv es q uick l y identif y tr a ns f er p r icing r ul es , p r a ctices a nd a p p r oa ch es . T h es e m us t b e under s tood in or der f or a com p a ny to ca r r y out b oth com p l ia nce a nd p l a nning a ctiv ities . T h e inf or m a tion incl uded in th e g uide now cov er s 1 1 8 countr ies a nd ter r itor ies in w h ich

T h e tr a ns f er p r icing g l ob a l r ef er ence g uide is m ea nt to p r ov ide a n ov er v iew f or th e cov er ed j ur is dictions r eg a r ding th eir tr a ns f er p r icing ta x l a w s , r eg ul a tions a nd r ul ing s ; O r g a nis a tion f or E conom ic C o- op er a tion a nd D ev el op m ent (O E C D ) g uidel ines tr ea tm ent, p r ior ities a nd p r icing m eth ods ; p ena l ties ; th e p otentia l f or r el ief f r om p ena l ties ; docum enta tion a udits a nd tr a ns f er p r icing s cr utiny b y th e ta x a uth or ity ; a nd op p or tunities f or a dv a nce p r icing a g r eem ents (A P A s ).

l ink b el ow to f ol l ow a nd tr a ck th e l a tes t dev el op m ents th a t m a y b e r el ev a nt. E Y o nB E P S A w eb - b a s ed v er s ion of th is p ub l ica tion ca n b e f ound a t ey . com . P l ea s e ch eck th is w eb p a g e p er iodica l l y f or l a te- b r ea k ing countr y dev el op m ents .

conta ct l is ted a t th e b a ck of th is b r och ur e. P l ea s e note th e a v a il a b il ity of oth er tr a ns f er p r icing m a ter ia l s s uch a s s ur v ey r ep or ts th a t s h a r e v iew s of ta x a uth or ities a nd ta x dir ector s (ey . com The Worldwide Corporate Tax Guide; The Worldwide Personal Tax Guide; a nd The Worldwide VAT, GST and Sales Tax Guide. The content is correct as of 15th August 2016 unless otherwise noted. This publication should not be regarded as offering a complete explanation of the tax matters referred to and is subject to changes in the law and other applicable rules.

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C ontents L eg end

7

G l os s a r y of ter m s

8

F ij i

1 4 0

F inl a nd

1 4 3

A l b a nia

1 0

F r a nce

1 4 6

A l g er ia

1 4

G a b on

1 5 4

A ng ol a

1 7

G eor g ia

1 5 6

A r g entina

2 1

G er m a ny

1 5 9

A r m enia

2 5

G h a na

1 6 6

A us tr a l ia

2 7

G ib r a l ta r

1 6 9

A us tr ia

3 8

G r eece

1 7 2

44

G ua m

1 7 5

4

G ua tem a l a

1 7 8

H ondur a s

1 8 1

H ung a r y

1 8 7

I cel a nd

1 9 3

I ndia

1 9 5

4 4

4

C a m er oon

7 6

I ndones ia

2 0 0

C a na da

7 9

Ir a q

2 0 4

I r el a nd

2 0 6

4 C h il e

8 7

I s r a el

2 1 0

C h ina

9 3

I ta l y

2 1 4

C ol om b ia

9 9

J a p a n

2 1 9

J or da n

2 2 4

K eny a

2 2 9

K os ov o

2 3 2

4 C r oa tia

1 0 7

C y p r us

1 1 0

D enm a r k

1 1 5

K uw a it

2 3 5

L a os

2 3 9

E cua dor

1 2 2

L a tv ia

2 4 1

E g y p t

1 2 9

L eb a non

2 4 4

L ib y a

2 4 6

L ith ua nia

2 4 8

E s tonia


1 3 7

4

L ux em b our g

2 5 1

4 4

N a m ib ia

2 9 1

N eth er l a nds

2 9 3

4

4 T a iw a n

4 0 4

N ica r a g ua

3 0 2

T h a il a nd

4 1

N ig er ia

3 0 4

T ur k ey

4 1

N or w a y

3 0

4

O m a n

3 1

4

P a k is ta n

3 1 4

4

P a na m a

3 1

4

P a p ua N ew G uinea

3

4 4

P a r a g ua y

3 2

4

P er u

3 2

44

P h il ip p ines

3 2

44

P ol a nd

3 3

4

P or tug a l

3 4

Q a ta r

3 4

T r a ns f er p r icing conta cts

5

4 5 4



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L egend Taxing authority and tax law: na m e of ta x ing a uth or ity a nd s ta tutor y p r ov is ions cur r entl y in ef f ect in ea ch j ur is diction. Relevant regulations and rulings: cur r ent tr a ns f er p r icing r ul es a nd r eg ul a tor y p r ov is ions in ef f ect in ea ch j ur is diction. OECD Guidelines treatment: cons ider a tion g iv en b y th e ta x ing a uth or ity to th e O E C D T r a ns f er P r icing G uidel ines f or Documentation requirements: g ov er ning ta x a uth or ity r eq uir em ents or r ecom m enda tions th a t ta x p a y er s p r ep a r e a nd m a inta in w r itten docum enta tion to conf ir m th a t th e a m ounts ch a r g ed in r el a ted- p a r ty tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th s ta nda r d. Priorities/pricing methods: tr a ns f er p r icing m eth ods a l l ow ed, a s w el l a s th e p r ior ity of ea ch m eth od. Return disclosures/related-party disclosures: inf or m a tion on dis cl os ur es r eq uir ed f r om tr a ns a ctions .

ta x p a y er s r eg a r ding r el a ted- p a r ty

Transfer pricing-specific returns: th es e incl ude a ny tr a ns f er p r icing - s p ecif ic f or m s r eq uir ed to b e f il ed w ith in th e j ur is diction. Documentation deadlines: dea dl ine f or p r ep a r ing tr a ns f er p r icing docum enta tion. Transfer pricing penalties: dis cus s ion of p otentia l l y a p p l ica b l e tr a ns f er p r icing p ena l ties if a ta x p a y er is deter m ined not to b e in com p l ia nce w ith th e r ul es im p os ed b y th e ta x ing a uth or ity . Penalty relief: p otentia l w a y s in w h ich p ena l ties m a y b e r educed or a v oided. Statute of limitations on transfer pricing assessments: dis cus s ion of th e a p p l ica b l e s ta tute of l im ita tions r eg a r ding tr a ns f er p r icing ex a m ina tion a nd a s s es s m ents . Frequency of tax audits/transfer pricing scrutiny: dis cus s ion of th e l ev el of f r eq uency of th e ta x a uth or ity s ub j ecting em p l oy ed. T h is is b a s ed on th e p a s t ex p er ience of our l oca l ta x p r of es s iona l s a nd is not a f or w a r d- l ook ing p r ediction. APA opportunity: dis cus s ion of th e p os s ib il ity of ob ta ining a n a dv a nce p r icing a g r eem ent w ith th e ta x a uth or ity . Impact of new OECD BEPS Action 8-10 guidelines: dis cus s ion on h ow a j ur is diction w il l a p p l y th e a m ended O E C D

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Glossary of t erm s APA (Advance Pricing Agreement) th e deter m ina tion of th m eth od to b e us ed f or A P A s m a y b e unil a ter a m ul til a ter a l (th r ee or m

e a p p r op r ia te tr a ns f er p r icing p r icing inter com p a ny tr a ns a ctions . l , b il a ter a l (tw o g ov er nm ents ) or or e g ov er nm ents ).

Arm’s-length principle T h e s ta nda r d a dop ted b y th e O E C D a nd in m a ny j ur is dictions , w h ich m a nda tes th a t th e r es ul t r el a ted p a r ties ob ta in f r om a n inter com p a ny tr a ns a ction a p p r ox im a tes th e r es ul t th a t uncontr ol l ed p a r ties w oul d h a v e ob ta ined h a d th ey under ta k en th e s a m e tr a ns a ction under th e s a m e cir cum s ta nces . BEPS (Base Erosion and Profit Shifting) O n 1 2 F eb r ua r y 2 0 1 3 th e O E C D r el ea s ed its r ep or t Addressing Base Erosion and Profit Shifting f ol l ow ed b y th e r el ea s e of a n A ction P l a n on 5 O ct 2 0 1 5 . T h us , th e O E C D a im s to dev el op a p p r oa ch es f or a ddr es s ing g ov er nm ent

CbCR (Country-by-Country Reporting)

r ep or t th a t p r ov ides inf or m a tion on th eir g l ob a l a l l oca tion of incom e, econom ic a ctiv ity a nd ta x es p a id a m ong countr ies . CFC (Controlled Foreign Corporation) CPM (Comparable Profits Method) a n a r m ’ s - l eng th cons ider a tion f or tr a ns f er s of ta ng ib l e p r op er ty , inta ng ib l e p r op er ty a nd s er v ices tr a ns a ctions . I f th e r ep or ted op er a ting incom e of th e tes ted p a r ty is not w ith in a cer ta in r a ng e, a n a dj us tm ent w il l b e m a de. I n ef f ect, th is m eth od r eq uir es a com p a r is on of th e op er a ting incom e th a t r es ul ts f r om th e cons ider a tion a ctua l l y ch a r g ed in a contr ol l ed tr a ns f er w ith th e op er a ting incom e of s im il a r ta x p a y er s th a t a r e uncontr ol l ed. CSA (Cost Sharing Agreement) or CCA (Cost Contribution Arrangement) A f r a m ew or k a g r eed a m ong enter p r is es to s h a r e th e cos ts a nd r is k s of dev el op ing , p r oducing or ob ta ining a s s ets , s er v ices or r ig h ts a nd to deter m ine th e na tur e a nd ex tent of th e inter es ts of ea ch p a r ticip a nt in th e r es ul t of th e a ctiv ity of dev el op ing , p r oducing or ob ta ining th os e a s s ets , s er v ices or r ig h ts .

Worldwide Transfer Pricing Reference Guide 8

CUP method (Comparable Uncontrolled Price)

s er v ices a nd th e a v oida nce of doub l e ta x a tion of incom e or

A tr a ns f er p r icing m eth od th a t com p a r es th e p r ice f or p r op er ty or s er v ices in a contr ol l ed tr a ns a ction w ith th e p r ice ch a r g ed f or p r op er ty or s er v ices tr a ns f er r ed in a com p a r a b l e uncontr ol l ed tr a ns a ction in com p a r a b l e cir cum s ta nces .

conv ention; s ee b el ow . OECD Guidelines a nd T a x A dm inis tr a tions , th e l a tes t edition of w h ich w a s p ub l is h ed b y th e O E C D in 2 0 1 0 . T h e O E C D G uidel ines endor s e th e a r m ’ s - l eng th p r incip l e a nd cons is t of a

ETR (Effective Tax Rate) T h e p er centa g e ob ta ined b y div iding th e ta x p a y er ’ s ta x th e r a te a t w h ich a ta x p a y er w oul d b e ta x ed if h is or h er ta x l ia b il ity w er e ta x ed a t a cons ta nt r a te r a th er th a n p r og r es s iv el y .

b e a p p l ied. OECD Model Tax Convention

EU (European Union) is to b e us ed b y m em b er s ta tes in neg otia tions of b il a ter a l doub l e ta x tr ea ties . T h e O E C D a l s o p r ov ides com m enta r y on EUJTPF (EU Joint Transfer Pricing Forum) r ep r es enta tiv es of g ov er nm ents a nd th e p r iv a te s ector , w h ich a dv is e a nd cons ul t on tr a ns f er p r icing is s ues .

th a t m em b er countr ies s h oul d f ol l ow th is com m enta r y , s ub j ect to th eir ex p r es s ed r es er v a tions th er eon, w h en a p p l y ing a nd inter p r eting th eir doub l e ta x tr ea ties .

FTE (Full-Time Equivalent)

PLI (Profit Level Indicator)

em p l oy ed b y ta x a uth or ities to under ta k e tr a ns f er p r icing r ev iew s in th eir j ur is dictions . GAAP (Generally Accepted Accounting Principles) T h e r ul es a nd p r a ctices r eq uir ed to b e f ol l ow ed in cer ta in

dis cus s ion of th eir a p p l ica tion.

a ccount.

PATA (Pacific Association of Tax Administrators) A n a s s ocia tion of th e ta x a dm inis tr a tions of A us tr a l ia ,

MNE (Multinational Enterprise) A m em b er of a r el a ted g r oup , th a t ca r r ies on b us ines s dir ectl y or indir ectl y in tw o or m or e countr ies .

coop er a tion a nd th e ex ch a ng e of inf or m a tion a m ong docum enta tion r eq uir em ents . TNMM (Transactional Net Margin Method)

MAP (Mutual Agreement Procedure) A dis p ute r es ol ution p r oces s f ound in A r ticl e 2 5 of th e

p r oces s of neg otia tion to r es ol v e m a tter s of ta x a tion not in a ccor da nce w ith th e p a r ticul a r ta x tr ea ty a nd to a ttem p t to a v oid doub l e ta x a tion. OECD (Organisation for Economic Co-operation and Development) to f os ter inter na tiona l tr a de a nd econom ic dev el op m ent. T h e O E C D h a s 3 4 m em b er s ta tes . A m ong its m a ny concer ns

9


A lb ania Taxing authority and tax law

Relevant regulations and rulings • L a w N o. 8 4 3 8 on I ncom e T a x es , a s a m ended (I ncom e T a x L a w ), da ted 2 8 D ecem b er 1 9 9 8 • •

4 E f f ectiv e 4 J une 2 0 1 4 , A r ticl es 3 6 - 3 6 / 7 w er e intr oduced, p r ov iding a m or e com p r eh ens iv e r eg ul a tor y f r a m ew or k on inter na tiona l tr a ns f er p r icing , a l ig ned w ith th e O E C D T r a ns f er P r icing G uidel ines of 2 0 1 0 (O E C D T P G 2 0 1 0 ).

• • •

A r ticl e 1 1 5 / 1 a ddr es s es p ena l ties r el a ted to tr a ns f er p r icing .

• D oub l e ta x a tion tr ea ties ena cted b y A l b a nia 4 p r ov iding f ur th er g uida nce on th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e a nd th e p r ep a r a tion of th e tr a ns f er p r icing docum enta tion. im p l em enta tion of th e A P A s .

OECD Guidelines treatment T h e a r m ’ s - l eng th p r incip l e under th e A l b a nia n tr a ns f er p r icing l eg is l a tion a nd ins tr uction is in l ine w ith th e p r ov is ions of A r ticl e 9 (1 ) of 2 0 1 0 . in th e com p a r a b il ity a na l y s is , th e nine- s tep p r oces s of th e O E C D T P G 2 0 1 0 in th e s ea r ch f or com p a r a b l es a nd th e p r ep a r a tion of th e

th e O E C D g uida nce. I ns tr uctions s h a l l p r ev a il .

Documentation requirements D ocum enta tion r eq uir em ents a r e s tip ul a ted in A r ticl e 3 6 , P a r a g r a p h 5 , of th e I ncom e T a x L a w . F ur th er g uida nce on th e docum enta tion 4


1 0

A lb ania

(continued)

• • • A des cr ip tion of th e contr ol l ed tr a ns a ction, incl uding a na l y s is of th e com p a r a b il ity f a ctor s a nd deta il s of a p p l ied tr a ns f er p r icing p ol icies • • A com p a r a b il ity a na l y s is , incl uding a des cr ip tion of th e p r oces s ca r r ied out to identif y com p a r a b l e uncontr ol l ed tr a ns a ctions , a n ex p l a na tion of th e b a s is f or th e r ej ection of a ny p otentia l inter na l com p a r a b l e uncontr ol l ed tr a ns a ctions , a des cr ip tion of th e com p a r a b l e uncontr ol l ed tr a ns a ctions , a n a na l y s is of th e com p a r a b il ity of th e contr ol l ed tr a ns a ctions a nd th e com p a r a b l e uncontr ol l ed tr a ns a ctions , a nd inf or m a tion on a ny com p a r a b il ity a dj us tm ents m a de • A n ex p l a na tion of a ny econom ic a na l y s is a nd p r oj ections r el ied up on • C oncl us ions on w h eth er th e conditions of th e contr ol l ed tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e, incl uding deta il s of a ny a dj us tm ents m a de to ens ur e com p l ia nce • D eta il s of a ny A P A s or s im il a r a r r a ng em ents in oth er countr ies a p p l ica b l e to th e contr ol l ed tr a ns a ctions • A ny oth er inf or m a tion th a t m a y h a v e a m a ter ia l im p a ct on th e deter m ina tion of th e ta x p a y er ’ s com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e, w ith r es p ect to th e contr ol l ed tr a ns a ctions

Priorities/pricing methods

a p p r op r ia te m eth ods . P r ef er ence is g iv en to th e b es t m eth od p r ov iding th e m os t r el ia b l e r es ul ts .

Return disclosures/related-party disclosures th eir contr ol l ed tr a ns a ctions ex ceeds A L L 5 0 m il l ion. (i. e. , w ith out of f s etting cr edit a nd deb it v a l ues ). T h e notice conta ins inf or m a tion on th e na tur e of inter com p a ny tr a ns a ctions p er counter p a r ty , th e v a l ue th er eof , th e tr a ns f er p r icing m eth od a p p l ied a nd w h eth er tr a ns f er p r icing docum enta tion ex is ts . F ur th er m or e, th er e a r e l is ted tr a ns a ctions f or no cons ider a tion a nd b us ines s r es tr uctur ing s , incl uding r ea l l oca tion of f unctions , a s s ets or r is k s , a nd ch a ng es in th e g r oup l eg a l s tr uctur e.

Transfer pricing-specific returns A l b a nia does not r eq uir e a s ep a r a te r etur n f or r el a ted- p a r ty tr a ns a ctions .

1 1


A lb ania

(continued)

Documentation deadlines D ocum enta tion m us t b e s ub m itted w ith in 3 0 da y s up on r eceip t of th e ta x a uth or ity ’ s r eq ues t, w h ich ca n b e initia ted a t a ny tim e a f ter th e

A l b a nia n, w h ich s h oul d b e p r ov ided w ith in 3 0 da y s of th e ta x a uth or ities ’ r eq ues t f or tr a ns l a tion. T r a ns f er p r icing docum enta tion s h oul d b e up da ted a nnua l l y . H ow ev er , ta x p a y er s w ith a tur nov er of l es s th a n A L L 5 0 m il l ion th a t us e conditions of th e contr ol l ed tr a ns a ctions , th e com p a r a b il ity of th e ex ter na l da ta a nd th e r el ev a nt econom ic cir cum s ta nces .

Transfer pricing penalties T r a ns f er p r icing a dj us tm ents in w h ich no docum enta tion h a s b een m a de a v a il a b l e tr ig g er l a te p a y m ent p ena l ties of 5 % of th e a dditiona l incom e ta x l ia b il ity a s s es s ed f or ea ch m onth of del a y , ca p p ed a t 2 5 % th er eof , a s w el l a s def a ul t inter es t.

Penalty relief T a x p a y er s th a t h a v e s ub m itted th e tr a ns f er p r icing docum enta tion in a tim el y m a nner (i. e. , w ith in 3 0 da y s up on r eceip t of th e ta x a uth or ities ’ r eq ues t) s h a l l b e r el iev ed f r om p ena l ties in th e ca s e of a tr a ns f er p r icing a dj us tm ent, a nd th ey w il l b e l ia b l e to p a y onl y th e a dditiona l ta x l ia b il ity a nd def a ul t inter es t. I n p r incip l e, th e ta x a dm inis tr a tion b ea r s th e b ur den of p r oof to s ub s ta ntia te on w h a t g r ounds th ey cons ider th a t th e tr a ns f er p r ices a p p l ied a r e not in l ine w ith th e a r m ’ s - l eng th p r incip l e. H ow ev er , w h en th e ta x p a y er h a s p r ep a r ed docum enta tion a nd m a k es it a v a il a b l e to th e ta x a uth or ities , th e b ur den of p r oof s h if ts to th e ta x p a y er .

Statute of limitations on transfer pricing assessments

r ea s s es s m ent on th e m a tter a t is s ue in th e p r oceeding a r e not p r es cr ib ed.

Frequency of tax audit and transfer pricing scrutiny by the tax authority to f our y ea r s . I n l ig h t of th e tr a ns f er p r icing r ul es th a t b eca m e ef f ectiv e on 4 J une 2 0 1 4 , a nd es p ecia l l y due to th e new l y intr oduced a nticip a te th a t tr a ns f er p r icing ta x a udits w il l incr ea s e r a p idl y . T h e ta x a dm inis tr a tion is unl ik el y to ch a l l eng e th e m eth odol og y a p p l ied. I n p r incip l e, in ex a m ining th e a r m ’ s - l eng th ch a r a cter of a tr a ns a ction, th e ta x a dm inis tr a tion s h oul d us e th e s a m e tr a ns f er p r icing m eth od a p p l ied b y th e ta x p a y er , to th e ex tent th a t it is th e m os t a p p r op r ia te one f or th a t tr a ns a ction.


1 2

A lb ania

(continued)

APA opportunity T a x p a y er s th a t under ta k e contr ol l ed tr a ns a ctions ex ceeding in a g g r eg a te th e v a l ue of A L L 4 , 2 b il l ion f or th e p r op os ed p er iod of a p p l ica tion a r e el ig ib l e to a p p l y f or unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s w ith no r ol l b a ck op tion. E x cep tions to th e a g g r eg a te

on A P A s p r ov ides m a na g em ent p r ocedur es , dis cl os ur e r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts .

Impact of new OECD BEPS Action 8-10 guidelines

1 3


A lgeria Taxing authority and tax law dir ection)

Relevant regulations and rulings • A r ticl e 1 4 1 b is of th e A l g er ia n D ir ect T a x C ode • A r ticl e 1 9 2 of th e A l g er ia n D ir ect T a x C ode • A r ticl e 2 0 ter of th e A l g er ia n T a x P r ocedur e C ode • A r ticl e 1 6 9 b is of th e A l g er ia n T a x P r ocedur e C ode A decr ee, da ted 1 2 A p r il 2 0 1 2 , dr ew up a l is t of entities ob l ig a ted to p r ov ide tr a ns f er p r icing docum enta tion a nd l is ted its content.

OECD Guidelines treatment p r a ctice a r e not p r ov ided ex p l icitl y .

Documentation requirements 4 • • •

•

A g ener a l des cr ip tion of th e f unctions p er f or m ed, r is k s incur r ed a nd a s s ets of ea ch r el a ted com p a ny •

A g ener a l des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy •

A des cr ip tion of th e com p a ny , th e a ctiv ities it p er f or m s a nd th e na tur e of th e tr a ns a ctions it is eng a g ed in, incl uding ch a ng es th a t h a v e

•

• (incl uding r oy a l ties ); th is inf or m a tion m a y b e p r es ented g l ob a l l y b y tr a ns a ction ty p e • •

A l is t of th e m a in inta ng ib l e a s s ets h el d in r el a tion to th e com p a ny (s uch a s p a tents , tr a dem a r k s , tr a de na m es a nd k now - h ow )

• C op ies of a l l a g r eem ents b etw een th e com p a nies concer ned


1 4

A lgeria

(continued)

• F ina ncia l inf or m a tion, ov er h ea d a nd a dm inis tr a tiv e ex p ens es , a nd r es ea r ch a nd dev el op m ent cos ts • a dm inis tr a tion.

• De jure or de facto p r ov ided b y l a w • J oint s tock com p a nies a nd p a r tner s h ip s th a t h a v e op ted f or th e ta x r eg im e f or j oint s tock com p a nies w h os e s a l es a t th e cl os e of th e • De jure or de facto g r oup s of com p a nies in w h ich th e a nnua l s a l es of a ny one of th e m em b er com p a nies a r e g r ea ter th a n or eq ua l to • C om p a nies es ta b l is h ed in A l g er ia th a t a r e m em b er s of f or eig n g r oup s (r eg a r dl es s of th e A l g er ia n ta x r eg im e a p p l ied)

Priorities/pricing methods tr a ns f er p r icing m eth od, b ut th e A l g er ia n ta x a uth or ities is s ued g uidel ines in 2 0 1 0 r ef er r ing to th e O E C D m eth ods . I n th eor y , a l l O E C D com p a r a b il ity .

A l g er ia n tr a ns f er p r icing r ul es a p p l y f or b oth cr os s - b or der tr a ns a ctions a nd dom es tic tr a ns a ctions w ith r el a ted p a r ties .

Return disclosures/related-party disclosures I n th e f r a m ew or k of a ta x a udit, ta x ins p ector s a r e entitl ed to a udit p os s ib l e inf r ing em ent of th e a r m ’ s - l eng th p r incip l e w ith r el a ted p a r ties b etw een indep endent enter p r is es .

Transfer pricing–specific returns N ot a p p l ica b l e.

Documentation deadlines

p r icing p ol icy in th e f r a m ew or k of a ta x a udit.

1 5


A lgeria

(continued)

Transfer pricing penalties is entitl ed to s end a f or m a l notice a s k ing f or it to b e com p l eted or p r ov ided w ith in 3 0 da y s . T h e p ena l ty f or not doing s o ca n b e a ls oa p p ly .

Penalty relief (remise conditionnelle) p r ocedur e p r ov ided b y th e A l g er ia n T a x P r ocedur e C ode, under cer ta in conditions .

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is th e s a m e a s f or a l l A l g er ia n cor p or a te ta x a s s es s m ents (i. e. , f our y ea r s f ol l ow ing th e y ea r f or w h ich th e ta x is due).

Frequency of tax audit and transfer pricing scrutiny by the tax authority on a continuous b a s is . T a x a udits a nd ta x r ea s s es s m ents r el a ted to tr a ns f er p r icing a r e m or e a nd m or e f r eq uent. F iel d a uditor s a r e not a l w a y s f a m il ia r w ith tr a ns f er p r icing concep ts , a nd th e a dj us tm ents s om etim es a r e not onl y g r ounded in th e O E C D G uidel ines . I t is a l s o w or th m entioning

APA opportunity A l g er ia n T a x P r ocedur e C ode r ecentl y (f or com p a nies el ig ib l e f or th e D G E ), a nd in th eor y , it coul d cov er tr a ns f er p r icing .

Impact of new OECD BEPS Action 8–10 guidelines


1 6

A ngola Taxing authority and tax law Administração Geral Tributária) Código do Imposto Industrial)

Relevant regulations and rulings 4 of L a w 1 9 / 1 4 of 2 2 O ctob er , a p p r ov ing th e I ndus tr ia l T a x C ode, p r ov ide g uida nce on tr a ns f er p r icing r eg ul a tions . T h e A ng ol a n tr a ns f er 4

4

4

4

g a s , a nd dia m ond com p a nies , a s w el l a s tel ecom m unica tions com p a nies , a r e, b y na tur e, l a r g e ta x p a y er s a nd th er ef or e s ub j ect to th e

p r icing p ur p os es .

ow ner s h ip inter es t of 1 0 % or m or e in th e ca p ita l or th e v oting r ig h ts of th e oth er entity non- m a r ita l p a r tner s h ip or dir ect k ins h ip

eq uiv a l ent s itua tion f ol l ow ing th e ter m s of com p a ny l a w

OECD Guidelines treatment O E C D G uidel ines a r e not a dop ted in th e l oca l tr a ns f er p r icing r eg ul a tions b eca us e A ng ol a is not a n O E C D m em b er countr y , a l th oug h cer ta in O E C D l a ng ua g e is incl uded in th e tr a ns f er p r icing r eg ul a tions ena cted. T h e a r m ’ s - l eng th p r incip l e a p p l ies to a l l r el a ted- p a r ty tr a ns a ctions .

1 7


A ngola

(continued)

Documentation requirements 4 4

4

4

4 T h e r eq uir em ent to p r ep a r e a nd s ub m it tr a ns f er p r icing docum enta tion a p p l ies to a l l com p a nies incl uded on th e L a r g e T a x p a y er s ’ L is t 4 4 tel ecom m unica tions com p a nies a nd com p a nies r ep or ting a nnua l r ev enue in ex ces s of A O A 7 b il l ion. w ith th eir r es p ectiv e a s s ocia ted enter p r is es . s ub j ect to docum enta tion.

(c) P r es enta tion of th e entity (d) F unctiona l a na l y s is of th e entity

(f ) E conom ic a na l y s is of th e r el a ted- p a r ty op er a tions T h e A ng ol a n l a w r eq uir es th a t a l l docum ents s ub m itted to th e ta x a uth or ities m us t b e w r itten in or tr a ns l a ted into P or tug ues e.


Return disclosures/related-party disclosures

Transfer pricing-specific returns N ot a p p l ica b l e.


1 8

A ngola

(continued)


Transfer pricing penalties th a t th e m a x im um

a m ount of th e r a ng e is b eing a p p l ied. T h e a p p l ica tion of p ena l ties in th is r eg a r d w il l im p l y a r ep uta tiona l r is k to th e

p er f or m ing ca p ita l op er a tions , cur r ent inv is ib l e tr a ns a ctions (p a y m ents f or s er v ices a nd inta ng ib l es ) or tr a ding op er a tions th a t, p r a ctice, it m a y com p l etel y b l ock th e da y - to- da y a ctiv ity of a ny ta x p a y er w h enev er its l eg a l na m e is com m unica ted b y th e G ener a l T a x F or l a r g e ta x p a y er s , th e l a ck of com p l ia nce w ith th e tr a ns f er p r icing docum enta tion r eq uir em ents s h oul d a l s o p r ev ent th e a p p l ica tion of r ig h ts f or es een in th e cor r es p onding s ta tute, na m el y th e p os s ib il ity to p a y th e indus tr ia l ta x a t th e L a r g e ta x p a y er ’ s da y - to- da y q ues tions a nd to p a y ta x deb ts in ins ta l l m ents . T h e m os t im p or ta nt im p l ica tion of th e m os t r ecent tr a ns f er p r icing r ul es ena cted in A ng ol a w a s th e s h if t of th e b ur den of p r oof to th e ta x p a y er , w h ich is now r eq uir ed to p r oduce contem p or a neous docum enta tion to s us ta in th e tr a ns f er p r ices a p p l ied to tr a ns a ctions p er f or m ed w ith a s s ocia ted enter p r is es . I f th e ta x a uth or ities deem th a t a cer ta in a m ount ch a r g ed in a r el a ted- p a r ty contex t to a n A ng ol a n ta x p a y er is not cons is tent w ith th e a r m ’ s - l eng th p r incip l e, th e A ng ol a n ta x a uth or ities w il l p r op os e a n a dj us tm ent to th e p r ice of a g iv en tr a ns a ction a nd a s s es s a dditiona l ta x , p ena l ties a nd com p ens a tor y inter es t. T h e ta x a uth or ities a r e a l l ow ed to op en a n a udit a nd I f a tr a ns f er p r icing a dj us tm ent is m a de, a p ena l ty eq uiv a l ent to 3 5 % of th e a dditiona l ta x w il l b e a p p l ied, p l us del a y inter es t a t th e noncom p ounded r a te of 1 % p er m onth (or 1 2 % p er y ea r ). tr a ns a ctions inv ol v ing A ng ol a n ta x p a y er s , a s th e countr y h a s not y et s ig ned a ny doub l e ta x tr ea ty . T h e cur r ent tr a ns f er p r icing l eg is l a tion does not p r ov ide f or cr os s - b or der cor r el a tiv e a dj us tm ents .

Penalty relief N ot a p p l ica b l e.

1 9


A ngola

(continued)

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions f or tr a ns f er p r icing a s s es s m ents is 5 y ea r s f r om inf r ing em ent.

th e l a s t da y of th e ta x y ea r - end or 1 0 y ea r s in ca s e of ta x

Frequency of tax audit and transfer pricing scrutiny by the tax authority r es p ectiv e l eg is l a tion (P r es identia l D ecr ee 1 4 7 / 1 3 of 1 O ctob er 2 0 1 3 a nd L a w 1 9 / 1 4 of 2 2 O ctob er ) w a s ena cted onl y f ew y ea r s a g o, no p a tter ns of a udit r is k h a v e y et b een es ta b l is h ed. H ow ev er , des p ite th e l a w ’ s ea r l y s ta g e, tr a ns f er p r icing a udits a r e ex p ected to incr ea s e, a s th e s ub j ect b ecom es m or e p r om inent on th e r a da r of th e g ov er nm ent a nd A ng ol a n ta x a uth or ities .

APA opportunity N ot y et f or es een.


C ons ider ing th is , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .


2 0

A rgent ina Taxing authority and tax law Administración Federal de Ingresos Públicos, or A F I P )

Relevant regulations and rulings • N o. 1 , 6 6 3 / 0 4 , N o. 1 , 6 7 0 / 0 4 , N o. 1 , 9 1 8 / 0 5 , N o. 1 , 9 5 8 / 0 5 , N o. 1 , 9 8 7 / 0 5 , N o. 3 , 1 3 2 / 1 1 , N o. 3 , 1 4 9 / 1 1 , N o. 3 , 4 7 6 / 1 3 , N o. 3 , 5 7 3 / 1 3 , N o. 3 , 5 7 6 / 1 3 a nd E x ter na l N otes N o. 6 / 0 5 a nd N o. 1 / 0 8 . • • O p inions f r om

th e ta x a uth or ity a r e s ca r ce a nd nonb inding .

OECD Guidelines treatment

Documentation requirements tr a ns f er p r icing s tudy f or a l l tr a ns a ctions w ith r el a ted p a r ties , deem ed r el a ted p a r ties a nd indep endent p a r ties l oca ted in ta x h a v ens . h a v e b een es ta b l is h ed on a n a r m ’ s - l eng th b a s is .

Priorities/pricing methods T h e tes ted p a r ty m us t b e th e l oca l entity (i. e. , th e entity b a s ed in A r g entina ). T h e ta x p a y er s el ects th e m os t a p p r op r ia te m eth od, b ut th e

g oods tr a ns a ctions w ith b oth r el a ted a nd indep endent p a r ties w h er e th er e is a n inter na tiona l p r ice in a tr a ns p a r ent m a r k et.

2 1


A rgent ina

(continued)

F or tr a ns a ctions inv ol v ing g r a ins , ol ea g inous p r oducts , oth er s oil p r oducts , oil a nd g a s , a nd a l l oth er g oods w ith w el l - k now n p r ices in

(or it is th e a g r eed- up on p r ice, if h ig h er th a n th e m a r k et p r ice). T h is m eth od m a y not a p p l y , h ow ev er , if th e l oca l ex p or ter ca n p r ov e th e to l im it th e a p p l ica tion of th is m eth od or ex tend it to oth er tr a ns a ctions , dep ending on th e cir cum s ta nces . E x p or t a nd im p or t tr a ns a ctions w ith indep endent p a r ties not l oca ted in ta x h a v ens a r e s ub j ect to inf or m a tion r eq uir em ents if th e a nnua l

Return disclosures/related-party disclosures • A n a nnua l tr a ns f er p r icing s tudy • • •

Transfer pricing-specific returns 7 4 3

• A nnua l F or m

9 6 9

•

• A nnua l F or m 4 •

4 • A nnua l F or m

8 6 7 (f or oth er ex p or ts a nd im p or ts w ith indep endent p a r ties not l oca ted in ta x h a v ens )

•

4 •

Documentation deadlines 4


2 2

A rgent ina

(continued)

Transfer pricing penalties

4

4 4 4 dep ending up on th e l ev el of com p l ia nce w ith th e f or m a l duties r el a ted to th e contr ol of ta x es der iv ed f r om P ena l ties f or f r a ud a r e 2 to 1 0 tim es th e unp a id ta x es .

inter na tiona l tr a ns a ctions .

4 4

Penalty relief C oncer ning under p a y m ent a nd f r a ud, if th e non- r ecidiv is t ta x p a y er v ol unta r il y a m ends th e ta x r etur ns b ef or e r eceiv ing a s p ecia l notice

v ol unta r il y , or w ith in 1 5 da y s f r om

th e s p ecia l notice, th en no p ena l ty s h a l l b e a p p l ied.

Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions f or f eder a l ta x m a tter s is 5 y ea r s f or r eg is ter ed a nd r eg is tr a tion- ex em p t ta x p a y er s a nd 1 0 y ea r s f or unr eg is ter ed ta x p a y er s . T h es e p er iods b eg in on 1 J a nua r y f ol l ow ing th e y ea r in w h ich th e ta x r etur n is due. T h e m or a tor ium

r eg im e in p l a ce dur ing ca l enda r y ea r 2 0 0 9 a nd th e v ol unta r y decl a r a tion of th e f or eig n ex ch a ng e h ol ding r eg im e in

b y th e s ta tute of l im ita tions .

2 3


A rgent ina

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l ca n b e cons ider ed h ig h ; m ea nw h il e, th e ch a nce of a tr a ns f er p r icing r ev iew dur ing s uch a n a udit is es tim a ted a s m edium . N ev er th el es s , once tr a ns f er p r icing h a s b ecom e a top ic of th e a udit, th e l ik el ih ood of th e ta x a uth or ity ch a l l eng ing th e ta x p a y er ’ s tr a ns f er p r icing m eth odol og y is h ig h . I n a ddition, tr ia l - l ev el cour t ca s es a r e b eing p ub l is h ed. I n m os t ca s es , th e ta x p a y er s ’ p os itions h a v e p r ev a il ed, b ut a f ew h a v e b een in f a v or of th e ta x a uth or ity . I n a ddition, s om e s econd- l ev el cour t ca s es a r e a l s o b eing p ub l is h ed. T h e ta x a uth or ity w il l l ik el y tr y to incr ea s e r ev enue a nd s tr ictl y enf or ce p ena l ties w ith com p a nies th a t a r e not com p l y ing w ith tr a ns f er p r icing r eq uir em ents . dif f er ent f r om w h er e th e g oods w er e m a nuf a ctur ed, ca us ing a p r ice dif f er ence b eca us e of th e v a l ue a dded b y th e inter m edia te com p a ny . F ur th er s cr utiny a nd f or eig n tr a de contr ov er s y a r e ex p ected w ith r eg a r d to tr a ns f er p r icing , cus tom s a nd f or eig n ex ch a ng e contr ol is s ues

APA opportunity Impact of new OECD BEPS Action 8–10 guidelines A l th oug h O E C D r ul es a r e not m a nda tor y in A r g entina , th er e is a tendency in cour t ca s es to cons ider th e O E C D G uidel ines a s

of v iew , r ecent O E C D dev el op m ents a r e l ik el y to a f f ect th e tr a ns f er p r icing a na l y s es of A r g entine com p a nies . F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents .


2 4

A rm enia Taxing authority and tax law

Relevant regulations and rulings C ur r entl y , A r m enia does not h a v e l oca l tr a ns f er p r icing r eg ul a tions b ut does h a v e doub l e ta x tr ea ties w ith 4 3 countr ies th a t conta in a n

OECD Guidelines treatment N ot a p p l ica b l e.

Documentation requirements N ot a p p l ica b l e.

Priorities/pricing methods N ot a p p l ica b l e.

Return disclosures/related-party disclosures N ot a p p l ica b l e.


Documentation deadlines N ot a p p l ica b l e.

Transfer pricing penalties N ot a p p l ica b l e.


2 5


A rm enia

(continued)

Statute of limitations on transfer pricing assessments N ot a p p l ica b l e.

Frequency of tax audit and transfer pricing scrutiny by the tax authority N ot a p p l ica b l e.

APA opportunity N ot a p p l ica b l e.

Impact of new OECD BEPS Article 8–10 guidelines N ot a p p l ica b l e.


2 6

A ust ralia Taxing authority and tax law

Relevant regulations and rulings • D iv is ion 1 3 of P a r t I I I of I ncom e T a x A s s es s m ent A ct 1 9 3 6 (I T A A 1 9 3 6 ) •

• 4 •

A p p licab ilit y of legislat ion D iv is ion 1 3 w a s ena cted in 1 9 8 2 a nd a p p l ies to incom e y ea r s th a t com m enced b ef or e 1 J ul y 2 0 1 3 . D iv is ion 1 3 a p p l ies a t th e dis cr etion of th e C om m is s ioner of T a x a tion (C om m is s ioner ) a nd ca nnot b e s el f - a s s es s ed. 4 concur r entl y w ith D iv is ion 1 3 f or tr a ns a ctions w ith r el a ted p a r ties in countr ies th a t h a v e a doub l e ta x a tion a g r eem ent w ith A us tr a l ia .

O v erv iew of current legislat iv e fram ework

• dis ch a r g e th is r es p ons ib il ity . • P ena l ty r eg im e l ink ed to docum enta tion. T h e p r ep a r a tion of tr a ns f er p r icing docum enta tion is not com p ul s or y . H ow ev er , f a il ur e to p r ep a r e docum enta tion contem p or a neous l y in a ccor da nce w ith th e new r ul es p r ev ents th e ta x p a y er f r om es ta b l is h ing a r ea s ona b l y a dj us tm ent th a t incr ea s es its ta x l ia b il ities in A us tr a l ia . A f a il ur e to p r ep a r e contem p or a neous docum enta tion ca nnot b e r em edied a t a l a ter p oint in tim e. •

f or deter m ining th e a r m ’ s - l eng th conditions . T h is p r ov is ion m us t a l s o b e s el f - a s s es s ed b y th e ta x p a y er . • C om p l ia nce w ith th e a r m ’ s - l eng th p r incip l e is a s s es s ed on th e a l ig nm ent of th e ta x p a y er ’ s a ctua l conditions w ith a r m ’ s - l eng th conditions .

th eir a r r a ng em ents a s w el l a s th e p r icing of indiv idua l tr a ns a ctions .

2 7


A ust ralia

(continued)

entities op er a ting p er m a nent es ta b l is h m ents is not l es s th a n it w oul d b e if th e p er m a nent es ta b l is h m ent w a s a dis tinct a nd s ep a r a te

r ev enue a nd ex p ens es .

Recent ch anges — im p lem ent at ion of O E C D B E PS act ions th r oug h 1 0 a nd 1 3 .

I m p lem ent at ion of A ct ions 8 – 1 0 docum ent r el ev a nt f or th e deter m ina tion of a r m ’ s - l eng th conditions . T h e r eg ul a tions g iv ing ef f ect to th is incl us ion w er e ex p ected to b e

I m p lem ent at ion of A ct ion 1 3

F ur th er dr a f t a dm inis tr a tiv e g uida nce h a s b een p r ov ided b y th e A T O in r el a tion to th e content of th e L oca l F il e, th e f or m of th e L oca l F il e, w h a t cons titutes a n a g r eem ent f or L oca l F il e p ur p os es a nd ex em p tions . T h e f ol l ow ing ov er v iew of th e im p l em enta tion is b a s ed on th e l eg is l a tion a nd our under s ta nding of th e a dm inis tr a tiv e g uida nce eith er r el ea s ed f or m a l l y b y th e A T O , or dis cus s ed w ith th e A T O in

CbCR

th e countr y in w h ich th a t entity is r es ident.

Master file

m us t b e l odg ed b y th e ta x p a y er th r oug h th e L oca l F il e f or m , a s th er e is cur r entl y no a utom a tic ex ch a ng e of inf or m a tion p r ov is ion th a t


2 8

A ust ralia

(continued)

Local file

l ev el des ig n a nd incl ude th e p r ov is ion of tr a ns a ctiona l inf or m a tion on a l l r el a ted- p a r ty dea l ing s , th e tr a ns f er p r icing m eth od us ed b y ea ch p a r ty eng a g ed in th e tr a ns a ction a nd a g r eem ents . T h e A T O ’ s ob j ectiv e is to g a th er l a r g e a m ounts of da ta a nd th en da ta m ine th is . th a t ta x p a y er s w il l h a v e to b uil d a l odg em ent tool , s ub s cr ib e to a com m er cia l ta x l odg m ent p r og r a m F il e.

or us e a ta x a g ent to l odg e th e L oca l

ty p ica l l y due 6 m onth s a nd 1 5 da y s a f ter th e y ea r - end.

Interaction with other filings and transfer pricing documentation docum enta tion r eq uir em ents .

counter p a r ties a r e r es ident a nd docum enta tion dis cl os ur es . a nd a v a il a b l e to th e ta x p a y er a t th e tim e of l odg ing th e ta x r etur n if a ta x p a y er is s eek ing to a ch iev e p ena l ty m itig a tion. G iv en th a t docum enta tion b ef or e l odg m ent of th e ta x r etur n. 4

• • •

4 •

4 •

4 • 4 4

2 9


A ust ralia

(continued)

4

p r icing r ecor d- k eep ing f or s m a l l ta x p a y er s , dis tr ib ution entities , cer ta in ty p es of s er v ices a nd s m a l l l oa ns under cer ta in cir cum s ta nces . T h e A T O h a s a l s o p ub l is h ed a l a r g e num b er of tr a ns f er p r icing r ul ing s a nd oth er g uida nce in th e f or m of ta x deter m ina tions p r a ctice s ta tem ents a nd b ook l ets in r el a tion to th e h is tor ica l tr a ns f er p r icing l eg is l a tion. T h is g uida nce, w h ich is r el ev a nt f or y ea r s s ta r ting b ef or e

Tax at ion rulings ( TRs) in relat ion t o h ist orical t ransfer p ricing legislat ion •

• 4 4 • • • • • • • •

4 • •

• 4 • • • • T a x p a y er s s h oul d ta k e ca r e w h en r el y ing on th e r ul ing s l is ted a b ov e a nd oth er g uida nce l is ted b el ow f or y ea r s s ta r ting on or a f ter 1 J ul y 2 0 1 3 , a s th e op er a tion of th e l eg is l a tion h a s ch a ng ed a nd th e A T O ’ s inter p r eta tion is l ik el y to ev ol v e.

Tax det erm inat ions ( TD s) :

4 4


3 0

A ust ralia

(continued)

A TO b ook let s: • C oncepts and Risk Assessment • Applying the Arm’s-Length Principle • Advance Pricing Arrangements, Documentation • Risk Assessment for Small to Medium Businesses • Dependent Agent Permanent Establishments • Marketing Intangibles, Business Restructuring — discussion paper on application of Australia’s transfer pricing rules • ATO Discussion Paper on Intra-group Finance Guarantees and Loans — application of Australia’s transfer pricing and thin capitalization rules

A ssessm ent and adj ust m ent of t ransfer p rices

a r m ’ s - l eng th conditions r ep l a ce th e a ctua l conditions to deter m ine its A us tr a l ia n ta x a b l e incom e. F ol l ow ing th e s el f - a s s es s m ent, th e C om m is s ioner , th r oug h th e A T O , ca n r a is e a dj us tm ents w h en h e b el iev es th a t th e s el f - a s s es s ed

a s s es s m ent of th e a r m ’ s - l eng th cons ider a tion of th e ta x p a y er ’ s tr a ns a ctions . I n a ddition, th e C om m is s ioner ca n s ub s titute a n a r m ’ s l eng th a m ount of cons ider a tion onl y w h en a ta x p a y er h a s r eceiv ed l es s th a n a n a r m ’ s - l eng th a m ount or h a s p a id m or e th a n a n a r m ’ s l eng th a m ount.

Reconst ruct ion of t ransact ions s ub s ta nce of a r el a ted- p a r ty a r r a ng em ent w h er e th e econom ic s ub s ta nce does not m a tch th e l eg a l f or m .

th os e w ith in th e 2 0 1 0 O E C D G uidel ines , w h ich a p p l y onl y if th e uncom m er cia l tr a ns a ction a l s o p r a ctica l l y im p edes th e ta x a uth or ity f r om r econs tr uction p r ov is ion b r oa dl y a nd coul d, f or ins ta nce, s eek a r econs tr uction of th e a r r a ng em ent to a l ig n tr a ns f er p r icing a dj us tm ents in a ccor da nce w ith w h a t th e C om m is s ioner cons ider s to b e com m er cia l l y r ea l is tic b eh a v ior a nd outcom es , ev en w h er e com p a r a b l e a nd I n a ddition, th e A T O ca n a p p l y th e g ener a l a nti- a v oida nce p r ov is ions to r econs tr uct or dis r eg a r d a tr a ns a ction w h er e th e dom ina nt

3 1


A ust ralia

(continued)

T h e A T O h a s a l s o ex p r es s ed th e v iew th a t it ca n ch a ng e indiv idua l el em ents of th e a ctua l a r r a ng em ent outs ide th e r econs tr uction p r ov is ions to im p r ov e com p a r a b il ity . F or ex a m p l e, th e A T O m a y s eek to dis r eg a r d cer ta in ter m s of a tr a ns a ction if th es e a r e not ob s er v ed dis a g r ee w ith th is inter p r eta tion a nd w oul d r eg a r d a ny ch a ng e in th e a ctua l tr a ns a ction a s a r econs tr uction. I t r em a ins to b e s een w h ich v iew w oul d p r ev a il in a l eg a l ch a l l eng e.

Multinational Anti-Avoidance Law and Diverted Profits Tax

• • A n A us tr a l ia n entity is inv ol v ed w ith th e s a l es p r oces s (e. g . , b y m a na g ing th e cus tom er r el a tions h ip on a da y - to- da y b a s is ) b ut does not cons titute a p er m a nent es ta b l is h m ent. I n a ddition, ex p os ur e dr a f t l eg is l a tion w a s r el ea s ed in l a te 2 0 1 6 w h ich f ur th er ex p a nds th e g ener a l a nti- a v oida nce p r ov is ions th r oug h th e 4 • A n A us tr a l ia n ta x p a y er tr a ns a cts w ith a n ov er s ea s r el a ted- p a r ty . •

• • T h e ta x p a id ov er s ea s in r el a tion to th e tr a ns a ction is 8 0 % or m or e th a n th e r eduction in th e A us tr a l ia n ta x l ia b il ity . T h e ta x p a id a l s o due to l os s es or incentiv es , th is r educed a m ount f or m s th e b a s is f or a s s es s ing th e 8 0 % . •

OECD Guidelines treatment 4

r ef er ence th e 2 0 1 6 O E C D G uidel ines w ith r etr os p ectiv e ef f ect f or y ea r s s ta r ting on or a f ter 1 J ul y 2 0 1 6 .

Documentation requirements T h e p r ep a r a tion of tr a ns f er p r icing docum enta tion is not com p ul s or y . H ow ev er , ta x p a y er s th a t do not p r ep a r e contem p or a neous tr a ns f er 4 ev ent of a tr a ns f er p r icing a dj us tm ent. T h is w il l ty p ica l l y r es ul t in l a r g er p ena l ties if th e ta x p a y er r eceiv es a tr a ns f er p r icing a dj us tm ent th a t incr ea s es its ta x l ia b il ities in A us tr a l ia .


3 2

A ust ralia •

(continued)

4 • •

•

•

E x p l a in th e p a r ticul a r w a y in w h ich th e r el ev a nt tr a ns f er p r icing p r ov is ions a p p l y (or do not a p p l y ) to th e ta x p a y er ’ s inter na tiona l r el a ted- p a r ty dea l ing s •

E x p l a in w h y th e a p p l ica tion of th e tr a ns f er p r icing p r ov is ions to th e ta x p a y er ’ s inter na tiona l r el a ted- p a r ty dea l ing s in th a t w a y b es t a ch iev es th e cons is tency w ith th e r el ev a nt g uida nce m a ter ia l s 1 (e. g . , 2 0 1 0 O E C D G uidel ines ) I t a l s o r eq uir es th a t th e docum enta tion a l l ow s a ctua l conditions , a r m ’ s - l eng th conditions , com p a r a b l e cir cum s ta nces a nd th e r es ul t of th e a p p l ica tion of th e s ub div is ion to b e r ea dil y a s cer ta ined

4

dev el op m ents a b ov e.


Return disclosures/related-party disclosures • D eta il s of r es tr uctur ing ev ents inv ol v ing inter na tiona l r el a ted p a r ties (Q ues tion 1 7 , w h ich m us t b e com p l eted r eg a r dl es s of th e q ua ntum of th e tr a ns a ctions ) • D ea l ing s w ith b r a nch op er a tions (Q ues tion 1 8 , w h ich m us t b e com p l eted r eg a r dl es s of th e q ua ntum

of th e tr a ns a ctions )

I n a ddition, if th e a g g r eg a te a m ount of tr a ns a ctions or dea l ing s w ith inter na tiona l r el a ted p a r ties , b oth r ev enue a nd ca p ita l in na tur e, is • •

4

1

3 3


A ust ralia

(continued)

• •

T y p e of tr a ns a ction, e. g . , r oy a l ties , inter com p a ny l oa ns , tech nica l s er v ices , a dm inis tr a tiv e s er v ices

•

T h e q ua ntum

p er ty p e of tr a ns a ction

•

T h e p er centa g e of tr a ns a ctions of ea ch ty p e cov er ed b y contem p or a neous docum enta tion th a t h a s b een p r ep a r ed in a ccor da nce w ith th e f our - s tep p r oces s (tr a ns f er p r icing docum enta tion does not need to b e l odg ed w ith th e ta x r etur n) •

T r a ns f er p r icing m eth odol og ies s el ected a nd a p p l ied f or ea ch inter na tiona l r el a ted- p a r ty tr a ns a ction ty p e •

I nf or m a tion on tr a ns a ctions f or no p a y m ent or nonm oneta r y p a y m ent, s h a r e- b a s ed em p l oy ee r em uner a tion a nd cos t contr ib ution a r r a ng em ents (Q ues tions 1 4 th r oug h 1 6 )

Transfer pricing-specific returns Documentation deadlines a t a l a ter p oint in tim e.

Transfer pricing penalties f a il ur e to ta k e r ea s ona b l e ca r e a nd (3 ) a p ena l ty f or a f a l s e a nd m is l ea ding s ta tem ent m a de b y th e ta x p a y er . E a ch of th es e is ex p l a ined in m or e deta il b el ow . A l l p ena l ties ca n a p p l y to th e s a m e tr a ns a ction. D r a f t g uida nce on th e a s s es s m ent of tr a ns f er p r icing p ena l ties under

Penalt ies for sch em e sh ort falls a p ena l ty ca n b e a p p l ied. T h e l ev el of p ena l ty w il l v a r y dep ending on w h eth er th e s ol e dom ina nt p ur p os e of th e a r r a ng em ent is to ob ta in


3 4

A ust ralia

(continued)

Penalt ies for failure t o t ak e reasonab le care A dditiona l p ena l ties a p p l y w h er e th e C om m is s ioner m a k es a n a dj us tm ent th a t r es ul ts in a ta x s h or tf a l l a nd th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e. T h e l ev el of th e p ena l ty v a r ies dep ending on w h eth er th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e (2 5 % of th e

Penalt ies for false and m isleading st at em ent s p ena l ty v a r ies dep ending on w h eth er th e ta x p a y er h a s f a il ed to ta k e r ea s ona b l e ca r e, h a s a cted r eck l es s l y or h a s h a d intentiona l dis r eg a r d f or th e r el ev a nt r ul es . T h e p ena l ties r a ng e f r om 2 0 to 6 0 p ena l ty units 2 p er s ta tem ent a nd a p p l y r eg a r dl es s of w h eth er a s h or tf a l l r es ul ted.

Penalties for significant global entities

O t h er p enalt ies Penalt ies for F ailure t o lodge on t im e

4 P ena l ties in r el a tion to s a l es m a de b y a n ov er s ea s entity dir ectl y to a n A us tr a l ia n cus tom er

Public officer liability conditions a r e cons is tent w ith a r m ’ s - l eng th conditions b ef or e s ig ning th e incom e ta x r etur n. I f th e conditions do not a l ig n a nd a tr a ns f er

ta x r etur n is not f a l s e or m is l ea ding .

A T O to do s o.

2

3 5


A ust ralia

(continued)

S h ort fall int erest ch arge ( S I C ) 4 a p p l ies r eg a r dl es s of w h eth er th e ta x p a y er is l ia b l e f or a ny s h or tf a l l p ena l ty .

Penalty relief

A ta x p a y er w ith a n A P A w il l ty p ica l l y not incur p ena l ties . E x cep tions to th is incl ude non- a r m ’ s - l eng th dea l ing s th a t a r e not cov er ed b y th e A P A , or f or noncom p l ia nce w ith th e ter m s a nd conditions of th e A P A .

C om m issioner’ s discret ion t o rem it p enalt ies it h a s th e dis cr etion to r em it th e p ena l ty in p a r t or in tota l . T h e p r a ctice s ta tem ent p r ov ides s om e v er y r es tr ictiv e ex a m p l es in w h ich 4 docum enta tion ex is ts .

Statute of limitations on transfer pricing assessments is s ued to th e ta x p a y er . H is tor ica l l y , th er e h a s b een no s ta tute of l im ita tions w ith r es p ect to tr a ns f er p r icing a dj us tm ents . T h e ta x l eg is l a tion a p p l ica b l e f or

4

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n deter m ining w h eth er a n A us tr a l ia n ta x p a y er ’ s tr a ns f er p r icing a r r a ng em ent s h oul d b e r ev iew ed or a udited, th e A T O g ener a l l y r es ul ts a p p ea r to b e com m er cia l l y r ea l is tic. T h e A T O h a s dev el op ed a s op h is tica ted r is k eng ine th a t cons ider s th es e f a ctor s , a l ong w ith

l ow - ta x j ur is dictions


3 6

A ust ralia

(continued)

• • F ina ncing a r r a ng em ents , incl uding inter es t- f r ee l oa ns , inter es t- b ea r ing l oa ns a nd g ua r a ntee f ees • C om p a nies under g oing s up p l y ch a in r es tr uctur ing s • • • • I nta ng ib l es (b oth A us tr a l ia n a nd f or eig n- ow ned) • T h e l ik el ih ood of a n a nnua l ta x a udit in A us tr a l ia w oul d b e a s s es s ed a s m edium

in g ener a l . H ow ev er , if ta x p a y er s ex h ib it th e r is k f a ctor s

p er centa g e of inter na tiona l r el a ted- p a r ty tr a ns a ctions , th e l ik el ih ood th a t tr a ns f er p r icing w oul d b e r ev iew ed a s p a r t of a ny g ener a l ta x a udit is v er y h ig h . f or com p a nies w ith th es e s tr uctur es ca n b e cons ider ed h ig h .

APA opportunity 4 b inding on th e A T O . T h e p r a ctice s ta tem ent r einf or ces th e A T O ’ s s ta ted com m itm ent to m a inta ining th e A P A p r og r a m of A us tr a l ia ’ s tr a ns f er p r icing r eg im e.

a s a n ef f ectiv e p a r t

th e A P A p r og r a m . T h e l a nds ca p e continues to ev ol v e, a nd ta x p a y er s cons ider ing a n A P A w oul d b e w el l - a dv is ed to ch eck th e l a tes t s ta te of p l a y w ith th eir a dv is or s b ef or e a p p r oa ch ing th e A T O .

Impact of new OECD BEPS Action 8–10 guidelines w il l b e intr oduced into th e A us tr a l ia n l eg is l a tion w ith r etr os p ectiv e a p p l ica tion f r om

3 7

1 J ul y 2 0 1 6 .


A ust ria Taxing authority and tax law

• I ncom e T a x A ct a nd I ncom e T a x G uidel ines • C or p or a te I ncom e T a x A ct a nd C or p or a te I ncom e T a x G uidel ines • F eder a l T a x C ode (F T C ) • D oub l e ta x a tion tr ea ties ena cted b y A us tr ia • on or a f ter 1 J a nua r y 2 0 1 6 • C r im ina l T a x L a w (C T L )

Relevant regulations and rulings •

4 • T P D L a nd th e r el a ted r eg ul a tion f or im p l em enta tion of th e l a w • • • I ncom e T a x G uidel ines 6 . 1 3 . 3 , 2 5 1 1 - 2 5 1 3 • C or p or a te I ncom e T a x G uidel ines 1 4 . 8 . 2 , 1 1 4 7 •

4 •

• 4 •

OECD Guidelines treatment A ccor ding to th e A us tr ia n T r a ns f er P r icing G uidel ines , th e a r m ’ s - l eng th p r incip l e conta ined in th e incom e ta x l a w h a s to b e cons tr ued in l ine w ith th e O E C D G uidel ines a nd a ny up da tes th er eto. E s ta b l is h m ents (A O A ), a l th oug h th e A O A is cur r entl y not f ul l y a p p l ica b l e, a s none of A us tr ia ’ s cur r ent doub l e ta x tr ea ties incl ude th e cons ider ed a s b a s is f or th e im p l em enta tion of th e T P D L ). T h e A us tr ia n T r a ns f er P r icing G uidel ines w er e r el ea s ed in th e f or m a uth or ities b ut a r e not b inding on A us tr ia n cour ts or ta x p a y er s .


of a m inis ter ia l decr ee. T h ey a r e b inding on th e A us tr ia n ta x

3 8

A ust ria

(continued)

Documentation requirements T h e T P D L s tip ul a tes a n ob l ig a tion to p r ep a r e tr a ns f er p r icing docum enta tion a nd f ol l ow s th e th r ee- tier docum enta tion a p p r oa ch

• r ev enues g ener a ted f r om

a ctiv ities on th e m a r k et.

•

• • a ccor ding to th e F T C ) a r e not a f f ected b y th e T P D L . C ons ider ing th e a b ov e, in ca s e a n A us tr ia n cons tituent entity does not ex ceed th e tur nov er th r es h ol d, th e oth er r ecita l s need to b e

th e oth er h a nd, th e A us tr ia n ta x a uth or ities ca n s til l r eq ues t (a dditiona l ) inf or m a tion neces s a r y to a s s es s th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions in th e cour s e of a ta x a udit. C ons eq uentl y , ev en if th e T P D L does not a p p l y , tr a ns f er p r icing docum enta tion h a s to b e p r ep a r ed a ny w a y .

Obligation to file a CbC report

• • T h er e is no q ua l if y ing com p etent a uth or ity a g r eem ent on th e ex ch a ng e of C b C r ep or ting in f or ce w ith th e ul tim a te p a r ent entity ’ s s ta te of • T h er e h a s b een a s y s tem ic f a il ur e of th e ul tim a te p a r ent entity ’ s s ta te of r es idence (i. e. , th er e is a q ua l if y ing a g r eem ent in p l a ce, b ut th e ex ch a ng e of inf or m a tion w a s s us p ended or th e oth er contr a cting s ta te f a il ed to a utom a tica l l y tr a ns m it C b C r ep or ts ).

3 9


A ust ria

(continued)

des ig na ted b y notice a s th e s ur r og a te p a r ent entity .

• • is in ef f ect. • T h er e is no s y s tem ic f a il ur e r eg a r ding th e ex ch a ng e of inf or m a tion. • r ep or t cov er s ). •

C ont ent of t h e C b C rep ort

inf or m a tion.

Content of the master file and local file

• • D es cr ip tion of th e m ul tina tiona l g r oup ’ s b us ines s • D ocum enta tion of m ul tina tiona l g r oup ’ s inta ng ib l es • •

• D es cr ip tion of th e l oca l cons tituent entity • D ocum enta tion of m a ter ia l contr ol l ed tr a ns a ctions • F ina ncia l I nf or m a tion


4 0

A ust ria

(continued)

L anguage

b e p r ep a r ed in E ng l is h .


A us tr ia n T r a ns f er P r icing G uidel ines , th e m eth od th a t p r ov ides th e h ig h es t deg r ee of cer ta inty f or th e deter m ina tion of a n a r m ’ s - l eng th tr a ns f er p r ice h a s to b e s el ected.

Return disclosures/related-party disclosures I n ca s e of a ta x a udit, th e a uditor s us ua l l y a s k f or a des cr ip tion of m a j or r el a ted- p a r ty tr a ns a ctions , a s w el l a s dis cl os ur e of a l l contr a cts in p l a ce w ith r el a ted p a r ties a nd tr a ns f er p r icing s tudies a v a il a b l e. I n a n incr ea s ing num b er of ca s es , a n ex tens iv e tr a ns f er p r icing q ues tionna ir e is dis cus s ed.

Transfer pricing-specific returns Documentation deadlines

4 1


A ust ria

(continued)

ta x a uditor a t th e b eg inning of a ta x a udit. A s ub m is s ion dea dl ine w a s deter m ined, w h ich coul d v a r y g r ea tl y f r om

ca s e to ca s e (e. g . ,

th e dea dl ine f or s ub m is s ion of th e T P D L w il l b e 3 0 da y s (w h enev er r eq ues ted b y th e ta x a uth or ities or ta x a uditor ). A n ex tens ion of th e dea dl ine s h oul d s til l b e p os s ib l e.

Transfer pricing penalties 4 item s in th e ta b l es in A p p endices 1 to 3 of th e T P D L due to intent com m its a ta x of f ens e. T h e C T L s tip ul a tes p ena l ties of up to s uch ta x of f ens es is ex cl uded b y th e C T L .

th e ta x a uth or ities w il l r eg a r d a tr a ns a ction a s noncom p l ia nt w ith th e a r m ’ s - l eng th cr iter ion, w h ich a l s o incr ea s es th e r is k of a tr a ns f er p r icing a dj us tm ent. I f th e ta x a b l e incom e is incr ea s ed b eca us e th e a r m ’ s - l eng th cr iter ion h a s not b een m et, nondeductib l e l a te- p a y m ent inter es t in th e p a y m ents f or a ny a dditiona l p r ior y ea r f or up to 4 8 m onth s .

Penalty relie T h er e a r e no r el ief p r ov is ions a v a il a b l e. docum enta tion. L a te- p a y m ent inter es t w il l b ecom e due on a ny cor p or a te incom e ta x p a y m ents f or a n a dditiona l p r ior y ea r , r eg a r dl es s of w h eth er th e

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions on a tr a ns f er p r icing a dj us tm ent is us ua l l y s ix y ea r s a f ter th e end of th e ca l enda r y ea r in w h ich th e r el ev a nt

Frequency of tax audit and transfer pricing scrutiny by the tax authority T a x a uth or ities r eg ul a r l y ex a m ine r el a ted- p a r ty tr a ns a ctions a nd tr a ns f er p r ices ch a r g ed. T h er e is a cl ea r tr end tow a r d incr ea s ed a w a r enes s of tr a ns f er p r icing p r ob l em s a m ong ta x a uditor s .


4 2

A ust ria

(continued)

APA opportunity

A P A on th e b a s is of A r ticl e 2 5 (3 ) of th e r es p ectiv e doub l e ta x tr ea ty .

Impact of new OECD BEPS Action 8–10 guideline b etw een th e inter na tiona l a nd na tiona l a r m ’ s - l eng th p r incip l e, th e O E C D G uidel ines do not onl y s er v e a s inter p r eta tiv e g uida nce f or

th e inter na tiona l a nd na tiona l a r m ’ s - l eng th p r incip l e needs to b e dy na m ica l l y inter p r eted (i. e. , new dev el op m ents r eg a r ding th e O E C D

4 3


B ah rain Taxing authority and tax law

Relevant regulations and rulings 44 enter p r is es ).

OECD Guidelines treatmen N ot a p p l ica b l e.






4 4

B ah rain

(continued)







Impact of new OECD BEPS Action 8–10 guidelines N ot a p p l ica b l e

4 5


B angladesh Taxing authority and tax law

• I ncom e T a x O r dina nce, 1 9 8 4 •

4


4 •

4 •

4

4

or ig ina l l y intr oduced in th e F ina nce A ct 2 0 1 2 . T h e p r icing of a ny incom e or ex p ens e a r is ing f r om

inter na tiona l tr a ns a ctions b etw een a s s ocia ted enter p r is es w il l need to b e deter m ined

a r e enter p r is es f or w h ich m or e th a n 2 5 % v oting p ow er is h el d b y th e oth er or a com m on p a r ent h ol ds m or e th a n 2 5 % of v oting p ow er in (a ) C um ul a tiv e a m ount of b or r ow ing f r om

th e r el a ted- p a r ty cons titutes m or e th a n 5 0 % of th e b ook v a l ue of tota l a s s ets of l ender

(b ) C um ul a tiv e a m ount of g ua r a ntee p r ov ided cons titutes m or e th a n 1 0 % of th e b ook v a l ue of th e tota l b or r ow ing s of th e entity in f a v or of w h om g ua r a ntee h a s b een is s ued (c) A p p ointm ent of m em b er s in th e b oa r d of dir ector s / ex ecutiv e dir ector b y th e oth er enter p r is e

(e) O ne enter p r is e h a s th e p r a ctica l a b il ity to contr ol th e decis ion of th e oth er enter p r is e T r a ns f er p r icing p r ov is ions a r e a p p l ica b l e to th e f ol l ow ing ty p es of tr a ns a ctions b etw een a s s ocia ted enter p r is es , w ith a t l ea s t one of th em • P ur ch a s e, s a l e or l ea s e of ta ng ib l e or inta ng ib l e p r op er ty • P r ov is ion of s er v ices • L ending or b or r ow ing m oney • A m utua l a g r eem ent or a r r a ng em ent f or cos t a l l oca tion/ a p p or tionm ent • T r a ns a ctions w ith a th ir d p a r ty w il l b e deem ed tr a ns a ctions b etw een a s s ocia ted enter p r is es if th e th ir d p a r ty h a s a p r ior a g r eem ent w ith th e a s s ocia ted enter p r is e, or if th e ter m s of th e r el ev a nt tr a ns a ction a r e deter m ined in s ub s ta nce b etw een th e th ir d p a r ty a nd th e p er s on or v entur e.


4 6

B angladesh

(continued)

OECD Guidelines treatment F iv e of th e s ix m eth ods p r es cr ib ed in th e l eg is l a tion to com p ute a r m ’ s - l eng th p r ices a r e in conf or m ity w ith th e O E C D G uidel ines .

Documentation requirements A . Transfer p ricing docum ent at ion

• • • • • • T h e na tur e a nd ter m s (incl uding p r ices ) of inter na tiona l tr a ns a ctions • D es cr ip tion of f unctions p er f or m ed, r is k s a s s um ed a nd a s s ets em p l oy ed • • • D es cr ip tion of m eth ods cons ider ed • • D eta il s of tr a ns f er p r icing a dj us tm ents • A ny oth er inf or m a tion or da ta r el a ting to th e a s s ocia ted enter p r is e th a t m a y b e r el ev a nt f or deter m ina tion of th e a r m ’ s - l eng th p r ice T h e a b ov e docum enta tion r eq uir em ents s h a l l not b e a p p l ica b l e in th e ca s e of a ta x p a y er w h os e a g g r eg a te v a l ue of inter na tiona l

B . S t at em ent of I nt ernat ional Transact ions

C . A ccount ant ’ s rep ort

C h a r ter ed A ccounta nt or cos t a ccounta nt w ith in th e tim e a nd f or m a t a s p r es cr ib ed.

4 7


B angladesh

(continued)


Return disclosures/related-party disclosures Transfer pricing-specific returns

Documentation deadlines A . Transfer p ricing docum ent at ion T h er e is no s ta tutor y dea dl ine to s ub m it th e tr a ns f er p r icing docum enta tion. H ow ev er , it needs to b e p r ep a r ed a nd m a inta ined b y ev er y

B . S t at em ent of I nt ernat ional Transact ions

C . A ccount ant ’ s Rep ort


4 8

B angladesh

(continued)

Transfer pricing penalties • ex ceeding 1 % of th e v a l ue of th e inter na tiona l tr a ns a ction. • ta x p a y er f a ces a p ena l ty not ex ceeding 1 % of th e v a l ue of th e inter na tiona l tr a ns a ction. • •

Penalty relief N o p ena l ty r el ief r eg ul a tion h a s b een p r ov ided to da te.


Frequency of tax audit and transfer pricing scrutiny by the tax authority 4 a s th er e is no p r ecedent to s ub s ta ntia te th e na tur e of r is k s .

APA opportunity Impact of new OECD BEPS Action 8–10 guidelines

4 9


B elarus Taxing authority and tax law

Relevant regulations and rulings

• T r a ns a ctions r el a ted to s a l e/ p ur ch a s e of im m ov a b l e p r op er ty a nd h ous ing b onds tr a ns a ctions . • • • • s p ecia l ta x a tion r eg im es or s im il a r a ca l enda r y ea r (ex cl uding indir ect ta x es ). • L a r g e tr a ns a ctions F or eig n tr a de tr a ns a ctions (1 ) of l a r g e ta x p a y er s or (2 ) w ith s tr a teg ic g oods a r e cons ider ed a s s ub j ect to tr a ns f er p r icing contr ol if th eir 4

tim b er .

OECD Guidelines treatment p r icing r ul es do not r ef er to th e O E C D G uidel ines . P r a ctica l a p p l ica tion of tr a ns f er p r icing r ul es m a y th er ef or e b e dif f er ent f r om G uidel ines .


5 0

th e O E C D

B elarus

(continued)

Documentation requirements • F ul l - s cop e tr a ns f er p r icing docum enta tion is to b e p r ep a r ed w ith r es p ect to l a r g e tr a ns a ctions . • tr a ns a ctions . • •

C om p r eh ens iv e inf or m a tion a b out r el a ted p a r ties •

I nf or m a tion a b out th e g r oup (s tr uctur e, des cr ip tion of a ctiv ities , g r oup tr a ns f er p r icing p ol icies ) •

D es cr ip tion of th e tr a ns a ction (contr a ctua l ter m s a nd conditions ) •

D es cr ip tion of g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , a nd tr a dem a r k s

•

F a ctor s th a t im p a ct th e p r ice •

F unctiona l a nd r is k a na l y s is •

• I nf or m a tion a b out r el a ted p a r ties • D es cr ip tion of th e tr a ns a ction (contr a ctua l ter m s a nd conditions ) • D es cr ip tion of g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , a nd tr a dem a r k s • • •

Priorities/pricing methods • • • • •

da ta , a l th oug h th er e is a l a ck of l oca l da ta b a s es a v a il a b l e in th e m a r k et. A t th e s a m e tim e, th e l a w a l l ow s ta x a uth or ities to us e s ecr et com p a r a b l es (cus tom s inf or m a tion, p eer s a na l y s is , etc. ).

5 1


B elarus

(continued)

Return disclosures/related-party disclosure E f f ectiv e f r om

1 J ul y 2 0 1 6 , ta x p a y er s a r e r eq uir ed to inf or m

th e ta x a uth or ities a b out th eir contr ol l ed tr a ns a ctions under ta k en dur ing a

m onth f ol l ow ing th e r ep or ting m onth , w h il e in p a r ticul a r ca s es it ca n dif f er . T h e r ep or ting h a s to b e done on a tr a ns a ction- b y - tr a ns a ction schet-factura

Transfer pricing-specific returns (a t l ea s t m onth l y ) r eg a r dl es s of w h eth er th e v ol um e of tr a ns a ctions ex ceeds th e es ta b l is h ed th r es h ol ds or not. P l ea s e r ef er to th e s ection a b ov e f or m or e deta il s .


• 1 0 w or k ing da y s f r om

th e r eq ues t f or a des k ta x a udit

• p r a cticed f or a des k ta x a udit.

Transfer pricing penalties • • P ena l ties w il l b e im p os ed if a ta x p a y er ’ s incom e is a dj us ted a s a r es ul t of a ta x a udit, a nd if th e ta x p a y er did not p r ov ide th e tr a ns f er p r icing docum enta tion s up p or ting th e p r ices in a contr ol l ed tr a ns a ction. • • T h e p ena l ty of 2 0 % on th e a dditiona l ta x p a y a b l e is a l s o a p p l ied.

Penalty relief P ena l ties ca nnot a p p l y if a ta x p a y er h a s a dj us ted its ta x r etur n a nd p a id outs ta nding ta x l ia b il ity b ef or e a ta x a udit.

Statute of limitations on transfer pricing assessments T h e g ener a l r ul e is th a t th e ta x a uth or ity m a y a udit a ta x p a y er f or a ny num b er of y ea r s th a t a r e not cov er ed b y a p r ior ta x a udit. A s a


5 2

B elarus

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T r a ns f er p r icing m a tter s in contr ol l ed tr a ns a ctions a r e not s ub j ect to s p ecia l tr a ns f er p r icing a udits a nd a r e contr ol l ed w ith in g ener a l ta x a udits .

T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed dur ing a n a udit is cur r entl y unk now n b eca us e of th e nov el ty of th e H ow ev er , des p ite its ea r l y s ta g e, tr a ns f er p r icing a udits a r e ex p ected to incr ea s e in f r eq uency , a s tr a ns f er p r icing is a top p r ior ity f or th e

APA opportunity C ur r entl y , no A P A op p or tunities a r e f or es een.


5 3


B elgium Taxing authority and tax law

Relevant regulations and rulings 4 4

a p p ended to th e cor p or a te incom e ta x r etur n. 4 44

4

4

p r icing docum enta tion r ul es . th e notes or a nnex s ection of th eir s ta tutor y a nnua l a ccounts .

ex is ting p a tent incom e deduction (P I D ) r eg im e. T h is new innov a tion r eg im e is ex p ected to b e intr oduced w ith r etr oa ctiv e ef f ect a s f r om ta x p a y er s w il l h a v e th e r ig h t to continue to a p p l y th e 8 0 % p a tent incom e deduction until 3 0 J une 2 0 2 1 w ith r eg a r d to incom e der iv ed th a t h a v e b een a p p l ied f or b ef or e 1 J ul y 2 0 1 6 b ut a r e onl y ef f ectiv el y ob ta ined a f ter th a t da te. tex t of th e l a w r eg a r ding th e new innov a tion incom e is not y et a v a il a b l e. H ow ev er , it is env is a g ed th a t th e new r eg im e w il l (i) b r oa den th e s cop e of th e deduction to incl ude, in a ddition to p a tents , s of tw a r e, etc. , (ii) a p p l y to th e net a m ount of q ua l if y ing I P incom e a nd (iii) incl ude incom e f r om q ua l if y ing I P a s s ets onl y if th e ta x p a y er h a s incur r ed q ua l if y ing ex p ens es b y its el f r el a ting to th e dev el op m ent of q ua l if y ing incom e w il l b e s ub j ect to a n ef f ectiv e ta x r a te of 5 . 1 % or l es s .


5 4

B elgium

(continued)

ta x a b l e if th e incom e w er e r eceiv ed b y r es idents (in b oth tr ea ty a nd non- tr ea ty s itua tions ).

• • A ta x p a y er s ub j ect to cor p or a te ta x • A l eg a l entity •

• O r • T h e s cop e of th e ca tch - a l l cl a us e w il l b e na r r ow ed, a s it w il l onl y b e a p p l ica b l e w h en th e s er v ice p r ov ider h a s a dir ect or indir ect l ink of

l eg a l a nd econom ic contr ol . de minimis regime

h er p r of es s iona l a ctiv ities . T h e new ca tch - a l l p r ov is ion, th er ef or e, ca n no l ong er b e a p p l ica b l e to s er v ices p r ov ided to a n indiv idua l w h o does not a ct w ith in th e f r a m ew or k of h is or h er p r of es s iona l a ctiv ity . T h e new cl a us e is ex p ected to a p p l y a s f r om

1 J ul y 2 0 1 6 .

• A dm inis tr a tiv e g uidel ines a b out th e of f ens iv e a s p ects of tr a ns f er p r icing , is s ued in 1 9 9 9 • A dm inis tr a tiv e g uidel ines a b out th e def ens iv e a s p ects of tr a ns f er p r icing , is s ued in 2 0 0 0 a nd 2 0 0 3 • • A dm inis tr a tiv e g uidel ines r eg a r ding th e f or m a l cr ea tion of a tr a ns f er p r icing a udit tea m

w ith in th e ta x a uth or ity , is s ued in J ul y 2 0 0 6

• A dm inis tr a tiv e g uidel ines a b out tr a ns f er p r icing docum enta tion, th e tr a ns f er p r icing code of conduct a nd tr a ns f er p r icing a udits , is s ued in N ov em b er 2 0 0 6

5 5


B elgium

(continued)

OECD Guidelines treatment I n its a dm inis tr a tiv e g uidel ines , th e ta x a uth or ity indica tes th a t ta x p a y er s g ener a l l y s h oul d f ol l ow th e g uida nce m entioned in th e O E C D a p p l ica b l e v er s ion of th e O E C D G uidel ines h a s b een m a de b y th e ta x a uth or ity , in p r a ctice, it is g ener a l l y cons ider ed th a t th e m os t r ecent

tr a ns f er p r icing el em ents m a y dif f er f r om

oth er countr ies ’ inter p r eta tion.

Documentation requirements th a n w h a t w a s incl uded in th e 1 9 9 9 a dm inis tr a tiv e g uidel ines (w h ich s ta te th a t docum enta tion s h oul d dem ons tr a te th a t th e ta x p a y er ’ s p r icing com p l ies w ith th e a r m ’ s - l eng th p r incip l e to a v oid a n indep th tr a ns f er p r icing a udit), th e l a w of 1 J ul y 2 0 1 6 intr oduced f or m a l tr a ns f er p r icing docum enta tion r eq uir em ents .

• • O r • A v er a g e a nnua l num b er of em p l oy ees of 1 0 0 in f ul l - tim e eq uiv a l ents (F T E s ) s h oul d conta in a n ov er v iew of th e m ul tina tiona l g r oup of com p a nies , incl uding th e na tur e of its b us ines s op er a tions , its inta ng ib l e a s s ets ,

a na l y s es , com p a r a b il ity s tudies a nd oth er inf or m a tion m us t a l s o b e p r ep a r ed a nd a tta ch ed to th e ta x r etur n. T h is deta il ed f or m

is

T h er ef or e, com p a nies ex ceeding th e a b ov em entioned th r es h ol ds need to s ub m it m a nda tor y tr a ns f er p r icing f or m s w ith th eir cor p or a te • •


5 6

B elgium

(continued)

m ea s ur es of econom ic a ctiv ity . I n a ddition, th e a ctiv ities of a l l entities in ea ch countr y s h oul d b e dis cl os ed.

• • of r es idence of th e ul tim a te p a r ent com p a ny . • f a il ur e, no ef f ectiv e ex ch a ng e of inf or m a tion does ta k e p l a ce.

G er m a n), or in E ng l is h (cons ider ing th a t a tr a ns l a tion m ig h t b e r eq ues ted). F ina l l y , w ith r es p ect to com p a nies not ex ceeding th e a b ov em entioned th r es h ol ds b ut h a v ing inter com p a ny tr a ns a ctions , th e ol d g uida nce

• A ctiv ities of th e g r oup , incl uding com p etitiv e p os ition, l ev el of m a r k et, econom ic cir cum s ta nces a nd b us ines s s tr a teg ies • • F unctiona l a na l y s is , incl uding a n ov er v iew of th e f unctions , r is k s a nd inta ng ib l es • E conom ic a na l y s is s ections r eg a r ding th e tr a ns f er p r icing m eth ods us ed

Priorities/pricing methods I n p r incip l e, ta x p a y er s a r e f r ee to ch oos e a ny O E C D tr a ns f er p r icing m eth od a s l ong a s it r es ul ts in a r m ’ s - l eng th p r icing f or th e F or m a l l y , ta x p a y er s a r e not r eq uir ed to us e m or e th a n one m eth od or dem ons tr a te th a t m ul tip l e m eth ods w er e cons ider ed, b ut s uch docum ented r ev iew s s tr ong l y s up p or t th eir p os ition to a p p l y a p a r ticul a r m eth od up on a n a udit. I n th is r es p ect, th e ev ol v ing g uida nce f r om

th e O E C D s h oul d a l s o b e cons ider ed.

5 7


B elgium

(continued)

Return disclosures/related-party disclosure

D ecr ee (it cur r entl y conta ins a b out 3 0 j ur is dictions th a t eith er do not l ev y cor p or a te incom e ta x or h a v e a nom ina l cor p or a te incom e ta x r a te th a t is l ow er th a n 1 0 % ). A m a nda tor y f or m (N o. 2 7 5 F ) f or r ep or ting dir ect or indir ect p a y m ents to p er s ons es ta b l is h ed in ta x h a v ens is to b e a tta ch ed to th e ta x r etur n. F a il ur e to r ep or t p a y m ents r es ul ts in nondeductib il ity of s uch p a y m ents . I n a ddition, th es e

• C om p a nies m us t p r ov ide inf or m a tion r eg a r ding th e na tur e a nd b us ines s p ur p os e of th eir r el ev a nt, of f - b a l a nce s h eet a r r a ng em ents ; if th e com p a ny . T h is r eq uir em ent is a p p l ica b l e in ca s es of intr a g r oup g ua r a ntees , p l edg es , f a ctor ing l ia b il ities , tr a ns a ctions w ith s p ecia l p ur p os e entities (w h eth er tr a ns p a r ent or not) a nd of f s h or e entities . • th e ty p e of com p a ny , a dif f er ent s cop e of inf or m a tion is to b e p r ov ided, r a ng ing f r om

m er el y l is ting s uch tr a ns a ctions to m entioning th e

a r m ’ s - l eng th na tur e of th eir inter com p a ny tr a ns a ctions . N oncom p l ia nce m a y r es ul t in dir ector l ia b il ity . I n a ddition, a ny s uch dis cl os ur es a r e a n ex cel l ent s our ce of inf or m a tion to initia te a (ta r g eted) tr a ns f er p r icing a udit.

Transfer pricing-specific returns

Documentation deadlines • •

docum enta tion a nd its contents s o a s to a s cer ta in th e cor r ectnes s of th e ta x a b l e incom e. A ta x p a y er h a s , in p r incip l e, onl y one m onth to p r ov ide s uch inf or m a tion. F or v a l id r ea s ons , th e one- m onth p er iod ca n b e ex tended.


5 8

B elgium

(continued)

Transfer pricing penalties th e new tr a ns f er p r icing docum enta tion ob l ig a tions incr ea s es th e l ik el ih ood of a tr a ns f er p r icing a udit. p r icing f or m s ) r es ul ts in a n incom p l ete or ina ccur a te ta x r etur n, w h ich m a y l ea d to th e r ev er s a l of th e b ur den of p r oof . T h e g ener a l ta x p ena l ty f r a m ew or k a p p l ies to tr a ns f er p r icing a dj us tm ents . T h es e p ena l ties v a r y f r om 1 0 % to 2 0 0 % (in ex cep tiona l ca s es ) of a dditiona l ta x . T h e r a te dep ends on th e deg r ee of intent to a v oid ta x or th e deg r ee of th e com p a ny ’ s g r os s neg l ig ence. F ur th er m or e, f or l a te p a y m ents , inter es t is due on a dditiona l ta x a s s es s m ents (incl uding a s s es s m ents r es ul ting f r om a dj us tm ent).

a tr a ns f er p r icing

Penalty relief p r incip a l l y w ith th e ta x a uth or ity , th e ta x p a y er needs to p r ov ide a l l inf or m a tion neces s a r y to a l l ow th e ta x a uth or ity to v er if y th e com p a ny ’ s ta x p os ition. T h er ef or e, b eca us e a dditiona l ta x a s s es s m ents l a r g el y dep end on th e deg r ee of intent to a v oid ta x es or on th e com p a ny ’ s g r os s neg l ig ence, p ena l ties m a y b e r educed or el im ina ted if th e ta x p a y er ca n dem ons tr a te its intent to es ta b l is h tr a ns f er p r ices in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e, w h ich w oul d g ener a l l y b e th e ca s e th r oug h th e a v a il a b il ity of deta il ed l oca l docum enta tion r ep or ts .

Statute of limitations on transfer pricing assessments T h e g ener a l r ul es r eg a r ding th e s ta tute of l im ita tions a p p l y to tr a ns f er p r icing a s s es s m ents . T h er ef or e, th e ta x a uth or ity is entitl ed to m a k e a dditiona l a s s es s m ents f or a p er iod of th r ee y ea r s , s ta r ting f r om th e cl os ing of th e a ccounting y ea r . H ow ev er , in th e ca s e of f r a ud b eing cons ider ed, th e ta x a uth or ity h a s th e r ig h t to a dj us t th e incom e dur ing a s ev en- y ea r p er iod, p r ov ided th a t th e ta x p a y er r eceiv ed p r ior notice of s er ious indica tions of f r a ud. I n ca s e of ta x l os s es , th e s ta tutes of l im ita tions do not r un until s itua tions .

Frequency of tax audit and transfer pricing scrutiny by the tax authority

4 p r icing a udit tea m

a b out ev er y tr a ns f er p r icing inv es tig a tion th ey p er f or m .

5 9


B elgium

(continued)

• • • • T h e us e of ta x h a v ens or l ow - ta x - r a te countr ies • • C ir cul a r s tr uctur es • I nv oices f or s er v ices s ent a t th e end of th e y ea r (i. e. , m a na g em ent s er v ices )

O cca s iona l l y , th e tr a ns f er p r icing a udit tea m p a r ticip a tes in cr os s - b or der tr a ns f er p r icing a udits (e. g . , w ith r es p ect to b us ines s r es tr uctur ing s ), w h ich a r e h el d j ointl y w ith th e ta x a uth or ities of (m os tl y ) neig h b or ing countr ies . g ener a l ta x a udits . T h is is th e ca s e r eg a r dl es s of w h eth er dedica ted tr a ns f er p r icing ins p ector s s up p or t th e ta x ins p ector s .

APA opportunity A dditiona l g uida nce in th is r es p ect is p r ov ided th r oug h v a r ious r oy a l decr ees . 4

A dv a nce D ecis ions .

Impact of new OECD BEPS Action 8–10 guidelines I n its a dm inis tr a tiv e g uidel ines , th e ta x a uth or ity indica tes th a t ta x p a y er s g ener a l l y s h oul d f ol l ow th e g uida nce m entioned in th e O E C D a p p l ica b l e v er s ion of th e O E C D G uidel ines h a s b een m a de b y th e ta x a uth or ity , in p r a ctice, it is g ener a l l y cons ider ed th a t th e m os t r ecent


6 0

B oliv ia Taxing authority and tax law Servicio de Impuestos Nacionales)

Relevant regulations and rulings • A ct N os . 5 1 6 a nd 5 4 9 • •

OECD Guidelines treatment O E C D r ul es a r e not ex p r es s l y a ccep ted, b ut th e cur r ent tr a ns f er p r icing r eg im e is b a s ed on th e O E C D G uidel ines .

Documentation requirements (C I T ) due da tes . 4 • A n ov er v iew of th e ta x p a y er a nd com p l ete deta il s of r el a ted p a r ties • A des cr ip tion of tr a ns a ctions w ith r el a ted p a r ties • A des cr ip tion of p r icing p r ocedur es b etw een r el a ted p a r ties • A n ov er v iew of th e ta x p a y er f r om

com m er cia l a nd indus tr ia l p oints of v iew

Priorities/pricing methods Return disclosures/related-party disclosures

6 1


B oliv ia

(continued)

Transfer pricing-specific returns F or m

6 0 1 .

Documentation deadlines L ine o f b u s ines s

T ax y ear - end

A g r icul tur e a nd a g r ib us ines s

3 0 J une

A l l oth er b us ines s es

3 1 D ecem b er

Transfer pricing penalties 4

Penalty relief Statute of limitations on transfer pricing assessments

• 4 y ea r s in 2 0 1 2 • 5 y ea r s in 2 0 1 3 • 6 y ea r s in 2 0 1 4 • 7 y ea r s in 2 0 1 5 • 8 y ea r s in 2 0 1 6 • 9 y ea r s in 2 0 1 7 • 1 0 y ea r s in 2 0 1 8

F ur th er m or e, tr a ns f er p r icing a udits ca n b e p er f or m ed w ith in a p er iod of tw o y ea r s .



6 2

B oliv ia

(continued)

APA opportunity Impact of new OECD BEPS Action 8–10 guideline

6 3


B raz il Taxing authority and tax law Receita Federal) 4 a nd N or m a tiv e I ns tr uction (I N ) 1 . 3 1 2 / 2 0 1 2


4 p r ov iding th r ee m eth ods f or im p or ts a nd ex p or ts of a s s ets , g oods a nd s er v ices . • 1 . f or unr el a ted p a r ties or b etw een unr el a ted p a r ties 2 . 3 . • 1 . p a r ties dur ing th e s a m e y ea r 2 . 3 . • N or m a tiv e I ns tr uction 2 4 3 / 2 0 0 2 p r ov ided th e m os t r el ev a nt inter p r eta tions a nd w a s v a l id until N or m a tiv e I ns tr uction 1 . 3 1 2 / 2 0 1 2 w a s is s ued in 2 0 1 2 , w ith f ur th er a m endm ents b y N or m a tiv e I ns tr uctions 1 . 3 2 1 / 2 0 1 3 , 1 . 3 2 2 / 2 0 1 3 , 1 . 3 9 5 / 2 0 1 3 , 1 . 4 3 1 / 2 0 1 3 a nd 1 .4 9 8 / 2 0 1 4 . • • • •

4 g oods , s er v ices or r ig h ts , dep ending on th e com p a ny ’ s indus tr y s ector •

4 •

P h a r m a ch em ica l s a nd p h a r m a ceutica l p r oducts •

•

O p tica l , p h otog r a p h ic a nd cinem a tog r a p h ic eq uip m ent a nd ins tr um ents

• •

E x tr a ction of oil a nd na tur a l g a s a nd der iv a tiv e p r oducts


6 4

B raz il

(continued)

Relevant regulations and rulings (continued) • •

C h em ica l p r oducts

•

G l a s s a nd g l a s s p r oducts •

P ul p , p a p er a nd p a p er p r oducts •

• •

O th er indus tr y s ector s

• • •

• • •

T h e p r ev ious l y s el ected tr a ns f er p r icing m eth odol og y ca n’ t b e ch a ng ed once th e ta x ins p ection h a s b een initia ted, unl es s th e ta x a uth or ities dis q ua l if y th e m eth od.

• p a r ties . • • • • • 4 g uida nce on th e a p p l ica tion of th e new L a w 1 2 . 7 1 5 / 2 0 1 2 a nd h ow to ex er cis e th e p ow er to deter m ine cer ta in r ul es , w h er e th e l a w p r ov ides th e a uth or ity . • • •

I nter com p a ny a g r eem ents enter ed into b ef or e 3 1 D ecem b er 2 0 1 2 w il l f ol l ow th e p r ev ious r ul es (L a w 9 . 4 3 0 / 1 9 9 6 ), w h er eb y th e

p l us 3 % . 6 5


B raz il •

(continued)

I nter com p a ny a g r eem ents enter ed into a s of 1 J a nua r y 2 0 1 3 or a f ter w il l b e s ub j ect to th e new L a w 1 2 . 7 6 6 / 2 0 1 2 , w h ich dif f er entia tes inter es t r a tes dep ending on th e under l y ing cur r ency of ea ch a g r eem ent a nd a l s o a l l ow s f or a v a r ia b l e s p r ea d to cons ider ed a s a new tr a ns a ction th a t is th er ef or e s ub j ect to th e new r eg ul a tions . • not incl uded in th e l a w a nd is th er ef or e s ub j ect to dif f er ent inter p r eta tions .

•

4

• • • b y th e p r ev ious r ul es a nd w il l not b e s ub j ect to th e new r eq uir em ents . P l ea s e note th a t th e r enew a l or r eneg otia tion of ex is ting a g r eem ents s h oul d b e cons ider ed a s a new tr a ns a ction a nd th er ef or e b e s ub j ect to th e new r eg ul a tions . • • tr a ded in th e com m odities a nd f utur es ex ch a ng es a r e l is ted in A p p endix I I . •

E s ta b l is h ed th e p os s ib il ity of a dj us tm ents in r el a tion to v a r ia tions of q ua l ity , f ea tur es a nd content of th e s ub s ta nce of th e p r oduct s ol d. •

E s ta b l is h ed th a t in th e a b s ence of a q uota tion on th e tr a ns a ction da te, th e q uota tion to b e us ed is th e l a tes t one a v a il a b l e. I n a ddition, in ca s e it is not p os s ib l e to identif y th e tr a ns a ction da te, th e da te to b e us ed is th a t of th e im p or t docum enta tion or th e p r oduct s h ip da te f or ex p or t p ur p os es . •

E s ta b l is h ed th a t, in th e a b s ence of a q uota tion f or th e g oods in th e com m odities a nd f utur es ex ch a ng es (A p p endix I I ), th e p r ices of (A p p endix I I I ).

• I N 1 . 4 9 8 / 2 0 1 4 b r oug h t b a ck s om e com m odities (cop p er , ir on, tin, m a ng a nes e) to A p p endix I th a t h a d b een r em ov ed b y I N 1 . 3 9 5 / 2 0 1 3 •

th e r ul ing )1 cos ts a nd ex p ens e a p p or tionm ent. •

D eductib il ity g uidel ines on s h a r ed s er v ices cos ts a nd ex p ens es 2

• r eim b ur s em ent.

1

•

T h e r ul ing incr ea s es ta x p a y er s ’ com f or t l ev el to ex ecute cos t- s h a r ing a g r eem ents , cl a r if y ing th a t it is p os s ib l e to concentr a te, in a s ol e entity , on ex p enditur es contr ol r el a ted to cor e s up p or t s er v ices (e. g . , h um a n r es our ces , a ccounting , l eg a l ).

4 2

4


6 6

B raz il

(continued)

• •

C ons ider ed neces s a r y , nor m a l a nd us ua l f or th e g r oup entities ’ b us ines s •

P a id a nd p r op er l y s up p or ted b y a ny a v a il a b l e docum enta tion • p a r ties • a cq uir ed b y th e s h a r ed s er v ices center

• I t s h oul d b e m entioned th a t a l l com p a nies s h oul d k eep p r op er b ook k eep ing of a l l th e a cts dir ectl y r el a ted to th e ex p enditur es ’ a p p or tionm ent. • p or tion p a id b y ea ch com p a ny .

OECD Guidelines treatment b a s ed m eth ods a nd th e concep t of a f unctiona l a nd r is k a na l y s is is not incl uded.

or cos t- p l us ) f or ea ch im p or ted (or ex p or ted) p r oduct, s er v ice or r ig h t.

Documentation requirements 4 f or m s th a t r eq uir e ta x p a y er s to dis cl os e deta il ed inf or m a tion r eg a r ding th eir m a in inter com p a ny im p or t a nd ex p or t tr a ns a ctions . A s p a r t of th es e contem p or a neous docum enta tion r eq uir em ents , ta x p a y er s need to dis cl os e th e tota l tr a ns a ction v a l ues of th e m os t tr a ded p r oducts , s er v ices or r ig h ts ; th e na m es a nd l oca tions of th e r el a ted tr a ding p a r tner s ; th e m eth odol og y us ed to tes t ea ch tr a ns a ction; th e ca l cul a ted b ench m a r k p r ice; th e a v er a g e a nnua l tr a ns f er p r ice; a nd th e a m ount of a ny r es ul ting a dj us tm ent. docum ent th eir tr a ns f er p r ices b y ea ch p r oduct, s er v ice a nd r ig h t. F or p r oducts , th e ta x p a y er s h oul d docum ent ea ch p r oduct us ing th e cus tom s a nd indir ect ta x p ur p os es .

of th e f ol l ow ing ca l enda r y ea r ).

6 7


B raz il

(continued)

Priorities/pricing methods m eth od (Método do Preço de Revenda menos Lucro) to docum ent a com p a ny ’ s tr a ns f er p r ices .

m eth ods to r educe th e p otentia l tr a ns f er p r ice ex p os ur e. T a x p a y er s m a y ch oos e w h ich ev er m eth od s uits th em b es t. T h is a p p r oa ch p r ov ides ta x p a y er s w ith th e op p or tunity to f ocus on th os e p r oducts a nd tr a ns a ctions th a t g ener a te th e h ig h es t a dj us tm ents under th e or a v oiding th e a dj us tm ent). T h e oth er m eth ods of ten a r e m or e f a v or a b l e, a s th e r es ul t is m or e l ik el y to b e in l ine w ith inter na tiona l

docum enta tion to s up p or t th e a p p l ica tion of th e P I C a nd C P L m eth ods . a dditiona l tr a ns f er p r icing m eth ods . E x p or ts a r e ex em p t f r om a p p l ica tions of th e tr a ns a ctiona l tr a ns f er p r icing r ul es if th ey m eet one of th e th r ee s a f e h a r b or s , w h ich a p p l y (1 ) to s m a l l ex p or ts , com p a r ed w ith th e ov er a l l b us ines s (l es s th a n 5 % of r ev enue is ex p or ted to a nd, a l s o, th e inter com p a ny ex p or t tr a ns a ctions ca nnot ex ceed 2 0 % of tota l net ex p or t tr a ns a ctions , a nd th e l a s t a p p r oa ch is (3 ) w h en th e a v er a g e p r ice of ex p or ts is a t l ea s t 9 0 % of th e a v er a g e dom es tic s a l es p r ice. I f a s a f e h a r b or is not m et, us ua l l y th e cos t- p l us m eth od F or tr a ns a ctions of p r oducts cons ider ed to b e com m odities , th e s a f e h a r b or is not a p p l ica b l e. F or inter com p a ny im p or t a nd ex p or t tr a ns a ctions , no a dj us tm ent w il l b e r eq uir ed a s l ong a s th e a ctua l tr a ns f er p r ice does not ex ceed th e m eth ods ), th e div er g ence m a r g in is r educed to 3 % . I t is im p or ta nt to note th a t, under th e new r ul es intr oduced b y L a w 1 2 . 7 1 5 / 2 0 1 2 , th e ta x p a y er is b ound to th e tr a ns f er p r icing m eth od ch os en, a nd a ch a ng e of m eth od dur ing a ta x a udit is a ccep ted onl y f or y ea r s 2 0 1 2 onw a r d if th e ta x a uditor a p p l ies a dif f er ent m eth od.

Return disclosures/related-party disclosures of th e nex t ca l enda r y ea r ), a t w h ich tim e th e com p a ny w il l a l s o h a v e to dis cl os e th e tr a ns f er p r icing m eth ods ch os en a nd a ny r el a ted inf or m a tion.



6 8

B raz il

(continued)

Documentation deadlines y ea r .

Transfer pricing penalties T h e a m ount of th e p ena l ty m a y b e up to 2 0 % of th e om itted ta x (or 0 . 3 3 % p er da y ) if th e ta x p a y er p a y s th e r el a ted ta x es l a te b ut b ef or e f r om

7 5 % to 2 2 5 % of th e om itted ta x es .

Penalty relief C ur r entl y , no p ena l ty r el ief is a v a il a b l e.


Frequency of tax audit and transfer pricing scrutiny by the tax authority v ol um es of a ccounting a nd tr a ns a ction da ta .

b ecom ing incr ea s ing l y s op h is tica ted in th eir a udit a p p r oa ch es a s th ey g r ow in num b er a nd dev el op ex p er ience.

6 9


B raz il

(continued)

APA opportunity C ur r entl y , th er e is no op p or tunity to p ur s ue a n A P A . I n cer ta in ca s es , unil a ter a l r ul ing s on th e inter p r eta tion of l a w , not on th e a ctua l p r ice to b e a p p l ied, a r e p os s ib l e.

r eg ul a tions h a v e b een is s ued y et.

Impact of new OECD BEPS Article 8–10 guidelines da ta f r om

m ul tip l e s our ces to v er if y a nd a udit a ta x p a y er ’ s tr a ns a ctions . T h es e incl ude num er ous da ta b a s es , w h ich tr a ck th e im p or ta tion


7 0

B ulgaria Taxing authority and tax law

Relevant regulations and rulings • • •

4 2 0 0 6 •

ta x a b l e b a s e th a n w h a t w oul d h a v e b een a ch iev ed in unr el a ted- p a r ty tr a ns a ctions , th e ta x a uth or ities w il l a dj us t th e ta x a b l e b a s e a ccor ding l y . F ur th er m or e, under A r ticl e 1 6 of th e C I T A , w h en one or m or e tr a ns a ctions , incl uding b etw een unr el a ted p a r ties , h a v e b een concl uded tr a ns a ctions , cer ta in ter m s or th eir l eg a l f or m . I ns tea d, th e ta x a b l e a m ount th a t w il l b e cons ider ed w oul d b e ob ta ined in a m a r k etcus tom a r y w a y of th e r el ev a nt ty p e a t m a r k et p r ices a nd is intended to a ch iev e th e s a m e econom ic r es ul t w ith out l ea ding to l ow er or no ta x .

dur ing th eir inv es tig a tions .

OECD Guidelines treatment w h ich th e h ier a r ch y of m eth ods is a b ol is h ed, h a s not y et b een intr oduced in th e l oca l tr a ns f er p r icing l eg is l a tion.

Documentation requirements T a x p a y er s b ea r th e b ur den of p r oof r eg a r ding th e a r m ’ s - l eng th na tur e of th e contr ol l ed p r ice a nd m us t p r es ent a l l r el ev a nt ev idence. I f th e ta x p a y er to es ta b l is h th e tr a ns f er p r ice. I f th ey dis a g r ee w ith th e tr a ns f er p r ice a p p l ied, th ey s h oul d com e up w ith ev idence of th e m a r k et p r ice th ey cons ider a p p r op r ia te, b a s ed on a ny r ea dil y a v a il a b l e p ub l ic inf or m a tion.

7 1


B ulgaria

(continued)

• • ch a r ts of th e g r oup ) •

E conom ic r ol e of th e div is ions w ith in th e g r oup

• • • dev el op m ent, s ucces s f a ctor s a nd r is k s ) •

F unctiona l a na l y s is of th e com p a ny • •

F ina ncing of th e enter p r is e

• • p enetr a tion p ol icy to g a in a s h a r e of a p a r ticul a r m a r k et) • countr ies inv ol v ed, s p ecia l ter m s a nd conditions • • •

A na l y s is of m eth ods a nd a p r es enta tion of th e tr a ns f er p r icing m eth od us ed • conditions

Priorities/pricing methods • • •

ca s es in w h ich a p p l y ing th e tr a ditiona l m eth ods p r oduces a n uns a tis f a ctor y r es ul t.


7 2

B ulgaria

(continued)


th em , a s w el l a s th e r el a ted- p a r ty tr a ns a ctions . s h oul d b e p a r ties w h er e one ex er cis es contr ol ov er th e oth er , w h er ea s f or ta x p ur p os es , p a r ties w il l b e r el a ted not onl y in th e ca s e of contr ol , b ut a l s o ev en in a ca s e w h er e one of th e p a r ties h ol ds dir ectl y 5 % of th e v oting s h a r es of th e oth er p a r ty .

• • C er ta in ty p es of r el a tiv es • E m p l oy er s a nd em p l oy ees • • P er s ons w h er e one of th em

p a r ticip a tes in th e m a na g em ent of th e oth er or its s ub s idia r y

• P er s ons in w h os e m a na g em ent or contr ol l ing b ody p a r ticip a tes one a nd th e s a m e p er s on (l eg a l or na tur a l p er s on), incl uding ca s es w h en th e na tur a l p er s on is a r ep r es enta tiv e of a noth er p er s on • A com p a ny a nd a p er s on, w h er e th e p er s on ow ns dir ectl y m or e th a n 5 % of th e com p a ny ’ s s h a r es w ith v oting r ig h ts • • P er s ons w h os e a ctiv ity is contr ol l ed b y a th ir d p er s on or its s ub s idia r y • P er s ons ex er cis ing j oint contr ol ov er a th ir d p er s on or its s ub s idia r y • P er s ons w h er e one of th em

is a com m er cia l r ep r es enta tiv e of th e oth er

• P er s ons w h er e one of th em

h a s m a de a dona tion to th e oth er

• P er s ons w h o p a r ticip a te (dir ectl y or indir ectl y ) in th e m a na g em ent, th e contr ol or th e ca p ita l of a noth er p er s on or p er s ons , th us b eing a b l e to neg otia te ter m s dif f er ent f r om th e r eg ul a r ones • •

one • O w ns dir ectl y or indir ectl y , or under a n a g r eem ent w ith a noth er p er s on, m or e th a n h a l f of th e v otes a t th e g ener a l m eeting of a noth er p er s on • H a s th e p os s ib il ity to deter m ine dir ectl y or indir ectl y m or e th a n h a l f of th e m em b er s of th e m a na g ing or contr ol l ing b ody of a noth er p er s on • H a s th e p os s ib il ity to m a na g e, incl uding th r oug h or tog eth er w ith a s ub s idia r y , in a ccor da nce w ith a p a r ticul a r s ta tute or contr a ct, th e a ctiv ity of a noth er p er s on • A s a s h a r eh ol der or a p a r tner in a n entity , contr ol s indep endentl y , in a ccor da nce w ith a dea l m a de w ith oth er p a r tner s or s h a r eh ol der s of th e s a m e entity , m or e th a n h a l f of th e v otes a t th e g ener a l m eeting of th is entity •

7 3


B ulgaria

(continued)

Transfer pricing-specific returns 4 inf or m a tion a b out tr a ns a ctions w ith dom es tic a nd nonr es ident r el a ted p a r ties , a s w el l a s w ith of f s h or e com p a nies .

Documentation deadlines a udit or ta x docum enta tion r ev iew w h en a ta x r ef und or ta x r el ief under a doub l e ta x conv ention is cl a im ed). I n th e cour s e of a tr a ns f er p r icing a udit, th e ta x a uth or ities coul d r eq ues t docum ents a nd inf or m a tion w ith in a cer ta in p er iod. T h e inf or m a tion r eq ues ted us ua l l y concer ns th e g r oup ’ s s tr uctur e, th e a udited com p a ny a nd its a ctiv ities , a na l y s is of tr a ns a ctions inv ol v ing r el a ted p a r ties , th e f unctions p er f or m ed in r el a tion to th os e contr ol l ed tr a ns a ctions , a nd p r oof a nd a w r itten ex p l a na tion w ith r eg a r d to th e tr a ns f er p r icing m eth ods 4


tr a ns a ctions is not a t a r m ’ s - l eng th .

ex p ens e w oul d b e cons ider ed a deem ed div idend a nd, th us , s ub j ect to a 5 % w ith h ol ding ta x .

• •

N ot b us ines s - r el a ted O r •

I n ex ces s of m a r k et p r ice l ev el s •

T h e l oa n p r incip a l ex ceeds th e eq uity of th e b or r ow er a s of 3 1 D ecem b er of th e p r eceding y ea r

• • • •

T h e r ep a y m ent of th e l oa n dep ends on s a tis f a ction of oth er cr editor s ’ cl a im s or on p a y m ent of div idends


7 4

B ulgaria

(continued)

Penalty relief T h is a l l ow s ta x p a y er s to s el f - a dj us t a ny ov er p r iced g r oup tr a ns a ctions w ith no th r ea t of p ena l ties .

Statute of limitations on transfer pricing assessments 1


APA opportunity N o b inding r ul ing or A P A op p or tunities a r e cur r entl y a p p l ica b l e.

l im ited, b eca us e th e ta x a uth or ities r ef us e to p r ov ide a ny op inion a b out tr a ns a ctions th a t h a v e not y et b een s tr uctur ed a nd docum ented.


1

2 0 1 2 .

7 5


C am eroon Taxing authority and tax law

Relevant regulations and rulings C ir cul a r on th e F ina nce L a w b y th e G ener a l D ir ector of T a x a tion 4

OECD Guidelines treatment T h e O E C D G uidel ines on tr a ns f er p r icing m a y b e r el ied up on to deter m ine th e a r m ’ s - l eng th na tur e of inter na tiona l tr a ns a ctions , a nd s up p or ting docum enta tion s h oul d b e p r ep a r ed.

Documentation requirements 4 p r ov ided b y th e A dm inis tr a tion, th e s ta tem ent of s h a r es w h ich th ey ow n in oth er com p a nies w h er e s uch s h a r es do not ex ceed 2 5 % of th eir s h a r e ca p ita l . T h ey s h a l l a tta ch a deta il ed s ta tem ent of tr a ns a ctions w ith th e com p a nies w h ich contr ol th em or w h ich a r e under th eir contr ol , b e th ey in C a m er oon or a b r oa d. F or th e a p p l ica tion of th is p r ov is ion, th e notion of contr ol m us t b e under s tood a s us ed in

• A s ta tem ent of ow ner s h ip in oth er com p a nies if th e ow ner s h ip ex ceeds 2 5 % of th eir s h a r e ca p ita l . T h e s ta tem ent s h oul d b e a ccom p a nied • •

A g ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding th e ch a ng es th a t occur r ed dur ing th e y ea r a udited

• • • •

A g ener a l des cr ip tion of th e f unctions p er f or m ed a nd r is k s a s s um ed b y th e r el a ted com p a nies , a s th ey a f f ect th e com p a ny A l is t of k ey inta ng ib l e a s s ets , incl uding p a tents , tr a dem a r k s , tr a de na m es a nd k now - h ow r el a ted to th e com p a ny A g ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy of th e g r oup

•

•

•

A g ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding th e ch a ng es th a t occur r ed dur ing th e y ea r a udited •

A des cr ip tion of th e tr a ns a ctions w ith th e r el a ted com p a nies , incl uding th e na tur e a nd a m ount of tr a ns f er s , incl uding r oy a l ties A l is t of cos t- s h a r ing a g r eem ents a nd, if a p p l ica b l e, a cop y of th e p r el im ina r y a g r eem ents on tr a ns f er p r icing a nd r es cr ip ts r el a ting to th e deter m ina tion of tr a ns f er p r ices a f f ecting th e r es ul ts of th e com p a ny


7 6

C am eroon

(continued)

•

A p r es enta tion of th e m eth od f or deter m ining tr a ns f er p r ices in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e, incl uding a n a na l y s is of th e f unctions p er f or m ed, a s s ets us ed a nd r is k s a s s um ed, a nd a n ex p l a na tion of th e s el ection a nd a p p l ica tion of th e m eth od us ed •

A n a na l y s is of th e b ench m a r k s cons ider ed r el ev a nt to th e com p a ny w h en th e ch os en m eth od r eq uir es it


Return disclosures/related-party disclosures T a x p a y er s m us t dis cl os e r el a ted- p a r ty tr a ns a ctions . I ndeed, th e p r ov is ions of A r ticl e 1 8 - 3 indica te th a t a com p a ny m us t p r ov ide a incl uded in th e tr a ns f er p r icing docum enta tion s ub m itted w ith th e r etur n.


Documentation deadlines under th e dep a r tm ent in ch a r g e of l a r g e enter p r is es .

Transfer pricing penalties Penalty relief I n ca s e of p a r tia l or tota l f a il ur e to s ub m it th e r eq uir ed docum enta tion, a notice to p r ov ide or com p l ete th e docum enta tion w il l b e s er v ed to th e com p a ny w ith in 3 0 da y s f r om th e docum enta tion s ub m is s ion dea dl ine. T h is notice s h oul d r em ind th e ta x p a y er of th e p ena l ties in ca s e of f a il ur e to r ep l y , incl uding a dj us tm ents b a s ed on inf or m a tion a v a il a b l e to th e a uth or ity . y ea r , ex cep t if th e com p a ny ob ta ins a n ex tens ion of th e dea dl ine f r om

th e r el ev a nt a uth or ities .

Statute of limitations on transfer pricing assessments 4 Cameroonian Tax Procedure Handbook, th e ta x a uth or ities m a y cor r ect th e s ta tute of l im ita tions a p p l ica b l e to tota l or p a r tia l om is s ions up to th e end of th e f our th y ea r a f ter th e one in w h ich th e ta x es w er e due. T h us , th is l im ita tion p er iod s h oul d b e a p p l ica b l e to tr a ns f er p r icing a s s es s m ents a s w el l .

7 7


C am eroon

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t g ener a l ta x a udit is a l s o h ig h . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is l ow .

APA opportunity T h e r el ev a nt ta x l a w in C a m er oon is s il ent on A P A s . H ow ev er , b ef or e a contr a ct is concl uded or a tr a ns a ction is p er f or m ed, a ta x p a y er ca n r eq ues t a ta x r ul ing (rescrit fiscal) f r om th e ta x a uth or ities to g et th eir p os ition on th e p otentia l ta x im p l ica tions .

Impact of new OECD BEPS Action8-10 guidelines


7 8

C anada Taxing authority and tax law 4 ta x a tion y ea r s th a t b eg a n a f ter 1 9 9 7 . I t cons titutes C a na da ’ s tr a ns f er p r icing l eg is l a tion a nd dea l s w ith th e deter m ina tion of tr a ns f er contem p or a neous docum enta tion r eq uir em ents a nd tim ing of p r ov is ions to th e m inis ter , w h en r eq ues ted; m inis ter ia l dis cr etion r eg a r ding a ccep ta nce of dow nw a r d ta x a dj us tm ent r eq ues ts ; a nd th e a p p l ica tion of w ith h ol ding ta x to tr a ns f er p r icing a dj us tm ents . F or 4 w ith h ol ding ta x im p l ica tions of tr a ns f er p r icing a dj us tm ents .


4

• •

44 •

44 •


I C s a nd oth er a dm inis tr a tiv e g uida nce a r e cons ider ed ins tr uctiv e b ut not b inding . T h e O E C D G uidel ines a nd oth er O E C D r ep or ts a r e not cons ider th e O E C D ’ s inter na tiona l p r incip l es a nd s ta nda r ds in r ea ch ing a decis ion.

Documentation requirements 4 4 • T h e p r op er ty or s er v ices to w h ich th e tr a ns a ction r el a tes • T h e ter m s a nd conditions of th e tr a ns a ction a nd th eir r el a tions h ip , if a ny , to th e ter m s a nd conditions of th e tr a ns a ction enter ed into b etw een th e p er s ons or p a r tner s h ip s inv ol v ed 7 9


C anada

(continued)

• T h e identity of th e p er s ons or p a r tner s h ip s inv ol v ed in th e tr a ns a ction, a nd th eir r el a tions h ip a t th e tim e th e tr a ns a ction w a s enter ed into • T h e f unctions p er f or m ed, th e p r op er ty us ed or contr ib uted, a nd th e r is k s a s s um ed b y th e p er s ons or p a r tner s h ip s inv ol v ed in th e tr a ns a ction • contr ib utions to cos ts of th e tr a ns a ction • l os s es , or contr ib utions to cos ts of th e tr a ns a ction inf or m a tion (e. g . , deta il s of cos t contr ib ution a r r a ng em ents , tr a ns l a tions of f or eig n docum ents a nd oth er g ener a l g uida nce). 4 enh a nced cl a r ity w ith r es p ect to th e r ea s ona b l e- ef f or ts s ta nda r d a nd th er eb y th e p otentia l a p p l ica tion of tr a ns f er p r icing p ena l ties .


4

com p a r a b il ity b etw een tr a ns a ctions , f ol l ow ing a n a na l y s is of th e h ier a r ch y of m eth ods . 4 a b a ndoning th e concep t of a na tur a l h ier a r ch y of m eth ods , it indica ted th a t a ccep ting th e p r ef er r ed m eth od in a p a r ticul a r cir cum s ta nce w oul d dep end on th e deg r ee of com p a r a b il ity a v a il a b l e under ea ch of th e m eth ods a nd th e a v a il a b il ity a nd r el ia b il ity of th e da ta .


da ta b a s e a nd is us ed to s cr een ta x p a y er s f or inter na tiona l ta x a udits .

Transfer pricing–specific returns T h e T 1 0 6 r etur ns r ef er r ed to a b ov e a r e es s entia l l y tr a ns f er p r icing r etur ns .

Documentation deadlines T a x p a y er s m us t p r ep a r e or ob ta in r ecor ds a nd docum ents th a t p r ov ide a des cr ip tion th a t is com p l ete a nd a ccur a te in a l l m a ter ia l 4 4 end. Worldwide Transfer Pricing Reference Guide

8 0

C anada

(continued) 4 4

Transfer pricing penalties 4 if s uch a dj us tm ents ex ceed th e l es s er of 1 0 % of th e ta x p a y er ’ s g r os s r ev enue f or th e y ea r or C A D 5 m il l ion, a nd if th e ta x p a y er h a s not m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices .

A ta x p a y er w il l b e deem ed not to h a v e m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices or a l l oca tions unl es s th e ta x p a y er h a s p r ep a r ed or ob ta ined r ecor ds or docum ents th a t p r ov ide a des cr ip tion th a t is com p l ete a nd a ccur a te, in a l l 4 4

w ith in th r ee m onth s of th e is s ua nce of a w r itten r eq ues t to do s o. T r a ns f er p r icing - r el a ted p ena l ties a r e a s s es s ed w ith out r ef er ence to th e ta x p a y er ’ s incom e or l os s f or th e r el ev a nt r ep or ting y ea r a nd a r e not ta x - deductib l e.

Penalty relief I f a ta x p a y er is deem ed to h a v e m a de r ea s ona b l e ef f or ts to deter m ine a nd us e a r m ’ s - l eng th tr a ns f er p r ices or a l l oca tions w ith r es p ect to 4 a r is e w ith r es p ect to tr a ns a ctions cov er ed b y a n A P A , a s l ong a s th e A P A r em a ins in ef f ect a nd th e ta x p a y er com p l ies w ith its ter m s a nd conditions .

p ena l ty a ccor ding l y . I f th e r es ul t of th e ch a ng e is th a t th e a dj us tm ent no l ong er ex ceeds th e p ena l ty th r es h ol d, th e p ena l ty is r es cinded.


r ea s s es s a ta x p a y er a t a ny tim e.

ex tended r ea s s es s m ent p er iod. A num b er of C a na da ’ s ta x tr ea ties r es tr ict th e tim e f or C a na da to m a k e a n a dj us tm ent to a p er iod l es s th a n th e s ev en y ea r s a l l ow ed under th e I T A .

8 1


C anada

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority inter na tiona l tr a ns a ctions , es p ecia l l y tr a ns f er p r icing . F or l a r g e cor p or a tions , th e l ik el ih ood of a n a nnua l ta x a udit is h ig h , a s is th e l ik el ih ood of tr a ns f er p r icing b eing r ev iew ed a s p a r t of th e a udit. T h e l ik el ih ood of a tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed, if tr a ns f er p r icing com es under a udit, is a l s o h ig h .

cour s e of a n a udit. T h is r eq ues t tr ig g er s th e th r ee- m onth w indow to p r ov ide th e contem p or a neous docum enta tion.

APA opportunity 44 ch a r g es ta x p a y er s onl y tr a v el cos ts it incur s in th e com p l etion of a n A P A . w ith r es p ect to r ol l ing a n A P A b a ck to p r ior y ea r s , w ith th e m a in l im ita tion b eing th a t A P A s m a y not b e r ol l ed b a ck to y ea r s f or w h ich a 4 ta x a tion y ea r s th a t a r e cur r entl y under g oing a tr a ns f er p r icing a udit.


th r oug h its inf or m a tion ex ch a ng e netw or k .


8 2

C anada

(continued)

r eq uir ed f or ta x a tion y ea r s th a t b eg in a f ter 2 0 1 5 . F ir s t ex ch a ng es b etw een j ur is dictions of countr y - b y - countr y r ep or ts a r e ex p ected

th e dr a f t l eg is l a tion, w h ich w il l b e r el ea s ed f or com m ents in th e com ing m onth s , a nd th e inf or m a tion r eq uir ed w il l b e cons is tent w ith th e

8 3


C ap e V erde Taxing authority and tax law Direcção Nacional de Receitas do Estado)


• G ener a l r ul es a nd s cop e of a p p l ica tion of tr a ns f er p r icing r ul es • T h e m eth ods f or th e deter m ina tion of tr a ns f er p r ices in l ine w ith th e a r m ’ s - l eng th p r incip l e • C om p a r a b il ity cr iter ia • C os t- s h a r ing a g r eem ents • I ntr a g r oup s er v ices a g r eem ents • D ocum enta tion r eq uir em ents • C or r es p onding a dj us tm ents p r ocedur e

OECD Guidelines treatment th e O E C D G uidel ines a s a s our ce of h ig h im p or ta nce in tr a ns f er p r icing m a tter s .

Documentation requirements

•

4 4 • • P er m a nent es ta b l is h m ents of nonr es ident entities • E ntities des ig na ted th a t th e ta x a uth or ities h a v e indica ted f or th is p ur p os e • •


8 4

C ap e V erde

(continued)

tr a ns a ctions (v ol um es , ter m s a nd conditions ) f or th e y ea r under a na l y s is , a s w el l a s f or th e p r ev ious tw o y ea r s , or f or th e p er iod dur ing w h ich th ey h a v e b een occur r ing (if l es s th a n th r ee y ea r s ) • es ta b l is h ed, w h enev er th is inf or m a tion does not r es ul t f r om

s ig ned a g r eem ents

• D es cr ip tion of th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er a nd th e r el a ted p a r ties inv ol v ed in th e intr a g r oup tr a ns a ctions • G uidel ines w ith r es p ect to th e a p p l ica tion of tr a ns f er p r icing p ol icies r eg a r dl es s of its f or m a nd des ig na tion, w h ich conta in ins tr uctions na m el y a b out th e m eth odol og ies to us e, th e p r ocedur es f or inf or m a tion g a th er ing (es p ecia l l y inf or m a tion on inter na l com p a r a b l es ), • A l l inter com p a ny a g r eem ents a nd unr el a ted- p a r ty a g r eem ents , incl uding inf or m a tion on del iv er y ter m s , a ny s up p l em enta l a ctiv ities inv ol v ed (e. g . , a f ter - s a l e s er v ices , w a r r a nty s er v ices , tech nica l a s s is ta nce), ex p l icit des cr ip tion of p r ices in contr ol l ed tr a ns a ctions a nd a g r eem ents , etc. • A des cr ip tion of th e m eth od or m eth ods us ed f or th e deter m ina tion of th e a r m ’ s - l eng th p r ice in ev er y contr ol l ed tr a ns a ction tog eth er , w ith r ea s ons f or ch oos ing th e m os t a p p r op r ia te m eth od • th e ca s es w h er e r el ev a nt, th e tech nica l cr edits of th e s tudies a nd th e s ens itiv ity a nd s a f ety a na l y s is • O th er r el ev a nt inf or m a tion


I t is f or es een th a t th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied to a contr ol l ed tr a ns a ction or to a s er ies of tr a ns a ctions to deter m ine w h eth er th os e tr a ns a ctions com p l y w ith th e a r m ’ s - l eng th p r incip l e. ca s e, ex p l a ining not onl y th e r ea s on a cer ta in m eth od is cons ider ed a s th e m os t a p p r op r ia te to tes t w h eth er th e contr ol l ed tr a ns a ctions com p l y w ith th e tr a ns f er p r icing r ul es , b ut a l s o w h y oth er m eth ods a r e r ej ected.

Return disclosures/related-party disclosures (Declaração annual de informação contabilística e fiscal) • I dentif y th e r el a ted entities • I dentif y a nd decl a r e th e a m ount of tr a ns a ctions conducted w ith ea ch of th e r el a ted p a r ties • a p p l ied T h e dea dl ine f or th e s ub m is s ion of s uch r etur n cor r es p onds to th e end of th e s ev enth m onth a f ter th e cor r es p onding ta x y ea r - end. 8 5


C ap e V erde

(continued)


Documentation deadlines I n th e a b s ence of p r ov is ions cov er ing th e dea dl ine to p r ep a r e tr a ns f er p r icing docum enta tion, it is r ea s ona b l e to a s s um e th a t it cor r es p onding ta x y ea r - end.



Statute of limitations on transfer pricing assessments Frequency of tax audit and transfer pricing scrutiny by the tax authority es ta b l is h ed.



8 6

C h ile Taxing authority and tax law Servicio de Impuestos Internos, or SII)

• C h il ea n ta x a tion r ul es a r e es ta b l is h ed in th e I ncom e T a x L a w (I T L ), ena cted in 1 9 7 4 . •

Relevant regulations and rulings A r ticl e 4 1 E es ta b l is h es th a t a ny cr os s in a b a ck - to- b a ck tr a ns a ction or a ny tr new r eg ul a tion is a p p l ica b l e a s of 1 J a tr a ns a ctions enter ed into dur ing a nd a

- b or der tr a ns a ction h el d w ith a r el a ted- p a r ty , or w ith a n unr el a ted entity dom icil ed in a ta x h a v en, a ns a ction r es ul ting f r om a r es tr uctur ing p r oces s is s ub j ect to tr a ns f er p r icing r eg ul a tions . T h e nua r y 2 0 1 3 a nd a p p l ies to 2 0 1 3 ta x ob l ig a tions a nd th er ea f ter , th us a f f ecting th e inter com p a ny f ter 2 0 1 2 .

F or p r ior y ea r s , tr a ns f er p r icing m a tter s w er e r eg ul a ted b y A r ticl e 3 8 , a ccor ding to w h ich th e b ur den of p r oof w a s on th e I nter na l 4 4

A ccount ing p rincip les

Tax t reat ies a g r eem ents w er e s ig ned b ut a r e not in f or ce.

Relat ionsh ip rules 4 • • A n entity is a p er m a nent es ta b l is h m ent, a g ency or b r a nch of a h ea dq ua r ter s • T r a ns a ctions a r e ca r r ied out w ith r es idents in ta x h a v ens • T h ey a r e indiv idua l s w ith th eir s p ous es , or r el a tiv es up to th e f our th deg r ee of cons a ng uinity • O ne of th e p a r ties ca r r ies out tr a ns a ctions w ith a th ir d p a r ty th a t, in tur n, ca r r ies out s im il a r tr a ns a ctions w ith p a r ties r el a ted to th e l a tter (b a ck - to- b a ck )

I ncom e t ax at ion 1.1. Increase in First Category Tax (corporate tax)

•

T h e F ir s t C a teg or y T a x w il l p r og r es s iv el y incr ea s e f r om

2 0 % to 2 5 % or 2 7 % (dep ending on th e ty p e of r eg im e under w h ich th e ta x p a y er

4 8 7


C h ile

(continued)

• • • •

1.2. New taxation regimes

(1 ) a ttr ib uted r eg im e (A r ticl e 1 4 A of th e I T L ), on w h ich b a s is f or eig n s h a r eh ol der s w il l b e s ub j ect to th e A dditiona l T a x (w ith h ol ding ta x on div idends ) on th e incom e of th e entities in w h ich th ey h a v e inter es ts in th e s a m e y ea r s uch incom e is tr ig g er ed, a nd (2 ) dis tr ib uted 4 • • P a r tner s h ip s (Sociedades de Responsabilidad Limitada • • •

Sociedades Anónimas y Sociedades por Acciones

International tax rules C h anges in ex cess indeb t edness rules

• r el a ted or not, s h a l l b e incl uded (b ef or e th is a m endm ent, onl y l oa ns g r a nted b y f or eig n r el a ted p a r ties s ub j ect to 4 % w ith h ol ding w er e incl uded). • T h e 3 5 % p ena l ty ta x a p p l ies onl y to p a y m ents to r el a ted entities s ub j ect to th e 4 % w ith h ol ding ta x or not s ub j ect to w ith h ol ding ta x es . • T h e concep t of r el a ted com p a ny now a p p l ies to a l l k inds of g ua r a ntees g r a nted b y g r oup com p a nies . • T h es e new r ul es w il l a p p l y onl y to l oa ns g r a nted a f ter 1 J a nua r y 2 0 1 5 .

Recognit ion of foreign p assiv e incom e ( C F C rules) I n a ccor da nce w ith new A r ticl e 4 1 G of th e I T L , f or eig n- s our ce incom e w il l continue to b e ta x ed on a ca s h b a s is , a s a g ener a l r ul e. A dditiona l l y , f r om 1 J a nua r y 2 0 1 6 , ta x p a y er s dom icil ed in C h il e w il l b e ta x ed on a n a ccr ua l b a s is on th e p a s s iv e incom e g ener a ted b y

• • T h e f or eig n entity is dom icil ed in a countr y or ter r itor y w ith l ow or no ta x a tion, unl es s p r ov en oth er w is e


8 8

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(continued)

General ant i- av oidance rules ( GA A R)

r el ev a nt ta x es a s if s uch a b us e or s im ul a tion nev er occur r ed. A nti- a b us e r ul es a p p l y to tr a ns a ctions ca r r ied out a f ter th e entr y into f or ce of th e s a m e; th er ef or e, a l l p r ior tr a ns a ctions w il l b e s ub j ect to th e r ul es cur r entl y in f or ce. A ccor ding to th e new r ul es , a b us e w il l ex is t w h en ta x p a y er s cir cum v ent, tota l l y or p a r tia l l y , a ta x a b l e ev ent; r educe th e ta x b a s e or ta x ob l ig a tion; or del a y or def er th e cr ea tion of s uch ob l ig a tion w ith out a r ea s on dif f er ent f r om p ur el y ta x m otiv a tion. I n tur n, s im ul a tion w il l b e deem ed to ex is t w h en th e l eg a l a cts or b us ines s a ctiv ities of ta x p a y er s concea l th e occur r ence of a ta x a b l e ev ent or th e na tur e of th e el em ents of th e ta x ob l ig a tion, or th e r ea l a m ount or cr ea tion of th e s a m e.

OECD Guidelines treatment A l th oug h th e I T L does not m ention th e O E C D G uidel ines , it is im p or ta nt to note th a t C h il e w a s a ccep ted a s a f ul l m em b er of th e O E C D in 2 0 1 0 . T h er ef or e, th e g uidel ines s h oul d b e tr ea ted a s r el ev a nt w h en dea l ing w ith tr a ns f er p r icing is s ues .

w h en it is a p p l ica b l e.

Documentation requirements T a x p a y er s m us t k eep a l l th e r el ev a nt inf or m a tion s up p or ting th e m eth ods us ed to deter m ine w h eth er th eir tr a ns a ctions a r e in f or eig n a uth or ities f ur nis h inf or m a tion r el a ted to inter com p a ny tr a ns a ctions . inter com p a ny tr a ns a ctions th a t a r e b eing a udited.

Priorities/pricing methods m eth od is a ccep ta b l e w h en a p p l ied in a ny r ea s ona b l e econom ic a na l y s is f or a ca s e in w h ich none of th e oth er m eth odol og ies is v ia b l e. econom ic r ea l ity to deter m ine its m a r k et v a l ue. T h e ta x p a y er s h oul d b e a b l e to dem ons tr a te or s us ta in th e a p p l ica b il ity of s uch a m eth od ov er th e oth er s . F or eig n com p a r a b l es a r e a ccep ted in th e a b s ence of l oca l com p a r a b l es a s l ong a s f or eig n com p a r a b l es a r e s im il a r in f unctions , a s s ets T h e l oca l T P r ul es do not m a k e r ef er ence to s ecr et com p a r a b l es , a nd th er e is no b a ck g r ound of th e us e of th is ty p e of com p a r a b l e.

8 9


C h ile

(continued)

Return disclosures/related-party disclosures T h is s ta tem ent com p r is es a l l inter com p a ny tr a ns a ctions h el d in th e p r ior y ea r , a nd it m us t dis cl os e a l l tr a ns a ctions h el d w ith r el a ted p r icing econom ic a na l y s is .

• • C om p a nies th a t enter ed into tr a ns a ctions w ith p a r ties dom icil ed in ta x h a v en countr ies (a ccor ding to th e l is t in A r ticl e 4 1 D of th e I T L ) • cur r ency ) w ith non- dom icil ed r el a ted p a r ties a s of 3 1 D ecem b er of th e com m er cia l y ea r to b e dis cl os ed

• T r a ns f er p r icing m eth od us ed • • G l ob a l or s eg m ented a na l y s is • • T r a ns f er p r icing a dj us tm ents (if a p p l ica b l e)

Transfer pricing-specific returns Documentation deadlines T h er e a r e no dea dl ines to p r es ent tr a ns f er p r icing docum enta tion. docum enta tion).


4 th e dif f er ence.

a l s o b e s ub j ect to a dditiona l p ena l ties a nd inter es t. Worldwide Transfer Pricing Reference Guide

9 0

C h ile

(continued)

Penalty relief T h er e a r e no p ena l ties f or not p r ep a r ing a nd s ub m itting T P docum enta tion. H ow ev er , m a inta ining contem p or a r y T P docum enta tion im p os ed.

Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions is th r ee y ea r s s ta r ting f r om

th e l a tes t da te a t w h ich th e ta x w a s due. I t coul d b e ex tended to s ix y ea r s 4

p r icing a udits , th e a p p l ica b l e s ta tute of l im ita tions w il l b e 1 2 m onth s , dur ing w h ich th e ta x a uth or ity w il l tes t th e p r op er a p p l ica tion of th e • • • A r ev iew of th e a ccounting f or tr a ns a ctions b etw een r el a ted com p a nies

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l , a s w el l a s th e l ik el ih ood th a t tr a ns f er p r icing w oul d b e r ev iew ed a s p a r t of th a t a udit, is cons ider ed to b e m edium . I f tr a ns f er p r icing is indeed r ev iew ed, th e l ik el ih ood th a t th e m eth odol og y w oul d b e ch a l l eng ed is deem ed to b e l ow . T h e ta x p a y er f a ces th e b ur den of p r oof to s h ow th a t tr a ns f er p r ices in tr a ns a ctions w ith r el a ted p a r ties a r e cons is tent w ith th e a r m ’ s l eng th p r incip l e.

g ener a ted f r om f r om T P .

th e r ev iew of T P a s p ects (e. g . , inf or m a tion incl uded in th e T P r etur n) a nd not a s a r es ul t of oth er a udits of top ics dif f er ent

I t is im p or ta nt to h ig h l ig h t th a t w h en a ta x p a y er is s ub j ect to a ta x or tr a ns f er p r icing a udit p er f or m ed b y th e C h il ea n a uth or ities , k eep ing a tr a ns f er p r icing s tudy w il l b e cons ider ed a s a s tr ong m ech a nis m of def ens e. of tr a ns f er p r icing a dj us tm ents m a de in oth er countr ies th a t h a v e enter ed into a conv ention w ith C h il e f or th e a v oida nce of doub l e

APA opportunity h a s f ur nis h ed th e r el ev a nt inf or m a tion. T h e r es ol ution to a ccep t or r ej ect th e p r op os ed a g r eem ent ca nnot b e ch a l l eng ed b y eith er a n a dm inis tr a tiv e or l eg a l p r oces s . T h is a g r eem ent m a y l a s t f or up to f our com m er cia l y ea r s , a t th e end of w h ich it ca n b e ex tended b y a p r ior a g r eem ent b etw een th e p a r ties inv ol v ed.

9 1


C h ile

(continued)

Impact of new OECD BEPS Action 8–10 guidelines A l th oug h O E C D r ul es a r e not m a nda tor y in C h il e, th er e is a tendency in cour t ca s es to cons ider th e O E C D G uidel ines a s inter p r eta tiv e

O E C D dev el op m ents a r e l ik el y to a f f ect th e tr a ns f er p r icing a na l y s es of th e C h il ea n com p a nies . F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents .

I m p act of new O E C D B E PS A ct ion 1 3 C ount ry - b y - C ount ry Rep ort

T h e ob j ectiv e of th is ob l ig a tion is to g r a nt ta x a dm inis tr a tions a tool to contr ol ta x a v oida nce a nd ev a s ion w h il e a t th e s a m e tim e

T h is ob l ig a tion a p p l ies to C h il ea n g r oup s w ith cons ol ida ted r ev enue of a t l ea s t E ur o 7 5 0 m il l ion a s of p r ev ious y ea r cl os ing a nd in

• • •

T a x es (p a id or deter m ined) • •

A ccum ul a ted ea r ning s •

T a ng ib l e a s s ets

•

N um b er of em p l oy ees •

A dditiona l f unctiona l inf or m a tion f or ea ch com p a ny of th e g r oup


9 2

C h ina “China” refers to the mainland China jurisdiction in this publication.

Taxing authority and tax law

• C h ina C or p or a te I ncom e T a x L a w (C I T L ), C h a p ter 6 , A r ticl es 4 1 to 4 8 •


4 C ontem p or a neous D ocum enta tion

4

• C ir cul a r 2 conta ins th e s ub s ta ntiv e r ul es w ith r es p ect to tr a ns f er p r icing , incl uding tr a ns f er p r icing m eth ods a nd com p a r a b il ity a na l y s is ;

4 4 C ir cul a r 2 cov er ing contem p or a neous docum enta tion r ul es p r ior to 2 0 1 6 . I t a l s o s up er s edes in its entir ety C ir cul a r (2 0 0 8 ) N o. 1 1 4 , w h ich cov er ed ta x r etur n dis cl os ur es p r ior to 2 0 1 6 . 4 im p l em ents th os e p or tions of th e C ons ul ta tion D r a f t w ith in its s cop e. I t is ex p ected th a t f utur e r el ea s es w il l im p l em ent th e oth er p or tions of th e C ons ul ta tion D r a f t; h ow ev er , th e tim ing of s uch r el ea s es is unk now n.

• Provides that entities with limited functions and risks (such as toll manufacturers, limited risk distributors, contract R&D service providers) that are making losses must prepare contemporaneous documentation (without regard to monetary thresholds) and spontaneously provide them to tax authorities by 20 June of the following year • Provides that taxpayers that have incurred a transfer pricing adjustment on audit will be subject to a five-year follow-up period during which tax authorities will maintain scrutiny of the taxpayer’s transfer pricing results • Sets out the guidelines for different tax authorities across China to coordinate work on tax investigations • Sets up a joint panel review mechanism for cases involving large taxpayers (capital over RMB100 million or revenues from main operations over RMB1 billion) to ensure consistency

9 3


C h ina

(continued)

• Supplements Circular 2 guidance on MAPs under tax treaties •

4 4 4 Provides guidelines for tax authorities investigating transfer pricing issues, including encouraging taxpayers to make self-adjustments even in the absence of a formal audit •

4 Modifies Circular 2 by eliminating pre-approval requirements for entering into a cost sharing arrangement while strengthening follow-up monitoring • Disallows deductions for royalty and service payments to related parties under certain circumstances, such as when the related-party has inadequate substance

OECD Guidelines treatment r ev is ions to th e O E C D G uidel ines r el a ting to r is k s a nd inta ng ib l es . H a v ing s a id th is , w h il e r ef er ence m a y b e h a d to th e O E C D G uidel ines , United Nations Practical Manual on Transfer Pricing for Developing Countries cer ta in nua nces . K ey a r ea s in w h ich th e C h ines e a p p r oa ch m a y dif f er to s om e ex tent f r om

oth er countr ies ’ under s ta nding of th e O E C D G uidel ines

• 4 • im p r ov em ents . • G uidel ines .

Documentation requirements 4 s tock ow ner s h ip . F a m il ia l r el a tions h ip s a nd ov er l a p p ing b oa r ds of dir ector s or m a na g em ent p er s onnel ca n a l s o g iv e r is e to a r el a tedp a r ty r el a tions h ip . 4


4

9 4

C h ina

(continued)

4

4 g r oup ’ s C b C r ep or t in th e cour s e of a n inv es tig a tion if th e ul tim a te p a r ent com p a ny is r eq uir ed b y its h om e j ur is diction to p r ep a r e a C b C m ech a nis m

b etw een C h ina a nd th a t j ur is diction or th e f a il ur e of s uch a n ex ch a ng e m ech a nis m

to w or k in p r a ctice.

4 4 dis cl os ur es w ith r es p ect to b us ines s r es tr uctur ing s a r e des cr ib ed in g r ea ter deta il , a nd dis cl os ur e a nd b r ief des cr ip tions of a ny b il a ter a l 4 • v a l ues f or cus tom s p ur p os es ) • • •

4 ta ng ib l e p r op er ty r enta l s a nd inter es t on l oa ns ) T a x p a y er s w h os e r el a ted- p a r ty tr a ns a ctions a r e w h ol l y dom es tic to C h ina a r e ex em p t f r om 4 r ep or ting r eq uir em ents ) a nd a r e not counted tow a r d th e th r es h ol ds in A r ticl e 1 3 . 4

docum enta tion r eq uir em ents . T r a ns a ctions

4

• E nter p r is e ov er v iew • • • C om p a r a b il ity a na l y s is •

•

• T h e r eq uir em ent of ex tens iv e dis cl os ur es a nd a na l y s is of r el a ted- p a r ty s er v ice tr a ns a ctions , incl uding deta il ed dis cl os ur es of p a r ticip a nts

9 5


C h ina

(continued)


da ta b a s es a v a il a b l e. T a x a uth or ities h a v e a cl ea r p r ef er ence f or l oca l C h ines e com p a r a b l es b ut, g iv en th e l im ited num b er of p otentia l

s ecr et com p a r a b l es ); s uch non- p ub l ic inf or m a tion is us ed in p r a ctice, es p ecia l l y in a r is k a s s es s m ent contex t.

Return disclosures/related-party disclosures 4

4

• • • • O w ner s h ip T r a ns f er of T a ng ib l e A s s et T r a ns a ctions F or m • O w ner s h ip T r a ns f er of I nta ng ib l e A s s et T r a ns a ctions F or m • • • F ina ncia l A s s et T r a ns a ctions F or m • F ina ncing T r a ns a ctions F or m • • E q uity I nv es tm ent F or m • • O utb ound P a y m ent F or m • • •



9 6

C h ina

(continued)


r eq ues t (ex tended f r om

2 0 da y s under C ir cul a r 2 ).


f a il ing to m a inta in a ccounting b ook s a nd oth er r el ev a nt inf or m a tion, or f a il ing to p r ov ide s uch inf or m a tion to ta x a uth or ities up on f a il ur e to m a inta in or p r ov ide contem p or a neous docum enta tion. th e ta x a uth or ities a r e em p ow er ed to a s s es s ta x a b l e incom e on a deem ed b a s is (r a th er th a n on th e b a s is of tr a ns f er p r icing r es ul ts ). dis cl os ur e f or m s or f a il s to m eet th e contem p or a neous docum enta tion r eq uir em ents . T o m eet th es e r eq uir em ents , in a ddition to p r ep a r ing th e docum enta tion des cr ib ed b el ow , th e ta x p a y er m us t p r ov ide it to ta x a uth or ities w ith in 3 0 da y s of th e r eq ues t (p r ior to 2 0 1 6 , w ith in 2 0 da y s of r eq ues t). I n a l l ev ents , w h eth er th er e is a n inter es t s ur ch a r g e or not, inter es t w il l b e a p p l ied to th e under r ep or ted

Penalty relief docum enta tion r eq uir em ents a r e m et.

Statute of limitations on transfer pricing assessments •

T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is 1 0 y ea r s . 4

4


4 th ir ds of C h ina ’ s tr a ns f er p r icing ta x r ev enues ea ch y ea r .

ta x p os itions ta k en. H ig h - r is k ta x p a y er s a r e m uch m or e l ik el y to f a ce f or m a l ta x a udits .

9 7


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(continued)

to r oy a l ties , ta x a uth or ities h a v e f ocus ed on th e ex tent to w h ich th e C h ines e ta x p a y er h a s m a de contr ib utions to th e v a l ue of l icens ed inta ng ib l es a nd p os s ib l y dev el op ed l oca l inta ng ib l es , th er eb y s ug g es ting r oy a l ty r a te r eductions a r e a p p r op r ia te. F or s er v ices , ta x a uth or ities h a v e s oug h t a uth entica tion th a t s er v ices w er e a ctua l l y p r ov ided, a nd th a t cos ts w er e a p p r op r ia tel y ca p tur ed a nd a l l oca ted

APA opportunity A P A s a r e a v a il a b l e in C h ina , incl uding unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s . G uida nce r eg a r ding th e A P A p r oces s a nd p r ocedur es is 4 4 r etur ns a nd th ey m us t h a v e m et contem p or a neous docum enta tion r eq uir em ents . T h er e is no a p p l ica tion f ee. 4

T h e im p or ta nce of of f er ing a h ig h - q ua l ity a p p l ica tion is h ig h l ig h ted b y cons ider ing s om e s ta tis tics . A s of 3 1 D ecem b er 2 0 1 4 , th er e w er e 4

4 4

4

4

th e 9 0 A P A r eq ues ts in th e p r e- a ccep ta nce s ta g e, 8 3 w er e b il a ter a l A P A r eq ues ts a nd onl y 7 w er e unil a ter a l .


4 s ta tute of l im ita tions w h er e th e r ecip ient onl y h a s l eg a l ow ner s h ip of th e inta ng ib l es b ut did not m a k e a ny v a l ua tion cr ea tion contr ib ution to th em .


9 8

C olom b ia Taxing authority and tax law Dirección de Impuestos y Aduanas Nacionales, or DIAN) 4

Relevant regulations and rulings • L a w 7 8 8 (ena cted D ecem b er 2 0 0 2 ) a nd L a w 8 6 3 (ena cted D ecem b er 2 0 0 3 ) es ta b l is h tr a ns f er p r icing r ul es , w h ich a r e A r ticl es 2 6 0 - 1 to 2 6 0 - 1 1 of th e C ol om b ia n T a x C ode. • p r icing ob l ig a tions . A dditiona l l y , tr a ns a ctions ca r r ied out b etw een ta x p a y er s in C ol om b ia a nd th eir r el a ted p a r ties l oca ted in f r ee tr a de

2 6 0 - 7 of th e C ol om b ia n T a x C ode. tr a ns a ction com p l ies w ith th e a r m ’ s - l eng th p r incip l e. A ccor ding l y , oth er s ta tis tica l m ea s ur es ca n b e us ed, incl uding th e tota l r a ng e. A dditiona l l y , one- y ea r da ta of th e tes ted p a r ty a nd com p a r a b l e com p a nies m us t b e us ed in th e tr a ns f er p r icing a na l y s is . I f m ul tip l e- y ea r da ta is us ed, it s h oul d b e s up p or ted in th e tr a ns f er p r icing r ep or t. to ca r r y out th e tr a ns f er p r icing a na l y s is of a n inter com p a ny tr a ns a ction. T h is r ul e a p p l ies ev en if th e tes ted p a r ty is th e r el a ted- p a r ty a b r oa d.

OECD Guidelines treatment C - 6 9 0 of th e C ol om b ia n C ons titutiona l C our t, is s ued on 1 2 A ug us t 2 0 0 3 , th e O E C D G uidel ines a nd C om m enta r ies a r e a n a ux il ia r y s our ce of g uida nce a nd inter p r eta tion, b ut th ey a r e not m a nda tor y f or th e C ol om b ia n ta x a uth or ity . H ow ev er , th e O E C D G uidel ines h a v e b een

Documentation requirements T a x p a y er s m us t p r ep a r e docum enta tion th a t s up p or ts th e a s s er tion th a t ea ch tr a ns a ction w ith f or eig n r el a ted p a r ties com p l ies w ith th e f unctions , a s s ets , r is k s a nd deta il ed inf or m a tion a b out th e inter com p a ny tr a ns a ctions , a m ong oth er a r ea s ), a m a cr oeconom ic a na l y s is , a n indus tr y a na l y s is a nd th e tr a ns f er p r icing econom ic a na l y s is . 4 in ta x h a v ens (r el a ted or indep endent p a r ties ) a r e s ub j ect to tr a ns f er p r icing a na l y s is if th e tota l a m ount of th e tr a ns a ctions ex ceeds

9 9


C olom b ia

(continued)

Priorities/pricing methods b e a p p l ied eith er in th e f or m

of a contr ib ution a na l y s is or a r es idua l a na l y s is ).

• • b y th e th ir d p a r ty to th e r el a ted- p a r ty a b r oa d m us t b e us ed to ob ta in th e initia l p ur ch a s e v a l ue, th us ta k ing into a ccount th e a s s et’ s dep r ecia tion s ince a cq uis ition, in com p l ia nce w ith th e a p p l ica b l e a ccounting p r incip l es . I f no or ig ina l inv oice is a v a il a b l e, a th ir d p a r ty ’ s v a l ua tion m us t b e p er f or m ed to p r ov e th e a r m ’ s - l eng th v a l ue of th e a cq uir ed a s s et. • • • C om p a ny r es tr uctur ing s th a t incl ude r edis tr ib ution of f unctions , a s s ets a nd r is k s m us t com p l y w ith th e a r m ’ s - l eng th p r incip l e. •

Return disclosures/related-party disclosures A s p a r t of th e tr a ns f er p r icing r etur n, ta x p a y er s m us t dis cl os e inf or m a tion a b out r el a ted p a r ties , s uch a s w h eth er it’ s a f or eig n or l oca l h a v en j ur is dictions a l s o m us t b e dis cl os ed. O th er inf or m a tion dis cl os ed on th e tr a ns f er p r icing r etur n incl udes th e ty p e of inter com p a ny tr a ns a ction, th e a m ount of th e tr a ns a ction, th e tr a ns f er p r icing m eth odol og y a p p l ied, th e com p a ny a s s es s ed, th e p r ice or m a r g in ob ta ined in th e tr a ns a ction a nd th e a r m ’ s - l eng th r a ng e. I t is a l s o neces s a r y to incl ude inf or m a tion r eg a r ding com p a r a b il ity a dj us tm ents , th e des ig na tion of th e tes ted p a r ty , th e a m ount of th e

a b out f unctions , a s s ets a nd r is k s , a nd deta il s a b out cos ts a nd ex p ens es incur r ed b y th e f or eig n entity , m us t b e incl uded in th e tr a ns f er p r icing docum enta tion. tr a ns f er p r icing r ep or t to p r ov e th er e is no econom ic r el a tion b etw een th e p a r ties , a nd th e deta il s a b out f unctions , a s s ets , r is k s , a nd cos ts a nd ex p ens es s h oul d not b e incl uded in th e r ep or t.

Transfer pricing-specific returns T h e C ol om b ia n ta x a uth or ities r eq uir e a tr a ns f er p r icing inf or m a tiv e r etur n to b e com p l eted, a s r eq uir ed b y A r ticl e 2 6 0 - 9 of th e C ol om b ia n T a x C ode. T h is a nnua l r eq uir em ent m us t conta in inf or m a tion a b out r el a ted p a r ties , inter com p a ny tr a ns a ctions com p l eted


1 0 0

C olom b ia

(continued)


N or m a l l y , due da tes f or com p l y ing w ith th es e ob l ig a tions a r e in J ul y of th e f ol l ow ing ca l enda r y ea r .

Transfer pricing penalties T h e C ol om b ia n tr a ns f er p r icing r eg im e is s ues p ena l ties s tem m ing f r om

th e s up p or ting docum enta tion a nd th e tr a ns f er p r icing r etur n. 1

Transfer pricing documentation •

4

4

4

• • a dditiona l l y , r ej ection of cos t a nd ex p ens e r el a ted to om itted op er a tions m a y a p p l y •

4 • is s ued b y ta x a uth or ities

Transfer p ricing ret urn • • • a dditiona l l y , r ej ection of cos t a nd ex p ens e r el a ted to om itted op er a tions m a y a p p l y • • r etur ns or tr a ns f er p r icing a dj us tm ents .

1

1 0 1


C olom b ia

(continued)

Penalty relief Transfer p ricing docum ent at ion • •

Transfer p ricing ret urn • • • noncom p l ia nce of f or m a l tr a ns f er p r icing duties .

Transfer p ricing adj ust m ent s A p ena l ty of up to 1 6 0 % of th e a dditiona l ta x coul d a p p l y . F or a s el f - a s s es s m ent or a ccep ta nce of th e ch a l l eng es m a de b y th e ta x


Frequency of tax audit and transfer pricing scrutiny by the tax authority 4 • a f or em entioned s er v ices com p l y w ith A r ticl e 1 0 7 of th e C ol om b ia n T a x C ode. • I n th e l a s t y ea r , th e ta x a uth or ities h a v e s ta r ted to ch a l l eng e, on a g ener a l b a s is , th e s ets of com p a r a b l es dev el op ed b y ta x p a y er s a nd h a v e p r ep a r ed new s ets b y th em s el v es . F r om

a g ener a l p er s p ectiv e, th e l ik el ih ood of a n a udit is m edium .


1 0 2

C olom b ia

(continued)

APA opportunity th em a s a v ia b l e a nd a dv a nta g eous op tion f or ta x p a y er s , a s th ey cons ol ida te th e ta x p a y er ’ s tr a ns f er p r icing p os ition a cr os s s ev er a l y ea r s ins tea d of on a y ea r - to- y ea r b a s is . T h e A P A a g r eem ent w il l b e v a l id f or th e y ea r it is s ub s cr ib ed to, th e y ea r b ef or e a nd up to th r ee ta x a b l e y ea r s a f ter .

Impact of new OECD BEPS Action 8–10 guidelines T h e C ol om b ia n ta x a uth or ities h a v e indica ted th a t C ol om b ia w il l a p p l y th e new O E C D G uidel ines , in p a r ticul a r th os e r el a ting to A ction

r eg ul a tion. T h e incl us ion of th e new O E C D G uidel ines in th e l oca l r eg ul a tion w oul d need a n a m endm ent of th e p r im a r y l a w .

1 0 3


C ost a Rica Taxing authority and tax law Dirección General de Tributación, or DGT)

Relevant regulations and rulings E x ecutiv e D ecr ee N o. 3 7 8 9 8 - H (th e T P E x ecutiv e D ecr ee), w h ich a dop ts tr a ns f er p r icing r eg ul a tions a p p l ica b l e to indiv idua l s or b us ines s Official Gazette on 1 3 44 th e T P E x ecutiv e D ecr ee.


Documentation requirements C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to dom es tic a nd cr os s - b or der r el a ted- p a r ty tr a ns a ctions m us t b e m a inta ined ca r r ied out, a s w el l a s th e cor r ect a p p l ica tion of a n a p p r ov ed m eth od, a s s ta ted in th e T P E x ecutiv e D ecr ee. I t is neces s a r y to incl ude inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion a b out com p a r a b l e tr a ns a ctions or com p a nies m us t a l s o b e incl uded.


Return disclosures/related-party disclosures incom e ta x r etur ns .


1 0 4

C ost a Rica

(continued)

Transfer pricing-specific returns (grandes contribuyentes

grandes empresas territoriales) or is a n indiv idua l or entity op er a ting under th e

Documentation deadlines T a x p a y er s m us t p r ep a r e a nd m a inta in th e tr a ns f er p r icing docum enta tion on a n a nnua l b a s is . T h e T P E x ecutiv e D ecr ee does not s ta te a dea dl ine. T h e docum enta tion m us t b e a t th e dis p os a l of th e D G T up on r eq ues t.

Transfer pricing penalties N o ex p r es s m oneta r y p ena l ties a r e a p p l ied w h en ta x p a y er s f a il to m a inta in contem p or a neous tr a ns f er p r icing docum enta tion or th e P r ocedur es s h oul d a p p l y b y def a ul t. I n th e ca s e of a tr a ns f er p r icing incom e a dj us tm ent, s ur ch a r g es a nd p ena l ty inter es t a p p l y , p er th e g ener a l p r ov is ions of th e T a x C ode of

Penalty relief N o p ena l ty r el ief r eg im e is in p l a ce.

Statute of limitations on transfer pricing assessments T h e s ta nda r d f our - y ea r s ta tute of l im ita tions on g ener a l ta x a s s es s m ents s h oul d a p p l y . T h is s ta tutor y p er iod is ex tended to 1 0 y ea r s f or T h e s ta tute of l im ita tions s ta r ts J a nua r y 1 f ol l ow ing th e due da te of th e ta x r etur n.

Frequency of tax audit and transfer pricing scrutiny by the tax authority com p a nies w ith r el a ted tr a ns a ctions . T h e l ik el ih ood of tr a ns f er p r icing a s s es s m ents a s p a r t of a g ener a l ta x a udit is cons ider ed h ig h a s

1 0 y ea r s .

1 0 5


C ost a Rica

(continued)

r ef er ences or g uidel ines f or ta x p a y er s , ta x a uditor s r ev iew ed a nd ch a l l eng ed r el a ted- p a r ty tr a ns a ctions p r im a r il y of m ul tina tiona l in th e countr y . T h es e D G T a ctions w er e endor s ed b y s ev er a l r ul ing s f r om

a dm inis tr a tiv e a nd j udicia l cour ts , a s w el l a s r ul ing s f r om

th e

T h er e w a s a n a ttem p t to p a s s tr a ns f er p r icing l eg is l a tion th r oug h C ong r es s in 2 0 1 2 , b ut it w a s p a r t of a l a r g er ta x r ef or m p a ck a g e th a t w a s r ep ea l ed a f ter th e C ons titutiona l C our t decl a r ed th e w h ol e l a w uncons titutiona l . H ow ev er , des p ite l a ck ing a l a w r eg ul a ting

l eg a l cer ta inty in r el a tion to th is s ub j ect m a tter w h il e C ong r es s p a s s es m or e com p r eh ens iv e l eg is l a tion.

APA opportunity A P A s a r e contem p l a ted under th e p r ov is ions of th e T P E x ecutiv e D ecr ee. T a x p a y er s ca n r eq ues t a n A P A f or a m a x im um H ow ev er , th e cor r es p onding r eg ul a tions h a v e not y et b een ena cted.

of th r ee y ea r s .

Impact of new OECD BEPS Action 8–10 guidelines T h er e is no r ef er ence to th e O E C D G uidel ines w ith in th e ex is ting tr a ns f er p r icing p r ov is ions .

cur r entl y v a l id. A g r eem ent f or th e a utom a tic ex ch a ng e of countr y - b y - countr y r ep or ts , a nd m or e r ecentl y in A ug us t 2 0 1 6 , th e cr ea tion of a com m is s ion tim e f r a m e in w h ich a m endm ents to th e ex is ting tr a ns f er p r icing r eg ul a tions w il l occur , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .


1 0 6

C roat ia Taxing authority and tax law

• C or p or a te I ncom e T a x A ct (C I T A ct) •

Relevant regulations and rulings 4 m eth ods a l l ow ed a nd th e docum enta tion r eq uir ed to s up p or t p r ices b etw een r el a ted p a r ties . I n g ener a l , a r m ’ s - l eng th p r icing is r eq uir ed onl y f or cr os s - b or der tr a ns a ctions b etw een r el a ted p a r ties . H ow ev er , in l ine w ith th e a m endm ents to th e C I T A ct (in f or ce a s of 1 J ul y 2 0 1 0 ), th e ob l ig a tion to com p l y w ith tr a ns f er p r icing r ul es is ex tended to tr a ns a ctions b etw een dom es tic entities if one of th e entities is eith er in a ta x - l os s p os ition or in a s p ecia l ta x s ta tus (p a y ing ta x a t a l ow er r a te or b ef or e a m endm ents to th e l eg is l a tion w er e intr oduced (i. e. , th e op inion g ov er ns p r ior to 1 J ul y 2 0 1 0 ). A t p r es ent, neith er th e C I T A ct nor I n l ine w ith A r ticl e 1 4 of th e C I T A ct, w h en deter m ining th e incom e f r om inter es t on l oa ns g r a nted/ r eceiv ed f r om r el a ted p a r ties , th e inter es t r a te a p p l ied f or ta x p ur p os es s h oul d b e th e r a te th a t w oul d b e a p p l ied b etw een non- r el a ted p a r ties a t th e tim e of g r a nting th e

inter es t r a te is th e one th a t ca n b e us ed in com p a r a b l e cir cum s ta nces or b etw een non- r el a ted p a r ties ). T h e inter es t r a te b etw een r el a ted

4

OECD Guidelines treatment A l th oug h C r oa tia is not a n O E C D m em b er countr y , th e p r ov is ions of r el ev a nt C r oa tia n ta x l eg is l a tion a r e g ener a l l y b a s ed on th e O E C D b a s ed on th e O E C D G uidel ines .


• C ol l ect inf or m a tion on th e cor p or a te g r oup in w h ich it op er a tes a nd its p os ition in th e g r oup , a nd p r ov ide a na l y s is of r el a ted- p a r ty tr a ns a ctions a nd oth er deta il s of th e g r oup a nd th e ta x p a y er • I dentif y th e tr a ns f er p r icing m eth od a p p l ied; des cr ib e da ta , m eth ods a nd a na l y s is p er f or m ed in th e p r oces s of deter m ining tr a ns f er p r ices ; a nd p r ov ide r ea s ons th a t th e p a r ticul a r m eth od w a s s el ected 1 0 7


C roat ia

(continued)

• D ocum ent a s s um p tions a nd ev a l ua tions us ed to deter m ine tr a ns f er p r ices (in l ine w ith th e p r incip l e of unb ia s ed tr a ns a ctions ), w ith r ef er ence to com p a r a b il ity , f unctiona l a na l y s is a nd r is k a na l y s is • D ocum ent a l l ca l cul a tions of tr a ns f er p r icing b a s ed on th e s el ected m eth od (s uch docum enta tion s h oul d ena b l e a com p a r is on w ith th e p r ices a p p l ied b y oth er com p a r a b l e ta x p a y er s ) • cir cum s ta nces • •

Priorities/pricing methods T h e C r oa tia n C I T A ct r eg ul a tions do not p r ov ide deta il ed r ul es on h ow to a r r iv e a t th e a r m ’ s - l eng th p r ice th a t s h oul d b e a p p l ied in r el a ted-

a t a r m ’ s - l eng th . s h oul d b e us ed on occa s ions w h en tr a ditiona l m eth ods ca nnot b e r el ia b l y a p p l ied.

Return disclosures/related-party disclosures A p p l ica b l e f or th e ta x r etur n f or 2 0 1 6 , a f or m s ub m itted (P D - I P O f or m ).

outl ining r el ev a nt inf or m a tion on tr a ns a ctions w ith r el a ted p a r ties w il l need to b e

Transfer pricing–specific returns r el a ted- p a r ty tr a ns a ctions .

Documentation deadlines T h er e is no dea dl ine f or p r ep a r ing th e tr a ns f er p r icing docum enta tion p r es cr ib ed b y th e l eg is l a tion. T h e l a w r eq uir es th e tr a ns f er p r icing docum enta tion to b e r ea dil y a v a il a b l e a nd p r ov ided to th e ta x a uth or ities up on th eir r eq ues t in a ta x a udit. T h e docum enta tion s h oul d b e in C r oa tia n. A l th oug h not p r es cr ib ed b y C I T l eg is l a tion, in p r a ctice, th e ta x a uth or ities s ta r ted r eq ues ting , on a ca s e- b y - ca s e b a s is , a s ta tem ent of th e tr a ns f er p r icing m eth od a p p l ied. T h e tr a ns f er p r icing docum enta tion is s ub m itted a s s up p or ting docum enta tion up on s ub m is s ion of th e

Transfer pricing penalties indiv idua l w ith in th e com p a ny m a y b e im p os ed f or a ny under es tim a tion of th e cor p or a te incom e ta x l ia b il ity . P ena l ty inter es t w oul d a l s o b e ca l cul a ted f r om th e da te th e ta x w a s due until th e da te th e ta x is p a id.


1 0 8

C roat ia

(continued)

Penalty relief Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions f or deter m ining ta x l ia b il ities a nd r ig h ts in a p a r ticul a r ta x p er iod ex p ir es a t th e end of th e th ir d y ea r

s ta tute- b a r r ed, r eg a r dl es s of th e num b er of inter v ening ev ents initia ted b y th e ta x a uth or ity , on 1 J a nua r y 2 0 2 0 . N ote, h ow ev er , th a t th e l a w ’ s p r ov is ions r eg ef f ectiv e 1 J a nua r y 2 0 1 3 . T h e s ta tute- of - l im initia ted concer ning a dir ector , s h a r eh ol der nonp a y m ent of ta x ) or unex p l a ined s our ces

ul a ting th e s ta tute- of - l im ita tions p er iod of th e r ig h t to a s s es s ta x h a v e b een a m ended, ita tions p er iod m entioned a b ov e now coul d b e p r ol ong ed in ca s es w h en inv es tig a tions a r e or r el a ted- p a r ty in connection w ith th e a b us e of r ig h ts (e. g . , del ib er a te a ctions a im ed a t of a s s ets .

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n th e p a s f r eq uency s er v ice ch incr ea s ing

t f ew y of tr a a r g es ly a w a

ea r s , th e ta x a uth or ities h a v e incr ea s ed th eir f ocus on p r ices a p p l ied in tr a ns a ctions w ith r el a ted p a r ties a nd th e ns f er p r icing a udits . I nitia l l y , b eca us e of l im ited ex p er ience in tr a ns f er p r icing , th e ta x a uth or ities tended to dis p ute b etw een r el a ted com p a nies . H ow ev er , ta x ins p ector s h a v e b ecom e m or e k now l edg ea b l e a b out tr a ns f er p r icing a nd a r e r e of th e is s ues .

T h e ta x a uth or ities is s ued a m a nua l conta ining ins tr uctions f or ta x ins p ector s to f ol l ow in tr a ns f er p r icing a udits . T h e m a nua l a l s o tr a ns f er p r ices a nd f or p r ep a r ing th e docum enta tion th a t s up p or ts th em .

O nce a ta x a udit is initia ted, th er e is a h ig h r is k of tr a ns f er p r icing b eing r ev iew ed w ith in th e a udit, es p ecia l l y w h en r el a ted- p a r ty

APA opportunity C r oa tia h a s not im p l em ented l eg is l a tion concer ning A P A s , b ut th ey a r e ex p ected to b e intr oduced in th e nea r f utur e.

G uidel ines , it is l ik el y th a t th e C r oa tia n ta x a uth or ities w il l f ol l ow th e r ecom m enda tions s et in th e new a m endm ents of th es e G uidel ines .

1 0 9


Rep ub lic of C y p rus Taxing authority and tax law


T r ea ty T a x C onv ention. H ence, dur ing a ta x a udit, tr a ns f er p r icing is s ues coul d th eor etica l l y a r is e.

OECD Guidelines treatment I n p r incip l e, O E C D G uidel ines a r e ex p ected to b e a p p l ica b l e in ca s e of a tr a ns f er p r icing is s ue.

Documentation requirements N o docum enta tion r eq uir em ents .


Return disclosures/related-party disclosures Transfer pricing-specific returns N ot a p p l ica b l e.


Transfer pricing penalties A ny tr a ns f er p r icing a dj us tm ents th a t m a y a r is e dur ing a ta x a udit m a y tr ig g er a dditiona l incom e ta x l ia b il ity (p l us a p p l ica b l e inter es t a nd


1 1 0

Rep ub lic of C y p rus

(continued)


Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions is th e s a m e a s it is f or incom e ta x (i. e. , 6 y ea r s , w h ich m a y b e incr ea s ed to 1 2 y ea r s in ca s e of f r a ud).

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n p r incip l e, th e l ik el ih ood of a n a nnua l ta x a udit a nd th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is l ow . I n ca s e tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e p r ob a b il ity th a t tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is l ow .

APA opportunity N ot a v a il a b l e, a l th oug h th e ta x a uth or ities m a y ch a ng e th eir p r a ctice in th e nea r f utur e.


1 1 1


C z ech Rep ub lic Taxing authority and tax law

Relevant regulations and rulings D ir ectiv e D - 3 3 2 dis cus s es th e a p p l ica tion of inter na tiona l s ta nda r ds in th e ta x a tion of tr a ns a ctions b etw een a s s ocia ted com p a nies .

a s s es s m ents , th e l a tter of w h ich cor r es p onds to th e p r el im ina r y p r ice a g r eem ent p r incip l es w ith in th e m ea ning of th e O E C D G uidel ines . D ir ectiv e D - 3 3 4 outl ines r eq uir em ents of th e ex p ected s cop e of docum enta tion of a tr a ns f er p r icing m eth odol og y a g r eed up on b etw een r el a ted p a r ties . I t a l s o com m ents on th e s cop e a nd na tur e of docum enta tion in a ccor da nce w ith th e C ode of C onduct on T r a ns f er P r icing F or um . D ir ectiv es D - 3 3 2 , 3 3 3 a nd 3 3 4 a r e not l eg a l l y b inding , b ut th e ta x a uth or ity us ua l l y f ol l ow s th em

in p r a ctice.

OECD Guidelines treatment 4 f or s ub s ta ntia ting th e m eth od of ca l cul a ting th e a r m ’ s - l eng th p r ice.

Documentation requirements T h er e a r e no f or m a l s ta tutor y docum enta tion r eq uir em ents in p l a ce. D - 3 3 4 des cr ib es th e docum enta tion th a t is ex p ected a nd m a y b e r eq uir ed b y th e ta x a uth or ity . T h e dir ectiv e is not l eg a l l y b inding , b ut it is f ol l ow ed in p r a ctice. D - 3 3 3 s ets out docum enta tion th a t a s s es s m ent s h oul d conta in inf or m a tion on th e g r oup , th e com p a ny , th e b us ines s r el a tions h ip , oth er cir cum s ta nces a f f ecting th e b us ines s r el a tions h ip a nd th e tr a ns f er p r icing m eth od. I t is cr ucia l f or th e ta x p a y er to h a v e s up p or ting docum enta tion in ca s e th e ta x a uth or ity a udits th e tr a ns a ctions , a s th e b ur den of p r oof th e ta x a udit, th e a uth or ity m a y r eq ues t a ny docum enta tion th a t r ea s ona b l y s ub s ta ntia tes th e a ctua l ch a r a cter a nd s ub s ta nce of th e

to s up p or t v a r ious a s p ects of th e tr a ns a ction.



1 1 2

C z ech Rep ub lic

(continued)


I n a ddition, a l l ta x p a y er s h a v e to dis cl os e in th e cor p or a te incom e ta x r etur n w h eth er th ey w er e eng a g ed in tr a ns a ctions w ith r el a ted p a r ties . E f f ectiv e 1 J a nua r y 2 0 0 1 , th e ex ecutiv es of a contr ol l ed entity a r e r eq uir ed to com p l ete a m em or a ndum w ith r es p ect to r el a tions h ip s a nd tr a ns a ctions w ith com p a nies in th e g r oup . T h is does not a p p l y if a contr ol l ing a g r eem ent is concl uded. N ote th a t th is is b a s ed on com m er cia l l eg is l a tion r a th er th a n on ta x l eg is l a tion, a nd th e m em or a ndum h a s no dir ect ta x im p a ct or ta x a s p ects .


g ener a l l y w ith in 1 5 da y s of th e ta x p a y er ’ s r eceip t of a r eq ues t f r om th e ta x a uth or ity if th e ta x p a y er s o r eq ues ts .

th e ta x a uth or ity . T h is tim e l im it m a y b e ex tended a t th e dis cr etion of

Transfer pricing penalties eith er 2 0 % of th e unp a id ta x or 1 % of th e decr ea s ed or r educed ta x l os s w il l b e a p p l ied. T h er ea f ter , inter es t is a s s es s ed a t 1 4 % a b ov e th e

Penalty relief Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions a p p l ies . E f f ectiv e 1 J a nua r y 2 0 1 1 , th e l im it s et b y th e T a x C ode is th r ee y ea r s f r om

th e end of th e

under ta k es a n a ct dir ected a t th e a s s es s m ent of ta x , th en th e th r ee- y ea r tim e l im it b eg ins a g a in. T h e l im it w il l a l s o b e p r ol ong ed if th e

m a y not b e a s s es s ed a f ter 1 0 y ea r s .

1 1 3


C z ech Rep ub lic

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority p a r t of th a t a udit is h ig h . T h e ta x a uth or ity h a s a dop ted a g l ob a l a p p r oa ch . A udit s ub j ects a r e s el ected b a s ed on com p l ex cr iter ia , a nd tr a ns f er p r icing is onl y one a s p ect a m ong m a ny oth er s . I nta ng ib l es , r oy a l ties , l ong - ter m l os s es a nd s er v ice f ees a r e s een a s th e m os t

conta ining f ul l - tim e s p ecia l is ts dedica ted to tr a ns f er p r icing is s ues .

APA opportunity r eq ues t, th e ta x a dm inis tr a tor decides w h eth er th e ta x p a y er h a s ch os en a tr a ns f er p r icing deter m ina tion on a n a r m ’ s - l eng th b a s is . T h e b inding a s s es s m ent ca n b e is s ued onl y f or tr a th a t w il l b e ef f ectiv e in th e f utur e. I t is im p os s ib l e to a p p l y f or a b inding a s s es s m ent of b us ta x l ia b il ity . D - 3 3 3 deta il s th e p r ocedur e f or is s uing b inding a s s es s m ents a nd th e p a r ticul a a dm inis tr a tor s h oul d is s ue th e decis ion w ith in s ix m onth s .

m eth od th a t w oul d r es ul t in a tr a ns f er p r ice ns a ctions ef f ectiv e in a p a r ticul a r ta x p er iod or ines s r el a tions h ip s th a t h a v e a l r ea dy a f f ected r s f or th e a p p l ica tion. G ener a l l y , th e ta x

Impact of new OECD BEPS Action 8–10 guidelines tr a ns f er p r icing l eg is l a tion a nd th e cur r ent p r a ctice in th e tr a ns f er p r icing a r ea , it is l ik el y th a t th e a m ended O E C D T r a ns f er P r icing G uidel ines w il l b e a p p l ied on tr a ns a ctions th a t ca n s til l com e under ta x a udit.


1 1 4

D enm ark Taxing authority and tax law

• D a nis h T a x A s s es s m ent A ct • D a nis h T a x C ontr ol A ct

Relevant regulations and rulings 4 0 1 , of 2 8 A p r il 2 0 1 6 , a p p l ies to contr ol l ed tr a ns a ctions ca r r ied out in incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or l a ter . T h e p r ev ious r eg ul a tion, N um b er 4 2 , of 2 4 J a nua r y 2 0 0 6 , on docum enta tion of tr a ns f er p r icing of contr ol l ed tr a ns a ctions , w il l b e r ep ea l ed w ith ef f ect 4 a f ter 1 J a nua r y 2 0 1 7 , w h il e f or incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or no l a ter th a n 3 1 D ecem b er 2 0 1 6 , it is p os s ib l e to a p p l y 4 4 4 on T r a ns f er P r icing D ocum enta tion.

T h e ta x a uth or ities h a v e p ub l is h ed g uidel ines on th e a p p l ica tion of th e E x ecutiv e O r der on T r a ns f er P r icing D ocum enta tion. T h es e I n 2 0 0 9 , th e ta x a uth or ities p ub l is h ed a dditiona l docum enta tion g uidel ines on v a l ua tion. T h e g uidel ines a p p l y to th e v a l ua tion of com p a nies , s h a r es a nd intel l ectua l p r op er ty r ig h ts . T h e g uidel ines incl ude a des cr ip tion of v a l ua tion m odel s , r ecom m enda tions on th e r ev is ed on 1 5 J a nua r y 2 0 1 3 .

OECD Guidelines treatment Documentation requirements

• •

A n a nnua l tota l b a l a nce of l es s th a n D K K 1 2 5 m il l ion O r

• A n a nnua l r ev enue of l es s th a n D K K 2 5 0 m il l ion 4

1 1 5


D enm ark

(continued)

• •

m il l ion) in th e im m edia tel y p r eceding incom e y ea r . T h e r eq uir em ent to p r ep a r e th e C b C r ep or t is a p p l ica b l e f or incom e y ea r s s ta r ting on or a f ter 1 J a nua r y 2 0 1 6 , if th e ul tim a te p a r ent com p a ny is a D a nis h ta x r es ident. I f cer ta in conditions a r e m et, D a nis h s ub s idia r ies of a non- D a nis h p a r ent m a y a ct a s a s ur r og a te a nd m a y s ub m it a C b C r ep or t on b eh a l f of th e non- D a nis h p a r ent in D enm a r k . A p r ov is ion F or incom e y ea r s s ta r ting on 1 J a nua r y 2 0 1 6 or no l a ter th a n 3 1 D ecem b er 2 0 1 6 , com p a nies ca n ch oos e to p r ep a r e tr a ns f er p r icing 4 4 4 4 • A des cr ip tion of th e g r oup , incl uding th e l eg a l g r oup s tr uctur e; h is tor y of th e g r oup , incl uding a des cr ip tion of r es tr uctur ing s , • A des cr ip tion of th e D a nis h entity a nd th e oth er entities inv ol v ed in inter com p a ny tr a ns a ctions w ith th e D a nis h entity (p r im a r y b us ines s • A des cr ip tion of ea ch inter com p a ny tr a ns a ction • C om p a r a b il ity a na l y s is (da ta b a s e s ea r ch if neces s a r y ) f or ea ch inter com p a ny tr a ns a ction • A l is t of a ny w r itten inter com p a ny a g r eem ents in r el a tion to th e inter com p a ny tr a ns a ctions a nd a cop y of a ny w r itten a g r eem ents th a t th e D a nis h entity or th e r el a ted p a r ties h a v e enter ed into w ith f or eig n ta x a uth or ities r eg a r ding inter com p a ny tr a ns a ctions to 9 0 da y s . F or eig n com p a r a b l e com p a nies a r e a ccep ted. I n a ddition, new r ul es a s of J a nua r y 2 0 1 3 ca m e into f or ce, a l l ow ing th e ta x a uth or ities to r eq ues t entities th a t a r e s ub j ect to th e tr a ns f er p r icing docum enta tion r eq uir em ents to ob ta in a n a uditor ’ s r ep or t under s p ecia l cir cum s ta nces .

Priorities/pricing methods a p p r op r ia te m eth od, th e ta x p a y er s h oul d cons ider th e a s p ects r eg a r ding th e a p p l ica tion of m eth ods s ta ted in th e O E C D G uidel ines .


Transfer pricing-specific returns onl y if th e tota l v a l ue of th e contr ol l ed tr a ns a ctions ex ceeds D K K 5 m il l ion in th e incom e y ea r .


1 1 6

D enm ark

(continued)

Documentation deadlines T h er e is a n a s s um p tion in th e docum enta tion r ul es th a t th e docum enta tion is b eing p r ep a r ed contem p or a neous l y . I n a ny ev ent, da y s of th e ta x a uth or ities ’ r eq ues t f or docum enta tion. T h e ta x a uth or ities ca n in p r incip l e s ta r t a ta x a udit f or a n incom e y ea r w h en th e

Transfer pricing penalties P ena l ties w er e intr oduced f or incom e y ea r s com m encing on or a f ter 2 A p r il 2 0 0 6 . P ena l ties a r e a p p l ica b l e if th e tr a ns f er p r icing docum enta tion r eq uir em ents a r e not ob s er v ed due to th e ta x p a y er ’ s g r os s neg l ig ence or w il l f ul m is conduct.

a dj us tm ent. T h e p ena l ty a m ounts a r e nondeductib l e. 4 4 4 4 2 0 1 1 ) w il l b e l ev ied on a l l p r ior - y ea r a dj us tm ents of cor p or a te ta x es p a y a b l e. F ur th er m or e, nondeductib l e inter es t of 0 . 8 % w il l b e a dded 4 4 w a s intr oduced in 2 0 1 3 .

Penalty relief s til l a p p l ies . A s s ta ted a b ov e, a deq ua te tr a ns f er p r icing docum enta tion s ub m itted in due tim e w il l p r ov ide p ena l ty p r otection.


Frequency of tax audit and transfer pricing scrutiny by the tax authority ch a l l eng ed is a l s o h ig h . T h e ta x a uth or ities op er a te dedica ted tr a ns f er p r icing a udit center s a cr os s D enm a r k s ol el y to ca r r y out tr a ns f er p r icing a udits indep endentl y of g ener a l ta x a udits . T h e D a nis h G ov er nm ent h a s l a unch ed initia tiv es w ith a f ocus on m ul tina tiona l com p a nies , incl uding incr ea s ing th e f unds a l l oca ted to th e ta x a uth or ities a nd tig h tening th e p ena l ty r ul es in tr a ns f er p r icing ca s es . T h e ta x a uth or ities a r e

1 1 7


D enm ark

(continued)

• • I nta ng ib l e a s s ets • • P r icing of intr a g r oup tr a ns a ctions of g oods a nd s er v ices •

APA opportunity T h e D a nis h l eg is l a tion p r ov ides f or unil a ter a l , b il a ter a l a nd m ul til a ter a l A P A s . T h er e is no b il a ter a l A P A r eg im e in p l a ce, h ow ev er it is y ea r s .



1 1 8

D o minic an R ep u b l ic Taxing authority and tax law Dirección General de Impuestos Internos, or DGII)

Relevant regulations and rulings I n J a nua r y 2 0 0 7 , a n a m endm ent to A r ticl e 2 8 1 of th e D om inica n T a x C ode intr oduced th e a r m ’ s - l eng th p r incip l e, a l l ow ing th e D G I I to y ea r 2 0 1 1 . 4 A s of 9 N ov em b er 2 0 1 2 , th r oug h th e ena ctm ent of L a w 2 5 3 - 1 2 (L a w ), th es e r eg ul a tions w er e incor p or a ted into A r ticl e 2 8 1 of th e 4 4 4 T h e decr ee b r oa dened th e s cop e of A r ticl e 2 8 1 of th e D om inica n T a x C ode, w h ich now s ta tes th a t tr a ns f er p r icing r eg ul a tions a p p l y to • A r es ident a nd a nonr es ident r el a ted- p a r ty • A r es ident a nd a r es ident r el a ted- p a r ty • A r es ident a nd a n indiv idua l , cor p or a tion or entity dom icil ed in a ta x h a v en T r a ns f er p r icing a dj us tm ents w il l a p p l y onl y if th e inter com p a ny tr a ns a ction r es ul ts in a ta x def er r a l or r eduction of ta x a b l e incom e. T h e D G I I w il l a s s um e th a t ta x a b l e incom e h a s b een r educed or def er r ed w h en th e inter com p a ny tr a ns a ction, a s or ig ina l l y p r iced, r es ul ts in (i) com p ens a tion of ca r r y f or w a r d l os s es , (ii) b a s e er os ion in f a v or of a noth er j ur is diction or (iii) a r b itr a g e of ta x r a tes a m ong r es idents .

OECD Guidelines treatment th e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion. H ow ev er , th e tr a ns f er p r icing r eg ul a tions in th e D om inica n T a x C ode a r e m a inl y b a s ed on th e O E C D G uidel ines .

Documentation requirements C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to dom es tic a nd cr os s - b or der inter com p a ny tr a ns a ctions m us t b e m a inta ined. 4 com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e to th e D G I I .

• A deta il ed des cr ip tion of th e na tur e of th e tr a ns a ctions • • C om p a r a b il ity a na l y s is • T r a ns f er p r icing m eth od em p l oy ed, incl uding th e m eth od s el ection p r oces s •

1 1 9


D o minic an R ep u b l ic

(continued)

4 • T a x p a y er s w h os e tota l a m ount of inter com p a ny tr a ns a ctions does not ex ceed D O P 1 0 m il l ion a nd th a t h a v e no tr a ns a ctions w ith entities l oca ted in ta x h a v ens or under p r ef er entia l ta x r eg im es • r es ul t in a ta x def er r a l or ov er a l l r eduction of ta x r ev enues N ev er th el es s , ta x p a y er s ex cl uded f r om

th e docum enta tion r eq uir em ents a r e s til l s ub j ect to com p l y ing w ith th e a r m ’ s - l eng th p r incip l e a nd


Return disclosures/related-party disclosures T h er e a r e no r el a ted- p a r ty dis cl os ur es th a t a r e to b e m a de on g ener a l incom e ta x r etur ns .

Transfer pricing-specific returns 4

Documentation deadlines a nd r ecor ds . I f r eq ues ted b y th e ta x a uth or ities , docum enta tion s h oul d b e p r ov ided w ith in th e p er iod th e ta x a uth or ities s tip ul a te in th e notice.

Transfer pricing penalties A r ticl e 2 8 1 b is of th e D om inica n T a x C ode, w ith r ef er ence to A r ticl e 2 5 7 , dicta tes th a t f a il ur e to p r ov ide tr a ns f er p r icing docum enta tion on tim e or f a il ur e to p r ov ide tr ue, com p l ete or a ccur a te inf or m a tion coul d r es ul t in p ena l ties of up to th r ee tim es 0 . 2 5 % of th e p r ev ious y ea r ’ s incom e. F ur th er m or e, a ny a dditiona l ta x g ener a ted b y D G I I p r ice a dj us tm ents s h oul d b e s ub j ect to s ur ch a r g es a nd p ena l ty inter es t.

Penalty relief • 4 0 % r eduction of th e s ur ch a r g es a s s es s ed if th e com p a ny decides to v ol unta r il y a m end its ta x r etur n w ith out a ny p r ior notice f r om ta x a uth or ities


1 2 0

th e

D o minic an R ep u b l ic

(continued)

• 3 0 % r eduction of th e s ur ch a r g es if , a f ter b eing a udited, th e dif f er ence b etw een th e es tim a ted ta x a nd th e ef f ectiv el y p a id ta x r ep r es ents l es s th a n 3 0 % of th e l a tter


Frequency of tax audit and transfer pricing scrutiny by the tax authority g ener a l ta x a udit is cons ider ed h ig h . E v en th oug h tr a ns f er p r icing r eg ul a tions a r e r el a tiv el y new in th e countr y , th e D G I I h a s b een a ctiv e in ta x a udits r eg a r ding tr a ns f er p r icing is s ues .

APA opportunity A P A s , b il a ter a l or m ul til a ter a l , a r e contem p l a ted in A r ticl e 2 8 1 b is of th e D om inica n T a x C ode a nd in D ecr ee N o. 7 8 - 1 4 . Timelines and general information • T a x p a y er s ca n r eq ues t a n A P A f or a cer ta in tim e p er iod a nd r enew it f or a n a dditiona l th r ee y ea r s . • •

4 p r es um ed to h a v e b een denied. • T h e decr ee es ta b l is h es th e inf or m a tion th a t m us t b e incl uded in th e A P A r eq ues t. F ur th er m or e, A r ticl e 2 8 1 of th e D om inica n T a x C ode contem p l a tes a p r otection r eg im e (regimen de protección

is s ues a cor r es p onding r es ol ution once th e indus tr y or econom ic a ctiv ity is s el ected.

Impact of new OECD BEPS Action 8–10 guidelines A s of th e da te of th is p ub l ica tion, th e ta x a uth or ities h a v e not m a de p ub l ic a ny f or m a l initia tiv e to up da te ex is ting tr a ns f er p r icing r ul es

cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur .

1 2 1


E c u ad o r Taxing authority and tax law Servicio de Rentas Internas Servicio Nacional de Aduanas del Ecuador Ley Orgánica de Régimen Tributario Interno Ley Reformatoria Para La Equidad Tributaria En El Ecuador, or L E T ); O r g a nic C ode f or P r oduction, T r a de a nd I nv es tm ents (Código Orgánico de la Producción, Comercio e Inversiones Código Orgánico de Organización Territorial, Autonomía y Descentralización, or C O O T A D ); a nd th e ex ecutiv e or der r eg ul a tions of th os e l a w s , doub l e ta x a tion tr ea ties a nd s up r a na tiona l nor m s .


• D om es tic tr a ns a ctions a r e a f f ected b y th e tr a ns f er p r icing r eg im e. C om p ul s or y del iv er y of its docum enta tion m a y b e w a iv ed if cer ta in conditions a r e m et. • T h er e a r e r es tr ictiv e deductib il ity l im its f or r oy a l ties , tech nica l s er v ices , m a na g em ent f ees a nd cons ul ting s er v ices p a id to r el a ted p a r ties . • C er ta in indir ect a l l oca ted ex p ens es p a id to r el a ted p a r ties a r e r es tr icted. • • T h e us e of th e inter q ua r til e r a ng e, w h en m or e th a n one com p a r a b l e is f ound, is com p ul s or y f or ev er y a p p l ica b l e m eth od. A l s o, th e tr a ns f er p r icing a dj us tm ent m us t b e ca l cul a ted to th e m edia n of th e com p a r a b l es s et. • th e ex cl us ion of com p a nies m a k ing l os s es . • T h e ta x a dm inis tr a tion m a y us e s ecr et com p a r a b l es . •

• • E l im ina ting th e com p ul s or y a p p l ica tion of h ier a r ch y of m eth ods • A l l ow ing th e ta x a dm inis tr a tion to es ta b l is h a nti- a v oida nce r ul es •

• H a v e a p a y a b l e C I T g r ea ter th a n 3 % of th eir ta x a b l e r ev enues • N ot p er f or m

tr a ns a ctions w ith ta x h a v ens

• N ot h a v e g ov er nm ent contr a cts r el a ted to th e ex p l or a tion a nd ex p l oita tion of nonr enew a b l e r es our ces


1 2 2

E c u ad o r

(continued)

ty p e a nd cl a s s of tr a ns a ction, num b er of tr a ns a ctions , na m e of r el a ted- p a r ty , a ddr es s of r el a ted- p a r ty a nd th e ta x r a te a p p l ica b l e to th e r el a ted- p a r ty . tr a ns a ctions a r e ty p ica l l y th e s ub j ect of deta il ed a na l y s es . A s th e O E C D G uidel ines s h a l l b e us ed a s a tech nica l r ef er ence f or E cua dor ia n

th os e r el a ted w ith A ction 3 . 4 p a r ties not to ex ceed 3 0 0 % of th e eq uity .

OECD Guidelines treatment inter na tiona l tr ea ties s ig ned b y E cua dor h ol d s up r em a cy ov er th e O E C D G uidel ines . a dm inis tr a tion k eep s p os ted a nd up da ted a t its w eb s ite.

T r ea tm ent of l oa ns to p a r ent com p a nies or s h a r eh ol der s a s div idends (A ction 2 ) •

O b l ig a tion to tr ea t ta x h a v ens or p r ef er entia l ta x r eg im es a s r el a ted p a r ties , p unis h m ent to s h a r eh ol der s in s uch j ur is dictions , a b il ity to •

•

4 • • •

N ondeductib il ity of r ecentl y tr a ded inta ng ib l es (A ction 8 ) •

D eductib il ity l im its to s er v ices a nd a l l oca tion tr a ns a ctions (A ction 1 0 ) •

O b l ig a tion to r ev ea l cr ea tion or tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions (A ction 1 2 )


• •

1 2 3


E c u ad o r

(continued)

• • • C a l cul a ted a dj us tm ents f or ea ch tr a ns a ction

ev en th oug h th e com p a ny does not r ea ch th e th r es h ol d a m ounts a nd on tr a ns a ctions th a t did not a ccum ul a te f or th e th r es h ol d.

• F ul l f unctiona l a na l y s is of th e m ul tina tiona l g r oup a nd th e l oca l p a r ty • • D eta il ed f unctiona l des cr ip tion of th e inter com p a ny tr a ns a ctions , a s w el l a s docum ents f or th e econom ic s ub s ta nce of th e tr a ns a ctions , • • • E conom ic a na l y s is , incl uding deta il ed r ea s oning f or ev er y m eth odol og ica l decis ion • outcom e • D eta il ed com p a r a b il ity f a ctor s a na l y s is • D eta il ed r ea s ons f or r ej ection of noncom p a r a b l e com p a nies , incl uding deta il ed inf or m a tion of s uch com p a ny • • A na l y s is des cr ip tion a nd concl us ion

f or its tr a ns f er p r icing a na l y s is . T h e T P A nnex a nd T P docum enta tion m us t b e s ub m itted up to tw o m onth s a f ter th e ta x r etur n of th e com p a nies a ccor ding to th e ninth

a p p l ica b l e to a ny of th e counter p a r ts or in ca s e a ny of th em

h a s s h a r eh ol der s l oca ted in ta x h a v ens or l ow ta x j ur is dictions .

a f or em entioned th r es h ol d is s ur p a s s ed, ex cep t w h en th e ta x p a y er h a s tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions or w h en th e ta x p a y er h a s a contr a ct w ith th e E cua dor ia n G ov er nm ent f or ex p l or a tion or ex p l oita tion of nonr enew a b l e r es our ces .


m eth od) m a y b e us ed.


1 2 4

E c u ad o r

(continued)

th e E cua dor ia n ta x a dm inis tr a tion to is s ue tech nica l g uidel ines th a t a l l ta x p a y er s m us t f ol l ow unl es s th ey m a y docum ent th e r ea s ons b eh ind th e us e of a dif f er ent m eth odol og ica l el ection.

com m odities r ul e).

• • E x is tence of r ef er ence p r ices • • A v a il a b il ity of inf or m a tion r eg a r ding th e l is ting p er iods • A ccep ta nce or p r oh ib ition of inter m edia r ies com p a nies is a ccep ta b l e if th e ta x p a y er s ca n docum ent a nd dem ons tr a te th a t it is not p os s ib l e to a cces s p ub l ic inf or m a tion of l oca l com p a nies .

in s uch ca s e, th e p r ev ious y ea r ’ s inf or m a tion m a y b e us ed if a dem ons tr a tion of s im il a r conditions h a p p ening in b oth y ea r s is incl uded.

Return disclosures/related-party disclosures p r ov iding enoug h inf or m a tion to m a k e s ur e th a t econom ic s ub s ta nce of th e tr a ns a ctions is docum ented, incl uding th e a b il ity of r el a ted p a r ties to p r ov ide s er v ices b eing p a id b y th e E cua dor ia n ta x p a y er . N oneth el es s , inf or m a tion r eg a r ding ow ner s h ip of com p a nies is r eq uir ed f or a l l ta x p a y er s f or g ener a l ta x p ur p os es , incl uding th e C I T r a te.

• • r el a tions h ip to th e ta x p a y er a nd th e ta x p a y er h a s not b een a b l e to p r ov e th a t th er e is no r el a tions h ip on m a na g em ent, a dm inis tr a tion, contr ol or ca p ita l tr a ns a ctions b eing h el d.

1 2 5


E c u ad o r

(continued)

Transfer pricing–specific returns ta x a dm inis tr a tion, a s w el l a s b y th e ex ter na l a uditor s b eca us e of T a x a nd C om p a nies L a w s com p l ia nce r eq ues ts . T h e f ol l ow ing is ty p ica l • com m unica te th e tr a ns f er p r icing a na l y s is outcom e b ef or e th e is s ua nce of th e a udit r ep or t • • • •

Documentation deadlines A p r il ).


I n s p ite of th e a b ov e, th e ta x a dm inis tr a tion is s ued a docum ent (Instructivo para el Establecimiento de Sanciones Pecuniarias) th a t is us ed to es ta b l is h th e p ena l ty a m ount a ccor ding to th e s er ious nes s of th e f a ul t or m is dem ea nor (l a te del iv er y or incom p l ete or er r oneous A s s es s m ents of a ny k ind, incl uding tr a ns f er p r icing a dj us tm ents , m us t ch a r g e inter es t (a r ound 1 3 % p er y ea r ) f or th e tim e b etw een th e p a id. I n a ddition, a 2 0 % s ur ch a r g e on th e a s s es s m ent w il l b e a p p l ied.

Penalty relief C ur r entl y , no p ena l ty r el ief r eg im e is a v a il a b l e; nev er th el es s , th e 2 0 % s ur ch a r g e m a y b e p r ev ented w h en a n a s s es s m ent is a ccep ted a t

Statute of limitations on transfer pricing assessments r etur n. Worldwide Transfer Pricing Reference Guide

1 2 6

E c u ad o r

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n r ecent y ea r s , th e num b er of ca s es inv ol v ed in ong oing l itig a tion a nd under g oing dom es tic a p p ea l s (p r eceding cour t a ction) h a s incr ea s ed. T a x h a v ens , r oy a l ties a nd com m odities a r e f r eq uentl y inv ol v ed in dis p utes . indus tr ies , r ecur r ence of l os s es , tr a ns a ctions w ith ta x h a v ens or l ow ta x j ur is dictions a nd com p l ia nce p r ecedents . I f a ta x p a y er is s el ected f or a g ener a l ta x a udit, th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h . I f tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is a l s o h ig h . F or ex a m p l e, in a udits of w h ich tr a ns f er p r icing is a s ub j ect, th e p er centa g e of r ev iew s w h er e a s s es s m ents a r e b a s ed on ch a l l eng ing th e m eth odol og y (or a t l ea s t th e com p a r a b l es s et) is m or e th a n 7 5 % . O n th e oth er h a nd, th er e is a p r ob a b il ity th a t f or cer ta in p r im a r y a g r icul tur a l p r oducts , nonr enew a b l e na tur a l r es our ces or a ny k ind of

b eca us e of cer ta in b us ines s a ctiv ities in r el ev a nt indus tr ies . A tr a ns f er p r icing a udit is tr ig g er ed b y a centr a l decis ion- m a k ing b ody . T o deter m ine w h ich ta x p a y er s to a udit, th es e el em ents a r e • • N a tur e of r el a ted- p a r ty tr a ns a ctions under ta k en b y th e ta x p a y er • • P r ev ious ta x a udits of th e ta x p a y er • L ow r a tio of p a id C I T / r ev enue • I m p or ta nt ch a ng es in th e op er a ting s tr uctur e of a com p a ny , s uch a s th e a p p l ica tion of a l ow - r is k s tr uctur e

APA opportunity T h e E cua dor ia n ta x a dm inis tr a tion is s ued a n A P A - l ik e p r ocedur e th a t deta il s th e k ind of inf or m a tion th a t w oul d b e r eq ues ted to a s k

ex p l a ined to th e a dm inis tr a tion. T h e cons ul ta tion p r ocedur es b eca m e m a s s iv e a s th e r es ul t of th e l im ita tion of cer ta in ex p ens es p a id to r el a ted p a r ties , w h er e th e onl y w a y to l if t th e l im ita tion is to r eq ues t f or a r ul ing on th e p r ice of th e r el ev a nt tr a ns a ction.

th e cons ul ta tion, b ut th e tim e w il l dep end on th e com p l ex ity a nd th e num b er of cons ul ta tions under th e r ev iew of th e l oca l ta x a dm inis tr a tion.

1 2 7


E c u ad o r

(continued)

Impact of new OECD BEPS Action 8–10 guidelines T h e O E C D G uidel ines a r e a p p l ica b l e a s tech nica l g uidel ines f or ev er y tr a ns a ction not b eing r eg ul a ted b y a ny inter na l l a w , r eg ul a tion or

w il l b e a p p l ica b l e f or tr a ns a ctions th a t E cua dor ia n com p a nies h ol d w ith r el a ted p a r ties (dom es tic or cr os s - b or der ) s ta r ting 1 J a nua r y 2 0 1 7 .


1 2 8

E g y p t Taxing authority and tax law

Relevant regulations and rulings T o r a is e ta x p a y er a w a r enes s of tr a ns f er p r icing p r incip l es a nd h ow to a p p l y A r ticl e 3 0 of th e I T L a nd A r ticl es 3 8 , 3 9 a nd 4 0 of its ex ecutiv e r eg ul a tion, th e E T A , w ith th e a s s is ta nce of th e O E C D , is s ued its tr a ns f er p r icing g uidel ines in 2 0 1 0 . T h e E T A decided to is s ue p r ov ides ta x p a y er s w ith g uida nce on th e a r m ’ s - l eng th p r incip l e, com p a r a b il ity a na l y s is , tr a ns f er p r icing m eth ods a nd docum enta tion r eq uir em ents . T h e up com ing p a r ts of th e tr a ns f er p r icing g uidel ines w il l a ddr es s oth er is s ues , s uch a s th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e to tr a ns a ctions inv ol v ing inta ng ib l e p r op er ty , intr a g r oup s er v ices , cos t contr ib ution a r r a ng em ents (C C A s ) a nd A P A s . T a x p a y er s m a y s ub m it th eir tr a ns f er p r icing docum enta tion in E ng l is h . H ow ev er , a n A r a b ic v er s ion is g ener a l l y r eq ues ted dur ing th e ins p ection p r oces s . conditions ta k ing p l a ce b etw een non- a s s ocia ted p er s ons , w h ich a r e l ia b l e to r educe th e ta x b a s e or tr a ns f er its b ur den f r om

a ta x a b l e

T h e h ea d of th e a dm inis tr a tion m a y concl ude a dv a nce a g r eem ents w ith a s s ocia ted p er s ons on one or m or e m eth ods f or deter m ining th e a r m ’ s - l eng th p r ice.

• A s p ous e, a nces tor s a nd des cenda nts (f a m il y m em b er s ) • C a p ita l a s s ocia tions a nd a p er s on th a t h ol ds a t l ea s t 5 0 % of th e v a l ue of s h a r es or v oting r ig h ts , w h eth er dir ectl y or indir ectl y • P a r tner s h ip s , th e j oint p a r tner s a nd s il ent p a r tner s of th os e p a r tner s h ip s • A ny tw o or m or e com p a nies w h er e a th ir d p a r ty h ol ds 5 0 % or m or e of th e v a l ue of s h a r es or of th e v oting r ig h ts in ea ch com p a ny Introducing the General Anti-Avoidance Rule (GAAR): T h e r ul e w a s intr oduced under A r ticl e N o. 9 2 (b is ) of L a w N o. 5 3 of 2 0 1 4 , w h ich w a s p ub l is h ed b y th e E g y p tia n G ov er nm ent on 3 0 J une 2 0 1 4 . A r ticl e N o. 9 2 p r ov ides th a t ta x im p l ica tions of tr a ns a ctions w oul d not b e a ck now l edg ed (up on deter m ining a ta x a s s es s m ent) w h er e it is p r ov ed th a t th e p ur p os e or one of th e m a in p ur p os es of s uch tr a ns a ctions is to a v oid or p os tp one ta x es .

• tr a ns a ction. • b a s ed on th e tr a ns a ction. • T h e tr a ns a ction incl udes s om e cr iter ia h a v ing contr a dicting im p a cts el im ina ting ea ch oth er . I n a l l ca s es , th e b ur den of p r ov ing th e tr a ns a ction’ s a b us iv e p ur p os e f a l l s up on th e E T A . H ow ev er , th e ta x p a y er m a y p r ov ide ev idence th a t coul d dis p r ov e a ccus a tions of a g g r es s iv e ta x p l a nning . 1 2 9


E g y p t

(continued)

of f er s its a p p r ov a l .

OECD Guidelines treatment a ny one of th e m eth ods m entioned in th e O E C D G uidel ines , or a ny oth er a ccep ta b l e m eth od s uita b l e f or th e ta x p a y er , m a y b e f ol l ow ed.

Documentation requirements p r icing docum enta tion (a nd oth er s up p or ting docum ents , incl uding inter com p a ny a g r eem ents , s ch edul es a nd inv oices ) to s up p or t its decl a r ed tr a ns a ctions on th e ta x r etur n. A ccor ding to th e r ul es , h ow ev er , th e b ur den of p r oof s h if ts to th e ta x p a y er in th e ev ent th a t th e T h e tr a ns f er p r icing docum enta tion does not need to b e s ub m itted w ith th e ta x r etur n b ut s h oul d b e a v a il a b l e a t s h or t notice if th e E T A r eq ues ts it.

Priorities/pricing methods I n A r ticl es 3 9 a nd 4 0 of th e I T L , th e ex ecutiv e r eg ul a tions es ta b l is h th e m eth ods of ca l cul a ting th e a r m ’ s - l eng th p r ice.

4 a p p l y ing th is m eth od is una v a il a b l e, a ny of th e tw o oth er m eth ods p r es cr ib ed in A r ticl e 3 9 m a y b e a p p l ied. I n ca s e of ina b il ity to a p p l y a ny of th e th r ee m eth ods m entioned, a ny oth er m eth od des cr ib ed b y th e O E C D G uidel ines or a ny oth er a ccep ta b l e m eth ods , p r ov ided th e ta x p a y er ca n dem ons tr a te th a t th e m eth od us ed is th e m os t a p p r op r ia te f or th e a na l y s is a nd g iv e r ea s ons f or w h y th e oth er m eth ods a r e not a p p r op r ia te.

Return disclosures/related-party disclosures • N a m e of th e r el a ted- p a r ty or p a r ties , a l ong w ith th e g r oup s tr uctur e • T h e na tur e of th e r el a tions h ip • T y p e of th e r el a ted- p a r ty tr a ns a ctions , if a ny • T h e v a l ue of th e tr a ns a ctions • T h e m eth od us ed to deter m ine th e f a ir m a r k et p r ice a nd th e r ea s ons f or s el ecting th is m eth od • T h e countr y of or ig in f or ta ng ib l e a nd inta ng ib l e g oods • T h e countr y of th e s up p l ier


1 3 0

E g y p t

(continued)

Transfer pricing-specific returns cor p or a te ta x r etur n.

Documentation deadlines tr a ns f er p r icing s tudy w ith th e a nnua l ta x r etur n. T h e tr a ns f er p r icing r ep or t w il l b e r eq uir ed dur ing th e ins p ection p r oces s . F r om

2 0 1 0

l a tes t, tr a ns f er p r icing docum enta tion s h oul d b e com p l eted b y J une f or com p a nies w ith a D ecem b er y ea r - end (in p r incip l e, w ith out th e ex tens ion, th e com p a nies w oul d h a v e until A p r il ) to b e contem p or a neous .


• 5 % of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount is eq uiv a l ent to 1 0 % a nd up to 2 0 % of th e l eg a l l y p a y a b l e ta x • 1 5 % of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount is eq uiv a l ent to m or e th a n 2 0 % a nd up to 5 0 % of th e l eg a l l y p a y a b l e ta x • 4 0 of th e ta x p a y a b l e on th e non- incl uded a m ount, if s uch a m ount eq uiv a l ent to m or e th a n 5 0 % of th e l eg a l l y p a y a b l e ta x

Penalty relief p ena l ties a nd inter es t m entioned in th e I T L .

Statute of limitations on transfer pricing assessments Frequency of tax audit and transfer pricing scrutiny by the tax authority of E g y p t indica ted th a t tr a ns f er p r icing a dj us tm ents a r e a m a j or a nd p r ior ity s our ce of ta x incom e to th e countr y . H ence, th e E T A h a s th e a s s es s m ent, th e E T A dem a nds docum ents to s up p or t inter com p a ny p r icing . a r m ’ s - l eng th p r incip l e a r e l ik el y to b e a s s ig ned b y th e E T A a l ow ta x r is k r a ting . H ow ev er , ta x p a y er s g iv ing ina deq ua te cons ider a tion to th eir tr a ns f er p r icing p r a ctices w il l b e a s s ig ned a h ig h r is k r a ting .

1 3 1


E g y p t

(continued)

T a x p a y er s w ith h ig h p er ceiv ed r is k a r e m or e l ik el y to b e a udited b y th e E T A th a n th os e p er ceiv ed to h a v e l ow r is k . ex p er ience.

APA opportunity A P A s a r e a v a il a b l e in E g y p t, b ut none h a v e b een concl uded to da te.


• A ction 5 (H a r m f ul T a x P r a ctices ) • A ction 6 (T r ea ty A b us e) •

• 4 s ta nda r ds . I n a ddition, E g y p t a l s o needs to s ig n m ul til a ter a l ex ch a ng e of inf or m a tion a g r eem ents w ith oth er countr ies in or der to w or k A s of D ecem b er 2 0 1 6 , no a m endm ents h a v e b een intr oduced to th e l oca l ta x l a w . I n a ddition, E g y p t did not s ig n a ny m ul til a ter a l ex ch a ng e of inf or m a tion a g r eem ents w ith oth er countr ies dur ing 2 0 1 6 .


1 3 2

E l S al v ad o r Taxing authority and tax law Dirección General de los Impuestos Internos (D G I I ) a nd Ministerio de Hacienda

Relevant regulations and rulings com p a r a b il ity concep t.

Disclosure in the tax report 4

4

nex t b us ines s da y ). r ep or t r eg a r ding tr a ns a ctions conducted b y th e ta x p a y er w ith its r el a ted p a r ties or entities dom icil ed in ta x h a v en j ur is dictions , indica ting w h eth er th e ta x p a y er com p l ies w ith th e tr a ns f er p r icing l eg is l a tion (m a inl y th e a r m ’ s - l eng th p r incip l e). Guía de Orientación (G O ), N o. 0 0 1 / 2 0 1 2 , intended to p r ov ide g ener a l g uida nce to ta x p a y er s a b out th e ta x tr ea tm ent of r el a ted- p a r ty tr a ns a ctions or tr a ns a ctions w ith entities dom icil ed in ta x h a v en j ur is dictions .

a p p l ica tion of w ith h ol ding ta x a nd nondeductib il ity of cos ts a nd ex p ens es in r el a ted- p a r ty tr a ns a ctions a nd tr a ns a ctions w ith ta x h a v ens . F or ta x a uditor s , it p r ov ides g uida nce a b out dis cl os ur es in th e ta x r ep or t.

Recent ch anges 4 g uidel ines w h en deter m ining m a r k et p r ices of r el a ted- p a r ty tr a ns a ctions .

OECD Guidelines treatment G uidel ines to deter m ine th e p r icing us ed in r el a ted- p a r ty tr a ns a ctions . A s a r es ul t, ta x p a y er s ca n ca r r y out th eir tr a ns f er p r icing a na l y s es in a ccor da nce w ith O E C D G uidel ines , a nd it is b inding up on th e ta x a uth or ities .

Documentation requirements s a id tr a ns a ctions com p l y w ith tr a ns f er p r icing r eg ul a tions . F ur th er m or e, th e ta x a uth or ities h a v e a l r ea dy s ta r ted tr a ns f er p r icing a udits .

1 3 3


E l S al v ad o r

(continued)

I n ca s e a ta x p a y er does not m a inta in contem p or a neous tr a ns f er p r icing docum enta tion, no p ena l ties a p p l y , b ut th er e is a n incr ea s ed r is k th a t th e ta x a uth or ities w il l a ttem p t to r eca l cul a te a nd a dj us t it a ccor ding to th eir cr iter ia . I n a ny ca s e, ta x p a y er s s h oul d h a v e a l l s up p or ting da ta a nd inf or m a tion to dem ons tr a te th a t th eir inter com p a ny tr a ns a ctions m eet th e a r m ’ s - l eng th p r incip l e. A m ong th e docum enta tion r eq uir em ents im p os ed b y th e G O a nd th e D ecr ee, inf or m a tion a b out th e ta x p a y er a nd its m ul tina tiona l g r oup s h oul d b e incl uded, a s w el l a s a com p l ete f unctiona l a na l y s is a nd cr iter ia f or th e s el ection of com p a r a b l es (tr a ns a ctions or com p a nies ) a nd th e a p p l ica b l e tr a ns f er p r icing m eth odol og y . ov er a l l O E C D G uidel ines a s a v a l id r ef er ence f or es ta b l is h ing tr a ns f er p r ices . E v en th oug h th er e is no ex p l icit docum enta tion ob l ig a tion f or ta x p a y er s in th e T C , th e f a ct th a t th e ex ter na l a uditor h a s to is s ue a n Dictamen Fiscal) ef f ectiv el y r eq uir es ta x p a y er s to p r ep a r e a nd m a inta in

Priorities/pricing methods m eth od w h en a dj us ting p r ices . w h en deter m ining a nd a s s es s ing p r ices in r el a ted- p a r ty tr a ns a ctions . I n a ddition, th e G O es ta b l is h es th a t th e f ol l ow ing m eth ods a r e

Return disclosures/related-party disclosures D isclosure in t h e t ax audit rep ort 4

4

b us ines s da y ). conducted b y th e ta x p a y er w ith its r el a ted p a r ties or w ith entities dom icil ed in ta x h a v en j ur is dictions , indica ting w h eth er th e ta x p a y er com p l ied w ith th e tr a ns f er p r icing l eg is l a tion (m a inl y , th e a r m ’ s - l eng th p r incip l e).

Transfer pricing-specific returns 4 4

• T h e na m e of th e r el a ted- p a r ty or of th e ta x - h a v en- dom icil ed p a r ty •


1 3 4

E l S al v ad o r

(continued)

• T h e a nnua l a m ount of th e tr a ns a ctions • T h e com p a r a b il ity cr iter ia a p p l ied • T h e m eth odol og y a p p l ied • T h e com p a r a b il ity a dj us tm ents m a de • T h e des cr ip tion of th e tr a ns a ction (l is ted a r e 1 9 op er a tions of incom e, 2 0 of ex p ens e, 7 of a s s ets a nd 5 of l ia b il ities ) 44

m inim um

w a g es a p p l ies .


Transfer pricing penalties b a l a nce s h eet, m inus a ny s ur p l us on th e r ev a l ua tion of a s s ets . T h is is im p os ed w h en th e ta x p a y er does not h a v e s up p or ting docum enta tion or f a il s to com p l y w ith th e ob l ig a tion to m a inta in a l l docum enta tion f or 1 0 y ea r s f or tr a ns a ctions conducted w ith r el a ted l es s th a n nine m onth l y m inim um

w a g es . 1

F ailure t o com p ly wit h § 1 3 5 - ( f)

council f or not com p l y ing w ith th e r es p ons ib il ities of th e p r of es s ion. A dditiona l l y , w h en th e ta x a uditor ’ s noncom p l ia nce is due to th e f a ct th a t th e ta x p a y er f a il ed to p r ov ide th e inf or m a tion a nd

m inim um

w a g es .

Failure to file related parties information return 44 m onth l y m inim um

w a g es .

a p p l ies .

1

4

1 3 5


E l S al v ad o r

(continued)

General p enalt ies and int erest in case of t ax adj ust m ent s I n ca s e of a dj us tm ents f or under p a y m ents eith er on incom e ta x or v a l ue- a dded ta x , a g ener a l p ena l ty of 2 5 % of th e unp a id ta x a p p l ies , F ur th er m or e, l a te inter es t a l s o a p p l ies . I f th e ta x l ia b il ity is p a id w ith in tw o m onth s of th e or ig ina l p a y m ent ter m , th e a p p l ica b l e a nnua l inter es t r a te is 6 . 1 6 % . I f th e ta x l ia b il ity is p a id m or e th a n tw o m onth s a f ter th e or ig ina l p a y m ent ter m , th e a p p l ica b l e a nnua l inter es t r a te is 1 0 . 1 6 % .

Penalty relief a uth or ities , a 7 5 % p ena l ty r eduction a p p l ies ; if a n ex a m ina tion is a l r ea dy ong oing , a 3 0 % p ena l ty r eduction m a y s til l a p p l y .


Frequency of tax audit and transfer pricing scrutiny by the tax authority h ig h . T h e ta x a uth or ities h a v e b een inv es ting in tr a ining p er s onnel outs ide th e countr y to im p l em ent tr a ns f er p r icing a udit p r og r a m s a nd b e ch a l l eng ed is m edium , a nd th e l ik el ih ood th a t th e s et of com p a r a b l es w il l b e ch a l l eng ed is h ig h .

APA opportunity T h er e is no A P A p r og r a m

a v a il a b l e.


D G I I w il l a m end cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur . I t w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .


1 3 6

E s to nia Taxing authority and tax law

Relevant regulations and rulings • •

4 •

4 •

4 • C ur r ent E s tonia n tr a ns f er p r icing l eg is l a tion is ef f ectiv e a s of 1 J a nua r y 2 0 0 7 , a m ended a s of 1 J a nua r y 2 0 1 1 . 2 0 0 7 . T h e r eg ul a tion s ets out in m or e deta il th e p r incip l es f or deter m ining th e a r m ’ s - l eng th p r ice a nd a l s o es ta b l is h es docum enta tion r eq uir em ents . T h er e h a v e b een a f ew cour t r ul ing s a nd a n incr ea s ing num b er of ta x p r oceeding s on tr a ns f er p r icing is s ues in E s tonia .

OECD Guidelines treatment T h e ta x a uth or ities f ol l ow th e O E C D G uidel ines . H ow ev er , dom es tic l eg is l a tion is th e p r ev a il ing l a w .

Documentation requirements A l l entities m us t b e a b l e to p r ov e th a t tr a ns a ctions w ith r el a ted p a r ties ta k e p l a ce a t a r m ’ s - l eng th . Y et th er e is a n a dditiona l • • A r es ident of a l ow - ta x - r a te ter r itor y • •

N um b er of em p l oy ees (incl uding a s s ocia ted p er s ons ) is a t l ea s t 2 5 0

• •

4

• C om p a ny a na l y s is • I ndus tr y a na l y s is • F unctiona l a na l y s is • E conom ic a na l y s is

1 3 7


E s to nia

(continued)

Priorities/pricing methods T h er e is no h ier a r ch y of m eth ods ; a l l a r e tr ea ted a s eq ua l . H ow ev er , if a v a il a b l e, inter na l a nd E s tonia n dom es tic da ta is p r ef er r ed f or deter m ining th e a r m ’ s - l eng th p r ice.


Transfer pricing-specific returns C ur r entl y , th e E s tonia n ta x l a w s do not r eq uir e a s ep a r a te r etur n f or r el a ted- p a r ty tr a ns a ctions .

Documentation deadlines T h er e is no dea dl ine f or p r ep a r ing tr a ns f er p r icing docum enta tion. H ow ev er , ta x p a y er s a r e ob l ig ed to s ub m it th e docum enta tion w ith in 6 0 da y s of th e ta x a uth or ity ’ s r eq ues t.


I f th e p r ice of a tr a ns a ction concl uded b etw een a r es ident com p a ny a nd a p er s on a s s ocia ted w ith th is com p a ny dif f er s f r om v a l ue of th e tr a ns a ction, incom e ta x s h a l l b e im p os ed on th e a m ount th a t th e com p a ny w oul d h a v e r eceiv ed a s incom e, or th th a t th e com p a ny w oul d not h a v e incur r ed a s ex p ens es if th e tr a ns f er p r ice h a d conf or m ed to th e m a r k et v a l ue of th e tr a ns a incom e ta x r a te is 2 0 % on th e g r os s a m ount of th e ta x a b l e dif f er ence (i. e. , 2 0 / 8 0 of th e net a m ount) a nd is p a y a b l e ev en if a h a s l os s es .

th e m a r k et e a m ount ction. T h e com p a ny

I f ta x is a s s es s ed, inter es t on th e ta x a m ount a t th e r a te of 0 . 0 6 % p er da y , up to th e p r incip a l ta x a m ount, w il l b e im p os ed r etr oa ctiv el y a s of th e da te w h en th e ta x w a s s up p os ed to b e p a id until a ctua l p a y m ent (h er e, inter es t is s ub j ect to incom e ta x a t th e r a te of 2 0 / 8 0 a s a nonb us ines s - r el a ted ex p ens e).

Penalty relief T h er e is no p ena l ty r el ief if a ta x p a y er h a s th e neces s a r y docum enta tion b ut th e tr a ns f er p r icing is deter m ined to b e non- a r m ’ s - l eng th th e ta x p a y m ent is a l w a y s a s s es s ed.


1 3 8

E s to nia

(continued)

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions f or m a k ing a n a s s es s m ent of ta x is th r ee y ea r s . I n th e ev ent of intentiona l f a il ur e to p a y or w ith h ol d a n a m ount s ub m is s ion of th e ta x r etur n th a t w a s eith er not s ub m itted or conta ined inf or m a tion l ea ding to a n incor r ect deter m ina tion of th e ta x due.

Frequency of tax audit and transfer pricing scrutiny by the tax authority a s m edium .

APA opportunity C ur r entl y , th e E s tonia n ta x l a w s do not p r ov ide a ny op p or tunity to concl ude A P A s .

Impact of new OECD BEPS Action 8–10 guidelines F or m a l l y , th er e h a v e b een no ch a ng es in l oca l tr a ns f er p r icing r ul es b a s ed on th es e dev el op m ents ; h ow ev er , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

1 3 9


F ij i Taxing authority and tax law

• I ncom e T a x A ct • F ij i’ s doub l e ta x a g r eem ents

Relevant regulations and rulings 4 w ith in w h ich th e tr a ns f er p r icing r ul es op er a te.

OECD Guidelines treatment G uidel ines , r a th er th a n s up er s ede th em , a nd th e O E C D G uidel ines s h oul d b e r ef er r ed to if m or e deta il is r eq uir ed.

Documentation requirements 4 b e incl uded in tr a ns f er p r icing docum enta tion. th a t its contr ol l ed tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e.

th e ta x p a y er ’ s tr a ns f er p r ices a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e in l ig h t of th e r el ev a nt f a cts a nd cir cum s ta nces .

Priorities/pricing methods • • • C os t- p l us • • b or der a nd a r e p er f or m ed b y m ul tina tiona l s .


1 4 0

F ij i

(continued)


•

Transfer pricing–specific returns Documentation deadlines Transfer pricing penalties • FJ D 1 0 0 ,0 0 0 . • •

I f th e f a il ur e is k now ing l y or r eck l es s l y m a de, th e ta x p a y er f a ces a p ena l ty eq ua l to 7 5 % of th e a m ount of ta x p a y a b l e f or th e ta x p er iod to w h ich th e f a il ur e r el a tes O r

•

I n a ny oth er ca s e, th e ta x p a y er f a ces a p ena l ty eq ua l to 2 0 % of th e a m ount of ta x p a y a b l e f or th e ta x p er iod to w h ich th e f a il ur e r el a tes •

I f th e s ta tem ent or om is s ion w a s m a de k now ing l y or r eck l es s l y , th e ta x p a y er f a ces a p ena l ty eq ua l to 7 5 % of th e ta x s h or tf a l l . •

I n a ny oth er ca s e, th e ta x p a y er f a ces a p ena l ty eq ua l to 2 0 % of th e ta x s h or tf a l l . •

T h e a m ount of p ena l ty im p os ed under th e a b ov em entioned ca s es is incr ea s ed b y 1 0 p er centa g e p oints if th is is th e s econd a p p l ica tion of th e p ena l ties r el a ting to m a k ing f a l s e or m is l ea ding s ta tem ents , or 2 5 p er centa g e p oints if th is is th e th ir d or a s ub s eq uent a p p l ica tion.

•

Penalty relief • O r • T h e com m encem ent of a n a udit of th e ta x a f f a ir s of th e ta x p a y er

1 4 1


F ij i

(continued)

Statute of limitations on transfer pricing assessments a l l a s s es s m ents w il l a l s o a p p l y to tr a ns f er p r icing a s s es s m ents .

• I n th e ca s e of f r a ud, w il l f ul neg l ect or s er ious om is s ion b y or on b eh a l f of th e ta x p a y er , a t a ny tim e O r •


• C om p a ny incur r ing ong oing l os s es • • D ea l ing s w ith a s s ocia tes in ta x h a v en j ur is dictions • • T h os e w h o of f er s p ecia l r educed ta x r a tes f or a p a r ticul a r a ctiv ity • P oor com p l ia nce p r oces s es a nd r ecor ds • I ntr a g r oup ch a r g es , e. g . , m a na g em ent a nd tech nica l f ees • L a r g e r oy a l ty p a y m ents a nd ex ces s iv e deb t l ev el s (i. e. , inter es t p a y m ents ) • T r a ns f er of inta ng ib l es •

APA opportunity A P A s a r e not a v a il a b l e in F ij i cur r entl y b ut m a y b e cons ider ed l a ter in th e contex t of intr oducing a b inding r ul ing s p r oces s . C ur r entl y , th er e is one A P A in ex is tence in F ij i. v iew of el im ina ting a ny tr a ns f er p r icing im p l ica tions of th e s a m e, ev en th oug h s uch dis cus s ions a r e not b inding on eith er p a r ty .



1 4 2

F inl and Taxing authority and tax law 4

Relevant regulations and rulings 1 J a nua r y 2 0 0 7 or l a ter .

T h er e is no es ta b l is h ed ca s e l a w on b us ines s r es tr uctur ing s in F inl a nd. H ow ev er , th er e h a v e b een s om e a dv a nce r ul ing s r el a ting m a inl y 4 p r icing a dj us tm ent).

OECD Guidelines treatment T h e F innis h r eg ul a tions a nd ta x p r a ctice in g ener a l f ol l ow th e O E C D G uidel ines .

Documentation requirements T h e tr a ns f er p r icing docum enta tion a im s to p r ov e th a t th e p r ices us ed in cr os s - b or der intr a g r oup tr a ns a ctions a r e a ccep ta b l e f r om

th e

• G r oup com p a nies , if th e g r oup em p l oy s a t l ea s t 2 5 0 em p l oy ees , r eg a r dl es s of th e a m ount of tur nov er or a s s ets • 4 • T h e F innis h b r a nch es of a f or eig n com p a ny , if th e a b ov e conditions a r e m et b y th is com p a ny • E C ) r eg a r ding th e f or eig n ow ner s is a l s o ta k en into a ccount on a p r o r a ta b a s is . G r oup com p a nies a r e r eq uir ed to p r ov e th e a r m ’ s - l eng th na tur e of cr os s - b or der intr a g r oup tr a ns a ctions b y p r ep a r ing tr a ns f er p r icing docum enta tion. A ccor ding to th e l a w , th e docum enta tion • A des cr ip tion of th e b us ines s • A des cr ip tion of a s s ocia ted enter p r is es • I nf or m a tion on tr a ns a ctions b etw een a s s ocia ted enter p r is es

1 4 3


F inl and

(continued)

• A f unctiona l a na l y s is r eg a r ding tr a ns a ctions b etw een a s s ocia ted enter p r is es • A com p a r a b il ity a na l y s is , incl uding a v a il a b l e inf or m a tion on com p a r a b l es • A des cr ip tion of th e tr a ns f er p r icing m eth od a nd its a p p l ica tion

Priorities/pricing methods T a x p a y er s m a y ch oos e a ny of th e O E C D tr a ns f er p r icing m eth ods , a s l ong a s th e ch os en m eth od r es ul ts in a n a r m ’ s - l eng th p r icing f or th e intr a g r oup tr a ns a ction. I n its s el ection of th e m eth od, a ta x p a y er s h oul d cons ider th e a s p ects r eg a r ding th e a p p l ica tion of m eth ods s ta ted in th e O E C D G uidel ines .

Return disclosures/related-party disclosures 4 th e ta x a uth or ities ca nnot ob ta in a deq ua te inf or m a tion on th e tr a ns a ction b y us ing a n a p p r op r ia te inter na tiona l tr ea ty , th e ta x p a y er is r es p ons ib l e f or p r es enting s uch inf or m a tion.

Transfer pricing-specific returns I f a ta x p a y er (incl uding a F innis h b r a nch of a f or eig n com p a ny ) is ob l ig a ted to p r ep a r e tr a ns f er p r icing docum enta tion in F inl a nd, th e F innis h ta x a uth or ities a l s o r eq uir e F or m 7 8 to b e com p l eted a nd dis cl os ed w ith th e a nnua l cor p or a te incom e ta x r etur n. I nf or m a tion r ep or ted on F or m

7 8 .

H ow ev er , inf or m a tion r eg a r ding th e tr a ns f er p r icing m eth od a p p l ied is not r ep or ted in th is f or m .

Documentation deadlines b e s ub m itted w ith in 9 0 da y s of a r eq ues t b y th e ta x a uth or ities .

Transfer pricing penalties p r icing of intr a g r oup tr a ns a ctions h a s b een a t a r m ’ s - l eng th . I n a ddition, a p os s ib l e a dj us tm ent of ta x a b l e incom e m a y r es ul t in a s ep a r a te ta x p ena l ty of up to 3 0 % of th e a dj us ted a m ount of incom e, a s w el l a s p ena l ty inter es t.


1 4 4

F inl and

(continued)

Penalty relief P ena l ties ca n b e r educed or r em ov ed if th e ta x p a y er p r es ents s up p l em enta r y tr a ns f er p r icing docum enta tion th a t s up p or ts th e a r m ’ s l eng th na tur e of th e intr a g r oup tr a ns a ctions . T h e deter m ina tion of p ena l ties w il l b e m a de on a ca s e- b y - ca s e b a s is . 4 ca s es w h er e th e ta x p a y er h a s a deq ua tel y tr ied to f ol l ow th e a r m ’ s - l eng th p r incip l e in its intr a g r oup p r icing .


Frequency of tax audit and transfer pricing scrutiny by the tax authority p a r t of a n a udit, a nd th e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y s im il a r l y is h ig h .

APA opportunity A dv a nce r ul ing s a r e a v a il a b l e in F inl a nd. T h er e is no l eg is l a tion f or A P A s ; h ow ev er , th e ta x a uth or ities h a v e indica ted th eir w il l ing nes s to

Impact of new OECD BEPS Action 8–10 guidelines a s s es s ing th e a r m ’ s - l eng th na tur e of intr a g r oup tr a ns a ctions .

1 4 5


F r anc e Taxing authority and tax law Direction Générale des Finances Publiques, or D G F iP ; f or m er l y , Direction Générale des Impôts, or D G I ). T h e Mission d’Expertise Juridique et Economique Internationale

Autorité des normes comptable)

Relevant regulations and rulings • r eg im e) •

4 • • • 4 F r a nce h a s a l s o concl uded ta x tr ea ties w ith m or e th a n 1 0 0 countr ies in th e w or l d.

OECD Guidelines treatment T h e F r ench ta x a uth or ities cons ider th e F r ench tr a ns f er p r icing r eg ul a tions to b e cons is tent w ith th e O E C D G uidel ines a nd a r e f ol l ow ing

indica tor of a de facto tr a ns f er of s om eth ing of v a l ue, w h ich s h oul d b e ta x ed. I n a ddition, s p ecia l a ttention s h oul d b e p a id to r es tr uctur ing op er a tions (e. g . , s ite cl os ur e, l a y of f a nd tr a ns f er of g oing concer ns ), a s w el l a s th e v a l ue contr ib ution of th e F r ench ta x p a y er to th e tr a ns a ctions (e. g . , l oa ns , g ua r a ntees ), a s w el l a s continuing dis cus s ions a r ound intel l ectua l p r op er ty r ig h ts .

Documentation requirements G ener al tr ans f er p r ic ing d o c u mentatio n r eq u ir ements ( A r tic l e L 1 3 B o f th e F P T C ) w h er e A r tic l e L 1 3 A A d o es no t ap p l y F or s m a l l a nd m edium

enter p r is es th a t do not m eet th e cr iter ia s tip ul a ted in L 1 3 A A (s ee b el ow ), th e F T A m a y r eq uir e inf or m a tion

inf or m a tion, a nd th e s h or t dea dl ine under w h ich a ta x p a y er m a y h a v e to p r ov ide it, l ea ds to a de facto docum enta tion r eq uir em ent • • F unctiona l a na l y s is , contr a cts , l eg a l a nd m a na g em ent a ccount inf or m a tion


1 4 6

F r anc e

(continued)

• m eth od) S p ec ial tr ans f er p r ic ing d o c u mentatio n r eq u ir ement ( A r tic l es L 1 3 A A and L 1 3 A B o f th e F P T C )

•

4 • s uch tur nov er or g r os s a s s ets • • I f th e docum enta tion is not im m edia tel y p r ov ided to th e F T A , it s h oul d b e del iv er ed w ith in 3 0 da y s of th e F T A ’ s r eq ues t. I f docum enta tion is m is s ing , or if th e ta x p a y er f a il s to p r ov ide ex h a us tiv e a nd com p r eh ens iv e docum enta tion w ith in 3 0 da y s of a f or m a l notice f r om th e F T A , a p ena l ty of up to eith er 5 % of th e tr a ns f er p r icing r ea s s es s m ent or 0 . 5 % of th e v ol um e of tr a ns a ctions (s ee a b ov e) w oul d b e a p p l ied,

• General information concerning the related enterprises (economic, legal, financial background of the group): •

G ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding ch a ng es th a t occur r ed dur ing th e a udited p er iod, com p a r ed w ith p r ev ious y ea r s

•

•

•

G ener a l des cr ip tion of th e f unctions ca r r ied out a nd r is k s b or ne b y th e r el a ted entities , to th e ex tent th a t th ey im p a ct th e a udited com p a ny •

L is t of th e m a in inta ng ib l e a s s ets h el d in r el a tion to th e a udited com p a ny G ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy of th e g r oup

• Specific information pertaining to the audited company: •

G ener a l des cr ip tion of th e a ctiv ity ca r r ied out, incl uding ch a ng es th a t occur r ed dur ing th e a udited p er iod, com p a r ed w ith p r ev ious y ea r s • r oy a l ties •

L is t of th e cos t- s h a r ing a g r eem ents

•

C op y of tr a ns f er p r icing r ul ing s •

P r es enta tion of th e m eth ods us ed to deter m ine th e tr a ns f er p r ices (incl uding a n a na l y s is of th e f unctions , r is k s a nd a s s ets , a nd w ith a n •

• I nf o r matio n p er taining to ag r eements o r tax r u l ing s o b tained b y th e au d ited c o mp any ’ s r el ated p ar ties f r o m f o r eig n tax au th o r ities ( if known by the audited entity in question) 4

1 4 7


F r anc e

(continued)

p a r ties f r om f or eig n ta x a uth or ities ev en if s uch r ul ing s a r e not tr a ns f er p r icing - r el a ted a nd do not im p a ct th e r es ul ts of th e F r ench ta x p a y er . T h is docum enta tion r eq uir em ent enter ed into f or ce f r om 1 J a nua r y 2 0 1 4 onw a r d. I n p r a ctice, th e r eq uir em ent does not cov er docum ents ob ta ined f r om f or eig n ta x a dm inis tr a tions th a t a r e not in th e p os s es s ion of th e F r ench ta x p a y er .

4 4 m il l ion E ur o).

4 I t is im p or ta nt to note th a t th e r eq uir em ent to p r ov ide f ul l tr a ns f er p r icing docum enta tion in ca s e of a ta x a udit r em a ins in f or ce a nd th a t

• incl uding th e inta ng ib l e a s s ets h el d b y th e g r oup a nd us ed b y th e r ep or ting entity (e. g . , p a tents , tr a dem a r k s a nd k now - h ow ). T h e r ep or ting entity s h a l l r ep or t th e na tur e of th e a s s et a nd th e countr y w h er e th e entity ow ning th e a s s et r es ides . F ur th er m or e, th e r ep or ting entity h a s to m ention a g ener a l des cr ip tion of th e tr a ns f er p r icing p ol icy a p p l ied b y th e g r oup a nd r el a ted to th e r ep or ting entity . • I n th e s econd ta b l e, f or a l l intr a g r oup tr a ns a ctions (incl uding incom e, ex p ens es , a nd p ur ch a s e a nd dis p os a l of a s s ets ) w ith a n a g g r eg a te th e tr a ns f er p r icing m eth od a p p l ied, th e countr y or countr ies in w h ich th e r el a ted- p a r ty a t th e oth er end of th e tr a ns a ction(s ) is / a r e incor p or a ted, a nd a ny ch a ng e in th e tr a ns f er p r icing p ol icy or th e na tur e a nd l oca tion of th e a s s ets . I n a ddition, th e F r ench ta x p a y er is a l s o r eq uir ed to dis cl os e a ny ch a ng e th a t m a y h a v e occur r ed in th e tr a ns f er p r icing m eth od b eing a p p l ied a nd p r ov ide a dditiona l

b us ines s r es tr uctur ing s itua tions .

ca p a b il ity to identif y ta x p a y er s w ith th e h ig h es t tr a ns f er p r icing ex p os ur e a nd a l l oca te g ov er nm enta l a udit r es our ces a ccor ding l y . dev el op m ents . A ccor ding l y , th e p r ep a r a tion of th is l ig h t docum enta tion r ep or t s h oul d th er ef or e b e s een a s a n im p or ta nt ex tens ion to th e

ex ch a ng e a g r eem ents , s ub j ect to r ecip r ocity .


1 4 8

F r anc e

(continued)

T h e r eq uir em ent a p p l ies to l eg a l entities es ta b l is h ed in F r a nce th a t (i) p r ep a r e cons ol ida ted a ccounts , h ol d dir ectl y or indir ectl y f or eig n

r eq uir em ent.

th e F P T C , s up p l em enta r y docum enta tion, incl uding a l l docum ents nor m a l l y r eq uir ed b y th e F T A f r om

com p a nies s ub j ect to C I T , a nd s uch

out in A r ticl e L 1 0 of th e F P T C (s ee a b ov e).


Return disclosures/related-party disclosures th e l ink s of dep endence b etw een th e F r ench a udited entity a nd th e r el a ted p a r ties ). T h es e l eg a l p r ov is ions a l s o p r ov ide a n ob l ig a tion to dis cl os e th e a ctiv ities of th e r el a ted p a r ties .



ex cep tiona l cir cum s ta nces . E x ceeding s uch dea dl ine m a y tr ig g er p ena l ties m entioned p r ev ious l y .

1 4 9


F r anc e

(continued)

a n a udit. I f not, th e F T A w il l s end a f or m a l cl a im f or th e docum enta tion, w h ich w il l p r ov ide f or a 3 0 - da y dea dl ine, s ta r ting on th e da y th e f or m a l cl a im w a s r eceiv ed b y th e ta x p a y er , a f ter w h ich p ena l ties f or docum enta tion f a il ur e w il l a p p l y .

Transfer pricing penalties g ener a l l y a p p l ied a s a cons eq uence of a tr a ns f er p r icing r ea s s es s m ent. T r a ns f er p r icing r ea s s es s m ents f r om

th e F T A tr ig g er a n

• • p ena l ties . T h is p ena l ty r eg im e is ens h r ined in A r ticl e 1 7 3 5 ter of th e F T C a nd w a s a m ended b y th e F r ench P a r l ia m ent on 1 8 D ecem b er 2 0 1 4 . T h e cur r ent tr a ns f er p r icing p ena l ty r eg im e th er ef or e onl y a p p l ies to r ea s s es s m ent notices th a t w er e is s ued b y th e F T A a f ter th a t • •

0 . 5 % of th e v ol um e of tr a ns a ctions r el a ting to th e docum ents th a t f a il ed to b e p r ov ided to th e ta x a uth or ities •

5 % of th e r ea s s es s m ents b a s ed on A r ticl e 5 7 (a r m ’ s - l eng th p r incip l e) of th e F T C , incl uding tr a ns a ctions m entioned in th e a b ov e p oint

P ena l ties g ener a l l y a p p l ied a s a r es ul t of a tr a ns f er p r icing r ea s s es s m ent, r eg a r dl es s of com p l ia nce w ith tr a ns f er p r icing docum enta tion •

doub l e ta x tr ea ty p er m its th e F T A to tr ea t th e tr a ns f er p r icing r ea s s es s m ent a s a deem ed div idend dis tr ib ution, th e a ctua l w ith h ol ding ta x a p p l ied of cour s e dep ends on th e r el ev a nt ta x tr ea ty p r ov is ions . 1

1


1 5 0

F r anc e

(continued)

• I f th e tr a ns f er is tr ea ted a s a deem ed div idend, th e ta x a uth or ities a l s o us ua l l y a p p l y a 1 0 % p ena l ty f or not decl a r ing th e w ith h ol ding ta x . • H ow ev er , if cer ta in cum ul a tiv e conditions a r e m et, a t th e r eq ues t of th e ta x p a y er , th e w ith h ol ding ta x es m a y b e w a iv ed. T h es e cum ul a tiv e

ta x p a y er w ith in 6 0 da y s f r om th e r eq ues t. H ow ev er , th e ta x p a y er ca nnot h a v e r ecour s e to A r ticl e L 6 2 A if th e non- F r ench r el a ted- p a r ty th a t enter ed into th e r ea s s es s ed tr a ns a ction w ith th e F r ench entity is l oca ted in a non- coop er a tiv e s ta te or ter r itor y . • L a te inter es t p a y m ents a r e a p p l ied in th e ca s e of ta x r ea s s es s m ents m a de on th e g r ounds of A r ticl e 5 7 of th e F T C . T h e or dina r y l a te p a y m ent inter es t r a te is 0 . 4 0 % p er m onth (i. e. , 4 . 8 % p er y ea r ). •

4

h ow ev er , dep ending on tr ea ty p r ov is ions ). I n a ddition, th e a dj us tm ent m a y r es ul t in a r ea s s es s m ent of oth er ta x es a nd contr ib utions , s uch a s b us ines s or l oca l ta x es a nd em p l oy ee 4 of a ta x tr ea ty or th e E ur op ea n A r b itr a tion C onv ention), ta x col l ection coul d cur r entl y b e s us p ended dur ing th e entir e m utua l a g r eem ent p r oces s a nd p os tp oned until th e com p etent a uth or ities r ea ch a n a g r eem ent (A r ticl e L 1 8 9 A of th e F P T C ). T h is m ea s ur e h a s b een

Penalty relief D ur ing a ta x a udit a nd b ef or e th e ta x a uth or ities s end th e notice of r ea s s es s m ent, ta x p a y er s , under th e f r a m ew or k of A r ticl e L 6 2 of th e F P T C , a r e a l l ow ed to cor r ect th eir er r or s or om is s ions in cons ider a tion of a r educed l a te p a y m ent inter es t r a te (3 . 3 6 % p er y ea r ), w h ich cor r es p onding a dditiona l ta x es a t th e s a m e tim e. C onv ention) to a v oid doub l e ta x a tion r es ul ting f r om

th e r ea s s es s m ent. A dm inis tr a tiv e g uidel ines

p ena l ties ). A s s es s m ent of a tr a ns f er p r icing docum enta tion p ena l ty under L 1 3 A A (tr a ns f er p r icing docum enta tion p ena l ty r eg im e) does not

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions f or tr a ns f er p r icing a dj us tm ents is th e s a m e a s f or a l l F r ench cor p or a te ta x a s s es s m ents , g ener a l l y th r ee y ea r s l os s ca r r y f or w a r ds ). A s p ecia l ex tens ion ca n a p p l y in th e ca s e of a r eq ues t f or inter na tiona l ta x a s s is ta nce (A r ticl e L 1 8 8 A of th e F P T C ). w a s tr a ns f er r ed b ut not decl a r ed on tim e (ex tens ion f r om th r ee to s ix y ea r s in th is p a r ticul a r ca s e). A n ef f ectiv e ex tens ion to 1 0 y ea r s a p p l ies in ca s es w h er e p er m a nent es ta b l is h m ents a r e deem ed to ex is t b y th e F T A a nd w h er e th e non- F r ench entity nev er decl a r ed a ny a ctiv ities in F r a nce to th e F T A .

1 5 1


F r anc e

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h . T h e num b er of ta x a udits in tr a ns f er p r icing is incr ea s ing cons ider a b l y , a nd th e F T A is b ecom ing m or e ex tens iv e a nd tech nica l in its q uer ies , b eca us e it now in a s y s tem a tic m a nner g oing f or w a r d, ta x a udits f ocus ing on th is top ic a r e on th e r is e, a nd it is b ecom ing com m on to s ee v a l ua tion

g r oup b ef or e a nd a f ter th e b us ines s r es tr uctur ing a nd th e inter na l com m unica tion b etw een th e g r oup entities to deter m ine, f or ex a m p l e,

th e inf or m a tion ob ta ined s up p or ts it, th e F T A w il l not h es ita te to r ea s s es s th e ta x p a y er b a s ed on a n a l ter na tiv e tr a ns f er p r icing m eth od h a v e b een entitl ed to a h ig h er r etur n f or its non- r outine f unctions p r ev ious l y or to b e p er f or m ed.

ta x a b l e p os ition of th e com p a ny . From an overall perspective, transfer pricing issues that receive the greatest scrutiny are: • op er a ting m a r g in, l ik el y to h ide a ch a ng e in th e tr a ns f er p r icing p ol icy a p p l ied • P r oduct s a l e p r ices (under es tim a ted or ov er es tim a ted p r ices ), es p ecia l l y (b ut not onl y ) in ca s e of l os s es • • F r eq uency of ta x a udit a nd tr a ns f er p r icing s cr utiny b y th e ta x a uth or ity (continued) • P er m a nent es ta b l is h m ents • C l os ur e a nd conv er s ion cos ts • I nta ng ib l es a nd econom ic ow ner s h ip (incl uding q ues tions a b out r oy a l ties ) • F r ench , a nd it us ua l l y r ej ects P a n- E ur op ea n s ea r ch es ) • F ina ncia l tr a ns a ctions A s a n a l ter na tiv e to a tr a ns f er p r icing dis p ute, th e F T A incr ea s ing l y s eek s to deem th e ex is tence of a p er m a nent es ta b l is h m ent to tr y a nd a l l oca te a dditiona l ta x a b l e b a s e to th e F r ench ter r itor y a nd does not h es ita te to r es or t to j udicia l s ea r ch es in ins ta nces w h er e th e F T A f eel s th a t a uditor s ca nnot a cces s inf or m a tion v ia nor m a l inv es tig a tiv e p r ocedur es . Other tax audit trends: • • inf or m a tion f r om

a ccounting s y s tem s .


1 5 2

F r anc e

(continued)

•

4

s ub s idia r ies . •

4 4

F r ench h ol ding s w il l a l s o h a v e to dis cl os e th e deta il of th eir cons ol ida ted a ccounts , a l l ow ing th e F T A to identif y th e ta x p r ov is ions , f or ins ta nce. F ew cour t decis ions in F r a nce g o into deta il ed tr a ns f er p r icing is s ues . O ne of th e m a in q ues tions r el a tes to th e b ur den of p r oof , w h ich us ua l l y is s a id to r es t w ith th e ta x ins p ector s .

APA opportunity into th e A P A p r og r a m . T h is s ection w a s p r ov ided b y th e F ina nce A m endm ent A ct f or 2 0 0 4 a nd ca m e into f or ce 1 J a nua r y 2 0 0 5 . I t 4 4

T h er e is no r ol l b a ck p os s ib il ity .


a l l ow s th e F T A to do s o.

1 5 3


G ab o n Taxing authority and tax law

Relevant regulations and rulings tr a ns f er p r icing .

OECD Guidelines treatment T h e T a x A uth or ity a ccep ts th e O E C D G uidel ines .

Documentation requirements to v a l ida te th e tr a ns f er p r icing p ol icy . T h e docum ent s h oul d a l s o incl ude inf or m a tion a b out th e r el a tions h ip w ith oth er g r oup com p a nies

4 a nd a ctiv ities of a l l th e g r oup com p a nies .

Priorities/pricing methods Return disclosures/related-party disclosures T h er e a r e no dis cl os ur e r eq uir em ents .

Transfer-pricing-specific returns


1 5 4

G ab o n

(continued)


Transfer pricing penalties A ny ex ces s iv e ch a r g es w oul d b e r eg a r ded a s dis tr ib utions of incom e a nd b e s ub j ect to w ith h ol ding ta x es a s th e ca s e m a y b e. T a x a dj us tm ents f or tr a ns f er p r icing a r e s ub j ect to th e nor m a l p ena l ty r ul es . I n ca s e of a n a udit b y th e ta x a uth or ities , a n incor r ect cor p or a te ta x r etur n is s ub j ect to a p ena l ty of 1 . 5 % on th e b a s is of th e a m ount r ecov er ed, ca p p ed a t 5 0 % . I n ca s e of w il l f ul neg l ect, th e p ena l ty is incr ea s ed b y 1 0 0 % . I n ca s e of f r a ud, th e p ena l ty is 1 5 0 % ov er a nd a b ov e th e p ena l ty f or a n incor r ect ta x r etur n a s deta il ed a b ov e.

Penalty relief Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tion is f our y ea r s a f ter th e p a y m ent of cor p or a te ta x is due. T a x es a r e due b y 3 0 A p r il f ol l ow ing th e ca l enda r y ea r end.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e tr a ns f er p r icing l eg is l a tion is r el a tiv el y new . H ow ev er , ta x a udits a r e incr ea s ing l y f ocus ing on r el a ted- p a r ty tr a ns a ctions , es p ecia l l y w h en th e ta x p a y er is in a r ecur r ent l os s p os ition.

APA opportunity G a b on h a s j us t intr oduced a n A P A a g r eem ents f or r el a ted- p a r ty tr a ns a ctions in th e F ina nce A ct 2 0 1 4 .


1 5 5


G eo r g ia Taxing authority and tax law

Relevant regulations and rulings T h e tr a ns f er p r icing g ener a l p r incip l es a r e p r ov ided in A r ticl es 1 2 6 to 1 2 9

1

of th e G T C .

A dditiona l l y , tr a ns f er p r icing in G eor g ia is r eg ul a ted b y th e I ns tr uction on P r icing I nter na tiona l C ontr ol l ed T r a ns a ctions G eor g ia n tr a ns f er r es ident com p a ny r es ident com p a ny G eor g ia n G ov er nm

p r icing r ul es g ener a l l y f ol l ow th e O E C D G uidel ines . T h ey a nd a r el a ted f or eig n com p a ny . I n cer ta in ca s es , th es e r a nd a n unr el a ted f or eig n com p a ny , w h er e th e l a tter is a ent deter m ines th e l is t of l ow - ta x j ur is dictions a nd of f s h

2

(I ns tr uction).

a p p l y to cr os s - b or der tr a ns a ctions b etw een a G eor g ia n ul es m a y a l s o a p p l y to tr a ns a ctions b etw een a G eor g ia n r es ident of a l ow - ta x j ur is diction or of f s h or e countr y . T h e or e countr ies . 3

Relat ed p art ies

s ep a r a tel y or in th e a g g r eg a te ex ceed 5 0 % of a noth er p a r ty ’ s ca p ita l , (ii) h a s th e p ow er to contr ol a b oa r d of dir ector s of a noth er p a r ty or

OECD Guidelines treatment G eor g ia n tr a ns f er p r icing r ul es g ener a l l y f ol l ow th e O E C D G uidel ines . T h e I ns tr uction conta ins a dir ect r ef er ence to th e O E C D G uidel ines 2 0 1 0 a nd s ets f or th th a t is s ues th a t a r e not r eg ul a ted b y th e G T C or th e I ns tr uction s h a l l b e r eg ul a ted b y th e O E C D G uidel ines .

Documentation requirements • •

1

O v er v iew of th e b us ines s op er a tions of th e G eor g ia n enter p r is e A na l y s is of th e econom ic f a ctor s a f f ecting th e p r ices

4 2

I b id. 3


1 5 6

G eo r g ia

(continued)

• •

D es cr ip tion of th e contr ol l ed tr a ns a ctions •

A na l y s is of th e com p a r a b il ity f a ctor s

•

D eta il s of th e g r oup ’ s tr a ns f er p r icing p ol icy •

T r a ns f er p r icing m eth od a p p l ied a nd r ea s ons f or s el ection of a p a r ticul a r m eth od •

C om p a r a b il ity a na l y s is •

D eta il s of A P A s r el ev a nt to th e contr ol l ed tr a ns a ction (if a ny )

•

C oncl us ion on com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e a nd, w h er e r el ev a nt, on a dj us tm ents m a de b y th e G eor g ia n enter p r is e to its tr a ns f er p r ices or ta x a b l e incom e •

O th er inf or m a tion th a t m a y h a v e a m a ter ia l ef f ect w ith r eg a r d to com p l ia nce of th e a r m ’ s - l eng th p r incip l e

T h e tr a ns f er p r icing docum enta tion m a y b e s ub m itted in th e G eor g ia n or E ng l is h l a ng ua g es . H ow ev er , w h enev er th e docum enta tion is s ub m itted in E ng l is h , th e ta x a uth or ities m a y r eq ues t G eor g ia n tr a ns l a tion to b e a r r a ng ed b y a ta x p a y er .

Priorities/pricing methods 4 m eth ods ca n p r ov ide r el ia b l e r es ul ts a nd s uch oth er m eth od y iel ds a r es ul t cons is tent w ith th a t w h ich w oul d b e a ch iev ed b y indep endent enter p r is es eng a g ing in com p a r a b l e uncontr ol l ed tr a ns a ctions under com p a r a b l e cir cum s ta nces . I n s uch ca s es , a ta x p a y er s h a l l b ea r th e T a x p a y er s s h oul d s el ect th e m os t a p p r op r ia te m eth od a ccor ding to th e na tur e of th eir b us ines s , com p a r a b il ity f a ctor s a nd th e a v a il a b il ity of r el ev a nt inf or m a tion. I f th er e is a l a ck of inter na l com p a r a b l es or inf or m a tion (or if th es e inter na l com p a r a b l es or inf or m a tion a r e not com p a r a b l es is p r oh ib ited.

Return disclosures/related-party disclosures D is cl os ur e of tr a ns a ctions w ith r el a ted p a r ties , a nd a l s o oth er ty p es of th ir d- p a r ty tr a ns a ctions th a t w oul d r em a in s ub j ect to tr a ns f er r etur ns .


Documentation deadlines T h e docum enta tion h a s to b e s ub m itted w ith in 3 0 da y s up on r eq ues t b y th e ta x a uth or ity .

1 5 7


G eo r g ia

(continued)

Transfer pricing penalties s ub m itted w ith in th e dea dl ine, th e s ta nda r d p ena l ty f or th e f a il ur e to s ub m it inf or m a tion to th e ta x a uth or ities w il l a p p l y . I n a ddition, th e

Penalty relief p r icing a dj us tm ents .

Statute of limitations on transfer pricing assessments is a utom a tica l l y ex tended to 1 1 y ea r s w h en a ta x p a y er ch oos es a 1 0 - y ea r ca r r y f or w a r d of l os s es . T a x ca nnot b e r ea s s es s ed a f ter th is p er iod h a s el a p s ed.

Frequency of tax audit and transfer pricing scrutiny by the tax authority 4 f ocus ed on a ta x p a y er ’ s b us ines s a ctiv ities , s up p l y ch a in op er a tions a nd tr a ns f er p r icing s tr a teg ies th a n ev er b ef or e.

APA opportunity G E L 5 0 m il l ion. I n p r incip l e, th e a g r eed- up on m eth od is b inding th r oug h out th e A P A ter m , w h ich is th r ee y ea r s , w ith th e p os s ib il ity of ex tens ion. T h e l a w a l s o intr oduces th e p os s ib il ity f or a ta x p a y er to concl ude m ul til a ter a l A P A s w h er e th e tr a ns a ctiona l counter p a r ties a r e in a j ur is diction w ith w h ich G eor g ia h a s a doub l e ta x tr ea ty . H ow ev er , b eca us e th er e a r e no s p ecia l r eg ul a tions in th is r eg a r d y et, it is im p os s ib l e to concl ude m ul til a ter a l A P A s a t th is s ta g e.



1 5 8

G er many Taxing authority and tax law Bundeszentralamt für Steuern) or b y G er m a n s ta te a uth or ities


p r incip l e, it is a s s um ed th a t b oth p a r ties inv ol v ed in a n inter com p a ny tr a ns a ction h a v e f ul l k now l edg e a b out a l l f a cts a nd cir cum s ta nces (inf or m a tion tr a ns p a r ency ). T a x A ct on 1 J a nua r y 2 0 0 8 . A n E x ecutiv e O r der L a w p r ov iding deta il s on h ow th e new tr a ns f er p r icing p r ov is ions r el a te to b us ines s r es tr uctur ing s a nd tr a ns f er of f unctions is ef f ectiv e f r om 2 0 0 8 onw a r d. O n 1 3 O ctob er 2 0 1 0 , new A dm inis tr a tion P r incip l es f or th e E x a m ina tion of I ncom e A l l oca tion b etw een r el a ted p a r ties in ca s es of cr os s -

ca s es , th e r eceiv ing entity of a f unction ex cl us iv el y p er f or m s th e tr a ns f er r ed f unction f or th e tr a ns f er r ing entity a nd r eceiv es a cos t-

v a l ua tion of th e tr a ns f er p a ck a g e is not r eq uir ed. T h is ex em p tion f r om ex a m ina tion of th e tr a ns f er p a ck a g e g ener a l l y a f f ects th e tr a ns f er of r outine f unctions f or w h ich ex ecution is connected w ith l ow r is k s a nd th a t, a s a cons eq uence, a r e us ua l l y r em uner a ted on th e b a s is of th e cos t- p l us m eth od.

es ta b l is h m ent, s uch a s th e s up p l y of g oods , a s er v ice p r ov is ion a nd ev en l icens ing a r r a ng em ents . T h es e dea l ing s h a v e to b e p r iced in dif f er ent p a r ts of one enter p r is e, contem p or a neous tr a ns f er p r icing docum enta tion b ecom es cr ucia l to def end th e tr a ns f er p r ices a p p l ied deter m ined b a s ed on th e A O A if th e A O A is not y et im p l em ented in th e a p p l ica b l e doub l e ta x tr ea ty . H ow ev er , f or th e tr ea ty r el ief , th e I n O ctob er 2 0 1 4 , a n E x ecutiv e O r der L a w w ith r eg a r d to th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e to p er m a nent es ta b l is h m ents w a s r el ea s ed. T h e m a in is s ues cov er ed b y th e E x ecutiv e O r der L a w a r e th e a ttr ib ution of a s s ets a nd r is k s to a p er m a nent es ta b l is h m ent, th e

of b a nk s a nd ins ur a nce com p a nies a nd cons tr uction a nd ex p l or a tion s ites . F ur th er m or e, th e E x ecutiv e O r der L a w s tip ul a tes th a t th e a nd ex p ens es a ttr ib uta b l e to th e p er m a nent es ta b l is h m ent, incl uding deem ed r ev enues a nd ex p ens es r es ul ting f r om inter na l dea l ing s . P a r t of th e A ux il ia r y C a l cul a tion is docum enta tion notes on th e r ea s oning f or th e a p p l ied a s s et a ttr ib ution. I n p a r ticul a r , if th e ta x p a y er

1 5 9


G er many dev ia tes f r om

(continued)

th e b a s ic p r incip l es f or th e a s s et a ttr ib ution l a id dow n in th e E x ecutiv e O r der L a w , it s h oul d b e p r op er l y docum ented th a t

D ecem b er 2 0 1 4 .

a f ter 3 1 D ecem b er 2 0 1 2 , th e D r a f t A dm inis tr a tiv e P r incip l es dif f er entia te th e f ol l ow ing s cena r ios dep ending on th e ty p e of doub l e ta x • • I P ); f ul l a p p l ica tion of A O A in ca s e of cor r es p onding a p p r oa ch in oth er countr y . • countr y a p p l ies A O A ; oth er w is e no a p p l ica tion, b ut p r oof f r om

ta x p a y er r eq uir ed.

4 is r eq uir ed a nd th e a ttr ib ution r ul es f or ca p ita l , etc. , a p p l y . I n oth er w or ds , th e ta x p a y er h a s to p r ep a r e a n A ux il ia r y C a l cul a tion f or th e

2 0 1 0 is a p p l ica b l e (a s des cr ib ed a b ov e).

4 •

•

• 4 4

T h e A dm inis tr a tion P r incip l es do not cons titute b inding l a w f or ta x p a y er s or th e cour ts b ut a r e b inding f or th e ta x a uth or ity a nd th er ef or e P r incip l es is to p r ov ide a dir ectiv e concer ning th e ta x a udit tr ea tm ent of tr a ns f er p r icing ca s es a nd to ens ur e a unif or m r ul es a nd m eth ods .

a p p l ica tion of

I n a ddition to th e th r ee A dm inis tr a tion P r incip l es m entioned a b ov e, a dm inis tr a tion cir cul a r s concer ning incom e a l l oca tion w ith r eg a r d to cr os s - b or der cos t s h a r ing a r r a ng em ents (da ted 3 0 D ecem b er 1 9 9 9 ), cr os s - b or der s econdm ent of p er s onnel (da ted 9 N ov em b er 2 0 0 1 ),

ta x es on incom e a nd ca p ita l (da ted 1 3 J ul y 2 0 0 6 ), h a v e b een p ub l is h ed s ince 1 9 9 9 .


1 6 0

G er many

(continued)

A utom a tic I nf or m a tion E x ch a ng e D ir ectiv e, w h ich w a s a dop ted in D ecem b er 2 0 1 5 a nd g ov er ns th e ex ch a ng e of inf or m a tion concer ning • • A dditiona l inf or m a tion r ep or ting ob l ig a tions im p os ed on m ul tina tiona l enter p r is es

OECD Guidelines treatment T h e O E C D G uidel ines p r ov ide s up p or t f or dom es tic us e b ut do not cons titute b inding l a w in G er m a ny . G er m a n tr a ns f er p r icing r eg ul a tions m eth ods , docum enta tion r eq uir em ents a nd th e tr ea tm ent of tr a ns f er s of f unctions ). T h e G er m a n ta x a uth or ities cons ider th e G er m a n tr a ns f er p r icing l a w s a nd r eg ul a tions to b e g ener a l l y cons is tent w ith th e O E C D G uidel ines .


A p r il 2 0 0 5 p r ov ides th e ta x a uth or ity ’ s inter p r eta tion of th e r eq uir em ents s et out in th e G ener a l T a x C ode a nd in th e E x ecutiv e O r der L a w .

General docum ent at ion req uirem ent s are: • • • ter m s , b us ines s s tr a teg ies a nd v a l ue ch a in • p r ice, l is t of com p a r a b l es a nd docum enta tion of a dj us tm ent ca l cul a tions

S p ecial docum ent at ion req uirem ent s T h e ta x p a y er h a s to docum ent a ny s p ecia l cir cum s ta nces us ed to s ub s ta ntia te th e a r m ’ s - l eng th na tur e of th e p r ice deter m ined, incl uding p r ice a dj us tm ents a nd ca us es of l os s es f r om

inter com p a ny tr a ns a ctions , a nd counter m ea s ur es (if l os s es occur in m or e th a n th r ee

I n g ener a l , tr a ns f er p r icing docum enta tion m us t b e p r ep a r ed in G er m a n. H ow ev er , ta x p a y er s m a y a s k f or a p p r ov a l to p r ep a r e tr a ns f er p r icing docum enta tion in E ng l is h . I n p r a ctice, ta x p a y er s m os tl y us e E ng l is h docum enta tion a nd p r ov ide tr a ns l a tions up on ta x a uth or ities ’ r eq ues t.

Modification of existing German documentation requirements

1 6 1


G er many

(continued)

docum enta tion r eq uir em ent.

• • • G ener a l des cr ip tion of th e ov er a l l s tr a teg y f or th e us e of inta ng ib l e a s s ets in th e v a l ue ch a in, in p a r ticul a r w ith r eg a r d to dev el op m ent, ow ner s h ip a nd ex p l oita tion •

g r oup a nd docum ent th e a r m ’ s - l eng th na tur e of th e r es p ectiv e inter com p a ny p r icing . T h e m os t im p or ta nt inf or m a tion, w h ich needs to b e incl uded, is th e s el ection a nd a p p l ica tion of th e tr a ns f er p r icing m eth od us ed, a s w el l a s th e tim e of th e tr a ns f er p r icing deter m ina tion

g uida nce on th e a m ended docum enta tion r eq uir em ents .

I m p lem ent at ion of t h e C b C R st andard

D ecem b er 2 0 1 6 onl y . a utom a tica l l y del iv er ed b y th e G er m a n ta x a uth or ities to ta x a uth or ities of f or eig n countr ies th r oug h ex ch a ng e- of - inf or m a tion ch a nnel s . T h e a utom a tic ex ch a ng e w ith f or eig n countr ies w il l onl y ta k e p l a ce on th e b a s is of a n under l y ing a g r eem ent w ith th e countr y , i. e. , us ua l l y a doub l e ta x tr ea ty .

• em p l oy ees , s ta ted ca p ita l , a ccum ul a ted ea r ning s a nd ta ng ib l e a s s ets oth er th a n ca s h or ca s h eq uiv a l ents in ea ch j ur is diction in w h ich th e g r oup op er a tes • entity ’ s m a in b us ines s a ctiv ity or a ctiv ities


1 6 2

G er many •

A G er m a n g r oup p a r ent com p a ny •

A des ig na ted s ur r og a te p a r ent com p a ny

(continued)

O r •

A dom es tic g r oup com p a ny of a f or eig n g r oup p a r ent com p a ny

th e C b C r ep or t. I f th is inf or m a tion is m is s ing in th e G er m a n ta x r etur n, th e G er m a n entity is r eq uir ed to s ub m it th e C b C r ep or t b y its el f

Priorities/pricing methods T h e a p p l ica tion of tr a ns f er p r icing m eth ods is dep endent on th e a v a il a b il ity a nd q ua l ity of th ir d- p a r ty com p a r a b l e da ta . T h r ee s itua tions

cos t- p l us . A ny p r ice w ith in th e f ul l r a ng e of f ul l y com p a r a b l e th ir d- p a r ty da ta m eets th e a r m ’ s - l eng th p r incip l e. I f l im ited com p a r a b il ity ex is ts , a l l O E C D m eth ods (w h os e a p p l ica tion is a p p r op r ia te in th e ca s e under r ev iew ) a r e a l l ow ed, i. e. , th e r a ng e of a v a il a b l e th ir d- p a r ty com p a r a b l e da ta m us t b e l im ited b y a p p l y ing s ta tis tica l m ea s ur es (e. g . , th e inter q ua r til e r a ng e). I f no com p a r a b l e da ta ex is ts , th e l a w s tip ul a tes th a t ta x p a y er s h a v e to conduct a h y p oth etica l a r m ’ s - l eng th a na l y s is to der iv e a r m ’ s l eng th tr a ns f er p r ices . A ccor ding l y , in com p l ia nce w ith th e s o- ca l l ed p r udent a nd dil ig ent b us ines s m a na g er p r incip l e, a nd b a s ed on th e f unctiona l a na l y s is a nd inter na l p r oj ections , th e ta x p a y er h a s to es ta b l is h a r a ng e of h y p oth etica l a r m ’ s - l eng th p r ices . T h e r a ng e of p a y . T h e ta x p a y er m us t us e th e v a l ue w ith in th e r a ng e of neg otia tion th a t h a s th e h ig h es t p r ob a b il ity of com p l y ing w ith th e a r m ’ s - l eng th p r incip l e. I f th e ta x p a y er p r ov ides no r ea s oning b eh ind ch oos ing th a t v a l ue, th e a r ith m etic m ea n of th e r a ng e of v a l ues is a s s um ed to b e th e a r m ’ s - l eng th tr a ns f er p r ice f or th e tr a ns a ction under r ev iew .

Return disclosures/related-party disclosures Transfer pricing-specific returns A p a r t f r om

tr a ns f er p r icing docum enta tion r eq uir em ents , no s ep a r a te r etur ns f or r el a ted- p a r ty tr a ns a ctions a r e cur r entl y r eq uir ed.

Documentation deadlines I n G er m a ny , contem p or a neous docum enta b us ines s tr a ns a ctions (e. g . , r es tr uctur ing w s ix m onth s of th e end of th e b us ines s y ea r docum enta tion is s tr ong l y r ecom m ended f

tion r eq uir ith in th e g in w h ich th or a l l cr os s

em ents ex is t onl y f or ex cep tiona l b us ines s tr a ns a ctions . F or s uch ex tr a or dina r y r oup ), th e docum enta tion m us t b e p r ep a r ed contem p or a neous l y (i. e. , w ith in e tr a ns a ction h a s occur r ed). H ow ev er , th e p r ep a r a tion of contem p or a neous - b or der tr a ns a ctions .

1 6 3


G er many

(continued)

D ocum enta tion m us t b e s ub m itted w ith in 6 0 da y s up on r eceip t of th e ta x a uth or ity ’ s r eq ues t. I n th e ca s e of ex tr a or dina r y b us ines s tr a ns a ctions (e. g . , tr a ns f er of f unctions ), docum enta tion m us t b e s ub m itted w ith in 3 0 da y s of th e ta x a uth or ity ’ s r eq ues t. I n g ener a l , th e r eq ues t is m a de in th e cour s e of a ta x a udit.

Transfer pricing penalties G ener a l T a x C ode, a r eb utta b l e p r es um p tion a p p l ies under w h ich th e ta x p a y er ’ s incom e h a d b een r educed b y th e a m ount of ina p p r op r ia te tr a ns f er p r ices , th er eb y f or m ing th e b a s is of a tr a ns f er p r icing a dj us tm ent.

incom e, p r ov ided th a t th e ta x p a y er does not r eb ut th e p r es um p tion. T h is a l s o h ol ds tr ue w h en a ta x p a y er does not dis cl os e r el ev a nt da ta a v a il a b l e onl y f r om th e f or eig n r el a ted p a r ties . I f es tim a tion b y th e ta x a uth or ities is indica ted in s uch ca s es a nd it is p os s ib l e to deter m ine th e r el ev a nt incom e onl y w ith in a cer ta in r a ng e, th e r a ng e m a y b e f ul l y ex p l oited to th e ta x p a y er ’ s detr im ent. T h e l eg is l a tion ta k es into cons ider a tion th a t a s ing l e a p p r op r ia te tr a ns f er p r ice does not ex is t a nd th a t com p a r a b l e th ir d- p a r ty p r ices m a y ev ent th a t th e ta x p a y er ’ s tr a ns f er p r ice f a l l s outs ide th e f ul l r a ng e (in ca s e of f ul l com p a r a b il ity of th ir d- p a r ty da ta ) or th e inter q ua r til e r a ng e (in ca s e of l im ited com p a r a b il ity of th ir d- p a r ty da ta ) of a r m ’ s - l eng th p r ices . P ena l ties ca n b e a s s es s ed b a s ed on th e ta x p a y er ’ s noncom p l ia nce w ith th e docum enta tion r eq uir em ents . A n a ctua l incom e a dj us tm ent is not s ub j ect to p ena l ties , b ut inter es t is a s s es s ed on th e a dditiona l ta x p a y m ents (6 % p er a nnum , w h ich is nondeductib l e f or ta x p ur p os es ). I nter es t s ta r ts a ccr uing 1 5 m onth s a f ter th e end of th e ca l enda r y ea r in w h ich th e ta x l ia b il ity a r os e.

4 a uditor s in a tim el y m a nner up on r eq ues t.

tr a ns a ction is s ub m itted, th e b ur den of p r oof s h if ts to th e ta x p a y er , a nd th e G er m a n ta x a uth or ities ca n a s s es s incom e a dj us tm ents up to th e m os t unf a v or a b l e p oint w ith in th e a r m ’ s - l eng th r a ng e. T a x p a y er s , th er ef or e, h a v e to ens ur e th a t th eir tr a ns f er p r icing docum enta tion

Penalty relief Statute of limitations on transfer pricing assessments neg l ig ent ev a s ion of ta x es or ta x f r a ud, it is m uch l ong er (1 0 y ea r s in th e ca s e of ta x f r a ud). T h es e p er iods com m ence a t th e end of th e ca l enda r y ea r in w h ich th e ta x l ia b il ity a r os e. N o s p ecia l tim e l im it p r ov is ions a p p l y if inter com p a ny tr a ns a ctions a r e inv ol v ed. T h e Worldwide Transfer Pricing Reference Guide

1 6 4

G er many

(continued)

g ener a l r eg im e of th e s ta tute of l im ita tions a p p l ies in a ccor da nce w ith th e G ener a l T a x C ode. A ccor ding l y , ea ch ca s e h a s to b e ca r ef ul l y w ith in th e s ta tutor il y p r es cr ib ed a s s es s m ent p er iod, w h ich is s ub j ect to th e s ta tute of l im ita tions f or a s s es s m ents . T h e a s s es s m ent p er iod, h ow ev er , does not s ta r t b ef or e th e end of th e ca l enda r y ea r in w h ich th e ta x p a y er h a s s ub m itted th e ta x r etur n (b ut a l s o does not s ta r t l a ter th a n th r ee y ea r s a f ter th e y ea r th e ta x l ia b il ity a r os e). T h er e a r e a num b er of s ta tutor y ex cep tions to th e s ta tute of l im ita tions f or a s s es s m ents (e. g . , it s h oul d b e k ep t in m ind th a t th e l im ita tion p er iod is inter r up ted w h en a ta x a udit b eg ins ).

of l im ita tions h a v e ex p ir ed b ef or e.


w ith r es p ect to tr a ns a ctions q ua l if y ing a s ex cep tiona l b us ines s tr a ns a ctions under th e docum enta tion p r ov is ions , s uch a s th e tr a ns f er tr a ns f er p r icing m ech a nis m

w il l b e ch a l l eng ed, if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, is a l s o h ig h .

APA opportunity

th e I nter g ov er nm enta l a g r eem ent a nd m us t w a iv e its r ig h t to a p p ea l ta x a s s es s m ents , to th e ex tent th a t th ey a r e in l ine w ith th e content of th e A P A .

Impact of new OECD BEPS Action 8–10 guidelines G er m a ny does not h a v e a n ex p l icit r ef er ence in its dom es tic l a w to th e l a tes t a p p r ov ed v er s ion of th e O E C D G uidel ines . T h e O E C D it ca n b e a s s um ed th a t th e G er m a n ta x a uth or ities w il l a p p l y th e a m ended O E C D G uidel ines on tr a ns a ctions th a t ca n s til l com e under

1 6 5


G h ana Taxing authority and tax law

th e nine doub l e ta x a g r eem ents cur r entl y in ef f ect com p l ete th e ta x a r ch itectur e.

Relevant regulations and rulings 4 p r ov ides r ul es r eg a r ding th e a p p l ica tion of th e a r m ’ s - l eng th s ta nda r ds .

• T a x p a y er s in a contr ol l ed r el a tions h ip • • A p er m a nent es ta b l is h m ent a nd oth er r el a ted b r a nch es of th e p er m a nent es ta b l is h m ent • A ta x p a y er a nd a noth er ta x p a y er w h o a r e in a n em p l oy m ent r el a tions h ip

• T h e p ur ch a s e a nd s a l e of g oods • T h e p ur ch a s e, s a l e, l ea s e or us e of a ta ng ib l e a s s et • T h e p ur ch a s e, s a l e, l ea s e or us e of a n inta ng ib l e a s s et • T h e p r ov is ion of m a na g em ent s er v ices , tech nica l s er v ices a nd oth er intr a g r oup s er v ices • • •

OECD Guidelines treatment T h e r ul es f ol l ow th e O E C D G uidel ines .


1 6 6

G h ana

(continued)

Documentation requirements T h e r ul es s ta te th a t a p er s on w h o eng a g es in a tr a ns a ction w ith a noth er p er s on w ith w h om it h a s a contr ol l ed r el a tions h ip s h a l l m a inta in contem p or a neous docum enta tion deta il ing th e tr a ns a ctions eng a g ed in b y th a t p er s on f or ea ch ta x y ea r . T h e r eg ul a tions p r ov ide g uida nce a b out th e na tur e of docum enta tion to b e r eta ined. G ener a l l y , th is f ol l ow s th e O E C D r eq uir em ents . 4 p r icing s tudy .

Priorities/pricing methods T h e tr a ns f er p r icing r ul es r eq uir e th e us e of th e m os t a p p r op r ia te m eth od to p r ice r el a ted- p a r ty tr a ns a ctions .

• • • • • N otw ith s ta nding th e tr a ns f er p r icing m eth ods s ta ted, th e com m is s ioner - g ener a l m a y us e a dif f er ent m eth od or , in w r iting , p er m it a ta x p a y er to us e a noth er m eth od. T h e com m is s ioner - g ener a l m a y do th is w h er e, in h is op inion, h a v ing cons ider ed th e na tur e of th e

Return disclosures/related-party disclosures Transfer pricing-specific returns

1 6 7


G h ana

(continued)

Documentation deadlines T h e com m is s ioner - g ener a l m a y r eq ues t a dditiona l inf or m a tion f r om th e ta x p a y er , w h o w oul d b e r eq uir ed to com p l y w ith th e r eq ues t w ith in th e r eq uir ed tim e f r a m e. N o g uida nce is cur r entl y a v a il a b l e a b out th e tim e f r a m e.

Transfer pricing penalties a l s o a p p l y to th e tr a ns f er p r icing r eg ul a tions .

Penalty relief

Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions p r es cr ib es 1 2 y ea r s , a f ter w h ich th e com m is s ioner - g ener a l ca nnot r ecov er ta x . T h e ta x l a w , h ow ev er ,


r etur n. I n p r a ctice, th e l ik el ih ood of a n a nnua l ta x a udit (incl uding tr a ns f er p r icing s cr utiny ) occur r ing is m edium . T h e l ik el ih ood of th e p r icing m eth od b eing ch a l l eng ed in a tr a ns f er p r icing a udit is l ow to m edium .

APA opportunity T h er e is no A P A a v a il a b l e f or m ul tina tiona l s op er a ting in G h a na .

Impact of new OECD BEPS Action 8–10 guidelines G h a na is a m em b er of th e O E C D D ev el op m ent C entr e. I n th e tr a ns f er p r icing p r a ctice notes is s ued b y th e com m is s ioner - g ener a l (w h ich b inds th e com m is s ioner - g ener a l onl y ), th e com m enta r ies in th e O E C D G uidel ines a r e r ef er r ed to a s b eing inter p r etiv e a ids to th e tr a ns f er


1 6 8

G ib r al tar Taxing authority and tax law

Relevant regulations and rulings 4 C om m is s ioner of I ncom e T a x th e p ow er to counter ta x a v oida nce a nd p r ov ides th a t th is is to b e cons tr ued in s uch m a nner a s b es t s ecur es •

4 • b y th e O E C D • A l l docum ents p ub l is h ed b y th e O E C D , a t a ny tim e b ef or e 1 J a nua r y 2 0 1 1 , a s p a r t of its T r a ns f er P r icing G uidel ines E nter p r is es a nd T a x A dm inis tr a tions , tog eth er w ith s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e

OECD Guidelines treatment A s s et out a b ov e, th e g ener a l a nti- a v oida nce p r ov is ions in th e ta x l a w s ta te th a t th os e p r ov is ions s h a l l b e cons tr ued in a m a nner th a t b es t

on I ncom e a nd on C a p ita l p ub l is h ed b y th e O E C D , a nd s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e

Documentation requirements T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion in a r ea s of s ub j ectiv ity . T h e ex is tence of docum enta tion need not b e dis cl os ed in or p r ov ided w ith th e r etur n. I n p r a ctice, due to G ib r a l ta r ’ s r el a tiv el y l ow r a te of cor p or a te ta x (1 0 % f or m os t com p a nies ), th e r eq uir em ent to docum ent tr a ns f er p r icing is m or e l ik el y to a r is e f r om th e j ur is diction in w h ich th e

Priorities/pricing methods Return disclosures/related-party disclosures N ot a p p l ica b l e.

1 6 9


G ib r al tar

(continued)



Transfer pricing penalties im m edia tel y a f ter th e da te a t w h ich th e ta x w a s due. A f ur th er s ur ch a r g e of 2 0 % of th e under p a id a m ount is due if th e a m ount r em a ins

Penalty relief C om m is s ioner of I ncom e T a x .

Statute of limitations on transfer pricing assessments T h e C om m is s ioner of I ncom e T a x h a s one y ea r f r om th e da te th a t a r etur n is r eceiv ed to g iv e notice of h is intention to m a k e a a b out a r etur n. A f ter th a t da te ex p ir es , f or up to s ix y ea r s f r om th e end of th e r el ev a nt a ccounting p er iod or ta x y ea r , th e C om of I ncom e T a x m a y r a is e a n a s s es s m ent up on dis cov er y th a t a p er s on h a s not b een a s s es s ed ta x or w a s a s s es s ed a t a l es s er a oug h t to h a v e b een a s s es s ed. T h er e is no tim e l im it f or a dditiona l a s s es s m ents to b e r a is ed w h en a ny f or m of f r a udul ent or w or neg l ig ent conduct h a s b een com m itted.

n inq uir y m is s ioner m ount th a n il l f ul def a ul t

Frequency of tax audit and transfer pricing scrutiny by the tax authority tr a ns f er p r icing a r e r el a tiv el y uncom m on. I n p r a ctice, b eca us e of G ib r a l ta r ’ s r el a tiv el y l ow r a te of cor p or a te ta x (1 0 % f or m os t com p a nies ), th e r eq uir em ent to j us tif y tr a ns f er p r icing is m or e l ik el y to a r is e f r om th e j ur is diction in w h ich th e G ib r a l ta r - ta x a b l e entity ’ s counter p a r ty is ta x a b l e. T h is w oul d not a p p l y

APA opportunity b ut th e r ul ing s s ta te th a t th ey a r e g iv en on th e b a s is of th e f a cts a nd cir cum s ta nces a s des cr ib ed b y th e ta x p a y er in th e r eq ues t a nd on th e b a s is of th e ta x l a w in f or ce a t th e tim e of th e r ul ing .


1 7 0

G ib r al tar

(continued)

Impact of new OECD BEPS Action 8–10 guidelines H ow ev er , a s s ta ted a b ov e, th e g ener a l a nti- a v oida nce p r ov is ions in th e ta x l a w s ta te th a t th os e p r ov is ions s h a l l b e cons tr ued in a m a nner a ctiv ities w ith in a m ul tina tiona l g r oup of com p a nies , a nd s uch docum ents is s ued b y th e O E C D on or a f ter 1 J a nua r y 2 0 1 1 , w h ich a r e

1 7 1


G r eec e Taxing authority and tax law 4

4 4

Relevant regulations and rulings T r a ns f er p r icing in G r eece is dr iv en b y th e I ncom e T a x C ode (L . 4 1 7 2 / 2 0 1 3 ) a nd th e T a x P r ocedur es C ode (L . 4 1 7 4 / 2 0 1 3 ), doub l e • C ir cul a r P O L 1 1 4 2 / 0 2 . 0 7 . 2 0 1 5 a im s to cl a r if y tr a ns f er p r icing is s ues , a f f ecting inter com p a ny tr a ns a ctions p er ta ining to ta x y ea r s 4 th e b ench m a r k ing s tudies to b e us ed f or docum enta tion p ur p os es ). •

4

44

4

•

2 0 1 4 . 4 a nd a nnul m ent of a n A P A . T h e decis ion r ef er s to th e p r ocedur es of b oth unil a ter a l a nd b il a ter a l A P A s f or cr os s - b or der inter com p a ny 4 •

4

OECD Guidelines treatment T a x C ode, th e p r ov is ions r eg a r ding inter com p a ny tr a ns a ctions a r e inter p r eted a nd im p l em ented in a ccor da nce w ith th e O E C D G uidel ines .

Documentation requirements P er s ons s ub j ect to docum enta tion r eq uir em ents incl ude ta x p a y er s w ith a tota l v a l ue of inter com p a ny tr a ns a ctions of m or e th a n E ntities ex em p t f r om

incom e ta x ob l ig a tions a r e a l s o ex em p t f r om

tr a ns f er p r icing docum enta tion r eq uir em ents .

T a x p a y er s q ua l if y ing a s s ub j ect to docum enta tion r eq uir em ents need to docum ent a l l tr a ns a ctions ir r es p ectiv e of v a l ue, w h er ea s ex p ens e tr a ns a ctions f ul l y ta x a dj us ted f or cor p or a te incom e ta x p ur p os es a r e ex em p t f r om docum enta tion r eq uir em ents . 4 • th e b r a nch es . • ta x a uth or ities up to th e dea dl ine f or th e s ub m is s ion of com p a nies ’ cor p or a te incom e ta x (C I T ) r etur ns (i. e. , in p r incip l e, 3 0 J une f or


1 7 2

G r eec e

(continued)

Priorities/pricing methods 4

44

4

Return disclosures/related-party disclosures s ub m is s ion of com p a nies ’ C I T r etur ns .

Transfer pricing-specific returns th e s ub m is s ion of com p a nies ’ C I T r etur ns .

Documentation deadlines T h e tr a ns f er p r icing docum enta tion s h oul d b e p r ep a r ed a nnua l l y b y th e dea dl ine f or th e s ub m is s ion of com p a nies ’ C I T r etur ns , h ow ev er

Transfer pricing penalties 4 •

• ex ceed 1 0 % of th e v a l ue of th e tota l tr a ns a ctions s ub j ect to docum enta tion, no p ena l ty a p p l ies . • • a f ter 9 0 da y s or it is not p r ov ided a t a l l .

1 7 3


G r eec e

(continued)

I n a ddition, th e g ener a l incom e ta x ina ccur a cy p ena l ties r a ng ing f r om inter es t.

1 0 % to 5 0 % of th e ta x under p a y m ent w il l a p p l y , a s w el l a s def a ul t

Penalty relief N o p ena l ty r el ief is a v a il a b l e.



T h e l ik el ih ood of ta x a udit b y th e l oca l ta x a uth or ities in g ener a l ca n b e cons ider ed a s h ig h , b a s ed on r ecent ex p er ience. F ur th er , in th e f ol l ow ed b y th e G r eek ta x a uth or ities . T a x a uth or ities tend to ch a l l eng e r el a ted- p a r ty tr a ns a ctions a nd th er e is a cl ea r tr end tow a r d incr ea s ed a w a r enes s of tr a ns f er p r icing is s ues a m ong l oca l ta x a uditor s .

APA opportunity T h e T a x P r ocedur es C ode, a l ong w ith th e im p l em enting decis ion, p r ov ides th e p os s ib il ity of a n A P A f r om cov er a ny r el ev a nt cr iter ia us ed f or th e intr a g r oup p r icing .

1 J a nua r y 2 0 1 4 . A n A P A w il l

T h es e cr iter ia m a inl y incl udes th e tr a ns f er p r icing m eth od, th e com p a r a b l e da ta to b e us ed a nd a ny r el ev a nt a dj us tm ents to b e m a de, a s w el l a s th e cr itica l a s s um p tions under w h ich th e a p p r ov ed tr a ns f er p r icing m eth odol og y w il l r em a in v a l id. A n A P A ter m

ca nnot ex ceed f our y ea r s , a nd a r etr oa ctiv e ef f ect is not p os s ib l e.

Impact of new OECD BEPS Action 8–10 guidelines a m endm ents . concl uding th e tr a ns a ction; th us in th e a b s ence of ex p l icit g uida nce r eg a r ding th e tim e f r a m e f or th e a p p l ica tion of r ev is ed O E C D T r a ns f er K eep ing th is in m ind, th e p os s ib il ity of th e G r eek ta x a uth or ities ta k ing a r ob us t p os ition a nd tr y ing to r etr oa ctiv el y a p p l y new g uida nce if th is s up p or ts th eir p os ition ca nnot b e r ul ed out.


1 7 4

G u am Taxing authority and tax law


4 •

4 • 4 4 4 • 4 •

to r em a in a n is s ue up on w h ich th e I P N s w il l f ocus . • ex a m

p os itions . H ow ev er , th e C I P w a s w ith dr a w n on 2 6 J une 2 0 1 2 .

r eg ul a tions th a t h a d b een in ef f ect a s of 1 J a nua r y 2 0 0 7 . T h e new s er v ices r eg ul a tions ex p l icitl y r eq uir e s tock - b a s ed com p ens a tion to b e 4

OECD Guidelines treatment F or dom es tic p ur p os es , th e O E C D G uidel ines do not p r ov ide s up p or t a nd w oul d not b e dir ectl y r el ev a nt to th e a p p l ica tion of a ny p r icing m eth ods . H ow ev er , if ta x p a y er s p ur s ue com p etent a uth or ity r el ief f r om doub l e ta x a tion or a b il a ter a l A P A , th e O E C D G uidel ines a r e r el ev a nt a nd m a y b e us ed to dem ons tr a te com p l ia nce w ith inter na tiona l p r incip l es .

1 7 5


G u am

(continued)

Documentation requirements T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion to a v oid th e p ena l ties des cr ib ed a b ov e. T h e ex is tence of docum enta tion need not b e eith er dis cl os ed on, or p r ov ided w ith , th e r etur n. docum enta tion (f ur th er des cr ib ed b el ow ) th a t s ub s ta ntia tes th e ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

•

A n ov er v iew of th e ta x p a y er ’ s b us ines s a nd a n a na l y s is of th e l eg a l a nd econom ic f a ctor s a f f ecting p r icing

• • •

A des cr ip tion of th e p r icing m eth od a nd r ea s ons th e m eth od w a s s el ected (a b es t- m eth od a na l y s is ) •

A des cr ip tion of a l ter na tiv e m eth ods a nd w h y th ey w er e not s el ected • •

A des cr ip tion of com p a r a b l es us ed, h ow com p a r a b il ity w a s ev a l ua ted a nd a ny a dj us tm ents th a t w er e m a de •

A n ex p l a na tion of a ny econom ic a na l y s is a nd a ny p r oj ections us ed to dev el op th e p r icing m eth od • •

A g ener a l index of th e p r incip a l a nd b a ck g r ound docum ents a nd a des cr ip tion of th e r ecor d- k eep ing s y s tem

Priorities/pricing methods inter com p a ny tr a ns a ction. • • • •



1 7 6

G u am

(continued)


4


Transfer pricing penalties 4 or g r os s v a l ua tion m is s ta tem ent, r es p ectiv el y . T h e p ena l ties a r e ca l cul a ted a s a p er centa g e of th e under p a y m ent, or th e p ena l ty m a y a p p l y to a v a l ua tion m is s ta tem ent. T h er e is no p ena l ty f or f a il ur e to h a v e docum enta tion; h ow ev er , docum enta tion m a y h el p ta x p a y er s a v oid a p ena l ty .

Penalty relief P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia th e p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s 4


Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit is dep endent on th e f a cts a nd cir cum s ta nces . T h e intr oduction of w h a t th e O E C D r ef er s to in its

f r om

G ua m

is b a s ica l l y th e s a m e a s th e l ik el ih ood of a g ener a l ta x a udit.

APA opportunity r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts . A dditiona l com p etent a uth or ity g uida nce 4


1 7 7


G u atemal a Taxing authority and tax law Superintendencia de Administración Tributaria


to a p p l y w h en a s s es s ing th e a r m ’ s - l eng th p r incip l e, th e ta x p a y er ’ s ob l ig a tion to p r ep a r e a nd m a inta in th e tr a ns f er p r icing docum enta tion neces s a r y to s up p or t th e a r m ’ s - l eng th na tur e of inter com p a ny p r icing , a nd th e em p ow er m ent of th e ta x a uth or ities to a dj us t p r ices . 4 Publinews is s ua nce of D ecr ee 1 9 - 2 0 1 3 .


conducted b etw een G ua tem a l a n ta x p a y er s a nd th eir r el a ted p a r ties a b r oa d. T h e tr a ns f er p r icing r ul es a l s o p r es ent a n a dditiona l nonim p or ts or ex p or ts of g oods w ith w el l - k now n p r ices in inter na tiona l m a r k ets .

Documentation requirements • • •

D es cr ip tion of th e inter com p a ny tr a ns a ctions p er f or m ed b y th e com p a nies of th e cor p or a te g r oup •

D es cr ip tion of th e f unctions p er f or m ed a nd r is k s a s s um ed b y th e com p a nies of th e cor p or a te g r oup •

I nf or m a tion r eg a r ding th e inta ng ib l e a s s ets of th e cor p or a te g r oup •

D es cr ip tion of th e tr a ns f er p r icing p ol icy of th e cor p or a te g r oup •

I nter com p a ny s er v ice a g r eem ents s ub s cr ib ed b y th e com p a nies of th e cor p or a te g r oup •

A P A s s ub s cr ib ed to b y th e com p a nies of th e cor p or a te g r oup •

A nnua l r ep or t of th e cor p or a te g r oup


1 7 8

G u atemal a

(continued)

• • •

D es cr ip tion of th e inter com p a ny tr a ns a ctions p er f or m ed b y th e ta x p a y er •


D es cr ip tion of th e tr a ns f er p r icing m eth odol og y a p p l ied


tr a ns a ctions inv ol v ing im p or ts or ex p or ts of g oods w ith w el l - k now n p r ices in inter na tiona l m a r k ets .

Return disclosures/related-party disclosures F Y 2 0 1 3 onw a r d), w h ich w il l incl ude inf or m a tion r eg a r ding th eir inter com p a ny tr a ns a ctions , to th e a nnua l ta x r etur n.

Transfer pricing-specific returns a tr a ns f er p r icing inf or m a tion r etur n.

Documentation deadlines A s of F Y 2 0 1 5 , docum enta tion m us t b e r ea dil y a v a il a b l e b y th e due da te of th e a nnua l incom e ta x r etur n (w h ich m us t b e p r es ented docum enta tion s h oul d b e p r ov ided w ith in 2 0 da y s f r om

th e r eceip t of th e notice.

Transfer pricing penalties th e g ener a l ta x p ena l ties . P ena l ties f or f a il ur e to p r es ent th e tr a ns f er p r icing docum enta tion, up on r eq ues t of th e ta x a uth or ity , w oul d b e

Penalty relief T h er e a r e cur r entl y no p r ov is ions f or r eductions in p ena l ties .

1 7 9


G u atemal a

(continued)

Statute of limitations on transfer pricing assessments Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a g ener a l ta x a udit a nd tr a ns f er p r icing a s s es s m ents a s p a r t of a g ener a l ta x a udit is m edium . A l th oug h tr a ns f er p r icing

APA opportunity


a m end cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur .


1 8 0

H o nd u r as Taxing authority and tax law Servicio de Administración de Rentas

• D ecr ee N o. 2 3 2 - 2 0 1 1 th a t es ta b l is h es th e T r a ns f er P r icing L a w , A r ticl es 1 to 2 2 • E x ecutiv e D ecr ee N o. 0 2 7 - 2 0 1 5 , w ith its r eg ul a tions on tr a ns f er p r icing , A r ticl es 1 to 4 0 •

4

Relevant regulations and rulings H ondur a n tr a ns f er p r icing p r ov is ions a p p l y to a l l tr a ns a ctions conducted b y H ondur a n ta x p a y er s w ith l oca l r el a ted entities , f or eig n r el a ted entities a nd w ith entities op er a ting under a s p ecia l ta x r eg im e in H ondur a s . T h e r eg ul a tions a l s o a p p l y to tr a ns a ctions conducted b y ta x p a y er s w ith entities dom icil ed in ta x h a v ens .

P r icing L a w is in f or ce f r om

1 J a nua r y 2 0 1 4 .

OECD Guidelines treatment T h e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es , a s l ong a s th ey do not contr a dict th e H ondur a n ta x s y s tem .

Documentation requirements C ontem p or a neous tr a ns f er p r icing docum enta tion r eg a r ding r el a ted- p a r ty tr a ns a ctions is m a nda tor y a nd m us t b e m a inta ined. A ccor ding • T h e a ctiv ities a nd f unctions p er f or m ed b y th e ta x p a y er • T h e r is k s a s s um ed a nd a s s ets us ed b y th e ta x p a y er in ca r r y ing out th es e a ctiv ities a nd f unctions • T h e deta il s of th e item s , docum ents , f a cts a nd cir cum s ta nces a s s es s ed f or j us tif y ing th e p r ices or a m ounts b etw een r el a ted entities • • • T h e v a l ua tion m eth od us ed, indica ting th e r ea s ons a nd a r g um ents w h y it w a s cons ider ed a s th e m os t a p p r op r ia te m eth od • • • • D eta il s of com p a r a b l e tr a ns a ctions a nd com p a r a b il ity f a ctor s not s el ected, s ta ting th e r ea s ons a nd cons ider a tions f or dis p os a l • D es cr ip tion of th e com p a r a b l e com p a ny ’ s b us ines s a nd its ch a r a cter is tics • T h e m edia n a nd th e a r m ’ s - l eng th r a ng e • T h e a r m ’ s - l eng th p r ice • D eta il s of th e a dj us tm ents to tr a ns f er p r ices f or th es e to com p l y w ith th e a r m ’ s - l eng th p r incip l e

1 8 1


H o nd u r as

(continued)

Priorities/pricing methods r ea s ona b l y a p p l ied, a nd th a t it r ep r es ents w h a t th ir d p a r ties w il l a g r ee up on under com p a r a b l e a r m ’ s - l eng th cir cum s ta nces ). A ta x p a y er ca n us e a n a l ter na tiv e m eth od w h en it is in a ccor da nce w ith th e inter na tiona l p r a ctice a nd s ta nda r ds , a nd p r ev ious l y a p p r ov ed b y th e

Return disclosures/related-party disclosures T a x p a y er s m us t r ep or t on th e incom e ta x r etur n w h eth er th ey conducted tr a ns a ctions w ith r el a ted p a r ties a nd dis cl os e th e tota l a m ount of s uch r el a ted- p a r ty tr a ns a ctions , indica ting if th ey a r e incom e, p ur ch a s es or oth er ex p ens e item s .

Transfer pricing-specific returns • • y ea r - end.

Documentation deadlines T a x p a y er s a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion a nnua l l y b y th e due da te of th e incom e ta x r etur n. T h e docum enta tion


I f ta x p a y er s r ep or t ta x a b l e incom e l es s th a n it s h oul d h a v e b een under a r m ’ s - l eng th conditions , a p ena l ty of 1 5 % on th e cor r es p onding incom e a dj us tm ent a p p l ies . I f ta x p a y er s f a il to p r ov ide th e cor r ect inf or m a tion or f a il to decl a r e a cor r ect ta x a b l e incom e, th en th e p ena l ties w il l b e th e g r ea ter of 3 0 %

Penalty relief T h er e is cur r entl y no p ena l ty r el ief r eg im e in p l a ce.



1 8 2

H o nd u r as

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority 4

APA opportunity A P A s a r e contem p l a ted under th e p r ov is ions of D ecr ee 2 3 2 - 2 0 1 1 a nd E x ecutiv e D ecr ee 0 2 7 - 2 0 1 5 . T a x p a y er s ca n r eq ues t a n A P A f or a


1 8 3


H o ng K o ng ( S A R ) Taxing authority and tax law

Relevant regulations and rulings • • • • 4 A dj us tm ents , is s ued in A p r il 2 0 0 9 4 4

OECD Guidelines treatment 4 r ecom m ended b y th e O E C D G uidel ines .

Documentation requirements inv es tig a tion, th e ta x p a y er is ex p ected to h a v e m a inta ined r ecor ds th a t h a v e deta il s a b out inter com p a ny tr a ns a ctions w ith r eg a r d to docum enta tion is p r ep a r ed, a nd ty p ica l l y , r ep or ts a r e p r ep a r ed in E ng l is h . 4 • • T h e na tur e, ter m s , p r ices a nd q ua ntum

of r el ev a nt tr a ns a ctions , incl uding tr a ns a ctions th a t f or m

• T h e m eth od b y w h ich th e na tur e, ter m s a nd q ua ntum under ta k en

a s er ies a nd a ny r el ev a nt of f s ets

of r el ev a nt tr a ns a ctions w er e a r r iv ed a t, incl uding a ny s tudy of com p a r a b l es

• T h e m a nner b y w h ich th e s el ected m eth od h a s r es ul ted in a r m ’ s - l eng th ter m s or in w h ich it h a s not, th e com p uta tiona l a dj us tm ent r eq uir ed a nd h ow it h a s b een ca l cul a ted; th is us ua l l y incl udes a n a na l y s is of m a r k et da ta or oth er inf or m a tion a b out th ir d- p a r ty com p a r a b l es


1 8 4

H o ng K o ng ( S A R )

(continued)

• T h e ter m s of r el ev a nt com m er cia l a r r a ng em ents w ith b oth th ir d- p a r ty a nd g r oup cus tom er s ; th es e incl ude contem p or a neous com m er cia l a g r eem ents (e. g . , s er v ice or dis tr ib ution contr a cts , l oa n a g r eem ents ) a nd a ny b udg ets , f or eca s ts or oth er p a p er s conta ining inf or m a tion r el ied up on in a r r iv ing a t a r m ’ s - l eng th ter m s , etc. I n a ddition, D I P N 4 6 a l s o r ef er s to th e O E C D G uidel ines f or f ur th er g uida nce a b out docum enta tion r eq uir em ents .


cir cum s ta nces in w h ich tr a ditiona l tr a ns a ction da ta is not a v a il a b l e, com p a r a b l e or r el ia b l e.

Return disclosures/related-party disclosures p a id f or r oy a l ties , f ees p a id to nonr es idents f or s er v ices r ender ed in H ong K ong a nd th e l oca tion of th e nonr es ident p er s on.

Transfer pricing-specific returns Documentation deadlines D ocum enta tion is g ener a l l y r eq uir ed onl y up on r eq ues t.

Transfer pricing penalties a nd 8 2 A f or noncom p l ia nce. O f f ens es ca n incl ude a ny p er s on w h o, w ith out a r ea s ona b l e ca us e or w ith w il l f ul intent to ev a de ta x , f a il s to a r etur n in tim e; f a il s to inf or m

ch a r g ea b il ity f or ta x ; m a k es a ny f a l s e s ta tem ent in connection w ith a cl a im

f or a ny deduction of th e

or m a k es us e of a ny f r a ud, a r t or contr iv a nce to ev a de ta x , a m ong oth er s .

im p r is onm ent.

Penalty relief T h e s ca l e of th e p ena l ty to b e im p os ed on a ta x p a y er in H ong K ong is deter m ined b a s ed on th e na tur e of th e om is s ion, th e q ua ntum

of

th e of f ens e p er iod. P ena l ties ca n b e s ca l ed up w a r d or dow nw a r d b a s ed on s uch f a cts of th e ca s e.

1 8 5


H o ng K o ng ( S A R )

(continued)

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions in H ong K ong is s ix y ea r s a f ter th e end of th e a s s es s m ent y ea r . I n th e ca s e of f r a ud or w il l f ul ev a s ion, th e s ta tute of l im ita tions is ex tended to 1 0 y ea r s f r om th e end of th e a s s es s m ent y ea r .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e r is k of a n a nnua l ta x a udit in H ong K ong m a y b e tr ig g er ed b y a v a r iety of s itua tions , s uch a s if th e a ccounts of a b us ines s a r e h ea v il y not p r op er l y m a inta ined, or r eq ues ted inf or m a tion is not p r ov ided.

r eceiv ed, or tr a ns a ctions a r e w ith ta x h a v en l oca tions ). A n a udit r el a ted to tr a ns f er p r icing w il l b e a im ed a t r ev iew ing th e inter com p a ny p r icing p ol icies a nd a ny a na l y s is p r ep a r ed to s up p or t th e p r icing , cons ider ing th e f a cts of th e b us ines s a nd th e tr a ns a ctions . T r a ns f er com m on l ine of inq uir y . N ota b l y , a m ong a s s et m a na g er s , th e a l l oca tion of f ee r ev enue into H ong K ong is a n incr ea s ing l y f r eq uent a r ea of

f a cts a nd cir cum s ta nces of th e ta x p a y er .

APA opportunity of th e A P A p r og r a m . H ow ev er , unil a ter a l a com p etent a uth or ity a unil a ter a l A P A r eg a

A P A s g r eem is una r ding

w il l b e l im ited to b ents m a y b e cons b l e to r ea ch a n a g tr a ns a ctions integ

4 il a ter a l or m ul til a ter a l a g r eem ents a nd g ener a l l y w il l not incl ude unil a ter a l a g r eem ents . ider ed if a tr ea ty p a r tner does not w is h to p a r ticip a te in a n A P A , in w h ich th e H ong K ong r eem ent w ith th e r el ev a nt tr ea ty p a r tner , or w h er e a non- tr ea ty p a r tner is p r ep a r ed to g iv e r a l l y l ink ed to th e tr a ns a ctions cov er ed b y a b il a ter a l or m ul til a ter a l A P A .

Impact of new OECD BEPS Action 8–10 guidelines h a r m f ul ta x p r a ctices ), A ction 6 (p r ev enting tr ea ty a b us e), A ction 1 3 (tr a ns f er p r icing docum enta tion) a nd A ction 1 4 (enh a ncing dis p ute

C ons ul ta tion P a p er p r op os es th e intr oduction of tr a ns f er p r icing r ul es in H ong K ong , incl uding a dop tion of th e th r ee- tier ed a p p r oa ch to


1 8 6

H u ng ar y Taxing authority and tax law

• C or p or a te I ncom e T a x (C I T ) a nd D iv idend T a x (A ct on C I T ) • T a x P r ocedur e (A ct on T a x P r ocedur e)

Relevant regulations and rulings • • • • • • 1

•

ef f ectiv e 1 J a nua r y 2 0 1 0 , a m ended w ith a n ef f ectiv e da te of 2 1 J une 2 0 1 3 ; under s p ecia l cir cum s ta nces , a m ended v er s ion is op tiona l l y a p p l ica b l e to com p l ia nce l ia b il ities p er ta ining to 2 0 1 2 a s w el l

• •

4 • •

• • ef f ectiv e 1 J a nua r y 2 0 1 5 • •

4 • • •

•

4 • • 4

1

1 8 7


H u ng ar y

(continued)

• • • w a iv er of r eceiv a b l es • 4 •

OECD Guidelines treatment th e O E C D G uidel ines m a y b e us ed a s a p r im a r y r ef er ence.

Documentation requirements deter m ine th e f a ir m a r k et p r ices , a s w el l a s th e f a cts a nd cir cum s ta nces s up p or ting th em . T h e deta il ed docum enta tion ob l ig a tion m us t b e a p p l ied f or a l l r el a ted- p a r ty a g r eem ents in ef f ect in th e ta x y ea r . T h e deta il s of th e docum enta tion ob l ig a tion a r e r eg ul a ted b y D ecr ee 2 2 . F or eig n entities (us ua l l y f or eig n ta x p a y er s eng a g ed in b us ines s a ctiv ities th r oug h a H ung a r ia n p er m a nent es ta b l is h m ent) a r e a l s o s ub j ect to th e docum enta tion ob l ig a tion. H ow ev er , tr a ns f er p r icing r ul es a r e not r eq uir ed to b e ob s er v ed w h en th e C I T b a s e w oul d not ch a ng e ev en if a non- a r m ’ s - l eng th p r ice w er e a p p l ied (i. e. , if th e incom e a ttr ib uta b l e to th e f or eig n p er m a nent es ta b l is h m ent is ex em p t f r om H ung a r ia n ta x , b a s ed on th e a p p l ica b l e doub l e ta x tr ea ty ). O v er a l l , th e H ung a r ia n tr a ns f er p r icing docum enta tion r eq uir em ents a r e cons is tent w ith th e O E C D G uidel ines . T h e f ol l ow ing l is t outl ines • a uth or ity ) of th e r el a ted p a r ties p a r ticip a ting in th e r el a ted- p a r ty tr a ns a ction under r ev iew • • • •

P er iod dur ing w h ich th e a g r eem ent is ef f ectiv e •

C h a r a cter is tics of th e s er v ice p r ov ided or g oods s ol d (f unctiona l a na l y s is ) •

• A na l y s is of th e r el ev a nt m a r k et (indus tr y a na l y s is ) • T h e m eth od a p p l ied f or es ta b l is h ing th e a r m ’ s - l eng th p r ice • • D es cr ip tion of com p a r a b l e s er v ices a nd g oods tr a ns a ctions • • T h e a r m ’ s - l eng th p r ice, m a r g in or r a ng e


1 8 8

H u ng ar y

(continued)

• • P r ep a r a tion a nd a m endm ent da te of th e docum enta tion • I f cons ol ida ted tr a ns f er p r icing docum enta tion is p r ep a r ed (s ing l e docum enta tion cov er ing s ev er a l s im il a r or s tr ong l y inter r el a ted tr a ns a ctions ), r ea s ons f or cons ol ida tion h a v e to b e p r ov ided

concl uded b etw een th e H ung a r ia n ta x p a y er a nd its r el a ted p a r ties . T a x p a y er s m us t decl a r e to th e N T C A (on th e C I T r etur n) w h ich ty p e of tr a ns f er p r icing docum enta tion th ey w oul d l ik e to p r ep a r e (eith er th e s ing l e docum enta tion or th e j oint docum enta tion).

Th e ob ligat ory elem ent s of t h e com m on docum ent at ion are t h e following: • A g ener a l des cr ip tion of th e b us ines s a nd th e b us ines s s tr a teg y of th e enter p r is e, incl uding th e ch a ng es f r om

th e p r ev ious y ea r

• th e g r oup m em b er s a nd a des cr ip tion of th e p a r ent com p a ny ’ s p a r ticip a tion in th e op er a tion of its s ub s idia r ies ) • • • A g ener a l des cr ip tion of th e f unctions a nd r is k a nd th e ch a ng es in th es e, com p a r ed w ith th e p r ev ious y ea r • I nf or m a tion a b out th e ow ner s h ip of inta ng ib l e a s s ets a nd r oy a l ties p a id a nd r eceiv ed • A des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy or tr a ns f er p r icing s y s tem • C os t contr ib ution a g r eem ents (C C A s ) a nd A P A s r el a ting to th e deter m ina tion of th e a r m ’ s - l eng th p r ice a nd cour t decis ions a b out th e a r m ’ s - l eng th p r ice •

The country-specific documentation must include the following information: • a uth or ity ) of th e r el a ted- p a r ty • D es cr ip tion of th e b us ines s enter p r is e a nd th e s tr a teg y of th e b us ines s enter p r is e, incl uding th e ch a ng es , com p a r ed w ith th e p r ev ious y ea r • a nd th e p er iod dur ing w h ich th e a g r eem ent is ef f ectiv e • C om p a r a b l e s ea r ch (ch a r a cter is tics of th e s er v ice p r ov ided or g oods s ol d, f unctiona l a na l y s is , contr a ctua l conditions a nd econom ic cir cum s ta nces ) • D es cr ip tion of th e com p a r a b l e da ta • T r a ns f er p r icing p ol icy of th e g r oup •

1 8 9


H u ng ar y

(continued)

s er v ices in th e H ung a r ia n tr a ns f er p r icing r eg ul a tions . L ow - v a l ue- a dded intr a g r oup b etw een r el a ted p a r ties outs ide th e s cop e of th e m a in b us ines s a ctiv ity (e. g . , inf or m F or th es e s er v ices , ta x p a y er s m a y p r ep a r e tr a ns f er p r icing docum enta tion encom p A ccor ding to th e a m endm ent of D ecr ee 2 2 in 2 0 1 2 , th is ty p e of docum enta tion is a

s er v ices ty p ica l l y a tion tech nol og y a s s ing a r el a tiv el y p p l ica b l e if th e v a

a r e r outine s er v ices p s er v ices or a dm inis tr a l es s - deta il ed tech nica l ue of th e tr a ns a ctions

r ov ided tion s er v ices ). l a na l y s is . does not

g iv en ta x y ea r . I n th is ca s e, th e cos t- p l us m eth od is a ccep ted w ith out a s ep a r a te a na l y s is , a nd th e l a w cons ider s m a r k up s ch os en f r om

2

E x em p t ions from

t h e docum ent at ion ob ligat ion according t o D ecree 2 2 are as follows:

• • th e ta x p a y er or th e cos t- b ea r ing entity • I f th e N T C A es ta b l is h ed th e a p p l ica b l e a r m ’ s - l eng th p r ice in a r es ol ution (A P A ) • C a s h tr a ns f er s • T r a ns a ctions ca r r ied out b etw een a H ung a r ia n r es ident ta x p a y er ’ s f or eig n p er m a nent es ta b l is h m ent a nd its r el a ted- p a r ty , if th e ta x p a y er ’ s C I T b a s e does not incl ude th e incom e a ttr ib uta b l e to th e f or eig n p er m a nent es ta b l is h m ent F or 2 0 0 9 a nd onw a r d, th e docum enta tion ca n a l s o b e p r ep a r ed in a f or eig n l a ng ua g e. H ow ev er , a t th e N T C A ’ s r eq ues t, th e ta x p a y er h a s to p r ep a r e a H ung a r ia n tr a ns l a tion (a n ex cep tion a p p l ies f or E ng l is h , F r ench a nd G er m a n l a ng ua g e docum enta tion).


A s a n im p or ta nt new r eq uir em ent in a r el a tiv el y w ide a r r a y of ca s es , ta x p a y er s a r e r eq uir ed b y l a w to a p p l y th e inter q ua r til e r a ng e in th eir p r icing a nd a s s es s th eir H ung a r ia n ta x l ia b il ities a ccor ding l y .

Return disclosures/related-party disclosures th e contr a cting p a r ty to th e N T C A . C es s a tion of th e r el a ted- p a r ty s ta tus m us t a l s o b e r ep or ted. I n th e C I T r etur n, th e ta x b a s e s h oul d b e a dj us ted if th e p r ice us ed in th e r el a ted- p a r ty tr a ns a ction dif f er s f r om th e f a ir m a r k et p r ice. I n th eir y ea r - end cor p or a te ta x r etur ns , ta x p a y er s m us t decl a r e w h ich ty p e of tr a ns f er p r icing docum enta tion th ey h a v e el ected to p r ep a r e. N T C A ; h ow ev er , th e ta x p a y er needs to p r es ent th e docum enta tion dur ing a ta x a udit.

2

of th e tr a ns f er p r icing docum enta tion is not b ef or e 2 1 J une 2 0 1 3 .


1 9 0

H u ng ar y

(continued)



Transfer pricing penalties I n r el a tion to a ta x b a s e a dj us tm ent, a p ena l ty of 5 0 % of th e unp a id ta x m a y b e im p os ed, a s w el l a s a l a te p a y m ent inter es t ch a r g e a t


Statute of limitations on transfer pricing assessments ca l cul a ted f r om th e ta x y ea r in w h ich ta x es s h oul d h a v e b een decl a r ed, r ep or ted or p a id. H ow ev er , w ith in th e f r a m ew or k of th e A r b itr a tion C onv ention, it is p os s ib l e to r eq ues t a ta x b a s e a dj us tm ent ev en a f ter th e s ta tute of l im ita tions h a s ex p ir ed.

Frequency of tax audit and transfer pricing scrutiny by the tax authority ex is tence a nd com p l etenes s of th e docum enta tion (i. e. , w h eth er a l l tr a ns a ctions a r e cov er ed).

y ea r s .

• • T h e ta x p a y er ca m e to a n unus ua l concl us ion r eg a r ding th e tr a ns f er p r ices 1 9 1


H u ng ar y

(continued)

• T h e p r icing m eth od is unus ua l • T h e tr a ns a ctions th em s el v es ca n b e r eg a r ded a s unus ua l or uniq ue (es p ecia l l y h y b r ids , C C A s a nd cer ta in r oy a l ty a r r a ng em ents ) T h e N T C A continuous l y coop er a tes w ith oth er countr ies ’ ta x a uth or ities a nd f ol l ow s th e inter na tiona l tr a ns f er p r icing a uditing p r a ctices th e N T C A is now r a th er k now l edg ea b l e a b out m a tter s concer ning m eth od s el ection; th er ef or e, th e r is k of th e ta x p a y er ’ s a p p l ica tion of a

APA opportunity to th e p r ov is ion.

3

r eq ues t, th e ta x p a y er does not h a v e to p r ep a r e tr a ns f er p r icing docum enta tion f or th e tr a ns a ctions cov er ed b y th e A P A .


3


1 9 2

I c el and Taxing authority and tax law

Relevant regulations and rulings T h e G ov er nm ent h a s is s ued a r eg ul a tion (N o. 1 1 8 0 / 2 0 1 4 ) w ith a dditiona l g uidel ines on docum enta tion a nd p r icing . O n 1 5 J une 2 0 1 5 , I cel a nd’ s P a r l ia m ent p a s s ed a b il l a m ending A r ticl e 5 7 of th e I cel a nd I ncom e T a x A ct N o. 9 0 / 2 0 0 3 .

OECD Guidelines treatment p a r ties b a s ed on th e O E C D p r incip l es

Documentation requirements ex tent of tr a ns a ctions w ith r el a ted p a r ties , incl uding th e r ea s oning f or tr a ns a ction p r ices a nd oth er ter m s . T h e duty ex is ts a s of th e b eg inning of th e nex t op er a tiona l y ea r . T h e docum enta tion r eq uir em ents do not a p p l y to dom es tic tr a ns a ctions .



4


D ocum ents m us t b e p r ov ided to th e ta x a uth or ities w ith in 4 5 da y s of a r eq ues t, a nd docum ents m us t b e k ep t f or s ev en y ea r s .

1 9 3


I c el and

(continued)

Transfer pricing penalties T h er e is no p ena l ty f or f a il ur e to p r ov ide docum enta tion. b a s ed on th e O E C D p r incip l es . T h es e a dj us tm ents ca n b e p er f or m ed w ith in th e dom es tic s ta tute of l im ita tion p er iod (i. e. , f or th e s ix p r ev ious y ea r s f r om th e da te of th e a dj us tm ent). A 2 5 % p ena l ty ca n b e a p p l ied to th e a dj us tm ent of p r icing in ca s e of under p a y m ents .

Penalty relief A ccor ding to A r ticl e 1 0 8 of A ct 9 0 / 2 0 0 3 on incom e ta x , th e g ener a l r ul e is th a t a p ena l ty ca n b e a v oided if th e ta x a b l e p a r ty is not r es p ons ib l e f or th e s itua tion ca us ing th e a dj us tm ent of p r icing , or if th e s itua tion is ca us ed b y f or ce m a j eur e. F a il ur e to com p l y w ith docum enta tion r ul es does not p r ov ide p ena l ty r el ief .

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions p er iod is s ix y ea r s p r ior to th e y ea r of a s s es s m ent.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l dep ends on s ev er a l f a ctor s , s uch a s th e s ur v eil l a nce p l a n of th e ta x a uth or ities , th e ty p e T h er e is a h ig h l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a ta x a udit. D ue to th e f a ct th a t tr a ns f er p r icing r ul es j us t ca m e into ef f ect, it is h a r d to a s s es s th e l ik el ih ood of tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed.

APA opportunity I cel a ndic ta x a uth or ities do not is s ue A P A s . I t is uncer ta in if ta x a uth or ities w il l p r ov ide b inding op inions on tr a ns f er p r icing .

Impact of new OECD Guidelines F or m a l l y , th er e is no l oca l p os ition or ca s e l a w ; h ow ev er , it is im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .


1 9 4

I nd ia Taxing authority and tax law • • I ncom e T a x D ep a r tm ent


44 •

44 T h e p r icing of inter na tiona l tr a ns a ctions b etw een a s s ocia p r incip l e us ing m eth ods p r es cr ib ed under I ndia n tr a ns f er v oting p ow er in one is h el d b y th e oth er or a com m on p a r to cer ta in oth er s cena r ios th a t w oul d deem tw o enter p r is

ted enter p r is es w il l need to b e deter m ined w ith r eg a r d to th e a p r icing r eg ul a tions . A s s ocia ted enter p r is es a r e enter p r is es f or ent h ol ds a t l ea s t 2 6 % of th e v oting p ow er in b oth s uch enter p r es a s a s s ocia ted. T r a ns f er p r icing p r ov is ions a p p l y to th e f ol l ow

r m ’ s - l eng th w h ich 2 6 % of th e is es in a ddition ing ty p es of

• P ur ch a s e, s a l e or l ea s e of ta ng ib l e or inta ng ib l e p r op er ty • P r ov is ion of s er v ices • p ur ch a s e or s a l e of m a r k eta b l e s ecur ities or a ny ty p e of a dv a nce, p a y m ents or def er r ed p a y m ent or r eceiv a b l e; or a ny oth er deb t a r is ing dur ing th e cour s e of b us ines s • A m utua l a g r eem ent or a r r a ng em ent f or cos t a l l oca tion or a p p or tionm ent • • T r a ns a ctions w ith a th ir d p a r ty w il l b e deem ed tr a ns a ctions b etw een a s s ocia ted enter p r is es if th e th ir d p a r ty h a s a p r ior a g r eem ent w ith th e a s s ocia ted enter p r is e, or if th e ter m s of th e r el ev a nt tr a ns a ction a r e deter m ined, in s ub s ta nce, b etw een th e th ir d p a r ty a nd th e a s s ocia ted enter p r is e, ev en if th e ta x p a y er a nd th ir d p a r ty a r e b oth dom es tic entities .

S afe- h arb or p rov isions

a l s o cov er tr a ns a ctions p er ta ining to l ending m oney a nd p r ov iding a g ua r a ntee b y a n I ndia n entity to its w h ol l y ow ned s ub s idia r y . h a r b or r ul es , op tiona l f or a ta x p a y er , conta in th e conditions a nd cir cum s ta nces under w h ich th e ta x a uth or ity w oul d a ccep t th e nor m s a nd m a r g ins a nd th e r el a ted com p l ia nce ob l ig a tions .

a p p l ica b l e ta x tr ea ty .

1 9 5


I nd ia

(continued)

Specified domestic transactions

w ith r eg a r d to th e a r m ’ s - l eng th p r incip l e us ing m eth ods p r es cr ib ed under I ndia n tr a ns f er p r icing r eg ul a tions .

OECD Guidelines treatment I ndia n l eg is l a tion is b r oa dl y b a s ed on th e O E C D G uidel ines . F iv e of th e s ix m eth ods p r es cr ib ed in th e l eg is l a tion to com p ute a r m ’ s - l eng th p r ices conf or m w ith th e O E C D G uidel ines . incons is tent w ith dom es tic l a w .


• O w ner s h ip s tr uctur e • • • N a tur e a nd ter m s (incl uding p r ices ) of inter na tiona l tr a ns a ctions • D es cr ip tion of f unctions p er f or m ed, r is k s a s s um ed a nd a s s ets em p l oy ed • • • D es cr ip tion of m eth ods cons ider ed • • D eta il s of tr a ns f er p r icing a dj us tm ents • A ny oth er inf or m a tion or da ta r el a ting to th e a s s ocia ted enter p r is e th a t m a y b e r el ev a nt f or deter m ining th e a r m ’ s - l eng th p r ice

Worldwide Transfer t ransfer p Pricing ricing reference Referenceguide Guide

1 9 6

I nd ia

(continued)

Priorities/pricing methods f or a s im il a r uncontr ol l ed tr a ns a ction. N o h ier a r ch y of m eth ods ex is ts ; r a th er , th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied. p oints to b e eq uiv a l ent to th e a r m ’ s - l eng th p r ice a nd h a s a l l ow ed a p r es cr ib ed p er centa g e of v a r ia tion b etw een th e a r m ’ s - l eng th p r ice a p p r oa ch to us ing a n a r m ’ s - l eng th p r ice r a ng e b y us ing th e 3 5 th a nd 6 5 th p er centil es , ins tea d of th e inter na tiona l l y a ccep ted p r a ctice of th e inter q ua r til e r a ng e (if cer ta in conditions a r e m et, s uch a s a v a il a b il ity of m inim um 6 da ta p oints ).

Return disclosures/related-party disclosures to p r ov ide inf or m a tion s uch a s th e na tur e a nd v a l ue of th e tr a ns a ction, deta il s a b out th e a s s ocia ted enter p r is e w ith w h ich th e tr a ns a ction w a s under ta k en a nd th e m eth od us ed to b ench m a r k th e tr a ns a ction. s ta tem ents .



A l th oug h a n a ccounta nt’ s r ep or t m us t b e s ub m itted a l ong w ith th e ta x r etur n, th e ta x p a y er is not r eq uir ed to f ur nis h th e tr a ns f er p r icing

Transfer pricing penalties • F or not m a inta ining docum enta tion, f a il ur e to r ep or t th e tr a ns a ction, or m a intena nce of or f ur nis h ing ina ccur a te p a r ticul a r s , a p ena l ty of 2 % of th e tr a ns a ction v a l ue m a y b e l ev ied. • • of th e a dditiona l ta x l ia b il ity a r is ing f r om th e a dj us tm ent m a y b e l ev ied, unl es s th e ta x p a y er is a b l e to dem ons tr a te th a t th e a r m ’ s - l eng th p r ice w a s deter m ined in g ood f a ith a nd w ith due dil ig ence.

1 9 7


I nd ia

(continued)

• F or tr a ns a ctions under ta k en f r om 1 A p r il 2 0 1 6 onw a r d, a p ena l ty of 5 0 % on th e ta x p a y er on under r ep or ted incom e m a y b e l ev ied in th e ca s e of a tr a ns f er p r icing a dj us tm ent if it r es ul ts in under r ep or ting of incom e. T h e p ena l ty ca n b e incr ea s ed to 2 0 0 % if th e under r ep or ting is th e cons eq uence of m is r ep or ting . •

Penalty relief A dditiona l l y , im m unity f r om conditions .

im p os ition of p ena l ty m a y b e s oug h t f or tr a ns a ctions under ta k en f r om

1 A p r il 2 0 1 6 onw a r d under cer ta in



H ow ev er , th e ta x a uth or ities a m ov e to s h if t th e a p p r oa ch r eg a r dl es s of th e a p p r oa ch f a udits a r e ca r r ied out a nnua th er ea f ter .

r ecentl y r em ov ed th is num er ica l b ench m a r k of s el ecting ca s es f or tr a ns f er p r icing a udits or s el ecting ca s es f or a udit, th e r is k of tr a ns f l l y , a nd once a ca s e is s el ected f or a tr a ns f er

f or s el ecting ca s es f or tr a ns f er p r b a s ed on th e f a cts a nd cir cum s ta er p r icing a udit continues to r em a p r icing a udit, th er e is a h ig h l ik el ih

icing a udits . T h is nces of th e ca s es in r el a tiv el y h ig h . ood of r ecur r ing

is s een a s . H ow ev er , I n a ddition, a udits

a udit p r oceeding s .

p r icing m eth odol og y w il l b e ch a l l eng ed is a l s o h ig h . T h e inf or m a tion tech nol og y , b us ines s p r oces s outs our cing , b a nk ing a nd p h a r m a ceutica l s ector s h a v e r eceiv ed p a r ticul a r a ttention. ta x p a y er s . T h e ta x p a y er is r eq uir ed to dem ons tr a te th a t th e intr a g r oup s er v ices w er e a ctua l l y r ender ed or th e intel l ectua l p r op er ty w a s

ex ces s iv e w h en com p a r ed w ith indus tr y s ta nda r ds a nd, th us , dis a l l ow ed. T h e ta x a uth or ities h a v e s oug h t a n up da ted a na l y s is us ing da ta th a t m a y not b e a v a il a b l e to th e ta x p a y er w h en contem p or a neous docum enta tion is p r ep a r ed.

Worldwide Transfer t ransfer p Pricing ricing reference Referenceguide Guide

1 9 8

I nd ia

(continued)

its tr a ns f er p r icing docum enta tion. D ur ing r ecent a udits , ta x a uth or ities h a v e p a id cons ider a b l e a ttention to th e a p p r oa ch a dop ted b y th e ta x p a y er w h en s el ecting com p a r a b l e da ta . a l l eg ing th a t s uch ex p ens es m a y cons titute a n inter na tiona l tr a ns a ction if th e inta ng ib l es a r e not ow ned in I ndia . I n s uch a ca s e, th e a uth or ities ex p ect r ep or ting a nd s ep a r a te b ench m a r k ing of s uch tr a ns a ctions .

APA opportunity T h e A P A r eg im e h a s b een intr oduced in I ndia , ef f ectiv e 1 J ul y 2 0 1 2 . T h e A P A r ul es p r ov ide a n op tion f or ta x p a y er s to s eek a unil a ter a l , a l s o b een intr oduced b y th e F ina nce (N o 2 ) A ct, 2 0 1 4 . A r ol l b a ck w oul d b e a v a il a b l e to ta x p a y er s th a t h a v e a p p l ied f or a n A P A f or a

y ea r under th e A P A , w h ich th e ta x a uth or ities do not s ub j ect to a com p l ia nce a udit.


p ena l ties .

out l eg is l a tiv e ch a ng es in its dom es tic l a w .

1 9 9


I nd o nes ia Taxing authority and tax law

L ux ur y G oods L a w

Relevant regulations and rulings • L a w N um b er 7 Y ea r 1 9 8 3 r eg a r ding I ncom e T a x (a m ended b y L a w N um b er 3 6 Y ea r 2 0 0 8 ) (P P h L a w ) • • 4 2 Y ea r 2 0 0 9 ) (P P N L a w )

ex is ts . A r ticl e 1 8 (3 ) a l s o a l l ow s a r edeter m ina tion of deb t a s eq uity . T h e r edeter m ina tion s h oul d b e m a de in a ccor da nce w ith eq uity a nd com m on p r a ctice of b us ines s f or indep endent p a r ties (i. e. , in a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e). A s p ecia l r el a tion is deem ed to • A ta x p a y er h a s dir ect or indir ect ow ner s h ip of 2 5 % or m or e in a noth er ta x p a y er or tw o or m or e oth er ta x p a y er s • A ta x p a y er contr ol s a noth er ta x p a y er or tw o or m or e oth er ta x p a y er s •

contr a ct of w or k or th e coop er a tiv e a g r eem ent. 4

4

• C onduct a com p a r a b il ity a na l y s is a nd deter m ine com p a r a b l e tr a ns a ctions • D eter m ine th e a p p r op r ia te tr a ns f er p r icing m eth od • A p p l y th e a r m ’ s - l eng th p r incip l e b a s ed on th e r es ul ts of th e com p a r a b il ity a na l y s is a nd th e m os t a p p r op r ia te tr a ns f er p r icing m eth od • 4 T h e r eg ul a tions m a y b e a p p l ied w h en th er e a r e tr a ns a ctions b etw een a ta x p a y er a nd a noth er dom es tic ta x p a y er or p er m a nent • • T h e im p os ition of th e s a l es or l ux ur y g oods ta x • T r a ns a ctions conducted w ith ta x p a y er s of oil a nd g a s p r oduction- s h a r ing contr a ctor s


2 0 0

I nd o nes ia

(continued)

OECD Guidelines treatment p r incip l es of th e O E C D G uidel ines in its r eg ul a tions . H ow ev er , it s h oul d b e noted th a t th e D G T ’ s p r a ctica l a p p l ica tion of th e a r m ’ s - l eng th p r incip l e in a n a udit contex t r eg ul a r l y div er g es f r om th e p r incip l es endor s ed b y th e O E C D G uidel ines .

Documentation requirements 4

th eir r el a ted- p a r ty tr a ns a ctions dur ing th e y ea r . D ocum enta tion r eq uir em ents a r e l a r g el y p r es cr ip tiv e a nd s h oul d a l s o a ddr es s k ey p oints th a t th e D G T w il l r a is e dur ing a udits b a s ed on 2 0 1 3 .


• T h e a dv a nta g es a nd dis a dv a nta g es of ea ch m eth od • T h e s uita b il ity of th e m eth od b a s ed on th e f unctiona l a na l y s is • T h e a v a il a b il ity of r el ia b l e inf or m a tion to a p p l y th e m eth od • T h e l ev el of com p a r a b il ity b etw een th e tes ted tr a ns a ction a nd p otentia l com p a r a b l e da ta , incl uding th e r el ia b il ity of p otentia l a dj us tm ents

Return disclosures/related-party disclosures T h e inf or m a tion r eq uir ed incl udes th e counter p a r ty , th e ty p e of tr a ns a ction, th e v a l ue of th e tr a ns a ction, th e tr a ns f er p r icing m eth od a p p l ied a nd th e r ea s on f or th e a p p l ica tion of th e m eth od. A dditiona l l y , ta x p a y er s a r e r eq uir ed to dis cl os e w h eth er th ey h a v e tr a ns f er p r icing docum enta tion p r ep a r ed.

Transfer pricing–specific returns

2 0 1


I nd o nes ia

(continued)

Documentation deadlines docum enta tion f r om th e D G T , ta x p a y er s a r e r eq ues ted to s ub m it th eir docum enta tion w ith in 7 da y s ; h ow ev er , th ey h a v e 3 0 da y s to s ub m it th eir docum enta tion under th e r eg ul a tion.

Transfer pricing penalties I na p p r op r ia te dis cl os ur e of inf or m a tion r eg a r ding r el a ted- p a r ty tr a ns a ctions b y a ta x p a y er in a cor p or a te incom e ta x r etur n m a y b e cons tr ued a s a n a ct of f r a ud th a t coul d l ea d to a n a dm inis tr a tiv e p ena l ty of up to 4 0 0 % of th e ta x under p a y m ent. T h er e is a p ena l ty of 4 tr a ns a ctions a s a r es ul t of th e ta x a udit p r oces s .

Penalty relief T h er e a r e no p r ov is ions f or p ena l ty r el ief .


Frequency of tax audit and transfer pricing scrutiny by the tax authority I n g ener a l , th e l ik el ih ood of a n a nnua l ta x a udit is h ig h . I n a ddition, a ta x p a y er ’ s a p p l ica tion f or a ta x r ef und w il l tr ig g er a n a utom a tic ta x T h e l ik el ih ood th a uth or ity w il l ch env ir onm ent. T h col l ection a s a p

a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a r eg ul a r a nd s p ecia l ta x a udit is h ig h , a nd th e l ik el ih ood th a t th e ta x a l l eng e th e tr a ns f er p r icing m eth odol og y is a l s o h ig h , a s I ndones ia h a s a n a g g r es s iv e tr a ns f er p r icing contr ov er s y is a g g r es s iv e a udit env ir onm ent is p a r tia l l y dr iv en b y th e I ndones ia n G ov er nm ent’ s des ir e to incr ea s e I ndones ia ’ s ta x er centa g e of th e g r os s dom es tic p r oduct (G D P ).

p r icing a udit, unl es s it is a s p ecia l a udit, w il l occur a s a p a r t of a n a l l - ta x es a udit. T h e D G T h a s a centr a l tr a ns f er p r icing tea m a nd/ or v a l ua tions tea m th a t is a s s ig ned to ca s es a s needed. T h e centr a l tr a ns f er p r icing tea m or v a l ua tions tea m m ig h t a l s o b e inv ol v ed in I n p r a ctice, in a ddition to ta x p a y er s th a t a r e s ub j ect to a n a utom a tic ta x a udit a s a p a r t of th e ta x ov er p a y m ent p r oces s , ta x p a y er s th a t • A l a r g e num b er of r el a ted- p a r ty tr a ns a ctions w ith of f s h or e entities • • • •


2 0 2

I nd o nes ia

(continued)

b y a udit tea m s .

APA opportunity 4 1 2 J a nua r y 2 0 1 5 , r eg a r ding th e f or m a tion a nd im p l em enta tion of a n A P A . T h is r eg ul a tion b eca m e ef f ectiv e f r om ena ctm ent da te (i. e. , 1 2 A p r il 2 0 1 5 ) a nd is a p p l ica b l e f or a l l outs ta nding a nd f utur e A P A a p p l ica tions .

9 0 da y s a f ter th e

4 4 4 a r e ef f ectiv e p r ior to, on or a f ter th is da te.

4

4

4

4

Impact of new OECD BEPS Action 8–10 guidelines r eg a r ding th e ty p e of a dditiona l docum ents / inf or m a tion th a t is m a nda tor y to b e k ep t b y ta x p a y er w h o conducts tr a ns a ctions w ith r el a ted p a r ties a nd its p r ocedur es . T h e r el ea s e of th is r eg ul a tion m a r k s th e im p l em enta tion of th e th r ee- tier ed docum enta tion s tr uctur e a s p r icing docum enta tion a s w el l a s th e tim el ine f or a v a il a b il ity a nd s ub m is s ion of th e docum enta tion. T h e new r eg ul a tion is ef f ectiv e f or

2 0 3


I r aq Taxing authority and tax law

Relevant regulations and rulings I r a q ’ s incom e ta x l a w does not cur r entl y f ol l ow O E C D G uidel ines . H ow ev er , th e G C T ex p ects th a t a l l tr a ns a ctions w ith r el a ted p a r ties s h oul d b e enter ed under th e us ua l com m er cia l r a tes th a t a p p l y to contr a cts w ith unr el a ted th ir d p a r ties . a nd a ta x r etur n f or m ) a nd w il l a s k f or a ny s up p or ting docum enta tion it deem s neces s a r y .

I r a q h a s enter ed into a b il a ter a l doub l e ta x a tion tr ea ty w ith E g y p t a nd a m ul til a ter a l doub l e ta x a tion tr ea ty w ith th e s ta tes of th e A r a b b etw een I r a q a nd a noth er countr y , a s th e G C T does not l ook to th e tr ea ties , nor does it a p p l y th eir p r ov is ions .








2 0 4

I r aq

(continued)




Frequency of tax audit and transfer pricing scrutiny by the tax authority APA opportunity N ot a p p l ica b l e.

Impact of new OECD BEPS Action 8–10 guidelines N ot a p p l ica b l e.

2 0 5


I r el and Taxing authority and tax law


if th os e a r r a ng em ents a r e enter ed into or a m ended on or a f ter 1 J ul y 2 0 1 0 . T h e r eg ul a tions a p p l y to b oth dom es tic a nd cr os s - b or der tr a ns a ctions w h er e I r is h tr a ding r eceip ts a r e under s ta ted or tr a ding ex p ens es a r e ov er s ta ted. T h er e a r e ex em p tions f r om

th es e r eg ul a tions f or s m a l l a nd m edium

enter p r is es w h en a com p a ny h a s f ew er th a n 2 5 0 em p l oy ees a nd 4

8 3 5 C . T r a ns f er p r icing docum enta tion is f unda m enta l to v a l ida ting a nd ex p l a ining th e p r icing of th e intr a g r oup tr a ns a ctions a nd, if s a tis f a ction.

OECD Guidelines treatment G uidel ines (th e O E C D r ul es a p p l y onl y ins of a r a s th ey r el a te to tr a ding tr a ns a ctions ). g ener a l r ev iew of I r el a nd’ s cor p or a te ta x r eg im e, w h ich is ex p ected to b e concl uded in th e m iddl e of 2 0 1 7 .

Documentation requirements a nd cir cum s ta nces of th e tr a ns a ctions . T h e cos t of p r oducing th e docum enta tion s h oul d b e com m ens ur a te w ith th e r is k inv ol v ed. I t w oul d b e ex p ected th a t com p l ex a nd h ig h - v a l ue tr a ns a ctions g ener a l l y w oul d r eq uir e m or e deta il ed docum enta tion th a n s im p l e, h ig h v ol um e tr a ns a ctions . T h e tr a ns f er p r icing docum enta tion m a y b e k ep t in th e f or m

of th e com p a ny ’ s ow n ch oos ing , a nd th e com p a ny is not r eq uir ed to p r ep a r e

E ng l is h or I r is h ).


2 0 6

I r el and

(continued)

• T h e a s s ocia ted p a r ties inv ol v ed in th e tr a ns a ction • T h e na tur e a nd ter m s of th e tr a ns a ction • T h e ter m s of r el ev a nt tr a ns a ctions w ith b oth th ir d p a r ties a nd a s s ocia tes • T h e m eth od, or m eth ods , b y w h ich th e p r icing of th e tr a ns a ctions w a s der iv ed, incl uding a ny com p a r a b il ity a na l y s is a nd a ny f unctiona l a na l y s is under ta k en • T h e a p p l ica tion of th e tr a ns f er p r icing m eth od • A ny b udg ets , f or eca s ts or oth er r el ev a nt p a p er s r el ied on in a r r iv ing a t a n a r m ’ s - l eng th r es ul t T h e tr a ns f er p r icing docum enta tion r eq uir em ents a r e ex p ected to b e a m ended p os t a g ener a l r ev iew of I r el a nd’ s cor p or a te ta x r eg im e

• p r icing p ol icies • tr a ns a ctions , a nd th e com p a ny ’ s tr a ns f er p r icing s up p or ting a na l y s is w ith r eg a r d to th os e tr a ns a ctions

docum enta tion r eq uir em ent. A t th is p oint in tim e th e intr oduction of a nd up da te to th e docum enta tion r eq uir em ents in l ine w ith A ction

Priorities/pricing methods a s s ocia ted enter p r is es in I r el a nd’ s doub l e ta x a tion tr ea ties . T o es ta b l is h a n a r m ’ s - l eng th p r ice, th e O E C D G uidel ines w il l b e r ef er enced. T h e a r m ’ s - l eng th p r incip l e a s s er ts th a t intr a g r oup tr a ns f er p r ices s h oul d b e eq uiv a l ent to th os e th a t w oul d b e ch a r g ed b etw een indep endent p er s ons dea l ing a t a r m ’ s - l eng th in oth er w is e s im il a r cir cum s ta nces . T r a ns f er p r ices s h oul d b e r ev iew ed a t r eg ul a r inter v a l s to deter m ine th a t p r icing r em a ins a t a r m ’ s - l eng th .

Return disclosures/related-party disclosures C ur r entl y , th er e a r e no ta x r etur n dis cl os ur es . H ow ev er , cer ta in m ul tina tiona l s m a y b e ob l ig a ted to s ub m it a C b C r ep or t in a ccor da nce


2 0 7


I r el and

(continued)

Documentation deadlines p r a ctice th a t s om e tr a ns f er p r icing a na l y s is b e p r ep a r ed w h en th e ter m s of th e tr a ns a ction a r e a g r eed to, a nd th a t f or a com p a ny to b e in due nine m onth s a f ter th e end of a n a ccounting p er iod.

• T h e ter m s of th e a g r eem ent cl ea r l y env is a g e th e tr a ns a ction. • A p p l ica tion of th es e ter m s del iv er s th e p r ice of th e tr a ns a ction. • A n a g r eem ent to enter into a f ur th er a g r eem ent w oul d not m eet th es e conditions . H ow ev er , inter com p a ny a r r a ng em ents th a t w er e a g r eed to p r ior to 1 J ul y 2 0 1 0 , a nd th a t a r e r eneg otia ted a nd r e- s ig ned a f ter 1 J ul y 2 0 1 0 , a r e w ith in th e s cop e of th e r eg ul a tions .

Transfer pricing penalties T h er e is no s ep a r a te s ta tutor y r eg im e f or tr a ns f er p r icing p ena l ties . H ow ev er , s ta nda r d ta x - g ea r ed cor p or a te ta x p ena l ties th a t a p p l y to

Penalty relief tr a ns f er p r icing docum enta tion w il l b e a k ey f a ctor in deter m ining th e l ev el of p ena l ties a p p l ica b l e to a tr a ns f er p r icing a dj us tm ent, if a ny .

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions is cur r entl y f our y ea r s a f ter th e end of th e ta x y ea r or th e a ccounting p er iod in w h ich th e r etur n is m a de.

Frequency of tax audit and transfer pricing scrutiny by the tax authority eq uip p ed to dea l w ith th e com p l ex ities inv ol v ed in a p p l y ing th e a r m ’ s - l eng th p r incip l e. • r eg ul a tions . •

• •


2 0 8

I r el and

(continued)

APA opportunity p r a ctice, w h ich h a d p r ev ious l y op er a ted on a n inf or m a l b a s is .

Impact of new OECD BEPS Action 8–10 guidelines ef f ectiv e in I r el a nd until a t l ea s t th e b eg inning of 2 0 1 8 .

2 0 9


I s r ael Taxing authority and tax law


of a ta x ins p ector ), w h ich s h if ts th e b ur den of p r oof to th e ta x ing a uth or ity if th e l a tter ch a l l eng es th e tr a ns f er p r icing .

• intel l ectua l p r op er ty (I P ) m ig r a tion f ol l ow ing s uch r es tr uctur ing s . • • a p p r oa ch h a s r ecentl y b een r einf or ced b y th e I s r a el i cour t’ s r ul ing in tw o ca s es a ddr es s ing th is is s ue. T h es e ca s es a r e cur r entl y b eing a p p ea l ed. •

4

OECD Guidelines treatment T h e I T A cons ider s its tr a ns f er p r icing r ul es a nd r eg ul a tions to b e cons is tent w ith th e O E C D G uidel ines .


• T h e ta x p a y er ’ s g r oup s tr uctur e, th e p a r ties to th e inter na tiona l tr a ns a ction, th eir r es idency , a nd a ny s p ecia l r el a tions b etw een th e ta x p a y er a nd th e oth er p a r ties • g ua r a ntees • T h e ta x p a y er ’ s a r ea of a ctiv ity a nd a ny r el ev a nt dev el op m ents • T h e econom ic env ir onm ent in w h ich th e ta x p a y er op er a tes a nd th e r el a ted r is k s • D eta il s of a l l tr a ns a ctions enter ed into b y th e ta x p a y er w ith a r el a ted- p a r ty • A n econom ic a na l y s is Worldwide Transfer Pricing Reference Guide

2 1 0

I s r ael

(continued)

T h e ta x p a y er is a l s o r eq uir ed to a tta ch a dditiona l docum ents th a t cor r ob or a te th e da ta s ub m itted, s uch a s tr a ns a ction contr a cts a nd a ny


• • •

C os t- p l us or r es a l e p r ice

• • • O th er m eth ods inter q ua r til e r a ng e. p er f or m ed. I f th e inter na tiona l tr a ns a ction’ s r es ul t is outs ide th e r a ng e, th e m edia n s h oul d b e a p p l ied a s th e a r m ’ s - l eng th p r ice f or th e tr a ns a ction.

• A cos t- p l us m a r k up m a y b e a p p l ied to a com p a ny ’ s dir ect cos ts • • • • O th er m ea s ur es cons ider ed a p p r op r ia te under th e cir cum s ta nces


• A s h or t des cr ip tion of th e inter com p a ny tr a ns a ction deta il s of th e oth er p a r ty a nd its r es idency • T r a ns a ction v ol um e a nd r es idency of oth er p a r ty • A ccor ding to th e ta x ing a uth or ity , s uch decl a r a tion m us t b e s up p or ted b y docum enta tion th a t m eets th e r eq uir em ents .


2 1 1


I s r ael

(continued)

Documentation deadlines Transfer pricing penalties

Penalty relief T h er e is no p ena l ty r el ief r eg im e a p p l ica b l e in I s r a el .

Statute of limitations on transfer pricing assessments T h e I s r a el i I ncom e T a x O r dina nce h a s g ener a l r ul es f or a uditing a ta x r etur n. A s s uch , th e s ta tute of l im ita tions us ua l l y is th r ee y ea r s (or

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h . T r a ditiona l l y , ta x p a y er s op er a ting in th e inter na tiona l a r ena or s ub s idia r ies of f or eig n com p a nies h a v e a h ig h er l ik el ih ood of b eing a udited. T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h . I n th e p a s t, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w oul d b e ch a l l eng ed in a tr a ns f er p r icing r ev iew h a d b een m oder a te, if s up p or ted b y r ob us t tr a ns f er p r icing ex is ts , th e m eth odol og y is ev en m or e l ik el y to b e ch a l l eng ed. F ol l ow ing th e r ecent cir cul a r s on r es tr uctur ing , s tock op tion ex p ens es a nd th e dig ita l econom y a s des cr ib ed a b ov e, th es e is s ues a r e m or e a udits is I P m ig r a tions a nd b us ines s r es tr uctur ing s . T h er e a r e cur r entl y s ev er a l s uch ca s es b eing deb a ted in cour t.

APA opportunity w h ich a n A P A m a y b e concl uded a nd del inea tes th e s cop e of a n A P A . th e ta x p a y er ’ s a p p l ica tion w ith in 1 2 0 da y s (th oug h th e tim e ca n b e ex tended up to 1 8 0 da y s ), oth er w is e th e a p p l ica tion w il l b e a p p r ov ed a utom a tica l l y a nd th e inter com p a ny p ol icy w il l b e deem ed a s p r ov iding r ea s ona b l e a r m ’ s - l eng th p r ices . I n p r a ctice, a com p l ete A P A p r ocedur e m a y ta k e 1 2 m onth s .


2 1 2

I s r ael

(continued)

Impact of new OECD Guidelines D ur ing th e p a s t s ev er a l m onth s , th e I s r a el i ta x a uth or ities h a v e b een w or k ing on a m ending th e I s r a el i tr a ns f er p r icing r eg ul a tions , in l ig h t

th e f r a m ew or k f or th e ta x a tion of f or eig n enter p r is es r ecor ding incom e f r om

th e s a l e of p r oducts or s er v ices in I s r a el v ia th e inter net. 4 w oul d im p a ct m a ny dig ita l b us ines s es s el l ing in I s r a el . T h is im p a ct w il l a l s o incl ude a dded docum enta tion r eq uir em ents w h er e new

2 1 3


I tal y Taxing authority and tax law Agenzia delle Entrate, or A dE ) 4 4

Relevant regulations and rulings 4

l a w . A r ticl e 2 6 outl ines th a t if th e ta x p a y er p r ov ides ta x a uth or ities w ith p r op er tr a ns f er p r icing docum enta tion dur ing a ta x a s s es s m ent, no ta x p ena l ties w il l b e a p p l ied on p os s ib l e ta x a dj us tm ents ; cur r entl y , th e ta x p ena l ties a r e 9 0 % to 1 8 0 % of th e a dditiona l ta x es if th e ta x a uth or ity deter m ines th a t th e inter com p a ny tr a ns a ctions do not com p l y w ith th e a r m ’ s - l eng th s ta nda r d. (C ir cul a r 5 8 / E ). C om p l ia nce w ith th e I ta l ia n tr a ns f er p r icing docum enta tion r eg im e is not m a nda tor y . I n th is r es p ect, ta x p a y er s a r e ex p ected to m a k e a s tr a teg ic m a na g em ent decis ion, ta k ing into cons ider a tion th a t th e p ena l ty p r otection is a f f or ded onl y if com p l ete a nd a p p r op r ia te tr a ns f er p r icing docum enta tion is in p l a ce. T h e tr a ns f er p r icing docum enta tion m us t f ol l ow th e f or m a t p r ov ided b y th e l a w , b e in

• A s s es s th e I ta l ia n entity ’ s ty p e to deter m ine th e p r op er docum enta tion to b e p r ep a r ed f or p ena l ty a v oida nce • Corte di Cassazione) D ecis ion N o. 2 2 0 2 3 of 1 3 O ctob er 2 0 0 6 notes th a t th e b ur den of p r oof r es ts on th e ta x w h er e th e b ur den of p r oof is on th e ta x a uth or ity , th e ta x p a y er is not ob l ig ed to g iv e ev idence th a t th e tr a ns f er p r ices com p l y w ith th e a r m ’ s - l eng th p r incip l e unl es s th e ta x a uth or ity h a s a l r ea dy p r ov ed (prima facie) th a t th e ta x p a y er h a s not com p l ied w ith th e a r m ’ s - l eng th p r incip l e. 4 in I ta l y .


2 1 4

4

I tal y

(continued)

OECD Guidelines treatment I ta l ia n tr a ns f er p r icing r ul es a r e l a r g el y cons is tent w ith th e O E C D G uidel ines . I ndir ect r ef er ence to th e a p p l ica b il ity of th e 2 0 1 0 O E C D G uidel ines ca n b e f ound in th e a b ov em entioned r eg ul a tions on th e op tiona l tr a ns f er p r icing r eg im e f or p ena l ty p r otection. N o ex p l icit

Documentation requirements P r op er docum enta tion f or p ena l ty p r otection p ur p os es (op tiona l r eg im e) m us t b e dr a f ted on a y ea r l y b a s is , a nd it m us t b e a v a il a b l e in ea ch of th e ta x a b l e p er iods s ub j ect to a udit. D ocum enta tion r eq uir em ents (continued)

• N otw ith s ta nding com p l ia nce w ith th e f or m a l s tr uctur e, th e docum enta tion del iv er ed dur ing th e cour s e of a n a udit is neith er com p l ete nor cons is tent w ith th e p r ov is ions endor s ed b y th e op er a tiona l ins tr uctions . • T h e inf or m a tion p r ov ided in th e docum enta tion is not cons is tent, w h ol l y or p a r tl y , w ith th e r ea l ity . O m is s ions or p a r tia l ina ccur a cies do •

• •

A dditiona l g uida nce r eg a r ding op er a tiona l ins tr uctions w a s ex p ected to b e is s ued in 2 0 1 6 .

Priorities/pricing methods T h e s el ection of th e tr a ns f er p r icing m eth od enta il s a n ex p l a na tion of th e r ea s ons f or us ing a p a r ticul a r m eth od th a t p r oduces r es ul ts in a n eq ua l l y r el ia b l e m a nner , th e ta x p a y er s h oul d ex p l a in w h y th e l a tter h a d b een ex cl uded. T h e s a m e ex p l a na tion a p p l ies w h en a A n a ccur a te des cr ip tion of th e ta x p a y er ’ s p r ocedur e f or s el ecting com p a r a b l e tr a ns a ctions w il l h a v e to b e p r ov ided (incl us iv e of deta il ed com p a r a b il ity a na l y s is ), a s w el l a s a cl ea r des cr ip tion of th e under l y ing s tep s in a r r iv ing a t a n a r m ’ s - l eng th r a ng e, if needed. b ench m a r k s ev er y y ea r . 4 th e new r ul es p r ov ide th a t entities inv ol v ed in th e col l ection of onl ine a dv er tis em ents a nd in r el a ted a ux il ia r y s er v ices on b eh a l f of f or eig n

2 1 5


I tal y

(continued)

4 f ol l ow ing s ections ).

Return disclosures/related-party disclosures a nd contr ol l ed b y a noth er com p a ny , a s w el l a s th e na m e of th e r el a ted com p a ny (A r ticl e 2 4 9 7 - b is of th e I ta l ia n C iv il C ode). F ina ncia l p a r ties (A r ticl es 2 4 2 4 , 2 4 2 7 , 2 4 2 8 a nd 2 4 9 7 - b is of th e I ta l ia n C iv il C ode). T h e ta x r etur n s h oul d dis cl os e tr a ns a ctions w ith ta x h a v ens cos ts v er s us r ev enues .

Transfer pricing-specific returns ta x p a y er s th a t intend to a dh er e to s uch r eg im e s h a l l com m unica te th e a v a il a b il ity of p r op er docum enta tion on th e a nnua l incom e ta x

Documentation deadlines (i. e. , in a dedica ted b ox ) in ca s e th ey decide to op t f or th e p ena l ty p r otection r eg im e. s up p l em enta r y inf or m a tion is needed dur ing a n a udit or a ny oth er a s s es s m ent a ctiv ity , it m us t b e p r ov ided w ith in s ev en da y s of a r eq ues t (or w ith in a l ong er tim e p er iod, dep ending on th e com p l ex ity of th e tr a ns a ctions under a na l y s is ), to th e ex tent th a t th e p er iod is cons is tent w ith th e tim e of th e a udit. O nce th e tim e p er iods h a v e el a p s ed, th e ta x a uth or ities a r e not b ound b y th e a p p l ica tion of th e p ena l ty r el ief .

Transfer pricing penalties I f a nd w h en th e a b ov em entioned op tiona l tr a ns f er p r icing docum enta tion r eg im e f or p ena l ty p r otection p ur p os es is deem ed ina p p l ica b l e (w ith v a r ious deg r ees of j udg m ent), g ener a l p ena l ties f or under p a y m ent a p p l y (D ecr ee 4 7 1 ).

5 8 / E , h ig h er p ena l ties m a y b e, in p r incip l e, a p p l ica b l e w h en th e docum enta tion is not deem ed com p l ete a nd a p p r op r ia te.

• T h e ta x a b l e incom e decl a r ed is l ow er th a n a s s es s ed. • T h e ta x es decl a r ed a r e l ow er th a n th os e due. • T h e ta x cr edit decl a r ed is g r ea ter th a n th a t due to th e ta x p a y er . T h e s a m e p ena l ties a p p l y w h er e undue ta x a l l ow a nces or deductions f r om th e ta x a b l e incom e h a v e b een decl a r ed in th e ta x r etur n. I nter es t on ta x es or a dditiona l ta x es due a l s o a p p l ies . N o p ena l ties a p p l y in ca s e of l os s es .


2 1 6

I tal y

(continued)

L a w D ecr ee N o. 1 5 8 / 2 0 1 5 a m ended th e I ta l ia n p r ov is ions on th e cr im ina l im p a cts of unf a ith f ul ta x r etur ns , p r ov iding th a t ta x p a y er s th a t oth er docum enta tion r el ev a nt f or ta x p ur p os es (e. g . tr a ns f er p r icing docum enta tion f or p ena l ty p r otection) a r e not s ub j ect to p otentia l

Penalty relief P l ea s e r ef er to th e s ection a b ov e f or th e a p p l ica tion of th e new p ena l ty p r otection r eg im e.

Statute of limitations on transfer pricing assessments a p p l ies . T h er ef or e, ta x p a y er s m us t r eceiv e a notice of ta x a s s es s m ents b y 3 1 D ecem b er of th e f our th y ea r f ol l ow ing th e y ea r f or w h ich is ex tended b y a n a dditiona l y ea r . com m unica ted b y th e A dE to th e cr im ina l a uth or ities w ith in th e s ta nda r d s ta tute of l im ita tions . I n ca s e of ta x ins p ections r el a ting to F is ca l Y ea r 2 0 1 6 onw a r d, th e m entioned ter m s a r e incr ea s ed b y one y ea r f or unf a ith f ul ta x r etur ns , a nd b y tw o y ea r s f or om itted ta x r etur ns .

Frequency of tax audit and transfer pricing scrutiny by the tax authority onl y th e m eth odol og y , b ut a l s o th e f unctiona l a na l y s is a nd com p a r a b l es .

I n a ddition, th e I ta l ia n ta x a uth or ities g ener a l l y p a y p a r ticul a r a ttention a nd dir ect g r ea ter ta x a udit a ctiv ity to l a r g e ta x p a y er s , a nd th ey a r e dev oting g r ea ter r es our ces in intel l ig ence a nd m onitor ing th e a ctiv ities of m ul tina tiona l s . a uth or ities in r el a tion to p r ev enting a nd com b a ting ta x a v oida nce, a nd a m ong th e m os t cr ucia l a r ea s to b e a s s es s ed, it m entions inter com p a ny tr a ns a ctions a nd tr a ns f er p r ices a ccor ding to th e p r ov is ions of A r ticl e 1 1 0 (7 ) of D ecr ee 9 1 7 . L eg is l a tiv e D ecr ee N o. 1 8 5

com p a r ed w ith a b out 2 , 0 0 0 tutor ia l s in 2 0 1 1 ). A s p a r t of th e tutor s h ip a ctiv ities , th e need to m a inta in a h ig h l ev el of a ttention is cons ider ed. T r a ns f er p r icing is ex p r es s l y m entioned a m ong s uch p h enom ena .

2 1 7


I tal y

(continued)

G uida nce on tr a ns f er p r icing a s s es s m ents is incl uded in C ir cul a r L etter s th a t a r e g ener a l l y is s ued on a y ea r l y b a s is a nd r el a te to g ener a l of tr a ns p a r ency a nd coop er a tion w ith th e ta x a dm inis tr a tion w ith in th e r is k - m onitor ing a ctiv ities .

APA opportunity 4 m a inl y r el a ting to tr a ns f er p r icing , div idends a nd r oy a l ties . T h e l a w w a s ena cted w ith th e Provvedimento del Direttore dell’Agenzia delle Entrate, da ted 2 3 J ul y 2 0 0 4 . T h is docum ent p r ov ides a num b er of p r a ctica l g uidel ines f or th e r ul ing p r og r a m . O n 2 3 D ecem b er 2 0 1 3 , th e I ta l ia n G ov er nm ent is s ued L a w D ecr ee N o. 1 4 5 / 2 0 1 3 (th e D es tina tion I ta l y D ecr ee), w h ich ex tends th e s cop e of A P A s to p r el im ina r y a s s es s m ents of I ta l ia n p er m a nent es ta b l is h m ents of f or eig n entities a nd p r ov ides th a t th e v a l idity of a g r eem ents b e a b l e to us e r ul ing r es ul ts (e. g . , in th e ca s e of a n A P A ) to a dj us t p a s t y ea r s b ut not b ey ond th e y ea r in w h ich th e r ul ing r eq ues t w a s s ub m itted (r ol l b a ck s y s tem ). 4 4 1 9 7 3 , w h ich ex p a nds th e s cop e of th e A P A . I t w il l a l s o b e a v a il a b l e to deter m ine a s s et ta x b a s es in th e ca s e of inb ound a nd outb ound m ig r a tions .

Pat ent b ox regim e L a w (L a w N o. 1 9 0 of 2 3 D ecem b er 2 0 1 4 ) a nd s ub s eq uentl y a m ended b y L a w D ecr ee N o. 3 of 2 4 J a nua r y 2 0 1 5 . T h e s a id p r ov is ions intr oduce a n el ectiv e r eg im e th a t g r a nts a n ex em p tion f r om cor p or a te incom e ta x a nd l oca l ta x on incom e der iv ed f r om q ua l if y ing inta ng ib l e a s s ets (s uch a s p a tents , b r a nds , k now - h ow a nd oth er intel l ectua l p r op er ties ). T h e r eg im e is el ig ib l e f or ta x p a y er s th a t p er f or m r eq uir ed to deter m ine th e r el ev a nt incom e a ttr ib uta b l e to th e q ua l if y ing intel l ectua l p r op er ty w h en it is dir ectl y ex p l oited b y th e ta x p a y er s . A dditiona l op er a tiona l g uida nce w a s p r ov ided b y v a r ious ins tr uctions r el ea s ed f r om N ov em b er 2 0 1 5 to A p r il 2 0 1 6 .

M ut ual agreem ent p rocedures O n 5 J une 2 0 1 2 , th e I ta l ia n ta x a uth or ities is s ued a C ir cul a r L etter p er ta ining to th e s ettl em ent of inter na tiona l ta x dis p utes a nd, m or e

a l l ow ed onl y if th e ta x p a y er r enounces th e op tion to p ur s ue th e dom es tic l itig a tion p r ocedur e.

Impact of new OECD BEPS Action 8–10 guidelines p r oj ect) ex is ts , a l th oug h ex p er ience s h ow s th a t th e I ta l ia n T a x A uth or ities a r e in p r a ctice a l r ea dy r ef er encing to cer ta in up da ted p r ov is ions .


2 1 8

J ap an Taxing authority and tax law

• C or p or a tion ta x • • P r ef ectur a l a nd m unicip a l inh a b ita nt ta x es (l oca l ta x )


4

4

4

44

4

• P er s ons •

4 •

4 •

4

4

4

4

4

• G uidel ines ) • C or p or a tions (A dm inis tr a tiv e G uidel ines f or C ons ol ida ted C or p or a tions ) •

OECD Guidelines treatment T h e N T A r ef er s to th e O E C D G uidel ines f or dir ection, a nd th e J a p a nes e T r a ns f er P r icing A dm inis tr a tiv e G uidel ines conta in th e f ol l ow ing a uth or ities f or th e r es ol ution of inter na tiona l doub l e ta x a tion th a t a r is es due to ta x a tion p ur s ua nt to th e tr a ns f er p r icing ta x s y s tem , a p p r op r ia te a dm inis tr a tion s h a l l b e ca r r ied out b y r ef er r ing to th e O E C D G uidel ines to th e ex tent neces s a r y in ex a m ina tions a nd in


4

2 1 9


J ap an

(continued)

C b C rep ort (l im ited to th os e th a t f a l l into th e ca teg or y of ul tim a te or s ur r og a te p a r ent entities ) m us t s ub m it a C b C r ep or t to th e D is tr ict D ir ector is tr a ns m itted to th e ta x a uth or ities in th e countr y w h er e th e cons tituent entity r es ides a ccor ding to th e inf or m a tion ex ch a ng e s y s tem I f th e ul tim a te or s ur r og a te p a r ent entity is l oca ted in a f or eig n county , a J a p a nes e cor p or a tion or f or eig n cor p or a tion w ith a P E th a t is ul tim a te or s ur r og a te p a r ent entity to th e ta x a uth or ities in th e countr y w h er e it r es ides is tr a ns m itted b y th e ta x a uth or ities to th e N T A in J a p a n. A s a n ex cep tion, under cer ta in conditions , J a p a nes e cor p or a tions or f or eig n cor p or a tions w ith a P E th a t is a cons tituent entity of b y th e r ep or t ends .

Master file

Local file C or p or a tions eng a g ed in contr ol l ed tr a ns a ctions m us t p r ep a r e or ob ta in a nd s tor e docum ents cons ider ed a s neces s a r y to ca l cul a te

a nd 2 2 - 7 4 .

F a il ur e to p r ov ide a p p r op r ia te m a ter ia l s b y a da y des ig na ted b y a ta x ex a m iner th a t com es w ith in 4 5 da y s ca n tr ig g er th e ta x ex a m iner ’ s

out s im il a r a ctiv ities . I f a ny f or eig n r el a ted tr a ns a ctions a r e ex em p t f r om

contem p or a neous docum enta tion, th e ta x p a y er is r eq uir ed to s ub m it docum ents 4 th e da y des ig na ted b y th e ta x ex a m iner th a t com es w ith in 6 0 da y s .


2 2 0

J ap an

(continued)

Priorities/pricing methods 4 4 th e m os t- a p p r op r ia te- m eth od a p p r oa ch f or ta x y ea r s b eg inning on or a f ter 1 O ctob er 2 0 1 1 .

Return disclosures/related-party disclosures 4 4 l eng th p r ices of f or eig n r el a ted- p a r ty tr a ns a ctions . 4 • T h e num b er of em p l oy ees of th e f or eig n r el a ted- p a r ty • T h e a m ount of r eta ined ea r ning s of th e f or eig n r el a ted- p a r ty f or th e p r eceding y ea r • A ny A P A b etw een th e ta x p a y er a nd th e f or eig n com p etent a uth or ity



Transfer pricing penalties T r a ns f er p r icing a s s es s m ents a r e s ub j ect to th e s a m e p ena l ties th a t a p p l y to g ener a l cor p or a te ta x a s s es s m ents . T h er e a r e tw o ty p es of • T h e under p a y m ent p ena l ty ta x is com p uted a s eith er 1 0 % of th e a dditiona l a s s es s ed ta x (up to J P Y 5 0 0 , 0 0 0 ) or 1 5 % of th e a dditiona l ta x , dep ending on th e a m ount of under p a y m ent. • •

4 r a te is deter m ined b y a dding 1 % to th e a v er a g e contr a ctua l inter es t r a te on s h or t- ter m ex a m p l e, th is tr a ns l a tes to a del inq uency ta x r a te of 2 . 8 % f or th e p er iod f r om

2 2 1

b a nk l oa ns f or th e p er iod f r om

4 O ctob er (tw o

1 J a nua r y 2 0 1 5 to 3 1 D ecem b er 2 0 1 5 .


J ap an

(continued)

T h e s econd p a r t of del inq uency ta x a ccr ues f r om

th e da te f ol l ow ing th e da te of th e a s s es s m ent notice until th e da te th e a dditiona l ta x is 4

4 th e a b ov e p a r a g r a p h a p p l ies . F or a ny del inq uency ta x a ccr uing a f ter th is p er iod, th e r a te incr ea s es to th e l ow er of 1 4 . 6 % or th e r a te com p uted b y a dding 7 . 3 % to th e a v er a g e contr a ctua l inter es t r a te on s h or t- ter m b a nk l oa ns f or th e p er iod f r om O ctob er (tw o y ea r s p r ior ) tr a ns l a tes to a del inq uency ta x r a te of 2 . 8 % f or th e p er iod f r om

1 J a nua r y 2 0 1 5 to 3 1 D ecem b er 2 0 1 5 .

dea dl ine w ith out g ood r ea s on.

Penalty relief

T h e g r a ce p er iod is th e p er iod s ta r ting on th e initia l p a y m ent due da te of a s s es s ed ta x es (if th e a p p l ica tion s ub m is s ion da te is l a ter th a n

4 p os tp onem ent of ta x p a y m ent), th e ta x a uth or ity r eq uir es th e ta x p a y er to p r ov ide s ecur ity eq uiv a l ent to th e a m ount of th e ta x p a y m ent (i. e. , col l a ter a l ). T h is new tr a ns f er p r icing r ul e a p p l ies to a p p l ica tions f or a g r a ce p er iod m a de on or a f ter 1 A p r il 2 0 0 7 .


Frequency of tax audit and transfer pricing scrutiny by the tax authority ta x a udit in J a p a n is m edium

to h ig h , com p a r ed w ith oth er j ur is dictions . T h e J a p a nes e ta x a uth or ities h a v e a r ob us t enf or cem ent

l ik el ih ood h a s incr ea s ed w ith th e intr oduction of th e N ew G ener a l T a x L a w , w h ich p r oh ib its tw o or m or e s ep a r a te ta x a udits of th e s a m e s im ul ta neous conduct of a tr a ns f er p r icing a udit a l ong w ith th e g ener a l ta x a udit.


2 2 2

J ap an

(continued)

T a x p a y er s m a y a l s o b e a udited f or tr a ns f er p r icing onl y (not p a r t of a ta x a udit) w h en th ey cons ent to a s ep a r a te tr a ns f er p r icing a udit. I n g ener a l , th e J a p a nes e ta x a uth or ities r eq ues t th a t ta x p a y er s p r ov ide w r itten cons ent p r ior to th e s ta r t of a n ex tens iv e tr a ns f er p r icing a udit. T h e N T A a nd th e m a j or r eg iona l ta x b ur ea us tog eth er em p l oy a l a r g e cor p s of dedica ted tr a ns f er p r icing s p ecia l is ts to enf or ce

• I n indus tr ies ta r g eted b y th e N T A • •

4 • • • I n indus tr ies w ith h ig h m a r g ins (th e N T A is l ik el y to s eek a p p l y ing its ow n com p a r a b l es , incl uding p os s ib l y s ecr et com p a r a b l es a v a il a b l e onl y to th e N T A , a l th oug h s ecr et com p a r a b l es h a v e b ecom e l es s com m on in r ecent y ea r s ) th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h if th e ta x p a y er a p p ea r s unp r ep a r ed to def end its tr a ns f er p r icing p ol icies a nd m eth ods .

APA opportunity A P A g uidel ines a r e incl uded in th e A dm inis tr a tiv e G uidel ines . A r ol l b a ck of up to s ix y ea r s is p os s ib l e in th e ca s e of a b il a ter a l A P A ; h ow ev er , a r ol l b a ck is not p er m itted in unil a ter a l ca s es .


ex p ected to b e p r ep a r ed.

2 2 3


J o r d an Taxing authority and tax law 4

4

Relevant regulations and rulings J or da n’ s I ncom e T a x L a w does not cur r entl y f ol l ow O E C D G uidel ines . T h e onl y g uida nce r eg a r ding tr a ns f er p r icing r ul es in J or da n is

contr a cts w ith unr el a ted th ir d p a r ties b a s ed on th e s ta nda r d m a r k et p r a ctice. J or da n h a s enter ed into doub l e ta x tr ea ties w ith a num b er of f or eig n countr ies w h er ein th e l a ng ua g e conta ins a n a r ticl e th a t r es em b l es tr ea ties .









2 2 4

J o r d an

(continued)



Frequency of tax audit and transfer pricing scrutiny by the tax authority 4 a b ov e.



2 2 5


K az ak h s tan Taxing authority and tax law


4 • •

4 2 0 1 5 ) • •

OECD Guidelines treatment b us ines s tr a ns a ctions , r eg a r dl es s of w h eth er th e p a r ties a r e r el a ted.

Documentation requirements • T r a ns a ctions w ith g oods (w or k s , s er v ices ) th a t a r e s ub j ect to m onitor ing • A l l oth er tr a ns a ctions w ith g oods (w or k s , s er v ices ) s ub j ect to tr a ns f er p r icing contr ol r ep or ts incl ude inf or m a tion on th e a p p l ied p r ices , r el a tions h ip s of th e p a r ties , indus tr ies a nd m a r k et conditions , b us ines s s tr a teg y , tr a ns f er p r icing m eth odol og y , f unctiona l a nd r is k a na l y s is , ta ng ib l e a nd inta ng ib l e a s s ets , m eth od, s our ce of inf or m a tion us ed f or deter m ina tion of a m a r k et p r ice, a nd oth er r el a ted inf or m a tion. T r a ns a ction p a r ticip a nts ex ecuting tr a ns a ctions w ith oth er g oods (w or k s , s er v ices ) th a t a r e s ub j ect to tr a ns f er p r icing contr ol s h oul d m a inta in docum enta tion s up p or ting th e a p p l ied p r ices , b ut th is docum enta tion m us t not b e a s deta il ed a s th a t r eq uir ed f or m onitor ing

Priorities/pricing methods G uidel ines .


2 2 6

K az ak h s tan

(continued)


Transfer pricing-specific returns A p a r t f r om

th e g ener a l tr a ns f er p r icing docum enta tion r eq uir em ents (a s des cr ib ed a b ov e), no oth er tr a ns f er p r icing r etur n is r eq uir ed to

Documentation deadlines y ea r . T h e docum enta tion s up p or ting th e a p p l ied tr a ns a ction p r ices m us t b e s ub m itted w ith in 9 0 da y s of th e da te of th e com p etent a uth or ity ’ s r eq ues t.

Transfer pricing penalties (i. e. , m onitor ing r ep or ting a nd docum enta tion s up p or ting th e tr a ns a ction p r ice). T h e m a x im um 4

a m ount of p ena l ty is s et a t a p p r ox im a tel y

T h e p ena l ty f or a n under s ta tem ent of ta x r es ul ting f r om a tr a ns f er p r icing a dj us tm ent is up to 5 0 % of th e a dditiona l a ccr ued ta x a m ount. I n a ddition, inter es t f or th e del a y ed p a y m ent of th e a dditiona l l y a s s es s ed ta x r es ul ting f r om th e tr a ns f er p r icing a dj us tm ent is ca l cul a ted T r a ns f er p r icing p ena l ties a r e a l s o im p os ed on indiv idua l s f or p er s ona l l ia b il ity of a n a dm inis tr a tiv e v iol a tion, incl uding cr im ina l l ia b il ity if 4 4

Penalty relief a m ong oth er s , incl ude ex p ir a tion of th e s ta tute of l im ita tions , ex em p tion on th e b a s is of a n a ct of a m nes ty a nd r econcil ia tion of th e p a r ties . D es p ite l eg a l p r ov is ions a l l ow ing f or ex em p tion, im p l em enta tion is q uite r a r e in p r a ctice.


ta x r ep or ting .

2 2 7


K az ak h s tan

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a ta x a udit dep ends on th e ta x r is k l ev el a s s ig ned to a p a r ticul a r ta x p a y er . T h er e a r e s ev er a l cr iter ia f or deter m ining th e

• • •

inter p r eta tion of inf or m a tion on m a r k et p r ices of ten r es ul ts in tr a ns f er p r icing a dj us tm ents th a t a r e of ten contes ted b y ta x p a y er s .

APA opportunity T r a ns a ction p a r ticip a nts a r e a l l ow ed to concl ude a n a g r eem ent on th e a p p l ica tion of tr a ns f er p r ices . T h e p r ocedur e f or r eq ues ting s uch • L is t of docum ents r eq uir ed f or concl uding th e a g r eem ent • • D ur a tion of th e a g r eem ent (e. g . , not m or e th a n th r ee y ea r s f r om

th e da te of s ig ning )

• O th er

Impact of new OECD Guidelines T h er e h a s not b een a ny im p a ct f r om

th e new O E C D G uidel ines y et.


2 2 8

K eny a Taxing authority and tax law


• T r a ns a ctions b etw een a s s ocia ted enter p r is es w ith in a m ul tina tiona l com p a ny w h er e one enter p r is e is l oca ted in, a nd is s ub j ect to ta x in, K eny a a nd th e oth er is l oca ted outs ide K eny a •

OECD Guidelines treatment Documentation requirements T h e C om m is s ioner f or D om es tic T a x es m a y , w h er e neces s a r y , r eq ues t inf or m a tion, incl uding b ook s of a ccounts a nd oth er docum ents • T h e s el ection of th e tr a ns f er p r icing m eth od a nd th e r ea s ons f or th e s el ection • T h e a p p l ica tion of th e m eth od, incl uding th e ca l cul a tions m a de a nd p r ice a dj us tm ent f a ctor s cons ider ed • • T h e deta il s of th e tr a ns a ction under cons ider a tion • T h e a s s um p tions , s tr a teg ies a nd p ol icies a p p l ied in s el ecting th e m eth od • O th er b a ck g r ound inf or m a tion r eg a r ding th e tr a ns a ction T h e b ook s of a ccounts a nd oth er docum ents s h a l l b e p r ep a r ed in, or tr a ns l a ted into, E ng l is h a t th e tim e th e tr a ns f er p r ice is es ta b l is h ed.

• D ev el op a n a p p r op r ia te tr a ns f er p r icing p ol icy • D eter m ine th e a r m ’ s - l eng th p r ice a s p r es cr ib ed under th e g uidel ines p r ov ided b y th es e r ul es • F ur nis h docum enta tion ev idencing th eir a na l y s is up on r eq ues t b y th e C om m is s ioner f or D om es tic T a x es

Priorities/pricing methods 4 I n 2 0 1 2 , th e tr a ns f er p r icing r ul es w er e a m ended to g iv e th e C om m is s ioner f or D om es tic T a x es p ow er to p r es cr ib e th e a p p l ica tion of th e

2 2 9


K eny a

(continued)

Return disclosures/related-party disclosures A ccor ding to th e cor p or a te ta x r etur n f or m a t, th e ta x p a y er is r eq uir ed to decl a r e th e na m es a nd a ddr es s es of r el a ted p a r ties outs ide of K eny a .

Transfer pricing-specific returns Documentation deadlines A p p r op r ia te docum enta tion m us t b e p r ov ided up on r eq ues t.

Transfer pricing penalties 4 • •

due da te. 4 a m ount, incl uding th e p ena l ty r em a ining unp a id f or m or e th a n one m onth a f ter th e due da te, until th e f ul l a m ount is r ecov er ed. • ch a r g ea b l e ta x on th e ta x p a y er ’ s p r ov is iona l incom e ta x r etur n f or th a t y ea r , inter es t a t th e r a te of 2 % p er m onth s h a l l b e p a y a b l e on th e entir e dif f er ence b etw een th e ta x a s s es s ed a nd th e ta x es tim a ted.

Penalty relief C ur r entl y , th er e is no p ena l ty r el ief a v a il a b l e.

Statute of limitations on transfer pricing assessments y ea r of incom e, unl es s th e C om m is s ioner f or D om es tic T a x es h a s r ea s ona b l e ca us e to b el iev e th a t f r a ud or g r os s or w il l f ul neg l ect h a s b een com m itted in connection w ith , or in r el a tion to, ta x f or a y ea r of incom e.

Frequency of tax audit and transfer pricing scrutiny by the tax authority p r icing p ol icies . T h e l ik el ih ood of occur r ence of ta x a udits is h ig h , a s is th e l ik el ih ood of a tr a ns f er p r icing r ev iew a s p a r t of a g ener a l ta x a udit. T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed in a tr a ns f er p r icing r ev iew is h ig h .


2 3 0

K eny a

(continued)

APA opportunity Impact of new OECD Guidelines K eny a is not a m em b er s ta te of th e O E C D , a nd tr a ns f er p r icing r eg ul a tions do not h a v e ex p l icit r ef er ence to th e l a tes t a p p r ov ed O E C D v er s ion. T h us , th e a m endm ents w il l not a p p l y a utom a tica l l y , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

2 3 1


K o s o v o Taxing authority and tax law

Relevant regulations and rulings • L a w N o. 0 5 / L - 0 2 9 , da ted 2 2 J ul y 2 0 1 5 , on C I T • • • • L a w N o. 0 3 / 2 2 2 , da ted 1 2 J ul y 2 0 1 0 , on ta x p r ocedur es • •

4

•

• D oub l e ta x a tion tr ea ties ena cted b y K os ov o 4 a dm inis tr a tiv e ins tr uction is ex p ected to b e is s ued f ol l ow ing th e a b r og a tion of L a w 0 3 / L - 1 6 2 on C I T ) • • •

OECD Guidelines treatment T h e K os ov a r l eg is l a tion on tr a ns f er p r icing m a k es r ef er ence to th e O E C D G uidel ines . T h e r el ev a nt r eg ul a tor y f r a m ew or k f or tr a ns f er p r icing incl udes p r ov is ions of th e C I T l a w a nd ta x p r ocedur es l a w a nd th e r el a ted ins tr uctions .

Documentation requirements m eth odol og y us ed in a r r iv ing a t th e tr a ns f er p r ices a p p l ied.

Priorities/pricing methods T h e ta x a uth or ities g ener a l l y f ol l ow th e O E C D G uidel ines in ex a m ining r el a ted- p a r ty tr a ns a ctions a nd tr a ns f er p r ices ch a r g ed. H ow ev er ,


2 3 2

K o s o v o

(continued)

Return disclosures/related-party disclosures T h e cur r ent l eg is l a tion does not p r ov ide f or a ny r etur n dis cl os ur es or r el a ted- p a r ty dis cl os ur es . A ccor ding to th e K os ov a r ta x l eg is l a tion,



Transfer pricing penalties a dj us tm ent, th e g ener a l ta x p ena l ties w oul d a p p l y . H ence, a p ena l ty of 5 0 % w oul d a p p l y on th e a m ount of unp a id ta x l ia b il ity due to

m inim um , 0 . 5 % h ig h er th a n th e b a nk l ending inter es t r a te in K os ov o.


Statute of limitations on transfer pricing assessments Frequency of tax audit and transfer pricing scrutiny by the tax authority T r a ns f er p r icing is a udited in th e g ener a l cour s e of a cor p or a te incom e ta x a udit. T h e l ik el ih ood of a ta x a udit in K os ov o is h ig h f or not p r ov ide deta il s tr a ns f er p r ices a p p I n p r incip l e, in ex a m a p p l ied b y th e ta x p

on th e contents of th l ied a r e in l ine w ith th ining th e a r m ’ s - l eng a y er , to th e ex tent th

e docum enta tion r eq uir ed to b e k ep t b y th e ta x p a y er to s ub s ta ntia te th e g r ounds on w h ich th e e a r m ’ s - l eng th p r incip l e. T h e ta x a dm inis tr a tion is unl ik el y to ch a l l eng e th e m eth odol og y a p p l ied. th ch a r a cter of a tr a ns a ction, th e ta x a dm inis tr a tion s h oul d us e th e s a m e tr a ns f er p r icing m eth od a t it is th e m os t a p p r op r ia te one f or th a t tr a ns a ction.

2 3 3


K o s o v o

(continued)

APA opportunity K os ov a r l eg is l a tion does not p r ov ide f or th e p os s ib il ity of a n A P A .

Impact of new OECD Guidelines


2 3 4

K u w ait Taxing authority and tax law

Relevant regulations and rulings1 4 • • I ncor p or a tes th e a r m ’ s - l eng th p r incip l e into K uw a iti dom es tic r eg ul a tions • P r ov ides a cl ea r b a s is f or th e ta x a uth or ity to ins p ect com p a nies dea l ing w ith r el a ted p a r ties a nd v er if y w h eth er th e a r m ’ s - l eng th p r incip l es w a s ob s er v ed •

cr iter ia . p er ta ining to ta x a s s es s m ents a p p l y . T h e r eg ul a tions do not l is t th e m eth ods th a t th e ta x a uth or ities s h oul d f ol l ow , oth er th a n th e g ener a l g uida nce th a t r el a ted- p a r ty

a v oida nce a nd s a f e- h a r b or r eg ul a tions a p p l ica b l e in r el a ted- p a r ty tr a ns a ctions . T h e m ech a nis m s a p p l ied b y th e l eg is l a tur e h er e v a r y . A l im ita tions on deducting cos ts .

• • • •

1

2 3 5


K u w ait

(continued)

• • • • • • • • cus tom s docum ents ev idencing th e v a l ue of th e a s s ets a r e p r es ented to th e D I T . T h e l ea s e ex p ens es w il l b e l im ited to th e a m ount of dep r ecia tion nor m a l l y ch a r g ed on th e a s s et f or its us e in K uw a it. I n th e ev ent th a t it is not p os s ib l e to deter m ine th e a s s et’ s v a l ue on w h ich dep r ecia tion is ca l cul a ted, th e r enta l v a l ue of th e l ea s ed a s s ets m a y not b e a p p r ov ed a nd th e ex p ens e is f ul l y dis a l l ow ed. ca n b e ca p p ed. s up p or ting docum ents .

b e r ev ok ed in conj unction w ith th e ta x tr ea ty r eg ul a tions .

OECD Guidelines treatment T h e dom es tic r eg ul a tions do not ex p l icitl y r ef er to th e O E C D G uidel ines . I n p r a ctice, h ow ev er , th e l ik el ih ood of contr ov er s y a nd ta x a s s es s m ent decr ea s es if th e ta x p a y er r ef er s to inter na tiona l l y a ccep ted s ta nda r ds a nd th e p r op er a p p l ica tion of th e m eth od in a p a r ticul a r ca s e is w el l - docum ented.

Documentation requirements C ur r entl y , K uw a iti ta x r eg ul a tions do not s et a ny f or m a l tr a ns f er p r icing docum enta tion r eq uir em ents . T r a ns f er p r icing docum enta tion s h oul d b e dr a w n up a nd up da ted to l im it th e contr ov er s y ex p os ur e.

Priorities/pricing methods D om es tic l a w s do not r eg ul a te th e p r icing m eth ods . A s m entioned a b ov e, th e r eg ul a tions of f er g ener a l g uida nce in th is r es p ect. I n p r a ctice, it m a y b e us ef ul in dis cus s ions w ith th e D I T if th e tr a ns f er p r icing m eth od us ed is b a s ed on inter na tiona l l y a ccep ted p r incip l es a nd s ta nda r ds a nd th e tr a ns f er p r icing docum enta tion s h ow s th a t th e ta x p a y er a dh er ed to th e m eth od.


2 3 6

K u w ait

(continued)

Return disclosures/related-party disclosures tr a ns p a r ency in th is r eg a r d. T h e dis cl os ur e duties b a s ed on ta x l a w s a r e v er y b r oa d under th e K uw a iti r eg ul a tions . T h er e is a g ener a l ob l ig a tion to dis cl os e th e tr a ns a ctions (ob v ious l y incl uding th e r el a ted- p a r ty tr a ns a ctions ) in connection w ith ta x r etention duties . T h is im p l ies th a t th e ta x a uth or ities h a v e a cces s to a b r oa d b a s e of inf or m a tion p er ta ining to th e l ev el of p r ices a g r eed up on l oca l l y , b oth b etw een r el a ted a nd cor p or a te incom e ta x r etur n w ith r es p ect to m a ter ia l cos t, des ig n a nd cons ul ta ncy f ees incur r ed; r el a ted- p a r ty l ea s es ; intr a g r oup

Transfer pricing-specific returns p a r ty tr a ns a ctions m us t b e dis cl os ed, tog eth er w ith th e a nnua l ta x r etur n.

Documentation deadlines C ur r entl y , K uw a it does not h a v e a ny f or m a l docum enta tion r eq uir em ents a nd, h ence, no dea dl ines . I n p r a ctice, it is a dv is a b l e to p r ep a r e a nd up da te th e docum enta tion b ef or e th e a nnua l ins p ection s o th a t it ca n b e a dm itted a s ev idence in th e p r oceeding s in a tim el y m a nner .

Transfer pricing penalties th e a p p r op r ia te docum enta tion. P ena l ty inter es t (1 % p er m onth ) is im p os ed in th e ca s e of tr a ns f er p r icing a dj us tm ents r es ul ting in a n a s s es s m ent of a dditiona l incom e.

Penalty relief K uw a iti ta x r eg ul a tions do not of f er a ny p ena l ty r el ief m ech a nis m s .


Frequency of the tax audit and transfer pricing scrutiny by the tax authority T h e K uw a iti ta x s y s tem is b a s ed on initia l s el f - a s s es s m ent f ol l ow ed b y th e m a nda tor y a udit of th e ta x r etur n b y th e ta x a uth or ity . T h is im p l ies th a t, in es s ence, th e D I T a udits ev er y s ub m itted ta x r etur n, incl uding a ny r el a ted- p a r ty tr a ns a ctions .

2 3 7


K u w ait

(continued)

T h e ta x ing a uth or ity a dds s p ecia l s cr utiny f or inter com p a ny tr a ns a ctions r el a ting to m a ter ia l s up p l y cos t, des ig n a nd cons ul ta ncy f ees

th e a ttention of th e ta x a uth or ity . T h e s a m e a p p l ies w h en entities decl a r e m idter m

a nd l ong - ter m

l os s es f r om

th eir K uw a iti op er a tions .

APA opportunity Impact of new OECD BEPS Action 8–10 guidelines K uw a it h a s not ta k en a ny p os ition w ith r es p ect to th e a p p l ica b il ity of th e a m ended O E C D T r a ns f er P r icing G uidel ines 2 0 1 6 th a t w er e


2 3 8

L ao s Taxing authority and tax law

Relevant regulations and rulings T h er e a r e no tr a ns f er p r icing r eg ul a tions in L a os . L ux em b our g .



Priorities/pricing methods s uch a s a v er a g ed or m a r k et p r ices .





Penalty relief N ot a p p l ica b l e. 2 3 9


L ao s

(continued)






2 4 0

L atv ia Taxing authority and tax law

Relevant regulations and rulings T h e a r m ’ s - l eng th p r incip l e is es ta b l is h ed in th e L a w on C or p or a te I ncom e T a x . A r ticl e 1 2 of th e L a w on C or p or a te I ncom e T a x deter m ines th a t th e ta x a b l e incom e of th e ta x p a y er m a y b e a dj us ted up w a r d if r el a ted- p a r ty tr a ns a ctions a r e not a t a r m ’ s - l eng th . T r a ns f er p r icing docum enta tion r eq uir em ents a r e l a id dow n in A r ticl e 1 5 2 of th e L a w on T a x es a nd D uties . 4 r eg a r ding th e concl us ion of A P A s .

OECD Guidelines treatment L a tv ia n tr a ns f er p r icing l eg is l a tiv e a cts conta in a r ef er ence to th e O E C D G uidel ines in a p p l y ing th e tr a ns f er p r icing m eth ods . I n m os t docum enta tion.


• • • m a na g em ent s tr a teg y th a t m a y a f f ect th e p r icing p ol icy of inter com p a ny tr a ns a ctions • • em p l oy ed; th e r ol e a nd r es p ons ib il ity of ea ch g r oup m em b er inv ol v ed in th e tr a ns a ctions ; a nd inf or m a tion r eg a r ding r es tr uctur ing th e ta x p a y er ’ s op er a tions r es ul ting in th e tr a ns f er (a cq uis ition) of b us ines s f unctions , a s s ets or r is k s to (f r om ) a r el a ted- p a r ty f or a p r ice com p l ia nt w ith th e m a r k et p r ice • • •

2 4 1


L atv ia

(continued)

• th e m a r k et p r ice (cos t) • a p p l ied to com p a r a b l e tr a ns a ctions b etw een unr el a ted com p a nies a nd com p l ia nce w ith th e m a r k et p r ice (cos t) • docum ents j us tif y ing ex p ens es ; w r itten r es ol utions ; a nd decis ions m a de in b oa r d, council , s h a r eh ol der a nd oth er inter na l m eeting s a nd r el a ted- p a r ty tr a ns a ction w ith a n a nnua l v a l ue l es s th a n th e s ta tutor y th r es h ol d), p r ep a r a tion of tr a ns f er p r icing docum enta tion is op tiona l . H ow ev er , th ey s til l s h oul d com p l y w ith th e s ta tutor y r eq uir em ent th a t contr ol l ed p r ices a r e a t a r m ’ s - l eng th . I n p r a ctice, it m ea ns a p p l ied to inter com p a ny tr a ns a ctions a r e a t a r m ’ s - l eng th .

Priorities/pricing methods deem ed a s th e p r ef er entia l tr a ns f er p r icing m eth od.

Return disclosures/related-party disclosures tr a ns f er p r icing m eth ods a p p l ied.

Transfer pricing-specific returns C or p or a te I ncom e T a x r etur n.

Documentation deadlines T h er e is no dea dl ine s et f or th e p r ep a r a tion of th e tr a ns f er p r icing docum enta tion, b ut th e r el ev a nt docum enta tion coul d b e r eq uir ed

Transfer pricing penalties p a r ties a r e not a t a r m ’ s - l eng th , th e ta x a b l e incom e of th e ta x p a y er m a y b e a dj us ted up w a r d, a nd a p ena l ty of 2 0 % to 3 0 % a nd a l a te p a y m ent p ena l ty (a nnua l r a te of 1 8 % ) on th e a dditiona l l y p a y a b l e cor p or a te incom e ta x m a y b e a p p l ied. F or r ecur r ing tr a ns f er p r icing a dj us tm ents , th e p ena l ty r a tes a r e doub l ed (i. e. , a r e f r om 4 0 % to 6 0 % ).


2 4 2

L atv ia

(continued)

Penalty relief of a ta x a udit m a y b e r educed b y 5 0 % . I n p r a ctice, h a v ing p r op er tr a ns f er p r icing docum enta tion r educes th e r is k of tr a ns f er p r icing a dj us tm ents .


Frequency of tax audit and transfer pricing scrutiny by the tax authority h ig h r is k of a udit. A l l ta x p a y er s a r e ex p os ed to a h ig h r is k th a t tr a ns f er p r icing w il l b e r ev iew ed a s a p a r t of a n a udit. I n a ddition, th er e is a m edium p r icing m eth odol og y w il l b e ch a l l eng ed.

r is k f or a l l ta x p a y er s th a t if tr a ns f er p r icing is r ev iew ed a s a p a r t of th e a udit, th e tr a ns f er

APA opportunity 4


G uidel ines a nd a ccor ding to th e a dm inis tr a tiv e p r oces s l a w , a ny a m endm ents th a t m a y im p a ct ta x p a y er s s h oul d not h a v e r etr oa ctiv e ef f ect.

2 4 3


L eb ano n Taxing authority and tax law 44

Relevant regulations and rulings T h e L eb a nes e ta x r eg ul a tion r eg a r ding tr a ns f er p r icing is s til l neith er el a b or a ted up on nor cl ea r . A r ticl e 1 5 of th e I ncom e T a x L a w s ta tes th a t if it a p p ea r s th a t es ta b l is h m ents b el ong ing to es ta b l is h m ents l oca ted outs ide L eb a non

I n a ddition, th e L eb a nes e P a r l ia m ent r a is ed th e ta x p r ocedur es l a w in 2 0 0 8 . A r ticl e 1 0 of th a t l a w s ta tes th a t th e ta x a uth or ity h a s th e • • L eg a l tr a ns a ction in f or m

b ut f or th e p ur p os e of ta x ev a s ion

• T r a ns a ctions b etw een r el a ted p a r ties if th es e tr a ns a ctions a r e not a t a r m ’ s - l eng th

V irt ual t ransact ion A ccor ding to A r ticl e 1 2 of th e l eg is l a tiv e decr ee N o. 2 4 8 8 da ted 3 J ul y 2 0 0 9 , w h ich deter m ines th e a p p l ica tion of A r ticl e 1 0 m entioned a b ov e, a tr a ns a ction is cons ider ed v ir tua l w h en its v a l ue dif f er s b y 2 0 % f r om th e a r m ’ s - l eng th v a l ue of a s im il a r tr a ns a ction occur r ing b etw een tw o non- r el a ted p a r ties w ith th e s a m e com p eting conditions .

A rm ’ s- lengt h v alue 4 tr a ns a ction th a t occur s b etw een indep endent p er s ons a nd under com p l ete com p etitiv e conditions th a t took p l a ce on th e da y of th e tr a ns a ction. I ndiv idua l s a r e cons ider ed r el a ted if a ny of th em h ol ds th e a uth or ity of s up er v is ion, m a na g em ent or contr ol ov er th e oth er , or if th ey a r e r el a ted b y oth er m ea ns s uch th a t one p a r ty is a n em p l oy ee of th e oth er or if a ny one of th em is a g ua r dia n f or th e oth er . I ndiv idua l s a nd entities a r e cons ider ed r el a ted w h en a ny one of th em

h a s th e a uth or ity of s up er v is ion a nd m a na g em ent ov er th e oth er .

E ntities a r e cons ider ed r el a ted if one entity h a s th e a uth or ity of s up er v is ion a nd m a na g em ent ov er one or s ev er a l oth er entities .

Tax ev asion da tes , or to incr ea s e th e a m ount of deductib l e or r ef unda b l e ta x w h en it is p r oh ib ited.

OECD Guidelines treatment N ot a p p l ica b l e. Worldwide Transfer Pricing Reference Guide

2 4 4

L eb ano n

(continued)












2 4 5


L ib y a Taxing authority and tax law

Relevant regulations and rulings C ur r entl y , th er e a r e no l oca l tr a ns f er p r icing r eg ul a tions in L ib y a , b ut L ib y a h a s concl uded a b out 1 7 ta x tr ea ties th a t conta in a n a r ticl e










2 4 6

L ib y a

(continued)





2 4 7


L ith u ania Taxing authority and tax law

Relevant regulations and rulings T h e a r m ’ s - l eng th p r incip l e is es ta b l is h ed in th e L a w on C or p or a te I ncom e T a x of L ith ua nia a nd its im p l em enta tion r ul es , intr oduced in 2 0 0 4 . • A r ticl e 4 0 of th e L a w on C or p or a te I ncom e T a x of L ith ua nia •

4 • a nnua l cor p or a te incom e ta x r etur n

OECD Guidelines treatment T h e us e of th e O E C D G uidel ines is ex p l icitl y a dv oca ted in th e r eg ul a tions a nd r ul ing s a p p l ica b l e in L ith ua nia . im p l em ented in th e L ith ua nia n l eg is l a tion.

Documentation requirements T h e tr a ns f er p r icing docum enta tion r eq uir em ents a r e b inding f or r es ident a nd nonr es ident l eg a l entities r eg is ter ed a s cor p or a te incom e

s er v ices (e. g . , ins ur a nce com p a nies ), r eg a r dl es s of th eir r ev enue a m ount.

• D eta il s of th e tr a ns a ctions • T er m s a nd conditions of th e tr a ns a ctions • • F unctions p er f or m ed, p r op er ty us ed or contr ib uted, a nd th e r is k s a s s um ed b y th e p a r ties • D a ta a nd m eth ods cons ider ed a nd th e a na l y s es p er f or m ed to deter m ine th e tr a ns f er p r ices • I n g ener a l , th e p r incip l es in th e O E C D G uidel ines a r e to b e f ol l ow ed.


2 4 8

L ith u ania

(continued)

Priorities/pricing methods b a s ed m eth ods , s uch a s r es a l e p r ice or cos t- p l us , s h a l l b e us ed. to us e m or e th a n one m eth od; h ow ev er , a com b ina tion of m eth ods m a y b e us ed in a l l ca s es , p r ov ided th e decis ion to a p p l y a ny p a r ticul a r m eth od is a deq ua tel y s up p or ted.


a nd oth er s er v ices , s ecur ities a nd der iv a tiv es , r ent of p r op er ty a nd l oa ns . T h e ta x p a y er s a r e a l s o r eq uir ed to inf or m th e ta x a uth or ities w h eth er a ny tr a ns f er p r icing m eth od p r es cr ib ed in th e tr a ns f er p r icing r ul es h a v e b een us ed in th e tr a ns a ctions dis cl os ed.


Documentation deadlines p r icing docum enta tion w ith in 3 0 da y s of th e cor r es p onding notice b y th e ta x a uth or ities .


T h er e a r e no s p ecia l p ena l ties r el a ted to not p r ov iding tr a ns f er p r icing docum enta tion a t th e r eq ues t of th e ta x a uth or ities .

Penalty relief T r a ns f er p r icing p ena l ties a r e s ub j ect to g ener a l p ena l ty r el ief r ul es .


2 4 9


L ith u ania

(continued)


APA opportunity or m ul til a ter a l A P A s m a y b e concl uded b a s ed on ex is ting ta x tr ea ties f or a v oiding doub l e ta x a tion.



2 5 0

L u x emb o u r g Taxing authority and tax law Administration des Contributions Directes)

Relevant regulations and rulings 4 p a r ties . into tr a ns a ctions th a t do not m eet th e a r m ’ s - l eng th p r incip l e w il l b e deter m ined a ccor ding to nor m a l m a r k et conditions a nd ta x ed dom es tic a nd cr os s - b or der tr a ns a ctions .

H ow ev er , non- L ux em b our g r es idents (unl es s th ey h a v e a p er m a nent es ta b l is h m ent in L ux em b our g ) or tr a ns p a r ent entities (s uch a s F C P ,

T h e com m enta r ies of th e l a w s p ecif y th a t th e a r m ’ s - l eng th p r incip l e is a p p l ica b l e to a ny ta x p a y er , r eg a r dl es s of th e l eg a l f or m under w h ich it ex er cis es its a ctiv ities in L ux em b our g . T h er ef or e, not onl y w il l th is p r ov is ion cov er ta x op a q ue col l ectiv e under ta k ing s a nd ta x tr a ns p a r ent p a r tner s h ip s , b ut a l s o indiv idua l a nd col l ectiv e under ta k ing s w ith out l eg a l f or m . of a contr ol l ed tr a ns a ction (i. e. , a tr a ns a ction b etw een a s s ocia ted enter p r is es ) a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e a nd w h a t q ua ntum of a dj us tm ent h a s to b e m a de to a ch iev e th e a r m ’ s - l eng th p r incip l e. T o a s s es s th is , a com p r eh ens iv e econom ic com p a r a b il ity a na l y s is / b ench m a r k , w h ich cons is ts of com p a r ing contr ol l ed tr a ns a ctions w ith uncontr ol l ed tr a ns a ctions (i. e. , tr a ns a ctions b etw een com m enta r ies to th e l a w a l s o r ef er to th e O E C D G uidel ines , des ig ned to b e ob s er v ed b y m ul tina tiona l s a s w el l a s ta x a uth or ities in m a tter s of tr a ns f er p r icing b etw een r el a ted p a r ties inv ol v ed in cr os s - b or der tr a ns a ctions . 4 4 4

4

4 4

2 5 1


L u x emb o u r g

(continued)

I n a ddition, on 1 2 O ctob er 2 0 1 6 , a dr a f t l a w w a s intr oduced in th e L ux em b our g P a r l ia m ent, a dding a new tr a ns f er p r icing a r ticl e in th e

cl a r if y ing th a t th e m eth ods to b e us ed f or th e deter m ina tion of th e a p p r op r ia te a r m ’ s - l eng th p r ice m us t ta k e into a ccount th e f a ctor s of

OECD Guidelines treatment L a w m odif y ing A r ticl e 5 6 I T L r ef er to th e O E C D G uidel ines b eing des ig ned to b e ob s er v ed b y m ul tina tiona l s , a s w el l a s ta x a uth or ities , in m a tter s of tr a ns f er p r icing b etw een r el a ted p a r ties inv ol v ed in cr os s - b or der tr a ns a ctions . I n a ddition, th e com m enta r ies to th e 2 0 1 7 P r incip l e. T h e r ef er ence to th e O E C D G uidel ines f or a s s es s ing th e a r m ’ s - l eng th ch a r a cter of inter com p a ny tr a ns a ctions h a d a l r ea dy b een 4 C ons ider ing th a t O E C D G uidel ines a r e not incor p or a ted into L ux em b our g ’ s incom e ta x l a w , th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions m a y a l s o b e es ta b l is h ed w ith r ef er ence to oth er g ener a l l y a ccep ted tr a ns f er p r icing g uidel ines or r eg ul a tions .

Documentation Requirements r eg ul a tions . T h e G ener a l T a x L a w h a s b een a m ended to ex tend th e ex is ting g ener a l ob l ig a tion of ta x p a y er s s o th ey ca n j us tif y th e da ta p r icing m a tter s . T h is p r ov is ion is r einf or ced b y a th ir d p a r a g r a p h cl a r if y ing th a t th e g ener a l docum enta tion r eq uir em ents s et f or th b y th is p r ov is ion a l s o a p p l y to tr a ns a ctions b etw een a s s ocia ted enter p r is es . I n th e a b s ence of f ur th er g uida nce, one coul d r el y on th e O E C D G uidel ines (r ef er r ed to in th e com m enta r y to th e l a w ) a nd th e Practical Manual on Transfer Pricing for Developing Countries

docum enta tion th a t m ul tina tiona l s h a v e to p r ov ide to ta x a uth or ities .

Priorities/pricing methods m eth ods to b e us ed f or th e deter m ina tion of th e a p p r op r ia te a r m ’ s - l eng th com p ens a tion m us t ta k e into a ccount th e O E C D com p a r a b il ity f a ctor s a nd b e coh er ent w ith th e na tur e of th e a ccur a tel y del inea ted tr a ns a ctions . A l l m eth ods a dv oca ted b y th e O E C D a r e a ccep ta b l e es ta b l is h ed a m ong th e dif f er ent m eth ods .

Return disclosures/related-party disclosures a r e deta il ed b y na tur e a nd b y r el a ted- p a r ty in a s ch edul e a tta ch ed to th e ta x r etur ns .


2 5 2

L u x emb o u r g

(continued)

Transfer pricing-specific returns Documentation deadlines A s a g ener a l r ul e, contem p or a neous docum enta tion s h oul d ex is t w h en tr a ns a ctions a r e ca r r ied out. T h a t r ul e a l s o a p p l ies to tr a ns f er dea dl ine to p r oduce tr a ns f er p r icing docum enta tion. A s m entioned a b ov e, ta x p a y er s m us t b e a b l e to j us tif y th e da ta conta ined in th eir ta x r etur ns w ith a p p r op r ia te inf or m a tion a nd docum enta tion. T h e ta x a uth or ity m a y r eq ues t, in th e contex t of a s s es s ing th e ta x r etur n s h or t a s 1 4 da y s b ut m a y b e ex tended up on r eq ues t.

A ny cons tituent entity of a g r oup th a t is r es ident f or ta x p ur p os es in L ux em b our g s h a l l notif y th e L ux em b our g ta x a uth or ities a b out w h eth er it is th e ul tim a te p a r ent entity , th e s ur r og a te p a r ent entity or th e cons tituent entity no l a ter th a n th e l a s t da y of th e r ep or ting D ecem b er 2 0 1 6 ).

Transfer pricing penalties T o th e ex tent th a t th e a r m ’ s - l eng th s ta nda r d is not r es p ected, th e ta x a uth or ity m a y r ea s s es s or a dj us t th e ta x a b l e r es ul t, b ut no p ena l ties a r e s et f or th in th e ta x l a w f or ca s es in w h ich s uch a dj us tm ents a r e m a de.

decl a r ing entity . T h is p ena l ty is im p os ed a t th e dis cr etion of th e com p etent ta x a uth or ity . A g a ins t th e decis ion im p os ing th e p ena l ty , th e decl a r ing entity ca n a p p ea l a t th e a dm inis tr a tiv e cour t.


h a s b een a s s es s ed f or incom e a nd net w ea l th ta x p ur p os es f or a p a r ticul a r y ea r , th e ta x a uth or ities m a y not r ea s s es s th e r el ev a nt ta x y ea r unl es s th ey h a v e ob ta ined new inf or m a tion a nd th e s ta tute of l im ita tions h a s not y et ex p ir ed. A s l ong a s th e ta x a uth or ities h a v e is s ued a p r ov is iona l ta x a s s es s m ent, th e ta x a b l e b a s e m a y s til l b e a dj us ted a f ter th e p r ov is iona l a s s es s m ent is is s ued, until th e s ta tute of l im ita tions h a s ex p ir ed.

2 5 3


L u x emb o u r g

(continued)


APA opportunity T h e G ener a l T a x L a w (Abgabenordnung) incl udes a p r ov is ion (P a r a g r a p h 2 9 a ) dedica ted to th e ta x r ul ing p r a ctice (procedure des décisions anticipées

4 (i. e. , a ctiv ities cons is ting of g r a nting l oa ns or a dv a nces to a s s ocia ted enter p r is es f unded th r oug h th e is s ua nce of p ub l ic or p r iv a te l oa ns , a dv a nces or b a nk l oa ns ). D ir ectiv e 2 0 1 5 / 2 3 7 6 of 8 D ecem b er 2 0 1 5 ) w a s intr oduced into L ux em b our g ia n l eg is l a tion on 2 3 J ul y 2 0 1 6 . T h e l a w f or es ees th e

r ul ing s is s ued b ef or e 1 J a nua r y 2 0 1 7 . ex ch a ng e inf or m a tion on cer ta in ty p es of ta x r ul ing s a nd A P A s th a t w er e is s ued on or a f ter 1 J a nua r y 2 0 1 0 a nd th a t w er e s til l in ef f ect a s f r om 1 J a nua r y 2 0 1 4 .

Impact of new OECD BEPS Action 8-10 guidelines l eg is l a tion. T h e a im

of th e new a r ticl e (cur r entl y in dr a f t f or m ) is to im p l em ent th e r ecom m enda tions p r ov ided in th e G uida nce f or

env is a g ed th a t th es e up da ted ch a p ter s w oul d a p p l y to tr a ns a ctions v a l id a f ter th e da te w h en th e dr a f t l a w is ena cted (b oth new tr a ns a ctions a nd ong oing ones , cons ider ing a l s o th e tr a ns a ction ty p e).


2 5 4

R ep u b l ic o f M ac ed o nia Taxing authority and tax law

Relevant regulations and rulings • C IT L a w • • •

4 •

•

T a x P r ocedur es L a w • • C us tom s L a w • 4 4 tr a ns f er p r ices a p p l ied a r e cons ider ed to b e a t a r m ’ s - l eng th •

•

•

4

4

•

OECD Guidelines treatment N o r ef er ence is m a de in th e l a w or in th e a dm inis tr a tiv e g uidel ines to th e O E C D G uidel ines . H ow ev er , in th e a b s ence of a ny g uida nce outl ining w h a t th e contents of a deq ua te docum enta tion s h oul d l ook l ik e, th e O E C D G uidel ines ca n ef f ectiv el y s er v e a s a m odel .

Documentation requirements C I T L a w s tip ul a te th a t a ta x p a y er th a t is inv ol v ed in inter com p a ny tr a ns a ctions is ob l ig a ted to p r es ent, up on th e ta x a uth or ity ’ s r eq ues t,

2 5 5


R ep u b l ic o f M ac ed o nia

(continued)

Priorities/pricing methods m a de to th e oth er tr a ns f er p r icing m eth ods of th e O E C D G uidel ines . H ow ev er , us ing one of th e oth er O E C D tr a ns f er p r icing m eth ods a p p r op r ia te one, in l ine w ith th e O E C D G uidel ines .

Return disclosures/related-party disclosures Transfer pricing-specific returns Documentation deadlines H ow ev er , in p r a ctice, th e tim e f r a m e is v er y s h or t; h ence, it is a dv is a b l e th a t th e docum enta tion b e com p il ed a s s oon a s p r a ctica b l e a f ter th e cl os e of th e ta x y ea r .

Transfer pricing penalties F a il ur e to r ep or t th e cor r ect a m ount of ta x l ia b il ity r es ul ts in a p ena l ty of up to 1 0 tim es th e a m ount of th e under s ta tem ent of ta x . A dditiona l l y , def a ul t inter es t of 0 . 0 3 % a p p l ies on th e a m ount of th e a dditiona l ta x l ia b il ity f or ea ch da y of del a y in s ettl ing s uch l ia b il ity .

s us p end th e ta x p a y er ’ s b us ines s a ctiv ity f or 3 to 3 0 da y s .


Statute of limitations on transfer pricing assessments th e C I T r etur ns , a f ter w h ich th e ta x a uth or ities m a y not a udit th e ta x p a y er ’ s r ep or ted p os ition a nd r ea s s es s ta x l ia b il ities . A udited ta x


2 5 6

R ep u b l ic o f M ac ed o nia

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h er e is no m a nda tor y f r eq uency f or p er f or m ing ta x a udits . T h e ta x a uth or ity h a s th e dis cr etion to initia te a ta x a udit in a ccor da nce

APA opportunity N o b inding r ul ing or A P A op p or tunities a r e cur r entl y a v a il a b l e.

a s p ect is v er y l im ited b eca us e th e ta x a uth or ities r ef us e to p r ov ide a ny op inion a b out tr a ns a ctions th a t h a v e not y et b een im p l em ented.

Impact of new OECD BEPS Action 8–10 guidelines im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

2 5 7


M ad ag as c ar Taxing authority and tax law Direction Générale des Impôts)

Relevant regulations and rulings • ex p ens es ), 2 0 . 0 6 . 0 8 (docum enta tion r eq uir em ents a nd dea dl ines ), 2 0 . 0 1 . 5 6 . 8 (p ena l ties ) a nd 2 0 . 0 6 . 2 3 (on- s ite ta x a udit r eg im e a nd dea dl ines ) •

4

OECD Guidelines treatment p r icing , a l th oug h th er e a r e no dir ect r ef er ences .

Documentation requirements A ccor ding to th e G ener a l T a x C ode A r ticl e 2 0 . 0 6 . 0 8 , in th e ev ent of a ta x a udit, ta x a uth or ities a r e entitl ed to r eq ues t f r om • N a tur e of connections l ink ing th e l oca l com p a ny to f or eig n ones • counter p a r ties • K now n a ctiv ities of f or eig n b us ines s p a r tner s • T a x tr ea tm ent of com m er cia l ex ch a ng es b etw een th e l oca l com p a ny a nd a contr ol l ed f or eig n cor p or a tion.

Priorities/pricing methods 4 • • •

C os t- p l us • •

I t is up to th e ta x p a y er to s el ect a nd j us tif y th e m os t s uita b l e a p p r oa ch .


2 5 8

l oca l

M ad ag as c ar

(continued)

Return disclosures/related-party disclosures A s p r ev ious l y m entioned, in th e f r a m ew or k of ta x a udits , th er e is a n ob l ig a tion f or th e l oca l com p a ny to dis cl os e th e na tur e of its connections to a l l r el a ted f or eig n com p a nies , th eir a ctiv ities , th e s el ected m eth od f or deter m ining th eir p r ices a nd th e ta x tr ea tm ent of th eir tr a ns a ctions .


Documentation deadlines A l l a f or em entioned docum ents a nd inf or m a tion r eq uir ed b y ta x a uth or ities h a v e to b e p r ov ided up on r eq ues t f r om w ith in tw o m onth s (ex tenda b l e to th r ee m onth s ).

th e ta x a uth or ities

Transfer pricing penalties ev ent of a tr a ns f er p r icing r ea s s es s m ent.

Penalty relief tr a ns a ction, a p r ocedur e p r ov ided b y th e G ener a l T a x C ode, w ith ta x a uth or ities .

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions f or tr a ns f er p r icing a s s es s m ents is th e s a m e a s f or a l l cor p or a te ta x a s s es s m ents , i. e. , th r ee y ea r s f ol l ow ing th e is is s ued dur ing th e r ea s s es s m ent, w h ich th ey us ua l l y do.


its p r incip l es or p r icing m eth ods .

2 5 9


M ad ag as c ar

(continued)

APA opportunity



2 6 0

M al aw i Taxing authority and tax law

Relevant regulations and rulings • • N o r ul ing s a r e a v a il a b l e.

OECD Guidelines treatment G uidel ines .

Documentation requirements r el a ted docum enta tion, a nd s o it is a dv is a b l e th a t th e p er s on eng a g ed in tr a ns f er p r icing s h oul d m a inta in a l l th e r el ev a nt docum enta tion.

Priorities/pricing methods • • • C os t- p l us • • • A ny oth er s uch m eth od a s m a y b e p r es cr ib ed b y th e C om m is s ioner G ener a l f r om

tim e to tim e

Return disclosures/related-party disclosures p a r ty tr a ns a ctions .


2 6 1


M al aw i

(continued)

Documentation deadlines D ocum enta tion dea dl ines a r e not s tip ul a ted, b ut th e C om m is s ioner G ener a l m a y r eq uir e a ta x p a y er to p r ov ide th e neces s a r y docum enta tion in a p r es cr ib ed p er iod.

Transfer pricing penalties nor m a l l y , 1 0 0 % of th e ta x es inv ol v ed or 2 0 0 % of th e ta x es inv ol v ed if th e ca s e is cons ider ed f r a udul ent in na tur e.

Penalty relief P ena l ty r el ief is a v a il a b l e a t th e C om m is s ioner G ener a l ’ s dis cr etion.


Frequency of tax audit and transfer pricing scrutiny by the tax authority T h es e a r e conducted b y th e ta x a uth or ity f r om

tim e to tim e, th oug h not on a r eg ul a r b a s is .

APA opportunity Impact of new OECD BEPS Action 8–10 guidelines th e l etter a m endm ents in th e O E C D G uidel ines to r a is e a dditiona l a s s es s m ents f or ea r l ier y ea r s .


2 6 2

M al ay s ia Taxing authority and tax law


•

Transfer p ricing p rov ision 4 • • • • •

•

General ant i- av oidance p rov ision 4

•

Transact ions b y nonresident 4

Tim e b ar p eriod • g uidel ines is s ued in 2 0 0 3 . T h e tr a ns f er p r icing g uidel ines s et out f ur th er g uida nce in r el a tion to a p p l y ing th e tr a ns f er p r icing l eg is l a tion 4

T h es e 2 0 1 2 tr a ns f er p r icing G uidel ines a nd A P A r ul es h a d a r etr oa ctiv e ef f ectiv e da te of 1 J a nua r y 2 0 0 9 .


2 6 3


M al ay s ia

(continued)

Documentation requirements C ontem p or a neous docum enta tion p er ta ining to tr a ns f er p r icing need not b e s ub m itted w ith th e ta x r etur n, b ut it s h oul d b e m a de E ng l is h .

• • N a tur e of th e b us ines s or indus tr y a nd m a r k et conditions • T h e contr ol l ed tr a ns a ction • • C om p a r a b il ity , f unctiona l a nd r is k a na l y s is • • A p p l ica tion of th e tr a ns f er p r icing m eth od • D ocum ents th a t p r ov ide th e f ounda tion f or , or oth er w is e s up p or t or w er e r ef er r ed to in, dev el op ing th e tr a ns f er p r icing a na l y s is • I ndex to docum ents • A ny oth er inf or m a tion, da ta or docum ent cons ider ed r el ev a nt b y th e p er s on to deter m ine a n a r m ’ s - l eng th p r ice

Priorities/pricing methods m eth ods ca nnot b e r el ia b l y a p p l ied or ca nnot b e a p p l ied a t a l l .

Return disclosures/related-party disclosures T a x p a y er s a r e r eq uir ed to dis cl os e in a ta x r etur n if tr a ns f er p r icing docum enta tion h a s b een p r ep a r ed. T h is com p l ia nce r eq uir em ent is ef f ectiv e f r om th e y ea r of a s s es s m ent in 2 0 1 4 .

• • P ur ch a s es f r om

r el a ted com p a nies

• O th er p a y m ents to r el a ted com p a nies , l ending to a nd b or r ow ing f r om

r el a ted com p a nies

•


• • A ch a r t of th e g l ob a l cor p or a te s tr uctur e to w h ich th e ta x p a y er b el ong s , incl uding ul tim a te h ol ding com p a nies , dir ect a nd indir ect s ub s idia r ies , a s s ocia ted com p a nies a nd oth er r el a ted p a r ties , indica ting th e com p a nies w ith w h om th e ta x p a y er conducts r el a ted- p a r ty tr a ns a ctions Worldwide Transfer Pricing Reference Guide

2 6 4

M al ay s ia

(continued)

• • • • • • •

I nter es t •

G ua r a ntee f ees •

O th er s er v ices not f a l l ing under a ny of th e a b ov e ca teg or ies

• •

I nter es t- b ea r ing l oa ns •

I nter es t- b ea r ing tr a de cr edit •

I nter es t- f r ee l oa ns

Transfer pricing-specific returns (continued) • • • • •

O th er s (ta x p a y er to s p ecif y )

• •

cor p or a te ta x p a y er s to g a th er inf or m a tion a b out th e b a s is p er iod f or th e 2 0 1 0 y ea r of a s s es s m ent, a nd ta x p a y er s w il l b e g iv en 3 0 da y s

Documentation deadlines • • docum enta tion s h a l l b e up da ted p r ior to th e due da te f or f ur nis h ing a r etur n f or th a t b a s is p er iod f or th a t y ea r of a s s es s m ent

2 6 5


M al ay s ia

(continued)

Transfer pricing penalties Penalty for incorrect return, incorrect information, is a p p l ied w ith p ena l ties th a t a r e 1 0 0 % of th e under ch a r g ed ta x .

Penalty relief th e b a l a nce of ta x under ch a r g ed w h er e no tr a ns f er p r icing docum enta tion is p r ep a r ed, a nd 2 5 % w h er e docum enta tion is not p r ep a r ed in

Statute of limitations on transfer pricing assessments T h er e is a s ev en- y ea r s ta tute of l im ita tions f or a dditiona l a s s es s m ent is s ued p ur s ua nt to tr a ns f er p r icing a dj us tm ents , a nd docum enta tion m us t b e k ep t f or s ev en y ea r s . T h er e is no s ta tute of l im ita tions in ins ta nces of f r a ud, w il l f ul def a ul t or neg l ig ence.


ch a l l eng ed is h ig h .

APA opportunity neg otia tions h a s b een es ta b l is h ed.

Impact of new OECD BEPS Action 8–10 guidelines m onitor f ur th er dev el op m ents in th is a r ea .


2 6 6

M al d iv es Taxing authority and tax law

Relevant regulations and rulings indir ectl y b etw een th a t p er s on a nd a noth er p er s on a nd th os e tw o p er s ons a r e a s s ocia ted w ith ea ch oth er .

• O ne contr ol s th e oth er or b oth a r e contr ol l ed b y th e s a m e p er s on • O ne is a r el a tiv e of th e oth er

• T h e indiv idua l ’ s s p ous e • A b r oth er , s is ter , p a r ent, g r a ndp a r ent or ch il d of th e indiv idua l or th e indiv idua l ’ s s p ous e • A s p ous e of a p er s on l is ted a b ov e, a nd a ch il d incl udes a s tep ch il d

OECD Guidelines treatment I n g ener a l , th e tr a ns f er p r icing r eq uir em ents f ol l ow th e O E C D G uidel ines .

Documentation requirements Priorities/pricing methods T h e a r m ’ s - l eng th p r ice is deter m ined on th e b a s is of a com p a r is on w ith s im il a r g oods or s er v ices p r ov ided b etw een unr el a ted p a r ties .

Return disclosures/related-party disclosures • • L oa n inter es t p a y a b l e to r el a ted p a r ties f or th e p er iod

2 6 7


M al d iv es

(continued)

Transfer pricing-specific returns T h er e cur r entl y is no r eq uir em ent to p r ep a r e a s ep a r a te ta x r etur n f or r el a ted- p a r ty tr a ns a ctions .

Documentation deadlines T h er e a r e no docum enta tion dea dl ines .


Penalty relief T h er e a r e no p ena l ty r el ief p r ov is ions in p l a ce.

Statute of limitations on transfer pricing assessments ta x es a nd coul d conduct ta x a s s es s m ents up to th r ee y ea r s f r om

th e da te of th e s er v ice of th e notice of inq uir y .

com p l eted, a ta x a s s es s m ent is is s ued. H ow ev er , if new r el ev a nt da ta or inf or m a tion s ub s eq uentl y is dis cov er ed a f ter a n a s s es s m ent h a s dur ing th e ta x a udit p r oces s w oul d b e cons ider ed new da ta or inf or m a tion. I n ca s es w h er e a ta x p a y er h a s del ib er a tel y or f r a udul entl y ev a ded ta x , a notice of inq uir y m a y b e s er v ed w ith in th r ee y ea r s of th e da te on


tr a ns a ctions .


2 6 8

M al d iv es

(continued)

APA opportunity T h er e is no A P A p r og r a m

a v a il a b l e.


2 6 9


M al ta Taxing authority and tax law

Relevant regulations and rulings OECD Guidelines treatment deta il ed.


Priorities/pricing methods m eth od.

Return disclosures/related-party disclosures Transfer pricing-specific returns incl udes inf or m a tion a b out r el a ted- p a r ty tr a ns a ctions .


Transfer pricing penalties A n incor r ect tr a ns f er p r icing s tr uctur e coul d r es ul t in a ta x a s s es s m ent. P l ea s e r ef er to th e s ection b el ow f or m or e deta il s r eg a r ding p ena l ties f or om is s ion.


2 7 0

M al ta

(continued)

Penalty relief w ith in 1 2 m onth s a f ter th e r el a tiv e ta x r etur n da te, s uch ta x p a y er is not s ub j ect to a ny a dditiona l ta x oth er th a n th e inter es t p a y a b l e on th e l a te s ettl em ent of th e enda ng er ed ta x . 1 w r iting , th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 0 . 1 % p er m onth of th e enda ng er ed ta x . w h ich a dditiona l ta x is ch a r g ed f or th a t om is s ion, th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 0 . 7 5 % p er m onth of th e enda ng er ed ta x . w h ich a dditiona l ta x is ch a r g ed f or th a t om is s ion, th e r a te of a dditiona l ta x f or th a t om is s ion s h a l l b e 1 . 5 % p er m onth of th e enda ng er ed ta x .

Statute of limitations on transfer pricing assessments ev a s ion or f r a ud, th e tim e l im it f or r a is ing a n a s s es s m ent is op en- ended.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is l ow . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit a nd th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed a r e l ow .


1

to w h ich th e ta x p a y er m a y b e entitl ed a nd th e ta x a ctua l l y ch a r g ea b l e a f ter cons ider ing th e s a m e, b ut s h a l l not incl ude a ny a dditiona l ta x .

2 7 1


M au r itiu s Taxing authority and tax law


OECD Guidelines treatment th e O E C D G uidel ines h a v e b een us ed to deter m ine th e a r m ’ s - l eng th p r ice.



Return disclosures/related-party disclosures T h e ta x p a y er s h oul d a dv is e onl y if r el a ted- p a r ty tr a ns a ctions h a v e b een m a de a t a r m ’ s - l eng th .



r ecor ds f or s ev en y ea r s .


2 7 2

M au r itiu s

(continued)

Transfer pricing penalties l a te p a y m ent of ta x is 5 % , a nd m onth l y inter es t a t th e r a te of 1 % a p p l ies .

Penalty relief a ttr ib uta b l e to a j us t or r ea s ona b l e ca us e.

Statute of limitations on transfer pricing assessments a p p ly .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit is m edium . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is a l s o m edium . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h .


2 7 3


M ex ic o Taxing authority and tax law


I ncr ea s ing l y , m or e r eg ul a tions dea l w ith inter com p a ny tr a ns a ctions . • •

4 • • • • b or der ), tr a ns f er p r icing dis cl os ur e (cr os s - b or der ), I T L (A r ticl e 1 8 0 ) m eth od a p p l ica tion (a l l ), a ccounting r ecor ds (a l l ) • •

4

4

4

4

4

• a nd O E C D G uidel ines • •

maquiladoras • •

maquiladoras 4

•

• 4 • •

4 a ccounting r ecor ds


2 7 4

M ex ic o

(continued) 4

tr a ns f er p r icing a s p ects th a t s h oul d b e cons ider ed b y ev er y contr a ctor . • • •

OECD Guidelines treatment T h e I T L , A r ticl e 1 8 0 , s ta tes th a t th e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es a s l ong a s th ey do not contr a dict th e I T L or inter na tiona l ta x tr ea ties .

Documentation requirements C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to cr os s - b or der inter com p a ny tr a ns a ctions m us t b e m a inta ined. D ocum enta tion m us t incl ude th e na m e, a ddr es s a nd ta x r es idency of th e nonr es ident r el a ted p er s ons w ith w h om tr a ns a ctions a r e ca r r ied out, a s w el l a s ev idence of dir ect a nd indir ect p a r ticip a tion b etw een r el a ted p a r ties a nd cor r ect a p p l ica tion of a m eth od a s s ta ted in A r ticl e 1 8 0 of th e I T L , f ol l ow ing th e h ier a r ch y es ta b l is h ed th er ein. I t is neces s a r y to incl ude in th e docum enta tion inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er a nd its r el a ted p a r ties inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion of com p a r a b l e tr a ns a ctions or com p a nies b y ty p e of tr a ns a ction m us t a l s o b e incl uded. A r el a ted- p a r ty is cons ider ed if th er e is dir ect or indir ect p a r ticip a tion in m a na g em ent, s up er v is ion, contr ol or ca p ita l / ow ner s h ip . O n th e oth er h a nd, th e p a r ent com p a ny of a p er m a nent es ta b l is h m ent a nd a l l oth er p er m a nent es ta b l is h m ents of th a t com p a ny a r e a l s o cons ider ed r el a ted p a r ties .

m a intena nce, p r otection a nd ex p l oita tion of th e inta ng ib l es a s w el l a s to incl ude th e new a na l y tica l f r a m ew or k to deter m ine w h ich a s s ocia ted enter p r is e a s s um es th e r is k s f or tr a ns f er p r icing p ur p os es . T a x p a y er s a r e r eq uir ed to identif y r el a ted- p a r ty tr a ns a ctions cl ea r l y in th eir a ccounting r ecor ds . A l s o, dom es tic inter com p a ny tr a ns a ctions a r e r eq uir ed to b e docum ented b y dem ons tr a ting th a t a n a ccep ted p r icing m eth od (i. e. , one th a t is l is ted in th e I T L ) h a s b een a p p l ied a nd th a t th e a r m ’ s - l eng th s ta nda r d h a s b een m et. a r e p er f or m ing h y dr oca r b ons ex p l or a tion a nd ex tr a ction a ctiv ities in tr a ns a ctions conducted w ith r el a ted p a r ties , contr a ctor s w il l b e r eq uir ed to deter m ine th eir incom e a nd cos ts , cons ider ing th e p r ices a nd a m ount of cons ider a tion th a t w oul d h a v e b een us ed w ith or b etw een indep endent p a r ties in com p a r a b l e tr a ns a ctions on th e ter m s , m eth ods a nd conditions s et f or th in th e a p p l ica b l e l a w . T o dem ons tr a te th a t th e tr a ns a ctions w er e a g r eed to a t m a r k et p r ices , th e contr a ctor s h a l l m a k e us e of th e tr a ns f er p r icing m eth ods incl uded in th e I T L a nd th e O E C D G uidel ines .

entities th a t conduct inter com p a ny tr a ns a ctions w ith dom es tic r el a ted p a r ties to op t out of p r ep a r ing contem p or a neous tr a ns f er p r icing

2 7 5


M ex ic o

(continued)


Return disclosures/related-party disclosures of inf or m a tion r el a ted to inter com p a ny tr a ns a ctions w ith f or eig n r el a ted p a r ties , incl uding inf or m a tion r eg a r ding 5 7 concep ts b y ty p e of • • T y p es of tr a ns a ctions a nd cor r es p onding a m ounts • T r a ns f er p r icing m eth ods a p p l ied • G r os s or op er a ting m a r g ins ea r ned on ea ch tr a ns a ction (a p p l ica b l e onl y f or cer ta in ty p es of tr a ns a ctions ) • r enew ed in 2 0 1 6 . T h e new f or m

maquiladora r eq ues ts m or e inf or m a tion, com p a r ed w ith th e p r ev ious f or m

us ed, a nd h ig h l ig h ts th e f ol l ow ing r eq uir ed

• • F ina ncia l inf or m a tion f or deter m ining cos ts a nd op er a ting ex p ens es , s uch a s incom e on contr a ct m a nuf a ctur ing a nd th os e th a t a r e dis tinct f r om m a nuf a ctur ing , w a g es a nd s a l a r ies , l oa ns , a m ong oth er s • • • P er centa g e th a t r ep r es ents m a ch iner y a nd eq uip m ent th a t is th e p r op er ty of th e f or eig n r es ident w ith r es p ect to a l l m a ch iner y a nd eq uip m ent th a t is us ed in contr a ct m a nuf a ctur ing , a s w el l a s th e a m ounts th a t s er v e a s a b a s is f or deter m ining s uch a p er centa g e •

• • •

T a x na m e •

C ountr y of r es idence •

T y p e of inter com p a ny tr a ns a ction •

A m ount of inter com p a ny tr a ns a ction


2 7 6

M ex ic o

(continued)

•

T r a ns f er p r icing m eth odol og y a p p l ied •

A s s es s m ent r eg a r ding tr a ns f er p r icing com p l ia nce

T h is inf or m a tion is r eq uir ed f or a l l inter com p a ny tr a ns a ctions (i. e. , w ith f or eig n a nd dom es tic r el a ted p a r ties f or ea ch r el a ted- p a r ty a nd ty p e of tr a ns a ction). T h is q ues tionna ir e is intended to v er if y com p l ia nce w ith th e I T L , not onl y w ith r es p ect to tr a ns f er p r icing a s p ects , b ut a l s o w ith r es p ect to th e deductib il ity r eq uir em ents of a l l ta x p os itions . • •

A P A s (if a p p l ica b l e)

• •

A p p l ica tion of p r im a r y or cor r es p onding a dj us tm ents • •

• • •

Maquiladora r ul es com p l ia nce

• T r a ns f er p r icing q ues tionna ir e r el a ted to th e r ev iew conducted b y th e ex ter na l a uditor (not incl uded in th e A l ter na tiv e I nf or m a tion to th e •

in nondeductib il ity of th e p a y m ents to r el a ted p a r ties . 4

F ina nce th e tr a ns f er p r icing s tudy dem ons tr a ting th a t th e tr a ns a ctions th a t h a v e occur r ed w ith r el a ted p a r ties a r e a t a n a r m ’ s - l eng th . p a r ties to th e contr a ctor to s ub m it docum enta tion a nd inf or m a tion r el a ting to th eir op er a tions w ith th e contr a ctor or r el a ting to th e w ith w h ich it is ch a r g ed.

Transfer pricing-specific returns Maquiladoras

maquiladora

2 7 7


M ex ic o

(continued)


(Dictamen Fiscal), th e ta x p a y er ’ s ex ter na l a uditor is r eq uir ed to dis cl os e th e com p a ny ’ s com p l ia nce w ith a l l ta x ob l ig a tions , incl uding 4 Dictamen Fiscal

th e f ol l ow ing y ea r . C or r es p onding f or m a ts a nd ins tr uctions a r e s til l p ending .


r educes th e net op er a ting l os s (N O L ), th e p ena l ty r a ng es f r om

3 0 % to 4 0 % of th e dif f er ence b etw een th e deter m ined N O L a nd th e N O L in

T h er e a r e no p ena l ties if th e ta x p a y er s el f - cor r ects its ta x r es ul ts b ef or e a n a udit, a nd r educed p ena l ties a p p l y if s el f - cor r ection is m a de 4

if th e r el a ted- p a r ty r eceiv ing th e p a y m ent is tr a ns p a r ent f or ta x p ur p os es , th e p a y m ent is not cons ider ed ta x a b l e r ev enue f or th e counter p a r t or it is tr ea ted a s nonex is tent f or th e f or eig n r el a ted- p a r ty .

Penalty relief C ontem p or a neous docum enta tion m ig h t r educe ta x p ena l ties b y 5 0 % , a s l ong a s th e ta x p a y er com p l ies w ith th e f or m a l r eq uir em ents N O L .



2 7 8

M ex ic o

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority m a na g em ent f ees .

a udits , in a ddition to s ub s ta ntiv e a nd tech nica l is s ues r eg a r ding com p l ia nce, p l a nning a nd tr a ns f er p r icing docum enta tion.

APA opportunity 4 4

maquiladoras

of a p p l y ing a 6 . 5 % r etur n ov er tota l cos ts or a 6 . 9 % r etur n ov er tota l a s s ets , incl uding a s s ets a nd inv entor ies of cons ig nm ent p r op er ty ob l ig a tion. 4 p r oces s es of th e inf or m a tion, da ta a nd docum enta tion, f or p ur p os es of identif y ing a nd s p ecif y ing p er f or m ed f unctions , a s s ets us ed a nd

Impact of new OECD BEPS Action 8–10 guidelines im m edia te a nd m a nda tor y (I T L , A r ticl e 7 9 ). T h e a m endm ents w il l a p p l y to tr a ns a ctions th a t w er e in ef f ect dur ing 2 0 1 6 . N ew dis cl os ur e

2 7 9


M o ng o l ia Taxing authority and tax law


th is , th e ta x a uth or ities m a y s eek to a dj us t th e tr a ns a ction to a f a ir m a r k et v a l ue. • b ench m a r k p r ice us ed in tr a ns a ctions b etw een non- r el a ted p a r ties . •

4 4 s ta nda r d p r ice m eth od) to b e us ed if th is is not th e ca s e. • A r ticl e 4 8 . 5 of th e G T L notes th a t if m a r k et p r ices ca nnot b e a p p l ied, th en r etur ns ea r ned b y com p a r a b l e indep endent com p a nies w ith s im il a r b us ines s op er a tions s h oul d b e us ed to deter m ine th e a p p r op r ia te r etur n to b e ea r ned in r el a ted- p a r ty tr a ns a ctions . • •

4 4

• m or e of th e com m on s tock of th e oth er entity , (2 ) h a s th e r ig h t to r eceiv e 2 0 % or m or e of th e div idends or dis tr ib utions f r om th e oth er entity , or (3 ) h a s th e r ig h t to a p p oint 2 0 % or m or e of th e m a na g em ent of th e oth er entity or is oth er w is e a b l e to deter m ine its p ol icies . •

a nd s er v ices . •

2 5 D ecem b er 2 0 1 4 ) T a x p a y er s s h oul d us e th is new g uidel ine im p l icitl y f or tr a ns f er p r icing p ur p os es .

OECD Guidelines treatment p ur p os es , th e O E C D G uidel ines m a y p r ov ide s up p or t f or a p p l y ing a ny p r icing m eth ods dem ons tr a ting com p l ia nce w ith inter na tiona l p r incip l es .


2 8 0

M o ng o l ia

(continued)


T h e tr a ns f er p r icing docum enta tion s h oul d s ub s ta ntia te a ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e ch os en m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

• N a m e of th e r el a ted p a r ties , r el a tions h ip s b etw een th e tr a ns a cting p a r ties , incor p or a tion docum ents th er eof • G r oup ow ner s h ip a nd l eg a l s tr uctur e • • D es cr ip tion of th e g oods or s er v ices • K ey ter m s a nd conditions of th e contr a ctua l a g r eem ents • F unctions p er f or m ed a nd r is k s b or ne b y ea ch p a r ty • C om p a r a b il ity a na l y s is • b es t- m eth od a na l y s is ) • A na l y s is a nd ev a l ua tion of ex ter na l a nd inter na l econom ic a nd l eg a l f a ctor s , incl uding cons ider a tions of m a r k et conditions , econom ic cir cum s ta nces a nd b us ines s s tr a teg y

Priorities/pricing methods inter com p a ny tr a ns a ction.

Return disclosures/related-party disclosures A l is t of r el a ted- p a r ty tr a ns a ctions f or th e r el ev a nt ta x y ea r concer ned m us t b e dis cl os ed in cor p or a te incom e ta x r etur ns , incl uding inf or m a tion a b out th e na m e of th e r el a ted p a r ties , p r op er ty or g oods a nd s er v ices , a nd v a l ue of th e tr a ns a ction.

Transfer pricing-specific returns Documentation deadlines a nd m us t b e p r ov ided to th e G D N T up on r eq ues t.

2 8 1


M o ng o l ia

(continued)

Transfer pricing penalties G ener a l noncom p l ia nce p ena l ty r ul es a p p l y to tr a ns f er p r icing a dj us tm ents . T r a ns f er p r icing a dj us tm ents a r e s ub j ect to a 3 0 % p ena l ty 4 4 ex ceed 5 0 % of th e ta x p a y a b l e a m ount (A r ticl e 7 4 . 3 of th e G T L ).

Penalty relief Statute of limitations on transfer pricing assessments us ua l l y occur ev er y tw o to th r ee y ea r s f or dom es tic com p a nies , w h ich incl ude tr a ns f er p r icing a udits . D ur ing th is tim e, m ul tip l e op en y ea r s a r e of ten inv es tig a ted s im ul ta neous l y .

Frequency of tax audit and transfer pricing scrutiny by the tax authority incr ea s ing l y f ocus ing on tr a ns f er p r icing inv es tig a tions .

s tr eng th en tr a ns f er p r icing a udit s k il l s . a s p ecia l g r oup of tr a ns f er p r icing s p ecia l is ts , dev el op ing a m or e O E C D - b a s ed tr a ns f er p r icing f r a m ew or k .

APA opportunity A n A P A r eg im e is not a v a il a b l e a t th e m om ent.

Impact of new OECD guidelines


2 8 2

M o nteneg r o Taxing authority and tax law

Relevant regulations and rulings OECD Guidelines treatment Documentation requirements Priorities/pricing methods

Return disclosures/related-party disclosures A ccor ding to A r ticl e 3 8 of th e C I T L a w , ta x p a y er s a r e ob l ig a ted to dis cl os e in th eir a nnua l C I T r etur n th e r ev enues a nd ex p ens es r es ul ting f r om th e tr a ns a ctions w ith r el a ted p a r ties , a s w el l a s p r es ent a nd com p a r e th es e w ith r ev enues a nd ex p ens es th a t w oul d h a v e b een th e ta x a b l e b a s is .

Transfer pricing-specific returns Documentation deadlines N ot a p p l ica b l e.


2 8 3


M o nteneg r o

(continued)


Statute of limitations on transfer pricing assessments y ea r p er iod s ta r ts a t th e b eg inning of th e y ea r f ol l ow ing th e y ea r in w h ich th e r es p ectiv e ta x l ia b il ity w a s to b e a s s es s ed.

Frequency of tax audit and transfer pricing scrutiny by the tax authority of s op h is tica tion s h oul d not b e ex p ected a t th is s ta g e w ith r es p ect to r ev iew ing r el a ted- p a r ty tr a ns a ctions .



2 8 4

M o ro c c o Taxing authority and tax law Direction Générale des Impôts, or D G I )

Relevant regulations and rulings 4 •

A dm inis tr a tion. •

4 • •

T h e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d • •

T h e f or eig n com p a ny ’ s ta x r eg im e a nd ta x r a tes

undul y tr a ns f er of p a y m ents a b r oa d.

OECD Guidelines treatment r eg a r ding tr a ns f er p r icing . es ta b l is h m ents .

Documentation requirements 4 • • T h e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d • • T h e f or eig n com p a ny ’ s ta x r eg im e a nd ta x r a tes

2 8 5


M o ro c c o

(continued)


Return disclosures/related-party disclosures 4 a udited entity a nd th e r el a ted p a r ties ), th e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d, th e m eth od of deter m ining th e p r ices f or

Transfer pricing-specific returns Documentation deadlines 4 s h oul d b e p r ov ided w ith in 3 0 da y s . I n a ddition, a b es t p r a ctice is to h a v e tr a ns f er p r icing docum enta tion r ea dy , in ca s e of a tr a ns f er p r icing r ea s s es s m ent dur ing a ta x a udit

4 • • T h e na tur e of th e s er v ices p r ov ided or th e p r oducts s ol d • • T h e f or eig n com p a ny ’ s ta x r eg im e a nd ta x r a tes

G ener a l l y , p ena l ties a p p l y a s a r es ul t of a tr a ns f er p r icing r ea s s es s m ent (r eg a r dl es s of com p l ia nce w ith a ny tr a ns f er p r icing • I n ter m s of cor p or a te incom e ta x (C I T ), th e a m ounts r ea s s es s ed a r e r eins ta ted in th e ta x a b l e incom e of th e com p a ny a nd ta x ed a t th e • •

2 0 % f or r ea s s es s m ent of th e ta x a b l e b a s is , a nd a 1 0 0 % p ena l ty a p p l ies in ca s es w h er e b a d f a ith is dem ons tr a ted 1 0 % f or l a te p a y m ent

•


2 8 6

M o ro c c o

(continued)

• • •

3 0 % p ena l ty f or r ea s s es s m ent of th e ta x a b l e b a s is , a nd a 1 0 0 % p ena l ty a p p l ies in ca s es w h er e b a d f a ith is dem ons tr a ted 2 0 % p ena l ty f or l a te p a y m ent

•

Penalty relief I n th e ca s e of a r ea s s es s m ent r eg a r ding p ena l ties , a r eduction m ig h t b e g r a nted to ta x p a y er s th a t intr oduce a ta x cl a im

b ef or e th e

H a v ing tr a ns f er p r icing docum enta tion does not g r a nt ta x p a y er s w ith a ny p ena l ty r el ief . H ow ev er , it coul d h el p dur ing a ta x a udit to s up p or t th e com p a ny ’ s p r icing p ol icy . ta x a udit.


Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of tr a ns f er p r icing is s ues b eing r a is ed w ith in a ta x a udit is h ig h . I n f a ct, th e num b er of ta x a udits r a is ing tr a ns f er p r icing • P r oduct s a l e p r ices (under es tim a ted or ov er es tim a ted p r ices ), es p ecia l l y (b ut not onl y ) in ca s e of l os s es • • C os t a l l oca tions • h ide a ch a ng e in th e tr a ns f er p r icing p ol icy a p p l ied

APA opportunity 4 •

•

f r om

4

4 th e a dm inis tr a tion th e concl us ion of a n A P A on th e m eth od us ed to deter m ine th e p r ices of tr a ns a ctions m entioned in A r ticl e 2 1 4 -

4 in A r ticl e 2 1 4 - I I I if s uch a tr a ns a ction is cov er ed b y a n a dv a nced tr a ns f er p r icing a g r eem ent in a ccor da nce w ith th e a b ov e- m entioned A r ticl e 2 3 4 b is .

2 8 7


M o ro c c o

(continued)

• •

N oncom p l ia nce w ith th e m eth odol og y a nd ob l ig a tions s et out in th e a g r eem ent b y th e com p a ny , or th e us e of f r a udul ent m ea ns . T h e ca s es r ef er r ed to a b ov e m a y b e inv ok ed b y th e a dm inis tr a tion onl y in th e contex t of a ta x a udit

F ur th er m or e, th e decr ee deta il ing th e m oda l ities of concl us ion of A P A s h oul d h a v e b een p ub l is h ed no l a ter th a n th e end of 2 0 1 6 . I n f a ct,

Impact of new OECD 8–10 guidelines O E C D G uidel ines r eg a r ding tr a ns f er p r icing is s ues .


2 8 8

M y anmar Taxing authority and tax law

Relevant regulations and rulings OECD Guidelines treatment N ot a p p l ica b l e.






Transfer pricing penalties T h er e is no ex p l icit p ena l ty f or tr a ns f er p r icing a s s es s m ents , nor is th er e a n ex p l icit p ena l ty f or not h a v ing tr a ns f er p r icing docum enta tion. H ow ev er , f or ta x s h or tf a l l s in g ener a l , a p ena l ty not ex ceeding 1 0 % of th e ta x m a y b e im p os ed.


2 8 9


M y anmar

(continued)



s uch a s s es s m ent. H ence, a ta x a udit of th e p a s t y ea r r a r el y h a p p ens .




2 9 0

N amib ia Taxing authority and tax law 4

Relevant regulations and rulings ca l cul a ting th e N a m ib ia n ta x a b l e incom e of a p er s on.


G uidel ines w il l p r ev a il in r es ol v ing a ny dis p ute.

Documentation requirements C ur r entl y , th er e is no s ta tutor y r eq uir em ent to p r ep a r e tr a ns f er p r icing docum enta tion.

inf or m a tion.


Return disclosures/related-party disclosures C ur r entl y , th er e a r e no dis cl os ur e r eq uir em ents .


2 9 1


N amib ia

(continued)

Documentation deadlines C ur r entl y , th er e is no ob l ig a tion to s ub m it tr a ns f er p r icing docum enta tion.

Transfer pricing penalties • A dditiona l ta x of up to 1 0 0 % of th e p r ov is iona l ta x a m ount under p a id • 2 0 0 % of th e a dditiona l ta x r es ul ting f r om

a n a dj us tm ent (in th e ev ent of def a ul t, om is s ion, incor r ect dis cl os ur e or m is r ep r es enta tion)

• I nter es t of 2 0 % p er y ea r

Penalty relief


Frequency of tax audit and transfer pricing scrutiny by the tax authority APA opportunity N a m ib ia does not cur r entl y h a v e a n A P A p r og r a m .

Impact of new OECD BEPS Action 8–10 Guidelines


2 9 2

N eth er l and s Taxing authority and tax law Belastingdienst)

• D utch I ncom e T a x A ct 2 0 0 1 • D utch C or p or a te I ncom e T a x A ct 1 9 6 9

• •

Relevant regulations and rulings • A r ticl es 3 . 8 a nd 3 . 2 5 of th e D utch I ncom e T a x A ct 2 0 0 1 • A r ticl es 8 a nd 8 b of th e D utch C or p or a te I ncom e T a x A ct 1 9 6 9 • l eng th p r incip l e. • • 4 w h ich b oth up da ted a nd ex p a nded th e decr ees p ub l is h ed in 2 0 0 1 , incl uding a dj us tm ents a nd im p r ov em ents in th e r ul es f or ob ta ining

4

4 4 p ub l is h ed in th e Government Gazette on 3 0 D ecem b er 2 0 1 5 .

•

4 •

4 •

4 •

4 4 •

4 •

•

4 •

4

2 9 3


N eth er l and s

(continued)

• 4 •

4 a nd h ol ding com p a nies , a nd ex ch a ng e of inf or m a tion, w a s a m ended; th e im p a ct of th e ch a ng es h a s b een dea l t w ith in th e decr ees 4 4 •

4 docum enta tion r eq uir em ents f or m ul tina tiona l com p a nies

OECD Guidelines treatment T h e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D G uidel ines . r eg a r ding h ow th e a r m ’ s - l eng th p r incip l e is inter p r eted a nd a p p l ied. A ccor ding to th is decr ee, th e O E C D G uidel ines l ea v e r oom

f or

A dm inis tr a tion r eg a r ding th es e is s ues . s er v ices , contr a ct r es ea r ch , cos t contr ib ution a r r a ng em ents , a r m ’ s - l eng th p r ice deter m ina tion w h en th e v a l ue a t th e tim e of th e

H ow ev er , th e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D g uida nce on th is s ub j ect.

Documentation requirements Articles 29b–29h, Dutch Corporate Income Tax Act 1969

T h e r eq uir em ent to p r ep a r e a C b C r ep or t is a p p l ica b l e to D utch ta x r es ident entities , m em b er s of a m ul tina tiona l com p a nies g r oup , w ith

• • T h e countr y in w h ich th e ul tim a te/ s ur r og a te p a r ent entity is a ta x r es ident does not h a v e a s ig ned a g r eem ent in p l a ce f or a utom a tic O r • T h e ins p ector h a s inf or m ed th e g r oup entity th a t th e countr y in w h ich th e ul tim a te/ s ur r og a te p a r ent entity is a ta x r es ident h a s s y s tem a tica l l y f a il ed to com p l y

incl ude a ch a r t il l us tr a ting th e m ul tina tiona l com p a nies g r oup ’ s l eg a l a nd ow ner s h ip s tr uctur e a nd g eog r a p h ica l l oca tion of op er a ting entities , a des cr ip tion of th e m ul tina tiona l com p a nies g r oup ’ s b us ines s or b us ines s es , inf or m a tion r eg a r ding th e m ul tina tiona l com p a nies Worldwide Transfer Pricing Reference Guide

2 9 4

N eth er l and s

(continued)

4

th e ta x r etur n a p p l ies , th e a l r ea dy ex is ting D utch docum enta tion r eq uir em ents under A r ticl e 8 b (3 ) of th e C or p or a te I ncom e T a x A ct 1 9 6 9 a r e a p p l ica b l e. Article 8b(3), Dutch Corporate Income Tax Act 1969 T a x p a y er s a r e ob l ig a ted to p r ep a r e docum enta tion th a t des cr ib es h ow th e tr a ns f er p r ices h a v e b een es ta b l is h ed, a nd th is m us t b e ta x a uth or ity to ev a l ua te th e a r m ’ s - l eng th na tur e of th e tr a ns f er p r ices a p p l ied b etw een a s s ocia ted enter p r is es . T h e P a r l ia m enta r y ex p l a na tions to A r ticl e 8 b do not p r ov ide a n ex h a us tiv e l is t of inf or m a tion th a t s h oul d b e docum ented.

•

I nf or m a tion a b out th e a s s ocia ted enter p r is es inv ol v ed •

I nf or m a tion a b out th e inter com p a ny tr a ns a ctions b etw een th es e a s s ocia ted enter p r is es • •

A s ub s ta ntia tion of th e ch oice of th e tr a ns f er p r icing m eth od a p p l ied •

A s ub s ta ntia tion of th e tr a ns f er p r ice ch a r g ed •

O th er docum ents , s uch a s m a na g em ent a ccounts , b udg ets a nd m inutes of s h a r eh ol der a nd b oa r d m eeting s

Priorities/pricing methods ch os en r es ul ts in a r m ’ s - l eng th p r icing f or th e tr a ns a ction.

to tes t a l l of th e m eth ods , th oug h th ey m us t s ub s ta ntia te th e m eth od ch os en.


2 9 5


N eth er l and s

(continued)

Transfer pricing-specific returns ta x r etur n.

Documentation deadlines D ocum enta tion is g ener a l l y ex p ected to b e com p l ete w h en th e ta x p a y er enter s into a tr a ns a ction. D utch ta x r es ident entities of a w ith in th e ter m

s et f or s ub m itting th eir r es p ectiv e cor p or a te incom e ta x r etur ns .

of th e C or p or a te I ncom e T a x A ct 1 9 6 9 a r e g r a nted f our w eek s to p r ep a r e th e tr a ns f er p r icing docum enta tion if s uch docum enta tion is not a v a il a b l e up on th e r eq ues t of th e ta x a uth or ity . T h is p er iod m a y b e ex tended up to th r ee m onth s , dep ending on th e com p l ex ity of th e inter com p a ny tr a ns a ctions in w h ich th e ta x p a y er is eng a g ed.

Transfer pricing penalties T h e D utch g ener a l p ena l ty r eg im e is a l s o a p p l ica b l e f or tr a ns f er p r icing . A ccor ding to th is r eg im e, a n a dm inis tr a tiv e a nd, under cer ta in

D ur ing th e P a r l ia m enta r y dis cus s ions r eg a r ding th e intr oduction of th e a r m ’ s - l eng th p r incip l e a nd tr a ns f er p r icing docum enta tion r eq uir em ents (i. e. , A r ticl e 8 b ) into th e D utch C or p or a te I ncom e T a x A ct 1 9 6 9 , a q ues tion w a s r a is ed r eg a r ding th e D utch p ol icy in th a t p ena l ties in s uch ins ta nces s h oul d b e l im ited to ca s es in w h ich it is p l a us ib l e th a t th e a g r eed- up on tr a ns f er p r ice is not r eg a r ded a s a r m ’ s - l eng th a s a r es ul t of a p ur el y intentiona l a ct. T h er ef or e, a n a dm inis tr a tiv e p ena l ty w il l not b e im p os ed, ev en in th e ev ent of g r os s neg l ig ence or a conditiona l intentiona l a ct under th is p ol icy a nnouncem ent. I n ca s e of a p ur el y intentiona l a ct, a s s et f or th a b ov e, th e ta x m a y b e incr ea s ed w ith a m a x im um due, p l us inter es t.

p ena l ty of 1 0 0 % of th e (a dditiona l ) ta x

T h e l a ck of tr a ns f er p r icing docum enta tion w il l s h if t th e b ur den of p r oof r eg a r ding th e a r m ’ s - l eng th na tur e of th e tr a ns f er p r ice us ed b y th e ta x p a y er .

r eg a r ded a s a cr im ina l of f ens e f or w h ich a cr im ina l p ena l ty ca n b e im p os ed. H ow ev er , under cer ta in cir cum s ta nces , a s a n a l ter na tiv e, a n a dm inis tr a tiv e p ena l ty ca n b e im p os ed. D ur ing th e P a r l ia m enta r y dis cus s ion r el a ted to th is p r op os a l , it w a s m entioned th a t cr im ina l ch a r g es w il l b e r es er v ed f or th e m os t s ev er e ca s es .

Penalty relief T r a ns f er p r icing p ena l ties a r e unl ik el y if th e ta x p a y er p r ep a r es p r op er tr a ns f er p r icing docum enta tion th a t a deq ua tel y s ub s ta ntia tes th e a r m ’ s - l eng th na tur e of th e ta x p a y er ’ s inter com p a ny tr a ns a ctions .


2 9 6

N eth er l and s

(continued)

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions on tr a ns f er p r icing a s s es s m ents is th e s a m e a s th e s ta tute of l im ita tions on ta x a s s es s m ents (a s cov er ed b y th e

• O r •

T h e ta x p a y er a cted in b a d f a ith

A n a dditiona l a s s es s m ent is p os s ib l e onl y up to tw o y ea r s a f ter th e ta x a s s es s m ent h a s b een is s ued in th e ca s e of a m is ta k e, w h ich is

deem ed to h a v e b een a w a r e of th e m is ta k e).

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of b eing a udited b y th e ta x a uth or ity is cons ider ed m oder a te. H ow ev er , dur ing a n a udit, th e l ik el ih ood of tr a ns f er p r icing

T r a ns f er p r icing is a k ey is s ue in a ny ta x a udit, a nd m a ny com p a nies a r e s ub j ect to s ep a r a te tr a ns f er p r icing a udits . A f unctiona l a na l y s is is incor p or a ted into m a ny of th es e a udits a nd f or m s th e b a s is of th e tr a ns f er p r icing r is k a na l y s is of ta x p a y er s .

tr a ns a ction. T h e ta x a uth or ity h a s a l s o f ocus ed, a s a na tur a l r es ul t of th e r is k a na l y s is , on tr a ns a ctions w ith entities in countr ies w ith l ow ef f ectiv e ta x r a tes .

APA opportunity

r eg a r ding econom ic a na l y s is th a t is a v a il a b l e to s m a l l ta x p a y er s .

2 9 7


N eth er l and s

(continued)

r eceip t a nd p a y m ent of inter com p a ny inter es t) a nd l icens ing (m er e r eceip t a nd p a y m ent of inter com p a ny r oy a l ties ) com p a nies . T h e D utch ta x a uth or ities p r oces s m a ny unil a ter a l a nd b il a ter a l A P A s on a nnua l b a s is . T h e D utch com p etent a uth or ity h a s b il a ter a l A P A ex p er ience a cr os s a l l continents .

M ut ual agreem ent p rocedures ( M A Ps) 4

ta x p a y er s . K ey f ea tur es of th e new decr ee a r e f or m a l l y intr oducing a n A ccel er a ted C om p etent A uth or ity P r ocedur e (A C A P ), endor s ing

m or e tr a ditiona l doub l e ta x a tion ca s es .

Attribution of profits to permanent establishments 4 p er m a nent es ta b l is h m ents (P E D ecr ee). T h is P E D ecr ee p r ov ides f ur th er ins ig h ts into th e ta x a uth or ity ’ s p os ition on p er m a nent

Impact of new OECD BEPS Action 8–10 Guidelines

2 0 1 6 ; y es T h e D utch P a r l ia m ent is of th e b el ief th a t th e g uida nce of th e O E C D ca n b e com p a r ed w ith th e v iew of a uth or ita tiv e w r iter s a nd concl us ions of th e A ttor ney - G ener a l . T h e ta x a uth or ity g ener a l l y f ol l ow s th e O E C D G uidel ines . T h e D utch tr a ns f er p r icing decr ee p r ov ides f ur th er g uida nce on h ow th e a r m ’ s - l eng th p r incip l e is inter p r eted a nd a p p l ied. I n a l etter to th e P a r l ia m ent on 5 O ctob er 2 0 1 5 , th e D utch


2 9 8

N ew Z eal and Taxing authority and tax law

•

4 • T a x A dm inis tr a tion A ct 1 9 9 4 (T A A ) •



1 0 q ues tions th a t s h oul d b e a ddr es s ed b y com p a nies under ta k ing cr os s - b or der b us ines s r es tr uctur ing s . T h es e q ues tions a im a s cer ta in th e com m er cia l r a tiona l e of th e r es tr uctur ing .

to h el p


h a s b een us ed to es ta b l is h th a t th e ta x p a y er ’ s tr a ns f er p r ices a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e, in l ig h t of th e r el ev a nt f a cts a nd cir cum s ta nces .


2 9 9


N ew Z eal and

(continued)

Return disclosures/related-party disclosures • • •


th eir tr a ns f er p r icing r is k a s s es s m ent a ctiv ities (s ee th e nex t s ection f or f ur th er deta il s ).

Documentation deadlines G uidel ines indica te th a t ta x p a y er s th a t p r ep a r e a nd m a inta in tr a ns f er p r icing docum enta tion a r e m or e l ik el y to ens ur e th a t th e b ur den

g ener a l l y is g iv en 2 0 w or k ing da y s to s ub m it th e docum enta tion up on r eq ues t.

Transfer pricing penalties 4 • A 2 0 % p ena l ty f or not ta k ing r ea s ona b l e ca r e • A 2 0 % p ena l ty f or a n una ccep ta b l e ta x p os ition • A 4 0 % p ena l ty f or g r os s ca r el es s nes s • A 1 0 0 % p ena l ty f or a n a b us iv e ta x p os ition • A 1 5 0 % p ena l ty f or ev a s ion or a s im il a r a ct

Penalty relief • una ccep ta b l e ta x p os ition ca teg or ies ) or 7 5 % f or oth er s h or tf a l l p ena l ties . •

4


3 0 0

N ew Z eal and

(continued)

Statute of limitations on transfer pricing assessments T h e C om m is s ioner ’ s p ow er to is s ue a m ended a s s es s m ents is s ub j ect to a f our - y ea r tim e l im it f r om

th e end of th e y ea r in w h ich th e ta x

a r is es w h en a dis p ute is not r es ol v ed, a nd m or e tim e w oul d a l l ow eith er com p l etion of th e dis p ute p r oces s b y m utua l a g r eem ent of b oth p a r ties or w h er e a noth er ca s e b ef or e th e cour t is l ik el y to r es ol v e th e is s ue in cur r ent dis p ute.


y ea r s .

q ues tionna ir e f or b r a nch es . T h e l ik el ih ood of th e tr a ns f er p r icing m eth odol og y b eing ch a l l eng ed dep ends on th e com p l ex ity of th e cr os s - b or der a s s ocia ted- p a r ty

deta il ed tr a ns f er p r icing r ev iew .

APA opportunity

a p p l ica tion conf er ences to m a k e th e A P A a p p l ica tion p r oces s l es s tim e- cons um ing .

Impact of new OECD BEPS Action 8–10 guidelines p r icing l eg is l a tion.

3 0 1


N ic ar ag u a Taxing authority and tax law Dirección General de Ingresos (D G I )

Relevant regulations and rulings C ur r entl y , th er e a r e no l oca l tr a ns f er p r icing r eg ul a tions in N ica r a g ua . H ow ev er , r eg ul a tions w il l b e in ef f ect a s of 3 0 J une 2 0 1 7 .











3 0 2

N ic ar ag u a

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority a udit is cons ider ed l ow . T h e D G I h a s not y et initia ted a ny ta x a udits r eg a r ding tr a ns f er p r icing b eca us e th e r eg ul a tions w il l com e into unk now n.



3 0 3


N ig er ia Taxing authority and tax law


f r om

s uch tr a ns a ctions a r e cons is tent w ith th e a r m ’ s - l eng th p r incip l e.

• • • T r a ns f er , p ur ch a s e, l icens e or us e of inta ng ib l e a s s ets • P r ov is ion of s er v ices • L ending or b or r ow ing of m oney • •

OECD Guidelines treatment G uidel ines a s b eing a p p r op r ia te. ca n b e ex p ected to a p p l y .

Documentation requirements ta x r etur ns . T h e ta x r etur ns a r e due s ix m onth s a f ter th e y ea r - end. T h e tr a ns f er p r icing docum enta tion ca n b e r eq ues ted w ith 2 1 da y s ’ th e docum enta tion s h oul d b e p r ep a r ed ta k ing into a ccount th e com p l ex ity a nd v ol um e of th e a p p l ica b l e tr a ns a ctions .


3 0 4

N ig er ia

(continued)

Priorities/pricing methods m eth ods to b e us ed in deter m ining w h eth er th e r es ul t of a tr a ns a ction or s er ies of tr a ns a ctions is cons is tent w ith th e a r m ’ s - l eng th • • • C os t- p l us • • • m eth ods ca n b e r ea s ona b l y a p p l ied a nd (ii) th e m eth od us ed g iv es r is e to a r es ul t th a t is cons is tent w ith th e a r m ’ s - l eng th p r incip l e.

Return disclosures/related-party disclosures T a x p a y er s a r e r eq uir ed to com p l ete a nd a tta ch a T r a ns f er P r icing D ecl a r a tion f or m to th e a nnua l ta x r etur n a s w el l a s a T r a ns f er P r icing D is cl os ur e f or m . T h e T r a ns f er P r icing D is cl os ur e F or m r eq uir es th e ta x p a y er to indica te w h eth er it h a s com p l ied w ith th e T r a ns f er P r icing a b out inter com p a ny tr a ns a ctions a nd b us ines s r es tr uctur ing .

Transfer pricing-specific returns T a x p a y er s a r e r eq uir ed to com p l ete T r a ns f er P r icing D ecl a r a tion a nd D is cl os ur e f or m s , w h ich a r e to b e s ub m itted a s p a r t of a n a nnua l T P r etur n. F or cl a r ity , th e T P r etur n cons is ts of (i) th e T r a ns f er P r icing D is cl os ur e F or m , (ii) th e T r a ns f er P r icing D ecl a r a tion F or m

(f or th e

com p uta tion a nd a l l r el ev a nt s ch edul es . p ol icy docum ents a r e a uniq ue r eq uir em ent of th e N ig er ia n r eg im e a nd s h oul d incl ude inf or m a tion s uch a s th e na m e of th e m em b er s of

tr a ns a ctions , a nd th e tr a ns f er p r icing m eth od th a t m a y b e a dop ted f or th e p r icing f or ea ch ty p e of contr ol l ed tr a ns a ction. F or cl a r ity , th e tr a ns f er p r icing p ol icy docum ent is not th e s a m e a s tr a ns f er p r icing docum enta tion b ut r a th er is a condens ed f or m of k ey inf or m a tion a b out th e com p a ny ’ s tr a ns f er p r icing p ol icies .

3 0 5


N ig er ia

(continued)

Documentation deadlines tr a ns a ctions occur r ed. T h e T r a ns f er P r icing D ecl a r a tion a nd T r a ns f er P r icing D is cl os ur e f or m s , a s w el l a s th e tr a ns f er p r icing p ol icy docum ents , s h oul d b e

Transfer pricing penalties A ta x a b l e p er s on w h o f a il s to com p l y w ith a ny of th e p r ov is ions of th e r eg ul a tions w il l b e l ia b l e f or a p ena l ty a s p r es cr ib ed in th e r el ev a nt

m onth in w h ich th e f a il ur e occur s a nd N G N 5 , 0 0 0 f or ea ch s ub s eq uent m onth . L a te p a y m ent of ta x es due a ttr a cts a p ena l ty of 1 0 % , p l us inter es t a t th e b a nk l ending r a te.

Penalty relief p ena l ties th r oug h a p p r op r ia te docum enta tion of contr ol l ed tr a ns a ctions . I n th is r eg a r d, th e b ur den of p r oof l ies w ith th e ta x p a y er .

Statute of limitations on transfer pricing assessments f or th e ta x p a y er ’ s r etur ns h a s to b e r eta ined f or s ix y ea r s . I n ca s es of cr im ina l tendencies , s uch a s f r a ud or w il l f ul def a ul t, th er e is no s ta tute of l im ita tions .

Frequency of tax audit and transfer pricing scrutiny by the tax authority th e ta x a uth or ities f or th e p ur p os es of r is k a s s es s m ent, a nd inf or m a tion r eq ues ts a r e s ent to ta x p a y er s s el ected f or tr a ns f er p r icing r eq ues t. r is k s th a n dom es tic tr a ns a ctions a nd a s s uch a r e g iv en m or e s cr utiny .


3 0 6

N ig er ia

(continued)

APA opportunity a p p r op r ia te s et of cr iter ia f or deter m ining w h eth er th e ta x p a y er h a s com p l ied w ith th e a r m ’ s - l eng th p r incip l e f or cer ta in f utur e contr ol l ed

Impact of new OECD BEPS Action 8–10 guidelines (A ction 1 4 ). H ow ev er , th er e is no p ub l ic p r onouncem ent on th e dev el op m ents y et.

3 0 7


N o r w ay Taxing authority and tax law

• T a x a tion A ct (1 9 9 9 ) • T a x A dm inis tr a tion A ct (1 9 8 0 )


E f f ectiv e in 2 0 1 4 , new inter es t deductib il ity r es tr ictions on r el a ted- p a r ty deb t ca m e into ef f ect. A ccor ding to th e new l eg is l a tion, th e net inter es t ex p ens e p a id to a r el a ted- p a r ty ca n b e deducted onl y to th e ex tent th a t inter na l a nd ex ter na l inter es t ex p ens e com b ined th ir d- p a r ty inter es t ex p ens es , w h er e a r el a ted- p a r ty h a s p r ov ided a g ua r a ntee. C er ta in ex em p tions a r e ex p ected to a p p l y in r el a tion to ex ter na l deb t g ua r a nteed b y a r el a ted- p a r ty . E x em p tions to th e inter es t deductib il ity r es tr ictions r ul e a p p l y if th e tota l a m ount of net

r ep or t. N o da te h a s b een s et f or im p l em enta tion of th e l a w , b ut it is a nticip a ted th a t th e l a w w il l b e ef f ectiv e f or th e incom e y ea r 2 0 1 6 ,

OECD Guidelines treatment T h e N T A h a s a l ong h is tor y of f ol l ow ing th e O E C D G uidel ines . T h e N or w eg ia n r eg ul a tions f ol l ow O E C D p r incip l es , a nd docum enta tion p r ep a r ed in l ine w ith th e O E C D G uidel ines w il l g ener a l l y m eet th e N or w eg ia n r eq uir em ents .

a r e not incl uded. T h e s ta tus of th e O E C D G uidel ines is l im ited to th a t of g uida nce, a nd th ey do not cons titute b inding r ul es .

p r a ctice.


3 0 8

N o r w ay

(continued)


tr a ns a ctions r ep or ted in th e ta x r etur n. I n a ddition, cov er ed ta x p a y er s a r e ob l ig ed to p r ep a r e tr a ns f er p r icing docum enta tion th a t des cr ib es h ow th e tr a ns f er p r ices h a v e b een

• N or w eg ia n entity dur ing th e cov er ed incom e y ea r , m us t b e incl uded, a nd a ny l os s es incur r ed b y th e N or w eg ia n entity m us t b e ex p l a ined. • A g r eem ents f or th e r el a ted- p a r ty tr a ns a ctions m us t b e a tta ch ed to th e docum enta tion. • A des cr ip tion of h ow th e tr a ns f er p r ice in a tr a ns a ction is a ctua l l y com p uted m us t b e p r ov ided. • T h e l ev el of deta il r eq uir ed dep ends on th e com p l ex ity of th e tr a ns a ction a nd, in p a r ticul a r , if th e tr a ns a ction is of h ig h v a l ue, inta ng ib l es a r e inv ol v ed or if th er e m a y b e a ta x m otiv a tion f or p r icing th e tr a ns a ction a t non- a r m ’ s - l eng th conditions , th e l ev el of deta il r eq uir ed is h ig h er . • a nd m a ter ia l ch a ng es to th e f unctions p er f or m ed b y th e enter p r is e, a nd th e p r op er ty it us es in its b us ines s a ctiv ities a nd th e r is k it a s s um es m us t b e incl uded. • •

Priorities/pricing methods m eth ods under cer ta in cir cum s ta nces is incr ea s ing . T h e N T A g ener a l l y does not a ccep t th e us e of P a n- E ur op ea n s ea r ch es a ny m or e

m eth ods p r ov ide a r m ’ s - l eng th r es ul ts . T h e N T A tends to p r ef er l oca l com p a r a b l es ov er f or eig n com p a r a b l es . H ow ev er , in th e a b s ence of l oca l com p a r a b l es , it is g ener a l l y r ecom m ended to p r ov ide inf or m a tion on f or eig n com p a r a b l es . T h er e h a v e b een incidents in w h ich th e N T A h a s m a de us e of s ecr et com p a r a b l es , a l th oug h th is is not deem ed com m on p r a ctice.

3 0 9


N o r w ay

(continued)

Return disclosures/related-party disclosures r ep or ted in th e ta x r etur n.


Documentation deadlines T h e tr a ns f er p r icing docum enta tion m us t b e s ub m itted w ith in 4 5 da y s of a r eq ues t b y th e N T A . A l l docum enta tion m us t b e r eta ined f or 1 0 y ea r s . T h e ta x a uth or ity a s s um es th a t docum enta tion is m a de on a contem p or a neous b a s is a nd, a ccor ding l y , does not a l l ow f or ex tens ions .

Transfer pricing penalties T h e tr a ns f er p r icing p ena l ty (s ur ta x ) is 3 0 % of th e ta x a dj us tm ents , p r ov ided th a t th e ta x a uth or ity concl udes th a t th e ta x p a y er p r ov ided im p os ed. I n th e ca s e of g r os s neg l ig ence, a s ur ta x of up to 6 0 % m a y b e l ev ied. H ow ev er , th e nor m a l s ur ta x r a te is 3 0 % . A dditiona l l y , a nondeductib l e a nnua l inter es t ch a r g e w il l a p p l y . T h e s a m e is a p p l ica b l e if th e docum enta tion is not s ub m itted b y th e dea dl ine.

Penalty relief A 3 0 % p ena l ty is nor m a l ; h ow ev er , th e r is k of a p ena l ty b eing im p os ed m a y b e r educed if p r op er docum enta tion is p r ep a r ed. D is cl os ur e in th e ta x r etur n m a y , in p r incip l e, r el iev e p ena l ties b eca us e th e ta x a uth or ity tech nica l l y w il l h a v e b een inf or m ed a nd m a y f ur th er inv es tig a te th e tr a ns f er p r icing ca s e. T h e a s s es s m ent of p ena l ties is b ecom ing incr ea s ing l y com m on.

Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions f or ta x a s s es s m ents in N or w a y s ta tes th a t is s ues r eg a r ding th e ta x r etur n ca nnot b e r a is ed a f ter 1 0 y ea r s f r om th e end of th e incom e y ea r . T r a ns f er p r icing docum enta tion m us t, th er ef or e, b e r eta ined a nd s tor ed f or a t l ea s t 1 0 y ea r s . T h e s ta tute of l im ita tions is th r ee y ea r s if th e a m endm ent is b a s ed on th e ta x a uth or ity ’ s dis cr etiona r y a s s es s m ents or th e inter p r eta tion end, th e s ta tute of l im ita tions w il l cea s e 3 1 D ecem b er 2 0 1 9 . T h e s ta tute of l im ita tions is tw o y ea r s if a ny ta x a dj us tm ent is a g a ins t th e ta x p a y er , p r ov ided th a t th e ta x p a y er h a s not g iv en incor r ect or incom p l ete inf or m a tion in th e ta x r etur n. A s s um ing th e ta x p a y er h a s 3 1 D ecem b er a s its 2 0 1 6 incom e y ea r - end, th e s ta tute of l im ita tions w il l cea s e 3 1 D ecem b er 2 0 1 8 .


3 1 0

N o r w ay

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a f ul l cor p or a te ta x a udit is , in g ener a l , l ow . H ow ev er , th e l ik el ih ood of a s ep a r a te tr a ns f er p r icing ta x ex a m ina tion is cons ider ed h ig h . F or b oth s ep a r a te tr a ns f er p r icing ta x ex a m ina tions a nd f ul l cor p or a te ta x a udits , th e ta x p a y er ’ s r el a ted- p a r ty b eing ch a l l eng ed is cons ider ed h ig h . T h e N T A h a s a s tr ong f ocus on inter com p a ny tr a ns a ctions a nd h a s es ta b l is h ed a na tiona l tr a ns f er p r icing p r oj ect com p os ed of a l l of th e tr a ns f er p r icing ta x ins p ector s w ith in th e N T A .

C ur r entl y , a ny com p a ny w ith a l ow or neg a tiv e m a r g in tr a ns a cting w ith a f or eig n r el a ted- p a r ty h a s a h ig h r is k of a ta x a udit. I n a ddition, y ea r - end a dj us tm ents a r e of ten ch a l l eng ed. T h e N T A of ten us es th is a s a n a r g um ent to cl a im th a t th e r es ul t is not a t a n a r m ’ s - l eng th .

APA opportunity r eg a r ding p r ocedur e f or th e a p p l ica tion. H ow ev er , it w il l not b e p os s ib l e to eng a g e th e A P A unit on a no- na m e b a s is . T h e A P A p r oces s is f r ee.

Impact of new OECD BEPS Action 8–10 guidelines 4

on docum enta tion.

3 1 1


O man Taxing authority and tax law

Relevant regulations and rulings A r ticl es 1 2 6 to 1 2 8 of th e I T L conta in th e tr a ns f er p r icing r eg ul a tions .

OECD Guidelines treatment Documentation requirements p r icing f or r el a ted- p a r ty tr a ns a ctions .

Priorities/pricing methods N o p r icing m eth ods h a v e b een p r es cr ib ed in th e l a w or under th e ex is ting r eg ul a tions . T h e l a w m entions th a t p r icing s h a l l b e ta k en into

Return disclosures/related-party disclosures a dditiona l r el a ted- p a r ty tr a ns a ction dis cl os ur es , a l ong w ith th e ta x r etur ns .

Transfer pricing-specific returns ta x p a y er a b out r el a ted- p a r ty tr a ns a ctions . T h e dis cl os ur e r eq uir em ent h a s b een ef f ectiv e s ince 2 0 1 2 .



3 1 2

O man

(continued)

Transfer pricing penalties Penalty relief

Statute of limitations on transfer pricing assessments T h er e a r e no s ep a r a te tr a ns f er p r icing a s s es s m ents conducted in O m a n. T h e tr a ns f er p r icing a s s es s m ent w il l b e conducted a s p a r t of th e y ea r f or w h ich a ta x r etur n is s ub m itted.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h , a nd ta x a s s es s m ents a r e conducted a nnua l l y . A r ev iew of tr a ns f er p r icing is one of th e m a in p r oces s es dur ing th e a nnua l ta x a s s es s m ent. T h er ef or e, r el a ted- p a r ty tr a ns a ctions , f r om a tr a ns f er p r icing p er s p ectiv e, a p p r op r ia te tr a ns f er p r icing m eth odol og y us ed is deter m ined on a ca s e- b y - ca s e b a s is . A ccor ding l y , th e l ik el ih ood of th e m eth odol og y b eing ch a l l eng ed in a tr a ns f er p r icing a udit is a l s o h ig h .

APA opportunity T h er e is no op p or tunity to concl ude a n A P A .

ca s e a nd ca nnot b e a p p l ied g ener a l l y to a ny oth er ca s e.

Impact of new OECD guidelines l a w y et; h ow ev er , it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

3 1 3


P ak is tan Taxing authority and tax law


deter m ine th e s our ce of incom e a nd th e na tur e of a ny p a y m ent or l os s a s r ev enue, ca p ita l or oth er w is e.

• • D is r eg a r d a tr a ns a ction th a t does not h a v e s ub s ta ntia l econom ic ef f ect • 4

OECD Guidelines treatment T h e m eth ods us ed b y th e com m is s ioner to deter m ine th e a r m ’ s - l eng th r es ul t a r e identica l to th e m eth ods a v a il a b l e under th e O E C D G uidel ines . C onv ention (on a s s ocia ted E nter p r is es ).

Documentation requirements T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in


deter m ining w h eth er th e tr a ns a ction b etw een contr ol l ed p a r ties is on a n a r m ’ s - l eng th b a s is . s im il a r tr a ns a ction b etw een contr ol l ed p a r ties is on a n a r m ’ s - l eng th b a s is .


3 1 4

P ak is tan

(continued)

4 b etw een indep endent p er s ons f or m ing a n a s s ocia tion w oul d b e cons ider ed. cir cum s ta nces , in th e op inion of th e com m is s ioner , s h a l l b e a p p l ied. T h e f our th m eth od s h a l l a p p l y onl y if th e oth er m eth ods ca nnot b e r el ia b l y a p p l ied.


Transfer pricing-specific returns Documentation deadlines a p p l ica b l e.

Transfer pricing penalties Penalty relief Statute of limitations on transfer pricing assessments T h er e a r e no s ep a r a te tr a ns f er p r icing a s s es s m ents conducted in P a k is ta n. A tr a ns f er p r icing a s s es s m ent, if a ny , w il l b e conducted a s p a r t of th e r eg ul a r ta x a s s es s m ent f or a ta x y ea r .

Frequency of tax audit and transfer pricing scrutiny by the tax authority b eing dev el op ed. G ener a l l y , th e tr a ns f er p r icing a s p ect is cov er ed in th e ta x a udit p r oceeding s conducted b y th e com m is s ioner once th e r etur n of incom e is s el ected f or a ta x a udit.

3 1 5


P ak is tan

(continued)

APA opportunity T h er e is no op p or tunity to concl ude a n A P A . H ow ev er , a n a dv a nce r ul ing is p os s ib l e.

on th e ta x a uth or ities r eg a r ding th e a p p l ica tion of th e tr a ns a ction a nd a ccor ding to th e l a w a s it s tood a t th e tim e of s uch r ul ing . T h e a nd docum ents .



3 1 6

P anama Taxing authority and tax law Dirección General de Ingresos, or D G I )

Relevant regulations and rulings • • •

OECD Guidelines treatment T h e O E C D G uidel ines ca n b e r el ied up on f or inter p r eta tion of th e r ul es , a s l ong a s th ey do not contr a dict th e T a x C ode.

Documentation requirements C ontem p or a neous tr a ns f er p r icing docum enta tion r el a ted to cr os s - b or der inter com p a ny tr a ns a ctions m us t b e k ep t a nd m a inta ined in • ev idence of dir ect a nd indir ect p a r ticip a tion b etw een r el a ted p a r ties • A deta il ed des cr ip tion of th e na tur e, ch a r a cter is tics a nd a m ount of a l l inter com p a ny tr a ns a ctions of th e ta x p a y er , incl uding th e tr a ns f er p r icing m eth od em p l oy ed I t is a l s o neces s a r y to incl ude th e m eth od s el ection p r oces s a nd s p ecif y th e p r ice or m a r g in, or a r a ng e of p r ices or m a r g ins , a p p l ied b y th e ta x p a y er in its inter com p a ny tr a ns a ctions . I n a ddition, it is neces s a r y to incl ude in th e docum enta tion inf or m a tion r eg a r ding th e f unctions p er f or m ed, a s s ets us ed a nd r is k s b or ne b y th e ta x p a y er inv ol v ed in ea ch tr a ns a ction. I nf or m a tion a nd docum enta tion a b out com p a r a b l e tr a ns a ctions or com p a nies b y ty p e of tr a ns a ction m us t a l s o b e incl uded. I nter na l com p a r a b l es a r e p r ef er r ed ov er ex ter na l com p a r a b l es , a nd th e r ea s ons f or not a p p l y ing inter na l com p a r a b l es m us t b e dul y docum ented. T h e docum enta tion m us t b e p r ep a r ed cons ider ing th e com p l ex ity a nd v ol um e of th e tr a ns a ctions a nd s h oul d incl ude th e inf or m a tion th a t th e ta x p a y er us ed in its ev a l ua tion of th e inter com p a ny tr a ns a ctions , cons is ting of inf or m a tion p er ta ining to b oth th e m ul tina tiona l g r oup to w h ich th e ta x p a y er b el ong s a nd th e ta x p a y er its el f .

3 1 7


P anama

(continued)

• • • T h e tr a ns f er p r icing p ol icy of th e m ul tina tiona l g r oup , if a ny

Priorities/pricing methods m eth od s h oul d b e b a s ed on th e ch a r a cter is tics of th e tr a ns a ction under a na l y s is a nd th e cir cum s ta nces of th e ca s e a nd s h oul d a im th e one th a t b es t r es p ects th e a r m ’ s - l eng th p r incip l e.

to b e

Return disclosures/related-party disclosures T a x p a y er s m us t r ep or t on th e incom e ta x r etur n w h eth er th ey conducted r el a ted- p a r ty tr a ns a ctions a nd dis cl os e th e tota l a m ount of


Documentation deadlines D ocum enta tion m us t b e r ea dil y a v a il a b l e b y th e da te on w h ich th e tr a ns f er p r icing inf or m a tion r etur n is due a nd m us t b e k ep t a l ong w ith 4

Transfer pricing penalties r eg a r dl es s of th eir na tur e (i. e. , r eg a r dl es s of w h eth er th ey a r e item s of incom e, ex p ens e or deduction). I n a ddition, tr a ns f er p r icing incom e a dj us tm ents im p os ed b y th e D G I ca n r es ul t in s ur ch a r g es a nd p ena l ty inter es t.

Penalty relief T h er e is cur r entl y no p ena l ty r el ief r eg im e in p l a ce.


3 1 8

P anama

(continued)

Statute of limitations on transfer pricing assessments of a n a m ended r etur n.

Frequency of tax audit and transfer pricing scrutiny by the tax authority g ener a l ta x a udit is m edium . I n th e p a s t coup l e of y ea r s , th e D G I h a s r eq ues ted tr a ns f er p r icing docum enta tion f r om 4

ta x p a y er s r eg a r ding

APA opportunity C ur r entl y , no A P A p r og r a m

h a s b een es ta b l is h ed.

Impact of new OECD BEPS Action 8–10 guidelines m a nda tor y f or ta x p a y er s .

a m end th e cur r ent tr a ns f er p r icing r eg ul a tions , a nd if s o, th e tim e f r a m e in w h ich th a t w oul d occur . T h us , it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

3 1 9


P ap u aa N N ewew G G u u inea inea (continued) Taxing authority and tax law

Relevant regulations and rulings P a p ua N ew G uinea ’ s doub l e ta x a g r eem ents (D iv is ion 1 5 ). I T A 1 9 5 9 (th e C ir cul a r ).

OECD Guidelines treatment A l th oug h P a p ua N ew G uinea (P N G ) is not a m em b er countr y of th e O E C D , th e O E C D G uidel ines a r e a ck now l edg ed a s a n im p or ta nt, w ith indus tr y a nd ta x p r a ctitioner s in m a ny countr ies . T h e C ir cul a r s ta tes th a t th e O E C D G uidel ines s h oul d b e f ol l ow ed in th e a b s ence of g uida nce in ter m s of th e C ir cul a r , th e p r ov is ions of D iv is ion 1 5 or th e doub l e ta x a g r eem ents enter ed into b y P N G . to b e r el ev a nt a nd r ecom m ends th a t ta x p a y er s f ol l ow th e g uida nce in es ta b l is h ing a r m ’ s - l eng th conditions in inter na tiona l a g r eem ents th is is s ue.

Documentation requirements T h e g ener a l r eq uir em ents of th e A ct r eq uir e ta x p a y er s to k eep p r op er r ecor ds r el a ting to th eir tr a ns f er p r icing . H ow ev er , th er e is no

Priorities/pricing methods D iv is ion 1 5 a nd th e doub l e ta x a g r eem ents enter ed into b y P N G do not p r es cr ib e a ny p a r ticul a r m eth odol og y f or a s cer ta ining a n a r m ’ s l eng th cons ider a tion. G iv en th a t th er e is no p r es cr ib ed l eg is l a tiv e p r ef er ence, th e C om m is s ioner G ener a l g ener a l l y w oul d s eek to us e th e m os t a p p r op r ia te m eth od, p er th e O E C D G uidel ines .

Return disclosures/related-party disclosures ex ceeded P a p ua N ew G uinea n k ina (P G K ) 1 0 0 , 0 0 0 in v a l ue (ex cl uding th e ca p ita l v a l ue of a ny r el a ted- p a r ty l oa ns ) or w h en l oa ns w ith r el a ted p a r ties h a v e a n a g g r eg a te ca p ita l v a l ue ex ceeding P G K 2 m il l ion a t a ny tim e dur ing th e y ea r .


3 2 0

P ap u a N ew G u inea

(continued)

• I nter na tiona l r el a ted- p a r ty tr a ns a ction ty p es a nd q ua ntum • C ountr ies w ith w h ich th e ta x p a y er h a s inter na tiona l r el a ted- p a r ty tr a ns a ctions • P er centa g e of tr a ns a ctions cov er ed b y contem p or a neous docum enta tion • T r a ns f er p r icing m eth odol og ies s el ected a nd a p p l ied f or ea ch inter na tiona l r el a ted- p a r ty ty p e • D eta il s of b r a nch op er a tions

Transfer pricing-specific returns P G K 1 0 0 , 0 0 0 in v a l ue (ex cl uding th e ca p ita l v a l ue of a ny r el a ted- p a r ty l oa ns ) or w h en l oa ns w ith r el a ted p a r ties h a v e a n a g g r eg a te ca p ita l v a l ue ex ceeding P G K 2 m il l ion a t a ny tim e dur ing th e y ea r .

Documentation deadlines A s a g ener a l r ul e, th e C om m is s ioner G ener a l cons ider s th a t ta x p a y er s s h oul d contem p or a neous l y docum ent th e p r oces s th ey h a v e f ol l ow ed a nd th eir a na l y s is in deter m ining tr a ns f er p r ices in th eir ef f or ts to com p l y w ith th e a r m ’ s - l eng th p r incip l e. T h is s h oul d incl ude

C ir cul a r b y no l a ter th a n th e da te of l odg m ent of th e ta x r etur n a f f ected b y th os e tr a ns a ctions .

Transfer pricing penalties p r ov is ions w il l a p p l y to def a ul t, ev a s ion or om is s ion r el a ting to tr a ns f er p r icing . T h e p ena l ty , a dditiona l ta x a nd of f ens e p r ov is ions a p p l ica b l e in th e ev ent of def a ul t or om is s ion in th e com p l etion of th e ta x r etur n or ev a s ion of ta x a tion conta ined in th e A ct s tip ul a te a l ia b il ity f or a dditiona l ta x or p ena l ty of doub l e th e dif f er ence b etw een th e ta x p r op er l y p a y a b l e a nd th e ta x th a t w oul d b e p a y a b l e b a s ed on th e r etur n a s l odg ed. T h e C om m is s ioner G ener a l h a s th e dis cr etion to r em it th e P G K 1 , 0 0 0 a nd not ex ceeding P G K 5 0 , 0 0 0 . I n a ddition, th e cour t m a y or der th e ta x p a y er to p a y to th e C om m is s ioner G ener a l a s um not ex ceeding doub l e th e a m ount of incom e ta x or div idend (w ith h ol ding ) ta x th a t w oul d h a v e b een a v oided if th e s ta tem ent in th e r etur n h a d a dditiona l ta x im p os ed b y th e C om m is s ioner G ener a l .

Penalty relief Statute of limitations on transfer pricing assessments T h er e g ener a l l y is no s ta tute of l im ita tions w ith r es p ect to tr a ns f er p r icing a dj us tm ents .

3 2 1


P ap u a N ew G u inea

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit is h ig h . I f tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e l ik el ih ood th a t th e m eth odol og y w il l b e ch a l l eng ed w oul d dep end on th e docum enta tion a v a il a b l e a nd th e a p p r op r ia tenes s of th e m eth odol og y ch os en. T h e C om m is s ioner G ener a l , a s a r ul e, a l l oca tes r es our ces f or tr a ns f er p r icing ca s es a ccor ding to th e p er ceiv ed r is k to r ev enue f r om

cons ta ntl y r etur ning l os s es a r e a t th e g r ea tes t r is k of a tr a ns f er p r icing r ev iew . T a x p a y er s s h r es ident in a m otiv a ted b y a s a r es ul t of

oul d b e a w a r e th a t th e C om countr y w ith l ow er ta x r a tes ta x , r a th er th a n s tr ictl y com its dea l ing s w ith a r el a ted- p

m is s ioner G ener a l m a y p a y cl os er a ttention to a tr a ns a ction inv ol v ing a n a s s ocia ted entity th a n P N G . T h e p er cep tion ex is ts th a t tr a ns a ctions inv ol v ing l ow - ta x j ur is dictions a r e of ten m er cia l r ea s ons . T h is w il l b e th e ca s e p a r ticul a r l y w h en th e P N G entity h a s ong oing ta x l os s es a r ty in a l ow er - ta x j ur is diction.

APA opportunity T h e C om m is s ioner G ener a l s up p or ts h a v ing a n A P A p r og r a m

op er a ting in P N G b ut no cur r ent A P A p r og r a m

ex is ts .

Impact of new OECD guidelines H ow w il l y our j ur is diction f r om

a dom es tic p er s p ectiv e (i. e. not in a tr ea ty contex t) a p p l y th e a m ended O E C D T P G uidel ines 2 0 1 6 w h ich

I f p os s ib l e, p l ea s e incl ude a s h or t r ef er ence ex p l a ining h ow y ou com e to y our a ns w er (e. g . , y our countr y h a s a n ex p l icit r ef er ence in its dom es tic l a w to th e l a tes t a p p r ov ed v er s ion of th e O E C D g uidel ines ) G uidel ines s h oul d b e f ol l ow ed in th e a b s ence of g uida nce in ter m s of th e C ir cul a r , th e p r ov is ions of D iv is ion 1 5 or th e doub l e ta x a g r eem ents enter ed into b y P N G .


3 2 2

P ar ag u ay Taxing authority and tax law Subsecretaría de Estado de Tributación) 4

4

Relevant regulations and rulings s ta tes a g ener a l dis p os ition r el a ted to s p r icing r eg ul a tion a nd a l l ow s th e P a r a g p ur p os es onl y . D ecr ee N o. 1 . 8 3 2 / 2 0 1 4 A uth or ity coul d incl ude oth er p r oducts

a l e p r ice a dj us tm ent (L a w N o. 5 0 6 1 / 1 3 ). T h is new dis p os ition is cons ider ed a s a k ind of tr a ns f er ua y T a x A uth or ity to a m end p r ices r el a ted to ex p or ta tion op er a tions f or cor p or a te incom e ta x es ta b l is h es th e s a l e p r ice a dj us tm ents on s oy b ea ns a nd th eir der iv a tiv es . T h e P a r a g ua y a n T a x in th e f utur e.








3 2 3


P ar ag u ay

(continued)







3 2 4

P er u Taxing authority and tax law Superintendencia Nacional de Administración Tributaria

Relevant regulations and rulings 4 r eg ul a tions in P er u.

4

T r a ns f er p r icing r ul es h a v e b een ef f ectiv e in P er u s ince 1 J a nua r y 2 0 0 1 . O v er th e y ea r s , th es e r ul es h a v e under g one s ev er a l ch a ng es

P er uv ia n T r a ns f er p r icing r ul es a p p l y b oth to cr os s - b or der a nd dom es tic tr a ns a ctions b etw een r el a ted p a r ties a nd a l l tr a ns a ctions w ith r es idents in ta x h a v en j ur is dictions . T h e tr a ns f er p r icing a dj us tm ents a r e a p p l ica b l e s ol el y w h en (1 ) th e v a l ue a g r eed up on b y th e r el a ted p a r ties deter m ines a l ow er ta x a b l e incom e th a n th e one a t a r m ’ s - l eng th or (2 ) in a ny oth er ca s e, if th e ta x a uth or ity cons ider s th a t th e tr a ns f er p r icing a dj us tm ent a f f ects th e ta x deter m ined in P er u f or a noth er r el a ted- p a r ty tr a ns a ction. T h e r eg ul a tions cons ider th a t a l ow er a m ount of incom e ta x is • A def er r a l of incom e is ev idenced. • H ig h er ta x l os s es h a v e b een deter m ined th a n th os e th a t w oul d h a v e a ccr ued a t a r m ’ s - l eng th .

OECD Guidelines treatment T h e P I T L r ef er s to th e O E C D G uidel ines a s a s our ce of inter p r eta tion f or tr a ns f er p r icing a na l y s is , a s l ong a s th ey do not contr a dict th e P IT L .


•

4 inf or m a tiv e r etur n

• p ol icies . •

indiv idua l tr a ns a ctions .

3 2 5


P er u

(continued)


F or cr os s - b or der tr a ns a ctions inv ol v ing com m odities a nd oth er p r oducts , w h os e p r ices a r e s et b y r ef er ence to com m odity p r ices , th e th e a r m ’ s - l eng th p r ice f or P er uv ia n incom e ta x p ur p os es s h a l l b e deter m ined b y r ef er ence to th e q uoted p r ice of (i) th e da te of s h ip m ent of th e com m odities ex p or ted or (ii) th e da te of dis em b a r k a tion of th e com m odities im p or ted. b y th es e new tr a ns f er p r icing r ul es , th e com m odity p r ices a nd q uotes to b e cons ider ed, th e inter na tiona l m a r k et, th e com m odity com m odity f ea tur es a nd th e econom ica l l y r el ev a nt ch a r a cter is tics of th e p a r ticul a r tr a ns a ction.

Return disclosures/related-party disclosures T h e m a in deta il s to b e dis cl os ed in th e tr a ns f er p r icing inf or m a tion r etur n incl ude th e a m ount of th e tr a ns a ctions , th e tr a ns f er p r icing m eth od s el ected a nd th e r el a ted- p a r ty w ith w h om th e tr a ns a ctions w er e m a de, a s w el l a s th e r es ul ts of th e tes ted p a r ty , th e inter q ua r til e r a ng e of s el ected com p a r a b l es a nd th e a m ount of th e tr a ns f er p r icing a dj us tm ents .

Transfer pricing-specific returns • T h e a m ount of inter com p a ny tr a ns a ctions ex ceeds P E N 2 0 0 , 0 0 0 . • T h e com p a ny h a s b een eng a g ed in tr a ns a ctions f r om , to or th r oug h a l ow - ta x j ur is diction f or w h ich th e m a r k et v a l ue is l es s th a n th e com p uta b l e cos t. •

4 • •

Documentation deadlines th e cor r es p onding tr a ns f er p r icing r etur n.


3 2 6

P er u

(continued)


T h e a dj us tm ents to a nnua l ta x a b l e incom e r es ul ting f r om

th e ta x a uth or ity ’ s a p p l ica tion of th e tr a ns f er p r icing p r ov is ions w il l b e s ub j ect

Penalty relief T h e p ena l ty r eductions th a t a ta x p a y er ca n b e s ub j ect to f or not com p l y ing w ith th e ob l ig a tion to h a v e a tr a ns f er p r icing tech nica l s tudy • • •

Statute of limitations on transfer pricing assessments A ccor ding to A r ticl es 8 7 - 7 a nd 4 3 of th e P er uv ia n T a x C ode, th e s ta tute of l im ita tions f or incom e ta x a s s es s m ents is f our y ea r s a f ter 1

Frequency of tax audit and transfer pricing scrutiny by the tax authority g ener a l a udit. T h e P er uv ia n ta x a dm inis tr a tion h a s a l r ea dy initia ted tr a ns f er p r icing a udits . A l s o, it h a s is s ued l etter s r eq ues ting th a t ta x p a y er s a m end th eir ta x r etur ns b a s ed on th e r es ul ts of th e tr a ns f er p r icing s tudies p r ev ious l y p r es ented. T h e l ik el ih ood th a t th e tr a ns f er p r icing

1

3 2 7


P er u

(continued)

APA opportunity

Impact of new OECD BEPS Action 8–10 guidelines G uidel ines w il l b ecom e ef f ectiv e f or l oca l p ur p os es , a nd it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .


3 2 8

P h il ip p ines Taxing authority and tax law


r eg ul a tions a r e is s ued, a l l concer ns of tr a ns f er p r icing s h a l l b e r es ol v ed in a ccor da nce w ith th em .

tr a ns a ctions b etw een a s s ocia ted enter p r is es . T r a ns a ctions enter ed into b ef or e th e tr a ns f er p r icing r eg ul a tions b eca m e ef f ectiv e s h a l l b e g ov er ned b y th e l a w s a nd oth er a dm inis tr a tiv e is s ua nces p r ev a il ing a t th e tim e th e contr ol l ed tr a ns a ctions w er e enter ed into. T h e tr a ns f er p r icing r eg ul a tions took ef f ect on F eb r ua r y 9 , 2 0 1 3 .

a s th e us e of ta x - ex em p t entities or th os e w ith s p ecia l ta x p r iv il eg es , inter com p a ny l oa ns a nd a dv a nces , cos t s h a r ing , a nd th e s up p l y of g oods a nd s er v ices . D ur ing a n a udit, p a r ticul a r a ttention s h a l l b e g iv en to tr a ns f er p r icing is s ues , w h ich w il l b e f a ctor ed into th e a udit

cov er s a l l inter na l r ev enue ta x es f or ta x a b l e y ea r 2 0 0 9 a nd h a s to b e com p l eted no l a ter th a n s ix m onth s f r om of a uth or ity .

th e is s ua nce of th e l etter

ta x p a y er s a s h ig h - r is k (m or e th a n 3 0 % b el ow th e b ench m a r k ), m edium - r is k (1 6 % to 3 0 % b el ow th e b ench m a r k ) a nd l ow - r is k (1 5 % or l es s

OECD Guidelines treatment T h e tr a ns f er p r icing r eg ul a tions a r e l a r g el y b a s ed on th e O E C D G uidel ines a nd r ef er to th em

3 2 9

f or f ur th er g uida nce a nd ex a m p l es .


P h il ip p ines

(continued)

Documentation requirements T h e tr a ns f er p r icing r eg ul a tions r eq uir e contem p or a neous docum enta tion to b e m a inta ined a nd r eta ined. I t is contem p or a neous if it ex is ts or is b r oug h t into ex is tence a t th e tim e th e a s s ocia ted enter p r is es dev el op or im p l em ent a ny a r r a ng em ent th a t m ig h t r a is e tr a ns f er p r icing is s ues . T h es e a r r a ng em ents s h oul d b e r ev iew ed w h en p r ep a r ing ta x r etur ns .

ex a m ina tion.

• • N a tur e of th e b us ines s or indus tr y a nd m a r k et conditions • C ontr ol l ed tr a ns a ctions • A s s um p tions , s tr a teg ies , p ol icies • C os t contr ib ution a r r a ng em ents (C C A s ) • C om p a r a b il ity , f unctiona l a nd r is k a na l y s is • • A p p l ica tion of th e tr a ns f er p r icing m eth od • • I ndex to docum ents


ca s e s h a l l b e us ed.

Return disclosures/related-party disclosures incom e ta x r etur n.

Transfer pricing-specific returns Documentation deadlines T h e tr a ns f er p r icing r eg ul a tions r eq uir e contem p or a neous docum enta tion. H ow ev er , th e docum enta tion is not r eq uir ed to b e s ub m itted


3 3 0

P h il ip p ines

(continued)

Transfer pricing penalties T h e tr a ns f er p r icing r eg ul a tions a dop t th e p r ov is ions of th e T a x C ode a nd oth er a p p l ica b l e l a w s in th e im p os ition of p ena l ties on a ny

Penalty relief T h er e is no p ena l ty r el ief r eg im e in th e tr a ns f er p r icing r eg ul a tions .

Statute of limitations on transfer pricing assessments f r a ud w ith th e intent to ev a de ta x , in w h ich ca s e th e s ta tute of l im ita tions is 1 0 y ea r s f r om

th e dis cov er y of f r a ud.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is h ig h . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a n a udit is h ig h . T h e l ik el ih ood is a l s o h ig h th a t if tr a ns f er p r icing is r ev iew ed, th en th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed.

APA opportunity

Impact of new OECD BEPS Action 8–10 guidelines a r ea .

3 3 1


P o l and Taxing authority and tax law • • s up er v is ion of th e unif or m

a p p l ica tion of th e ta x l a w

• C or p or a te I ncom e T a x A ct (C I T A ct) • P er s ona l I ncom e T a x A ct (P I T A ct) • T a x O r dina nce A ct • D ecr ees


4

4

• • • p ur p os e of cor p or a te incom e ta x (J our na l of L a w s 2 0 1 5 , N o. 6 0 0 ) • p ur p os e of p er s ona l incom e ta x (J our na l of L a w s 2 0 1 5 , N o. 5 9 9 ) • es tim a ting th e p r ices in tr a ns a ctions conducted b y th es e ta x p a y er s , a nd r eg a r ding th e m eth od a nd p r ocedur e f or el im ina ting doub l e ta x a tion of ta x p a y er s in ca s e of r el a ted p a r ties ’ incom e a dj us tm ent (J our na l of L a w s 2 0 1 4 , I tem 1 1 8 6 , a s a m ended) • es tim a ting th e p r ices in tr a ns a ctions conducted b y th es e ta x p a y er s , a nd r eg a r ding th e m eth od a nd p r ocedur e f or el im ina ting doub l e 4 r ef er r ed to a s th e T P D ecr ee

4 3 0 d of th e P I T A ct. A r ticl e 9 a of th e C I T A ct a nd A r ticl e 2 5 a of th e P I T A ct p r ov ide deta il ed g uida nce r eg a r ding tr a ns a ctions th a t a r e s ub j ect to docum enta tion r eq uir em ents , incl uding th e v a l ue l im its a nd ca teg or ies of s uch tr a ns a ctions . A ccor ding to A r ticl e 9 a of th e C I T A ct a nd A r ticl e 2 5 a of th e P I T A ct, th e docum enta tion r eq uir em ents a l s o encom p a s s tr a ns a ctions in w h ich p a y m ent is m a de dir ectl y or indir ectl y to a n entity cons ider ed to b e in a ta x h a v en. T h e l is t of th es e ter r itor ies a nd countr ies is r ul es . T h e decr ee w a s is s ued s ep a r a tel y f or p er s ona l a nd cor p or a te ta x a tion p ur p os es .


3 3 2

P o l and

(continued)

A s of 1 J a nua r y 2 0 0 7 , docum enta tion r eq uir em ents a l s o a p p l y to P ol a nd- b a s ed p er m a nent es ta b l is h m ents of f or eig n com p a nies . es ta b l is h ing p a r tner s h ip s .

incr ea s ed tr a ns f er p r icing r eq uir em ents (a s m entioned b el ow ). decr ees m or e p r ecis el y des cr ib e th e tr a ns f er p r icing m eth ods a nd intr oduce th e cor r es p onding a dj us tm ent p r ocedur e (b a s ed on th e O E C D G uidel ines ), th e A r b itr a tion C onv ention a nd th e C ode of C onduct f or th e A r b itr a tion C onv ention. P r ov is ions of th e decr ees a l s o a p p l y to P ol is h p er m a nent es ta b l is h m ents of f or eig n com p a nies a nd P ol is h ta x p a y er s ’ f or eig n p er m a nent es ta b l is h m ents .

Th e am ended decrees im p lem ent ed in J uly 2 0 1 3 : • • • • th a t ty p e • E x p r es s l y indica te th a t th e cos t b a s e us ed f or es tim a ting th e f ee f or l ow - v a l ue- a dded s er v ices s h oul d ex cl ude s h a r eh ol der ex p ens es •

s ub m it, a l ong w ith th eir a nnua l C I T r etur n, a p r og r es s r ep or t on th e im p l em enta tion of th e m eth od s tip ul a ted in th e A P A decis ion. A P A s m a y a l s o b e concl uded b y p er m a nent es ta b l is h m ents of f or eig n com p a nies in P ol a nd, a s w el l a s p er m a nent es ta b l is h m ents of P ol is h ta x p a y er s b a s ed a b r oa d.

Definition of “related parties”

• T h e dom es tic entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing th e f or eig n entity or h a s a s h a r e in its ca p ita l . • T h e f or eig n entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing a dom es tic entity or h a s a s h a r e in its ca p ita l . • T h e s a m e l eg a l a nd na tur a l p er s ons p a r ticip a te dir ectl y or indir ectl y a t th e s a m e tim e in m a na g ing or contr ol l ing a dom es tic entity a nd f or eig n entity or h a v e s h a r es of th eir ca p ita l . • T h e dom es tic entity p a r ticip a tes dir ectl y or indir ectl y in m a na g ing or contr ol l ing a noth er dom es tic entity or h a s a s h a r e of its ca p ita l . • T h e s a m e l eg a l a nd na tur a l p er s ons p a r ticip a te a t th e s a m e tim e dir ectl y or indir ectl y in m a na g ing or contr ol l ing dom es tic entities or h a v e s h a r es of th eir ca p ita l . C a p ita l r el a tions ex is t if one of th e entities or contr a cting p a r ties h ol ds a t l ea s t a 5 % s h a r e of th e oth er entity ’ s ca p ita l , dir ectl y or indir ectl y . D om es tic entities a r e a l s o cons ider ed r el a ted f or ta x p ur p os es b y v ir tue of f a m il y , p r op er ty or em p l oy m ent r el a tions b etw een th em or b etw een th eir m a na g em ent, s up er v is ion or contr ol p er s onnel , or if th e s a m e p er s on ca r r ies out m a na g em ent, s up er v is ion or contr ol f unctions in b oth of th es e entities .

3 3 3


P o l and ca p ita l r el a tions th r es h ol d f r om

(continued) 5 % to 2 5 % .

I f th e p a r ties to a tr a ns a ction, due to th eir r el a tions h ip , a g r ee to or im p os e ter m s a nd conditions th a t dif f er f r om th os e th a t w oul d b e a g r eed to b y unr el a ted p a r ties , r es ul ting in th e dom es tic entity not r ep or ting incom e f r om th e tr a ns a ction or r ep or ting l ow er incom e th a n w oul d b e ex p ected if th e r el a tions h ip did not ex is t, th e ta x ing a uth or ities m a y a s s es s a dditiona l incom e a nd deter m ine th e ta x due on s uch incom e f or th e dom es tic entity . ta x p a y er s ca r r y ing out tr a ns a ctions w ith th eir p er m a nent es ta b l is h m ents a b r oa d. D om es tic entities tr a ns a cting w ith f or eig n r el a ted p a r ties a r e a l l ow ed to a dj us t th eir incom e if th e f or eig n ta x a uth or ities a s s er t th a t th e tr a ns a ctiona l p r ices do not m eet th e a r m ’ s - l eng th p r incip l e. C ons eq uentl y , a dditiona l incom e of th e f or eig n entity is a s s es s ed, a nd th e ta x due on s uch incom e is deter m ined (th e s o- ca l l ed cor r es p onding a dj us tm ent). H ow ev er , th e P ol is h ta x a uth or ities m us t j us tif y a nd a ccep t p r er eq uis ites f or m a k ing th e a dj us tm ent. A dj us tm ents to th e dom es tic entities ’ incom e w il l b e a l l ow ed on th e b a s is of th e a g r eem ent f or th e a v oida nce of doub l e ta x a tion b etw een P ol a nd a nd th e countr y (i. e. , countr y of th e dom es tic entity ’ s r el a ted- p a r ty ), or on th e b a s is of th e conv ention of 2 3 J ul y 1 9 9 0 f or th e

r el a ted- p a r ty . I n a ddition, r eg ul a tions r el a ting to incom e a dj us tm ent a l s o a p p l y to p er m a nent es ta b l is h m ents . P ol is h r eg ul a tions do not a l l ow f or a na l og ous el im ina tion of doub l e ta x a tion in tr a ns a ctions b etw een dom es tic r el a ted entities .

OECD Guidelines treatment T h e P ol is h tr a ns f er p r icing r eg ul a tions do not r ef er to th e O E C D G uidel ines dir ectl y . N ev er th el es s , th e ta x a uth or ities s om etim es r ef er to th e O E C D G uidel ines w h en a p p l y ing tr a ns f er p r icing p r incip l es (e. g . , dur ing A P A neg otia tions ). A l s o, r ef er ence to th e O E C D G uidel ines is m a de w ith r es p ect to ta x h a v ens . A ccor ding to A r ticl e 9 a , C l a us e 6 of th e C I T A ct (a nd A r ticl e 2 5 a , C l a us e 6 of th e P I T A ct), th e l is t of

inv ol v ing s h if ts of r is k s a m ong g r oup com p a nies (th e r eg ul a tions a r e des ig ned to im p l em ent th e O E C D G uidel ines in th e l oca l l eg is l a tion a nd cov er not onl y f or eig n b ut a l s o l oca l r es tr uctur ing p r oj ects ).

Documentation requirements T a x p a y er s ca r r y ing out tr a ns a ctions w ith r el a ted p a r ties a nd p er m a nent es ta b l is h m ents of f or eig n com p a nies f unctioning in P ol a nd, a s

• • •


3 3 4

P o l and

(continued)

a ta x h a v en a r e ob l ig a ted to p r ep a r e ta x docum enta tion f or s uch tr a ns a ctions w h en th e tota l tr a ns a ction a m ount in a ta x y ea r ex ceeds N ew tr a ns f er p r icing r eg ul a tions (b inding f r om

J a nua r y 2 0 1 7 ) p r ov ide a n ex em p tion f r om

th e docum enta tion r eq uir em ent f or entities

•

• 4

4

•

• F unctions p er f or m ed b y th e p a r ties to th e tr a ns a ction (w ith cons ider a tion of a s s ets em p l oy ed a nd r is k s b or ne) • E x p ected tr a ns a ctiona l cos ts a nd th e m eth od a nd p a y m ent due da tes • • • • T h es e el em ents a r e m a nda tor y , s o if th e docum enta tion does not incl ude a ny of th es e r eq uir em ents , th e ta x a uth or ities m a y dis r eg a r d it. I n a ddition, ta x p a y er s a r e ob l ig ed to p r ep a r e s ta tutor y P ol is h tr a ns f er p r icing docum enta tion a nd p r ov ide it to th e P ol is h ta x a uth or ities a t th eir r eq ues t.

• • • • A l is t p r ov iding th e des cr ip tion a nd a na l y s is of th e r el a ted p a r ties ’ ex p ens es a r is ing f r om

th e s er v ice

• A l is t of s h a r eh ol der ex p ens es • A des cr ip tion of th e cos t- s h a r ing k ey • A l is t of s er v ices a v a il a b l e on dem a nd • • D ocum enta tion of a g iv en s er v ice, w h ich ca n b e s ub m itted to th e ta x a uth or ities

3 3 5


P o l and

(continued)

• •

• • • • r ep or t


T h e a m ended decr ees g iv e tr a ditiona l m eth ods p r ior ity f or th e p ur p os e of a s s es s ing incom e in r el a ted- p a r ty tr a ns a ctions (p r ev ious l y ,

• • A cces s to r el ia b l e da ta a b out s im il a r tr a ns a ctions a nd com p a nies in th e m a r k et • C om p a r a b il ity of th e r es p ectiv e tr a ns a ctions a nd com p a nies

a uth or ities .

Return disclosures/related-party disclosures I nf or m a tion a b out r el a ted- p a r ty tr a ns a ctions is one of th e el em ents of th e a nnua l incom e ta x r etur n. T h e ta x p a y er is r eq uir ed to indica te in th e r etur n w h eth er it w a s r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion.

• D is cl os ing in a nnua l incom e ta x r etur ns w h eth er th e ta x p a y er w a s r eq uir ed to p r ep a r e s ta tutor y tr a ns f er p r icing docum enta tion of tr a ns a ctions w ith r el a ted entities • • •

T h e tota l a m ount of l ia b il ities or r eceiv a b l es r es ul ting f r om


a l l a g r eem ents concl uded w ith th e s a m e nonr es ident in th e ta x y ea r

3 3 6

P o l and

(continued)

•

O ne p a r ty to th e a g r eem ent p a r ticip a tes dir ectl y or indir ectl y in th e m a na g em ent or contr ol of th e oth er p a r ty to th e a g r eem ent or h a s a s h a r e in its ca p ita l entitl ing it to a t l ea s t 5 % of a l l v oting r ig h ts •

A noth er entity , not b eing p a r ty to a n a g r eem ent, a t th e s a m e tim e p a r ticip a tes dir ectl y or indir ectl y in th e m a na g em ent or contr ol of ea ch p a r ty to th e a g r eem ent or h a s a s h a r e in th eir ca p ita l entitl ing it to a t l ea s t 5 % of a l l v oting r ig h ts in ea ch of th e p a r ties to th e a g r eem ent

• th e ta x y ea r in w h ich w ith h ol ding ta x w a s p a id (I F T - 2 / I F T - 2 f or m ); m or eov er , th e ta x p a y er is r eq uir ed to (a t th e r el a ted- p a r ty ’ s r eq ues t) 4 r etur n, a p r og r es s r ep or t on th e im p l em enta tion of th e m eth od s tip ul a ted in th e A P A decis ion. T h e f or m a t of th is r ep or t is deta il ed in m eth od f or cor p or a te incom e ta x p ur p os es (J our na l of L a w s N o. 9 9 , I tem

6 8 7 ).


docum ent w il l b e s ig ned b y a m em b er of th e m a na g em ent b oa r d.

Documentation deadlines T h er e is no dea dl ine f or p r ep a r ing th e tr a ns f er p r icing docum enta tion; h ow ev er , ta x p a y er s a r e r eq uir ed to s ub m it th e docum enta tion w ith in s ev en da y s of th e ta x a uth or ities ’ r eq ues t. N ew tr a ns f er p r icing r eg ul a tions (b inding f r om

J a nua r y 2 0 1 7 ) intr oduce a dea dl ine f or p r ep a r a tion of th e docum en¬ ta tion no l a ter th a n

Transfer pricing penalties I f th e ta x p a y er does not s ub m it tr a ns f er p r icing docum enta tion a t th e r eq ues t of th e P ol is h ta x a uth or ities , a 5 0 % ta x r a te p ena l ty is

Penalty relief th e da te of a r eq ues t), th e p ena l ty r a te f or incom e a s s es s ed ca n b e r educed to th e nor m a l ta x r a te (i. e. , 1 9 % ).

3 3 7


P o l and

(continued)

Statute of limitations on transfer pricing assessments T h er e a r e no s p ecia l tim e l im it p r ov is ions a p p l ica b l e to inter com p a ny tr a ns a ctions . T h e g ener a l s ta tute of l im ita tions f or ta x a s s es s m ent f r om

th e end of th e ca l enda r y ea r in w h ich th e ta x f el l due.

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n a utum n 2 0 1 5 , a new r ig h t- w ing g ov er nm ent ca m e into p ow er ; th e a dm inis tr a tion is f ocus ed on incr ea s ing ta x r ev enues . A m ong oth er a r ea . T h us , th e l ik el ih ood of a n a nnua l tr a ns f er p r icing a udit, in g ener a l , h a s b een h ig h s ta r ting f r om

a cces s to th e O r b is da ta b a s e (p ur ch a s ed m or e l icens es ). T h is inf or m a tion w il l a l l ow th em b ef or e s ta r ting ta x a udits , a s w el l a s m or e p r ecis e s el ection of entities f or a udits .

th e b eg inning of 2 0 1 6 . T h e deep es t

to conduct m or e deta il ed s cr eening s of entities

T h e l ik el ih ood is h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit. T h e ta x a uth or ities us ua l l y eng a g e in a dedica ted tr a ns f er p r icing a udit if th ey notice ir r eg ul a r ities in inter com p a ny s ettl em ents or b el iev e th a t A l th oug h th e a ccep ta nce of th e O E C D G uidel ines a nd inter na tiona l p r a ctices h a s incr ea s ed, th e l oca l a p p r oa ch tends to p r ev a il dur ing a udits . L oca l b ench m a r k s a r e p r ef er r ed ov er P a n- E ur op ea n ones (new tr a ns f er p r icing r ul es cr ea te a n ob l ig a tion f or ta x p a y er s w h os e

countr ies . T h e com p l ia nce r eg im e is s til l r ig or ous in P ol a nd. C our t r ul ing s f ocus m a inl y on l eg a l r a th er th a n econom ic is s ues . T h e m os t f r eq uentl y

of ta x a v oida nce, A P A s , unif or m cl a us e.

a p p l ica tion of th e ta x l a w in w r itten ta x inter p r eta tions a nd a p p l ica tion of th e new l a w cir cum v ention

O n 1 5 J ul y 2 0 1 6 , new r eg ul a tions w er e intr oduced to th e T a x O r dina nce A ct a im ing a t l im iting a g g r es s iv e ta x p l a nning (th e s o- ca l l ed l a w cir cum v ention cl a us e). T h es e r eg ul a tions a l l ow a uth or ities to dis r eg a r d th e a ctions ta k en b y a ta x p a y er if its m a in a im w a s to a ch iev e


3 3 8

P o l and

(continued)

APA opportunity A ct. A n A P A concl uded f or a p a r ticul a r tr a ns a ction is b inding on th e ta x a uth or ities w ith r eg a r d to th e m eth od s el ected b y th e ta x p a y er . A P A s in P ol a nd m a y a p p l y to tr a ns a ctions th a t h a v e not y et b een ex ecuted or tr a ns a ctions th a t a r e in p r og r es s a t th e tim e th e ta x p a y er • • •

A dom es tic entity a nd its r el a ted f or eig n p a r ty •

A dom es tic entity r el a ted to a f or eig n entity a nd a noth er dom es tic entity r el a ted to th e s a m e f or eig n entity

• of a dom es tic entity , b ut onl y a f ter cons ul ta tions a nd up on ob ta ining cons ent is s ued b y th e ta x a uth or ities of th e r el a ted f or eig n entity . • th e cons ent of a l l f or eig n entities ’ ta x a uth or ities is r eq uir ed to concl ude s uch a n a g r eem ent. T h er e a r e no tr a ns a ction v a l ue l im its to b e cov er ed b y th e A P A s . T o s ub m it a n a p p l ica tion f or a n A P A , th e ta x p a y er m us t p a y a f ee, • • • • • A des cr ip tion of th e m a nner of a p p l ica tion of th e s ug g es ted m eth od, w ith a n indica tion of th e p r incip l es f or p r ice ca l cul a tion, f or eca s ts a nd a na l y s es up on w h ich th e ca l cul a tion is b a s ed • A des cr ip tion of th e cir cum s ta nces th a t m a y a f f ect th e p r ices • T h e docum ents th a t m a y deter m ine th e tr a ns a ction p r ice (a g r eem ents , a r r a ng em ents a nd oth er docum ents indica ting th e intentions of th e p a r ties to th e tr a ns a ction) • T h e s ug g es ted l eng th of th e A P A a r r a ng em ent • A l is t of entities w ith w h ich th e tr a ns a ction w il l b e concl uded, incl uding th eir a g r eem ent to s ub m it to th e ta x ing a uth or ities a l l docum ents a nd p r ov ide neces s a r y ex p l a na tions w ith r eg a r d to th e r el ev a nt tr a ns a ction; th e a p p l ica tion m us t b e s ub m itted in P ol is h

• T h e unil a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in s ix m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e. • T h e b il a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in 1 2 m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e. • T h e m ul til a ter a l A P A m us t b e is s ued w ith out unneces s a r y del a y w ith in 1 8 m onth s of th e s ta r t of th e A P A a p p l ica tion p r ocedur e. f r om th e T a x O r dina nce A ct a p p l ies to th e A P A . I n cons eq uence, th e a b ov e tim e l im its f or th e A P A p r ocedur e m a y b e ex tended, if neces s a r y .

3 3 9


P o l and

(continued)

cr iter ia a p p l ied in concl uding th e A P A h a v e not ch a ng ed, or th e entity a p p l ies f or a n ex tens ion of th e A P A no l a ter th a n s ix m onth s b ef or e it ex p ir es . T h e decis ion is v a l id f r om th e da te of its del iv er y to a l l p a r ties (incl uding P ol is h a nd f or eig n, if a p p l ica b l e, ta x a uth or ities ).

• P os s ib il ity to a p p l y f or A P A f or a f ew tr a ns a ctions cov er ed b y one a p p l ica tion (f ee is p r op or tiona l l y incr ea s ed dep ending on th e num b er of tr a ns a ctions ) • A P A cov er ing C C A s • • dis continua nce of th e p r oceeding s is to b e p r ov ided to ta x a uth or ities • •

Impact of new OECD BEPS Action 8–10 guidelines tr a ns a ctions th ey s h oul d b e a p p l ied to, a nd th is is l ik el y to b e deter m ined b a s ed on f utur e p r a ctice.


3 4 0

P o r tu g al Taxing authority and tax law Autoridade Tributária e Aduaneira)

Relevant regulations and rulings A r ticl e 6 3 of th e C or p or a te I ncom e T a x C ode a r ticul a tes th e a r m ’ s - l eng th p r incip l e a nd p r ov ides g uida nce a b out tr a ns f er p r icing in P or tug a l . A n up da ted w r ite- up of A r ticl e 6 3 of th e C or p or a te I ncom e T a x C ode ca m e into f or ce on 1 6 J a nua r y 2 0 1 5 f ol l ow ing th e p ub l ica tion of L a w N o. 2 / 2 0 1 4 . 44 a g r eem ents , docum enta tion r eq uir em ents a nd th e cor r es p onding a dj us tm ents p r ocedur e. A / 2 0 0 8 on 1 6 J ul y 2 0 1 5 (w h ich ca m e into f or ce on 1 7 J ul y ) a nd is cur r entl y f or es een in A r ticl e 1 3 8 of th e C or p or a te I ncom e T a x C ode. C F C s a nd a nti- ta x - h a v en r eg im es m a y b e us ed in th e g ener a l contex t of tr a ns f er p r icing . T h e new A r ticl e 1 2 1 - A a dded to th e C or p or a te I ncom e T a x C ode intr oduced a n ob l ig a tion f or th e m ul tina tiona l g r oup s to s ub m it C b C r ep or ts .

OECD Guidelines treatment T h e P or tug ues e r eg ul a tions a nd ta x p r a ctice f ol l ow th e O E C D G uidel ines .

a ctiv ity . is not y et a dop ted in th e P or tug ues e l eg is l a tion; h ow ev er , th e tr a ns f er p r icing docum enta tion p r ep a r ed l oca l l y a ddr es s es a l l of th e r el ev a nt top ics conta ined th er ein a nd is m or e r ig or ous in ter m s of th e content.

Documentation requirements p r ep a r e contem p or a neous docum enta tion in th e P or tug ues e l a ng ua g e, w h ich s h oul d p r ov ide ev idence of m a r k et p a r ity r eg a r ding th e ter m s a nd conditions a g r eed to, a ccep ted a nd p r a cticed in th e op er a tions m a de w ith r el a ted p a r ties , a s w el l a s ev idence of s el ecting a nd us ing th e b es t m eth od. T h e r eg ul a tions div ide th e docum enta tion b etw een r el ev a nt, s up p or ting docum enta tion a nd th a t w h ich is a p p l ica b l e to C C A s a nd • s ub s ta ntia l l y f a v or a b l e ta x r eg im e or incl uded in th e P or tug ues e of f s h or e b l a ck l is t is a l s o cons ider ed to b e a r el a ted- p a r ty , r eg a r dl es s of a ny oth er r el a ted- p a r ty cr iter ia ) 3 4 1


P o r tu g al

(continued)

• • tw o y ea r s , or f or th e p er iod in w h ich th ey occur r ed (if l es s ) • A f unctiona l a na l y s is of ea ch r el ev a nt tr a ns a ction • T ech nica l s tudies f ocus ing on es s entia l a r ea s of b us ines s • A des cr ip tion of th e m eth od us ed a nd ev idence of h ow th e p r ices a r e ca l cul a ted • I nf or m a tion a b out P or tug ues e com p a r a b l es (g eog r a p h ica l com p a r a b il ity r eq uir em ent) • • A l l inter com p a ny contr a ctua l a g r eem ents a nd unr el a ted- p a r ty a g r eem ents

Priorities/pricing methods T h e tr a ns f er p r icing m eth ods des cr ib ed in th e P or tug ues e l eg is l a tion a r e b a s ed on th e O E C D G uidel ines a nd th er ef or e do not intr oduce 4 m eth od s h oul d b e a p p l ied to a contr ol l ed tr a ns a ction or to a s er ies of tr a ns a ctions to deter m ine w h eth er th os e tr a ns a ctions com p l y w ith th e a r m ’ s - l eng th p r incip l e. ca s e, ex p l a ining not onl y th e r ea s on a cer ta in m eth od is cons ider ed a s th e m os t a p p r op r ia te to tes t w h eth er th e contr ol l ed tr a ns a ctions com p l y w ith th e tr a ns f er p r icing r ul es , b ut a l s o w h y oth er m eth ods a r e r ej ected.

a p p l ica b l e.

Return disclosures/related-party disclosures Informação Empresarial Simplificada • I dentity of th e r el a ted entities • A m ount of tr a ns a ctions conducted w ith ea ch of th e r el a ted p a r ties • r eta ined T h e dea dl ine f or th e s ub m is s ion of s uch r etur n cor r es p onds to th e 1 5 th da y of th e 7 th m onth a f ter th e cor r es p onding ta x y ea r end. T a x p a y er s h a v e to s ta te in g ood f a ith in th is a nnua l r etur n th a t th ey h a v e com p l ied w ith th e contem p or a neous docum enta tion

s h oul d conta in inf or m a tion a b out a l l oca tion of r ev enues (s ep a r a ting th os e r eceiv ed in intr a g r oup tr a ns a ctions f r om s h oul d b e s ub m itted to th e ta x a uth or ities until th e end of th e 1 2 th m onth of th e y ea r f ol l ow ing th e r ep or ting y ea r .


3 4 2

th os e r eceiv ed in

P o r tu g al

(continued)

A ny entity , r es ident or w ith a p er m a nent es ta b l is h m ent in P or tug a l , w h ich is p a r t of a g r oup in w h ich one of th e entities is s ub j ect to th e p r es enta tion of a C b C r ep or t in l ine w ith th e one f or es een in A r ticl e 1 2 1 - A . 1 or 1 2 1 - A . 2 of th e C I T C , s h a l l com m unica te el ectr onica l l y , g r oup ’ s r ep or ting entity .

Transfer pricing-specific returns p r icing a nnex es .

Documentation deadlines I n P or tug a l , th e docum enta tion m us t b e p r ep a r ed b y th e 1 5 th da y of th e 7 th m onth a f ter th e cor r es p onding ta x y ea r - end. H ow ev er , th e ta x a uth or ity m a y , a nd does , a s k f or docum enta tion of tr a ns a ctions a t a ny tim e a f ter th ey ta k e p l a ce.

Transfer pricing penalties F a il ur e to com p l y w ith docum enta tion r eq uir em ents m a y r es ul t in a p os s ib l e s h if t of th e b ur den of p r oof a nd th e a p p l ica tion of s ecr et com p a r a b l es .

• • 4 • p er com p a ny . • y ea r a nd p er com p a ny . T r a ns f er p r icing a dj us tm ents a r e s ub j ect to th e g ener a l ta x p ena l ty r eg im e. P ena l ties f or noncom p l ia nce w ith m a nda tor y a p p l ica b l e f or tr a ns f er p r icing a dj us tm ents a t th e r a te of 4 % p er y ea r .

Penalty relief T h e g ener a l ta x p ena l ty r eg im e a p p l ies in P or tug a l . T h e deter m ina tion of p ena l ties w il l b e m a de on a ca s e- b y - ca s e b a s is .

3 4 3


P o r tu g al

(continued)

Statute of limitations on transfer pricing assessments I n P or tug a l , a s s es s m ent is p os s ib l e dur ing th e f our y ea r s a f ter th e end of th e a s s es s m ent y ea r . A l l P or tug a l - b a s ed com p a nies h a v e a s ta tutor y ob l ig a tion to k eep th eir tr a ns f er p r icing docum enta tion a v a il a b l e (a t th e P or tug ues e es ta b l is h m ent or p r em is es ) a nd in g ood or der f or th e r el ev a nt y ea r f or a 1 0 - y ea r p er iod.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium , a s is th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit. T h e l ik el ih ood is h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit. 4

• • • A tr a ns a ction is cons ider ed a r m ’ s - l eng th onl y if it is w ith in th e com p uted inter q ua r til e r a ng e. • O nl y th e m edia n of th e inter q ua r til e r a ng e of th e b ench m a r k is cons ider ed w h en ta x a dj us tm ents a r e m a de. ch a r g ed to b r a nch es is th e m os t r ecent a r ea of s cr utiny a nd a dj us tm ent. C r os s - b or der r es tr uctur ing s a r e a l s o under intens e s cr utiny , a s

APA opportunity

• • ta x p a y er s now a l s o m a y ch oos e to s ig n a n a g r eem ent w ith one or s ev er a l ta x a uth or ities in j ur is dictions w h er e a doub l e ta x a tion

A PA negot iat ion t im e fram e

• • b ef or e th e b eg inning of th e a p p l ica b l e ta x y ea r ; ta x a uth or ities ’ tim e f r a m e to ev a l ua te th e content of a n A P A p r op os a l is w ith in 1 8 0 da y s in th e ca s e of unil a ter a l a g r eem ents a nd ex tends to a 3 6 0 - da y p er iod in ca s e of b il a ter a l a nd m ul til a ter a l a g r eem ents • C oncl us ion of th e A P A p r oces s


3 4 4

P o r tu g al

(continued)

A P A s m a y not ex ceed a th r ee- y ea r p er iod, w h ich m a y b e r enew a b l e up on a w r itten r eq ues t to th e ta x a uth or ity .

A p p licat ion fee tur nov er (f ees a r e r educed b y 5 0 % f or r enew a l s or r ev is ions of ex is ting A P A s ).

A PA com p liance resp onsib ilit y a g r eed to in th e p r op os a l . inv a l ida ted. H ow ev er , it s h oul d a l s o b e noted th a t th e b ur den of m onitor ing th e com p l ia nce of th e ter m s a g r eed to in th e A P A r es ts w ith th e ta x a uth or ity . I n th is contex t, th e ta x p a y er is r eq uir ed to p r ep a r e a n a nnua l r ep or t on th e im p l em enta tion of th e a g r eem ent, env is a g ing th e v a l ida tion T a x a nd C us tom s A uth or ity up on th e dea dl ine es ta b l is h ed f or th e s ub m is s ion of a n a nnua l ta x a nd a ccounting r etur n.

A PA p ub lic dat a P or tug ues e ta x a uth or ities do not dis cl os e inf or m a tion a b out A P A s s ub m itted or concl uded. D es p ite th e f a ct th a t s om e inf or m a tion is p ub l icl y k now n, ta x a uth or ities a r e k een to incr ea s e th e tr a ns p a r ency of th e A P A p r oces s in P or tug a l . H ence, ta x p a y er s a r e encour a g ed to s ub m it p r op os a l s .


3 4 5


Q atar Taxing authority and tax law • • • to ta x p a y er s in Q a ta r , ex cep t f or th os e r eg is ter ed in th e Q a ta r F ina ncia l C entr e (Q F C ) (s ee b el ow ). • r eg is ter ed entities . • • I ns titutions (A A O I F I ).

Relevant regulations and rulings State tax regime T h e Q a ta r I ncom e T a x L a w intr oduced tr a ns f er p r icing p r ov is ions w ith in th e g ener a l a nti- ta x - a v oida nce f r a m ew or k , w h ich s ta tes th a t,

• A p p l y th e a r m ’ s - l eng th v a l ue to a deed or a n econom ic ev ent s ub j ected to a dif f er ent v a l ue b y th e ta x p a y er . • • A dj us t th e a m ount of th e ta x due b y th e ta x p a y er or a ny oth er p er s on inv ol v ed in th e ty p e of a r r a ng em ents , op er a tions or tr a ns a ctions .

• F or na tur a l p er s ons , w h er e one of th em

is a s p ous e, a n in- l a w or a r el a tiv e of th e oth er , up to th e f our th deg r ee

• F or na tur a l a nd l eg a l p er s ons , w h er e th e na tur a l p er s on ow ns , a l one or w ith a noth er r el a ted p er s on or p er s ons , dir ectl y or indir ectl y , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of th e l eg a l p er s on • F or l eg a l p er s ons , w h er e one of th em ow ns , a l one or w ith a noth er r el a ted p er s on or p er s ons , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of th e oth er , or w h er e a noth er p er s on or oth er r el a ted p er s ons ow ns , dir ectl y or indir ectl y , m or e th a n 5 0 % of th e ca p ita l , v oting r ig h ts or incom e r ig h ts of b oth l eg a l p er s ons


3 4 6

Q atar

(continued)

QFC tax regime

l eng th b a s is . •

OECD Guidelines treatment State tax regime

QFC tax regime

Documentation requirements State tax regime

docum enta tion in p l a ce. th e r el a ted- p a r ty tr a ns a ctions ta k e p l a ce. I n th e a p p l ica tion, a tr a ns f er p r icing s tudy s h oul d b e s ub m itted, a l ong w ith a n ex p l a na tion of I n p r a ctice, ta x p a y er s a r e r ecom m ended to m a inta in a nnua l tr a ns f er p r icing docum enta tion, w h ich s h oul d b e r ea dil y a v a il a b l e in th e

QFC tax regime T h e b ur den of p r oof is on th e Q F C - r eg is ter ed ta x p a y er to es ta b l is h th a t th e a ctua l conditions a r e cons is tent w ith th e a r m ’ s - l eng th • P r im a r y a ccounting r ecor ds • T a x a dj us tm ent r ecor ds • • E v idence to dem ons tr a te a n a r m ’ s - l eng th r es ul t (th is incl udes a des cr ip tion of th e inter com p a ny tr a ns a ctions a nd a f unctiona l a na l y s is ) inter com p a ny tr a ns a ctions a r e not b a s ed on th e a r m ’ s - l eng th p r incip l e (e. g . , th e ta x p a y er is incur r ing l os s es dur ing th e ta x a b l e y ea r or

3 4 7


Q atar

(continued)

Priorities/pricing methods State tax regime T h is p r ice is deter m ined on th e b a s is of a com p a r is on w ith s im il a r g oods or s er v ices p r ov ided b etw een unr el a ted p a r ties , p a r ticul a r l y • C h a r a cter is tics of th e g oods or s er v ice • C ontr a ctua l ter m s • F unctions p er f or m ed, a s s ets us ed a nd r is k s incur r ed • E conom ic cir cum s ta nces

com p a r a b l es s h oul d a l s o b e a ccep ta b l e. QFC tax regime s h oul d b e incl uded in th e docum enta tion a b out th e a p p r op r ia tenes s of th e s el ected m eth od. E ur op ea n com p a r a b l es .

Return disclosures/related-party disclosures State tax regime decl a r a tion. QFC tax regime

Transfer pricing-specific returns F or b oth th e s ta te a nd Q F C ta x r eg im es , th er e cur r entl y is no r eq uir em ent to p r ep a r e a s ep a r a te ta x r etur n f or r el a ted- p a r ty tr a ns a ctions .

Documentation deadlines State tax regime


3 4 8

Q atar

(continued)

QFC tax regime H ow ev er , th e Q F C A T a x D ep a r tm ent a s s um es th a t th e Q F C ta x p a y er w il l a s s es s its inter com p a ny tr a ns a ctions to b e a t a n a r m ’ s - l eng th b ef or e com p l eting its ta x r etur n, es s entia l l y r eq uir ing a n a na l y s is of its inter com p a ny p r icing to b e p r ep a r ed.

Transfer pricing penalties State tax regime p ena l ties , in th e f or m

of inter es t im p os ed f or noncom p l ia nce w ith incom e ta x r ul es under th e Q a ta r I ncom e T a x L a w , m a y a p p l y in th e

I nter es t on a ny a dditiona l incom e ta x due r es ul ting f r om (ca p p ed a t th e a m ount of incom e ta x due).

a tr a ns f er p r icing a dj us tm ent m a y b e l ev ied a t a r a te of 1 . 5 % p er m onth of del a y

QFC tax regime

p er a nnum , ca l cul a ted f or th e p er iod f r om

th e due da te of th e ta x to th e a ctua l p a y m ent da te.

I f a Q F C - r eg is ter ed ta x p a y er f a il s to m a inta in a deq ua te r ecor ds to s up p or t th e p r icing of tr a ns a ctions w ith a s s ocia tes , or cl a im s in its r etur n th a t no a dj us tm ent is r eq uir ed under th e tr a ns f er p r icing r eg ul a tions w ith out b eing a b l e to s ub s ta ntia te th a t cl a im , th en th er e s a nctions not ex ceeding th e ta x under s ta ted).

Penalty relief N o p ena l ty r el ief r eg im e is in p l a ce f or th e s ta te or Q F C ta x r eg im e.

Statute of limitations on transfer pricing assessments State tax regime

QFC tax regime T h e tim e l im it f or th e Q F C A T a x D ep a r tm ent to conduct a ta x a s s es s m ent is s ix y ea r s a f ter th e end of th e a ccounting p er iod to w h ich it r el a tes .

3 4 9


Q atar

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority State tax regime tr a ns a ctions to b e p r oduced, w ith a g ener a l r eq uir em ent th a t a ny inf or m a tion r eq ues t is dea l t w ith in a p er iod of tw o w eek s .

T h e l ik el ih ood of a r ev iew of tr a ns f er p r icing a s p a r t of th e r eg ul a r a udit is m edium

to h ig h .

tr a ns f er p r icing docum enta tion is a v a il a b l e. 4

QFC tax regime I n g ener a l , th e Q F C T a x D ep a r tm ent conducts a ta x a udit of incom e ta x r etur ns th a t a r e s ub m itted (th e l ik el ih ood b eing m edium T h e l ik el ih ood of a r ev iew of tr a ns f er p r icing a s p a r t of th e r eg ul a r a udit is h ig h .

to h ig h ).

T h e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y is m edium .

APA opportunity C ur r entl y , th er e is no A P A p r ocedur e in p l a ce. QFC tax regime T h e Q F C A T a x D ep a r tm ent h a s a n a dv a nce r ul ing r eg im e a nd w el com es Q F C - r eg is ter ed entities to a p p l y f or a n A P A to ob ta in cer ta inty a b out th eir ta x p os ition.

Impact of new OECD BEPS Action 8–10 guidelines State tax regime

QFC tax regime

ta k e into a ccount th e r ev is ions under th e 2 0 1 6 T P G uidel ines .


3 5 0

R o mania Taxing authority and tax law

• L a w 2 2 7 / 2 0 1 5 r eg a r ding th e F is ca l C ode, a s s ub s eq uentl y com p l eted a nd a m ended • G ov er nm ent D ecis ion 1 / 2 0 1 6 f or th e a p p r ov a l of th e nor m s f or th e a p p l ica tion of L a w 2 2 7 / 2 0 1 5 r eg a r ding th e F is ca l C ode, a s s ub s eq uentl y com p l eted a nd a m ended


1 J a nua r y 2 0 1 6 44 1 J a nua r y 2 0 1 6 • A N A F O r der 3 7 3 7 / 2 0 1 5 , a p p r ov ing th e f or m

of th e decis ion is s ued b y th e ta x a uth or ity in a p p l ica tion of th e p r ocedur e f or el im ina tion of

• A N A F O r der 3 7 3 5 / 2 0 1 5 , a p p r ov ing th e p r ocedur e f or th e is s ua nce/ a m endm ent of A P A s a nd th e content of th e r es p ectiv e A P A r eq ues t • A N A F O r der 3 7 3 6 / 2 0 1 5 , a p p r ov ing th e p r ocedur e f or th e is s ua nce of a dv a nce indiv idua l r ul ing s a nd th e content of th e r es p ectiv e r eq ues t • L a w 2 0 7 / 2 0 1 5 , r eg a r ding th e F is ca l P r ocedur e C ode, a s s ub s eq uentl y com p l eted a nd a m ended



T h e tr a ns f er p r icing docum enta tion h a s to b e p r ep a r ed in th e l oca l l a ng ua g e. I f th e tr a ns f er p r icing docum enta tion is p r ep a r ed in a

a v a il a b l e up on th e r eq ues t of th e ta x a uth or ity a nd w ith in th e r eq uir ed ter m . T a x p a y er s th a t enter ed into A P A s f or r el a ted- p a r ty tr a ns a ctions a r e not r eq uir ed to p r ep a r e a nd s ub m it a tr a ns f er p r icing docum enta tion

3 5 1


R o mania

(continued)

T h e p r ov is ions of O r der 4 4 2 / 2 0 1 6 s tip ul a te th a t ta x p a y er s th a t q ua l if y a s l a r g e ta x p a y er s a nd ca r r y out tr a ns a ctions w ith r el a ted p a r ties of a tota l a nnua l v a l ue a b ov e cer ta in th r es h ol ds a r e r eq uir ed to p r ep a r e on a n a nnua l b a s is tr a ns f er p r icing docum enta tion w ith in th e p r icing docum enta tion m a y b e r eq ues ted b y th e ta x a uth or ity dur ing or outs ide a ta x a udit (f or tr a ns a ctions under ta k en s ta r ting f r om 2 0 1 6 ). T h e th r es h ol ds cons ider ed f or es ta b l is h ing th e r eq uir em ent of p r ep a r ing a nnua l tr a ns f er p r icing docum enta tion (a p p l ica b l e f or th e tota l • • • F ur th er m or e, th e l a r g e ta x p a y er s th a t ca r r y out tr a ns a ctions th a t do not ex ceed th e a b ov em entioned th r es h ol ds , a s w el l a s s m a l l a nd m edium ta x p a y er s , a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion onl y up on r eq ues t f r om th e ta x a uth or ity dur ing a ta x a udit

• • • T h e ta x p a y er s th a t ca r r y out tr a ns a ctions w ith r el a ted p a r ties b ut do not ex ceed th e l ow er th r es h ol ds a r e r eq uir ed to p r ep a r e tr a ns f er p r icing docum enta tion dur ing a ta x a udit, a ccor ding to th e g ener a l r ul es es ta b l is h ed under th e a ccounting a nd ta x r eg ul a tions in f or ce. T h e tr a ns f er p r icing docum enta tion s h oul d com p r is e inf or m a tion r eg a r ding th e ta x p a y er , th e g r oup a nd th e r el a ted- p a r ty tr a ns a ctions (incl uding a n a na l y s is of th e f unctions p er f or m ed a nd th e r is k s a s s um ed b y th e r el a ted p a r ties ), a s w el l a s inf or m a tion a b out th e tr a ns f er p r icing m eth ods us ed f or deter m ining th e v a l ue of r el a ted- p a r ty tr a ns a ctions . F ina l l y , it s h oul d conta in a s et of r el ev a nt s ta tis tica l com p a r a b l es . A ccor ding to th e p r ov is ion of O r der 4 4 2 / 2 0 1 6 , th e inf or m a tion th a t s h oul d b e incl uded in th e tr a ns f er p r icing docum enta tion h a s b een


• T h e m eth od th a t is th e m os t a p p r op r ia te to th e cir cum s ta nces in w h ich th e p r ices th a t a r e s ub j ect to f r ee com p etition on th e com m er cia l com p a r a b l e m a r k ets a r e es ta b l is h ed • T h e m eth od f or w h ich inf or m a tion r es ul ting f r om a v a il a b l e

th e a ctua l r el a ted p a r ties inv ol v ed in th e tr a ns a ctions s ub j ect to f r ee com p etition is

• T h e deg r ee of a ccur a cy to w h ich a dj us tm ents ca n b e m a de in or der to a ch iev e com p a r a b il ity


3 5 2

R o mania

(continued)

• T h e cir cum s ta nces of th e indiv idua l ca s e • T h e a ctiv ities ef f ectiv el y conducted b y v a r ious r el a ted p a r ties • T h e docum enta tion th a t ca n b e m a de a v a il a b l e b y th e ta x p a y er

A ccor ding to th e p r ov is ions of O r der 4 4 2 / 2 0 1 6 , in th e ca s e of b ench m a r k ing a na l y s is p er f or m ed to deter m ine th e a r m ’ s - l eng th na tur e E ur op ea n a nd inter na tiona l . I n th e a b s ence of l oca l com p a r a b l es , f or eig n com p a r a b l es a r e a ccep ted.

Return disclosures/related-party disclosures under ta k en w ith r el a ted p a r ties .

• ob l ig a tion to w ith h ol d ta x es • •

Transfer pricing-specific returns Documentation deadlines p r ov iding th e tr a ns f er p r icing docum enta tion is s et f or 1 0 da y s f r om

th e r eq ues t da te, b ut not ea r l ier th a n 1 0 da y s f r om

th e dea dl ine s et

dur ing or outs ide a ta x a udit. F or th e l a r g e ta x p a y er s th a t ca r r y out tr a ns a ctions th a t do not ex ceed th e a b ov em entioned th r es h ol ds , a s w el l a s s m a l l a nd m edium

p r ov ided onl y up on th e r eq ues t of th e ta x a uth or ity dur ing a ta x a udit, a nd th e ter m

f or p r ov iding th e tr a ns f er p r icing docum enta tion is

docum enta tion dea dl ine p r ov is ions l ea ds to ca ncel l a tion of th e A P A .

3 5 3


R o mania

(continued)

Transfer pricing penalties L a r g e, m edium

a nd s m a l l ta x p a y er s f a il ing to p r ov ide th e tr a ns f er p r icing docum enta tion to th e ta x a uth or ity up on r eq ues t a r e

• I n th e ca s e of non- s ub m is s ion of th e tr a ns f er p r icing docum enta tion b y l a r g e ta x p a y er s (th a t h a v e th e ob l ig a tion to p r ep a r e th e tr a ns f er p r icing docum enta tion w ith in th e l eg a l dea dl ine f or s ub m is s ion of th e a nnua l cor p or a te incom e ta x r etur n) up on th e r eq ues t of th e ta x • I n th e ca s e of non- s ub m is s ion of th e tr a ns f er p r icing docum enta tion up on th e r eq ues t of th e ta x a uth or ity dur ing a ta x a udit, a p ena l ty 4 4 I n th e ca s e of a tr a ns a ction b etw een r el a ted p a r ties , th e ta x a uth or ity m a y a dj us t/ es tim a te th e a m ount of th e r es p ectiv e incom e or ca s e th a t th e ta x a uth or ity deter m ines th a t th e a r m ’ s - l eng th p r incip l e is not ob s er v ed f or th e r es p ectiv e tr a ns a ction or th a t th e ta x p a y er

a nd p ena l ties a ccor ding to th e p r ov is ions of th e l eg is l a tion. C ur r entl y , th e l a te p a y m ent inter es t is 0 . 0 2 % p er da y of del a y . L a te p a y m ent p ena l ties of 0 . 0 1 % p er da y of del a y ca n a l s o b e im p os ed. I n a ddition, a p ena l ty f or undecl a r ed or incor r ectl y decl a r ed ta x l ia b il ities es ta b l is h ed b y ta x a uth or ities th r oug h ta x decis ions of 0 . 0 8 % f or ea ch da y of del a y ed p a y m ent ca n b e im p os ed. I f th is ty p e of p ena l ty is a p p l ica b l e, th en it is a s ub s titute f or th e l a te p a y m ent p ena l ty is is s ued, th en th is p ena l ty is r educed b y 7 5 % ; h ow ev er , if th e ta x l ia b il ities a r e th e r es ul t of ta x ev a s ion, th en th is p ena l ty is incr ea s ed b y 1 0 0 % . T h is p ena l ty is a p p l ica b l e f or ta x l ia b il ities due s ta r ting f r om 2 0 1 6 onw a r d.

Penalty relief Statute of limitations on transfer pricing assessments ev a s ion or f r a ud).

Frequency of tax audit and transfer pricing scrutiny by the tax authority op er a ting l os s es ov er a p er iod of tim e. T h e l ik el ih ood is h ig h th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit, a nd th e l ik el ih ood is m edium th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit.


3 5 4

R o mania

(continued)

APA opportunity or m ul til a ter a l .

f or a ter m

of 1 2 m onth s , w h il e b il a ter a l a nd m ul til a ter a l A P A s a r e is s ued f or a ter m

of 1 8 m onth s .

• 4 •


a uth or ities a nd ta x p a y er s a s w el l .

w ith in th e na tiona l ter r itor y .

3 5 5


R u s s ia Taxing authority and tax law

Relevant regulations and rulings 4 C ode. b inding f or th e ta x a uth or ities or com p a nies .

ta x p a y er s .

Relat ed p art ies

I n p a r ticul a r , com p a nies a r e cons ider ed r el a ted if one ow ns dir ectl y or indir ectl y m or e th a n 2 5 % of th e ca p ita l of th e oth er , or if th er e is a noth er com p a ny or p er s on th a t ow ns dir ectl y or indir ectl y m or e th a n 2 5 % of th e ca p ita l of th os e com p a nies . th e ter m s a nd th e r es ul ts of th e tr a ns a ctions .


Documentation requirements T h e T a x C ode env is a g es th a t ta x p a y er s m us t p r ep a r e a nd m a inta in a cer ta in s et of docum ents , in a ny s uita b l e f or m , j us tif y ing th e p r icing m eth od us ed in contr ol l ed tr a ns a ctions . T h e l ev el of deta il a nd com p r eh ens iv enes s of docum enta tion s h oul d b e cons is tent w ith th e com p l ex ity of th e tr a ns a ction or tr a ns a ctions . D ocum enta tion s h oul d, in p a r ticul a r , incl ude indus tr y a na l y s is , com p a ny a na l y s is , f unctiona l a na l y s is , th e ter m s a nd conditions of th e tr a ns a ction, th e r ea s oning f or th e s el ection of th e tr a ns f er p r icing m eth od a nd da ta s our ces us ed, th e com p uta tion of th e m a r k et p r ice r a ng e a nd a dj us tm ents , if a ny , to th e ta x b a s e m a de b y a ta x p a y er . I n a ddition to th e contr ol l ed tr a ns a ction a r e cons is tent w ith th os e of com p a r a b l e uncontr ol l ed tr a ns a ctions . D ocum enta tion is not r eq uir ed f or tr a ns a ctions in w h ich p r ices conf or m b y a nA P A .


3 5 6

to a r eg ul a ted p r ice or a p r ice th a t is p r es cr ib ed b y th e a nti-

R u s s ia

(continued)

• A l l r el a ted- p a r ty tr a ns a ctions (no th r es h ol d) • T h ir d- p a r ty tr a ns a ctions inv ol v ing g oods tr a ded on g l ob a l com m odity ex ch a ng es , s uch a s oil a nd oil p r oducts , f er r ous m eta l s , nonf er r ous

• T h ir d- p a r ty tr a ns a ctions w h er e th e counter p a r ty is l oca ted in cer ta in l ow - ta x j ur is dictions (s a m e th r es h ol d a s a b ov e)1

• T h e s ub j ect of th e tr a ns a ction is a n ob j ect of a s s es s m ent to m iner a l ex tr a ction ta x ca l cul a ted a t a n a d v a l or em

ta x r a te.

• • • m il l ion. • O ne of th e p a r ties op er a tes dr il l ing or h ol ds a l icens e to ex p l or e new oil a nd g a s dep os its on th e continenta l s h el f .

C er ta in dom es tic tr a ns a ctions a r e ex em p t f r om

tr a ns f er p r icing contr ol , e. g . , tr a ns a ctions b etw een m em b er s of a dom es tic cons ol ida ted

• • r eg ions . • N one of th e p a r ties h a v e ta x l os s es . •

Priorities/pricing methods s p l it is a m eth od of l a s t r es or t.

Return disclosures/related-party disclosures D is cl os ur e of tr a ns a ctions w ith r el a ted p a r ties a nd th ir d- p a r ty tr a ns a ctions th a t a r e s ub j ect to tr a ns f er p r icing contr ol is r eq uir ed b y w a y 2 0 1 6 ).

1

3 5 7


R u s s ia

(continued)


C b C r ep or ts .

2

cur r entl y unk now n w h eth er a nd w h en th e dr a f t l a w w il l b e a dop ted.

Documentation deadlines T r a ns f er p r icing docum enta tion m us t b e p r es ented w ith in 3 0 w or k ing da y s of th e ta x a uth or ities ’ r eq ues t. T h e r eq ues t ca n b e is s ued no ea r l ier th a n 1 J une of th e y ea r f ol l ow ing th e y ea r in w h ich th e contr ol l ed tr a ns a ction took p l a ce.

Transfer pricing penalties F r om 2 0 1 4 , tr a ns f er p r icing p ena l ties w er e 2 0 % of th e a dditiona l ta x p a y a b l e due to a tr a ns f er p r icing a dj us tm ent. F r om 2 0 1 7 , th e p ena l ties a r e b eing incr ea s ed to 4 0 % . N o p ena l ties a p p l y w ith r es p ect to tr a ns f er p r icing a dj us tm ents f or 2 0 1 2 a nd 2 0 1 3 .

Penalty relief P ena l ties w il l b e im p os ed if a ta x p a y er ’ s incom e is a dj us ted a s a r es ul t of a tr a ns f er p r icing a udit, a nd if th e ta x p a y er did not p r ov ide th e tr a ns f er p r icing docum enta tion s up p or ting th e p r ices in a contr ol l ed tr a ns a ction. P ena l ties ca nnot a p p l y if p r ices w er e es ta b l is h ed in a ccor da nce w ith a n a p p l ica b l e A P A .

Statute of limitations on transfer pricing assessments T h e g ener a l r ul e is th a t th e ta x a uth or ity m a y a udit th e ta x p a y er f or up to th r ee y ea r s p r eceding th e y ea r w h en th e a udit w a s initia ted.

Frequency of tax audit and transfer pricing scrutiny by the tax authority T r a ns f er p r icing m a tter s in contr ol l ed tr a ns a ctions a r e s ub j ect to s p ecia l tr a ns f er p r icing a udits , w h ich a r e s ep a r a te f r om

g ener a l ta x

2

b or der tr a ns a ctions w ith em p h a s is on l os s - m a k ing tr a ns a ctions , tr a ns a ctions inv ol v ing l ow - ta x j ur is dictions , ex p or ts in r es our ce- or iented

4

4


3 5 8

R u s s ia

(continued)

APA opportunity f or a n A P A . T h e T a x C ode env is a g es a p os s ib il ity to concl ude m ul til a ter a l A P A s w h en th e tr a ns a ctiona l counter p a r ties a r e l oca ted in a


3 5 9


S au d i A r ab ia Taxing authority and tax law

Relevant regulations and rulings 4 in a ccor da nce w ith th e a g r eed- up on inter na tiona l s ta nda r ds .

• • w oul d h a v e r es ul ted f r om

a tr a ns a ction b etw een indep endent p er s ons

m or e s ub s idia r y of a ny ty p e of com p a ny .

Wit h h olding t ax G ener a l l y , th e w ith h ol ding ta x r a tes r a ng e f r om

5 % to 2 0 % f or tr a ns a ctions b etw een unr el a ted p a r ties . E x cep t f or tr a ns a ctions w ith

Th in cap it aliz at ion rules

• • • I nter es t (or l oa n f ee) in ex ces s of th e deductib il ity l im it s et out a b ov e is a p er m a nent dis a l l ow a nce under th e ta x l a w a nd its b y l a w s . deduction in th e b r a nch ’ s ta x decl a r a tion.


3 6 0

S au d i A r ab ia

(continued)

O E C D Guidelines t reat m ent a ccor da nce w ith th e a r m ’ s - l eng th p r incip l e.

Documentation requirements decl a r a tions . H ow ev er , it is h ig h l y r ecom m ended th a t th e ta x p a y er m a inta in a deq ua te docum ents to s up p or t th e a r m ’ s - l eng th na tur e of inter com p a ny tr a ns a ctions .

Priorities/pricing methods th a t is b a s ed on th e com m onl y a ccep ted tr a ns f er p r icing m eth ods s et out in th e O E C D G uidel ines ,


th e dis cl os ur e is r es tr icted to m a ter ia l s a nd s er v ices onl y or a l l oth er r el a ted- p a r ty tr a ns a ctions of th e ta x p a y er . H ow ev er , a ta x p a y er th a t m a k es a dis cl os ur e th a t s uch p r ices a r e a s p er th e a r m ’ s - l eng th p r incip l e m ig h t b e ex p ected to b a ck it up w ith docum enta tion. T a x p a y er s a r e a l s a ddition, th e ta x p b a l a nce, a s w el l a b a l a nce s h eet dis

o r eq uir ed to dis cl os e th e a m ount due to a nd due f r om r el a ted p a r ties , a s p a r t of th e b a l a nce s h eet dis cl os ur es . I n a y er s s h oul d dis cl os e th e na m e of th e r el a ted- p a r ty , na tur e of dea l ing s , op ening a nd cl os ing p a y a b l e/ r eceiv a b l e s m ov em ents in th e r el a ted- p a r ty p a y a b l e/ r eceiv a b l e b a l a nce, a s p a r t of th e ex p l a na tor y s ch edul es a ccom p a ny ing th e cl os ur es .

Transfer pricing-specific returns Documentation deadlines N ot a p p l ica b l e.


3 6 1


S au d i A r ab ia

(continued)


incor r ect w ith th e intent of ta x ev a s ion.

Frequency of tax audit and transfer pricing scrutiny by the tax authority l eng th b a s is . A m ong th es e, inter com p a ny r ech a r g e of cos ts b a s ed on a l l oca tion a nd p a y m ents m a de to r el a ted p a r ties b a s ed on m a r k up

APA opportunity C ur r entl y , th er e is no A P A p r ocedur e in p l a ce.

Impact of new OECD BEPS Action 8–10 guidelines a ction p oints m ig h t b e incl uded in th e nea r f utur e.


3 6 2

S eneg al Taxing authority and tax law

Relevant regulations and rulings 2 0 1 3 (a nd w ith r etr oa ctiv e ef f ect to 2 0 1 2 ). T h e tr a ns f er p r icing r ul es f ol l ow th e a r m ’ s - l eng th p r incip l e a nd r eq uir e th e us e of th e m os t a p p r op r ia te m eth od to deter m ine th e p r ice a p p l ied in r el a ted p a r ties ’ tr a ns a ctions .

• L oca l com p a nies contr ol l ing or under th e contr ol of f or eig n com p a nies • C om p a nies th a t a r e under th e com m on contr ol of a com p a ny or p a r t of a g r oup of com p a nies contr ol l ing or under th e contr ol of f or eig n com p a nies

• O ne com p a ny h ol ds , dir ectl y or indir ectl y , th e m a j or ity of th e s h a r es of th e oth er or h a s th er ein th e ef f ectiv e decis ion- m a k ing p ow er •

• • • com p a ny m eeting th e tur nov er condition

OECD Guidelines treatment Documentation requirements in a ccor da nce w ith A r ticl e 1 7 of th e T a x C ode.

• •

A g ener a l des cr ip tion of a ctiv ities , incl uding ch a ng es dur ing th e y ea r s concer ned or under a udit

• tr a ns a ctions

3 6 3


S eneg al

(continued)

• th a t s uch r is k a nd f unction a f f ect th e a udited com p a ny •

A l is t of th e m a in inta ng ib l e a s s ets h el d (na m el y p a tents , b r a nds , com m er cia l na m es a nd k now - h ow ) in connection w ith th e a udited com p a ny •

A g ener a l des cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icy

• •

A des cr ip tion of a ctiv ities , incl uding ch a ng es dur ing th e y ea r s concer ned or under a udit •

•

•

A l is t of th e cos t- s h a r ing a g r eem ents , a nd a cop y of p r ior a g r eem ents in r es p ect to tr a ns f er p r icing or docum ents r el a ting to th e •

A n intr oduction to th e m eth odol og y us ed to deter m ine th e a r m ’ s - l eng th ch a r a cter of th e tr a ns f er p r ices , incl uding a n a na l y s is of I f th e ch os en m eth odol og y r eq uir es s o, a n a na l y s is of com p a r a b l es cons ider ed r el ev a nt b y th e com p a ny

• T h e na tur e of th e r el a tions h ip b etw een th e a udited com p a ny a nd th e f or eig n com p a ny • com p a nies ; s up p or ting el em ents th a t j us tif y th e a p p l ied p r ices ; a nd, if a p p l ica b l e, a g r eed- up on com p ens a tion • a b ov e • com p a ny

Priorities/pricing methods ch a r a cter of th e p r ices a p p l ied in r el a ted- p a r ty tr a ns a ctions . T h e ta x l a w does not p r ov ide m eth ods f or p r icing r el a ted- p a r ty tr a ns a ctions .

Return disclosures/related-party disclosures r el a ted q ues tions .



3 6 4

S eneg al

(continued)

Documentation deadlines T h e com p a ny h a s to p r ov ide th e tr a ns f er p r icing docum enta tion up on th e ta x a uth or ities ’ r eq ues t. H ow ev er , if th e docum enta tion is not p r ov ided w h en r eq ues ted or is incom p l ete, th e ta x a uth or ities ca n a s k th e a udited com p a ny , b y m ea ns of a f or m a l r eq ues t, to p r ov ide or com p l ete th e docum enta tion w ith in 1 5 da y s .

Transfer pricing penalties f r om a n a dj us tm ent p er f or m ed b y th e ta x a uth or ities w il l b e deem ed a n a dditiona l ta x . A n a dditiona l p ena l ty ca n b e is s ued f or th e under p a y m ent of ta x . F ur th er m or e, intr a g r oup p a y m ents a r e deductib l e onl y if th e deb tor ca n p r ov e to th e ta x a dm inis tr a tion th a t th e tr a ns a ctions a r e r ea l a nd r em uner a tions a r e not ex ces s iv e.


Statute of limitations on transfer pricing assessments T h e g ener a l s ta tute of l im ita tions a p p l ies to tr a ns f er p r icing a s s es s m ents . T h e p er iod f or th e ta x a uth or ities to a s s es s ta x a nd a ny a p p l ica b l e p ena l ties r eg a r ding tr a ns f er p r icing m a tter s is f our y ea r s .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e ta x a uth or ities m a y conduct a tr a ns f er p r icing a udit a ny tim e dur ing th e y ea r . I n g ener a l , th e ta x a uth or ities f r eq uentl y a udit tr a ns f er p r icing .



3 6 5


S er b ia Taxing authority and tax law

Relevant regulations and rulings intr a g r oup tr a ns a ctions p r ov ides f ur th er deta il s a b out th es e a nd p r es cr ib es ob l ig a tor y content of th e tr a ns f er p r icing docum enta tion.

OECD Guidelines treatment Documentation requirements

•

A na l y s is of th e g r oup

•

I ndus tr y a na l y s is •

F unctiona l a na l y s is • • • •

C oncl us ions r ea ch ed •

A p p endices

p a r ty a nd th e ty p e a nd a m ount of th e tr a ns a ction w ith out ob l ig a tion to ca r r y out a ny econom ic a na l y s is ) f or a l l tr a ns a ctions (ex cep t • •


3 6 6

S er b ia

(continued)

Priorities/pricing methods T h er e is no p r ior ity in th e s el ection of m eth ods . T h e ta x p a y er is r eq uir ed to s el ect th e m os t a p p r op r ia te m eth od f or deter m ining th a t th e •

N a tur e of tr a ns a ctions th a t a r e s ub j ect to th e a na l y s is •

A v a il a b il ity a nd r el ia b il ity of da ta f or th e a na l y s is •

L ev el of com p a r a b il ity b etw een tr a ns a ctions a f f ected b y tr a ns f er p r ices a nd tr a ns a ctions ca r r ied out w ith or b etw een unr el a ted p a r ties • tr a ns a ctions •

T h e na tur e a nd r el ia b il ity of a s s um p tions

Return disclosures/related-party disclosures T a x p a y er s a r e ob l ig a ted to dis cl os e in th eir a nnua l C I T r etur n r ev enues a nd ex p ens es r es ul ting f r om w el l a s dis cl os e ta x - b a s ed a dj us tm ents b a s ed on th e tr a ns f er p r icing a na l y s is .

tr a ns a ctions w ith r el a ted p a r ties , a s

I n a ddition, r el a ted- p a r ty dis cl os ur es a nd deta il s of tr a ns a ctions a r e to b e docum ented th r oug h ob l ig a tor y tr a ns f er p r icing

Transfer pricing-specific returns Documentation deadlines Transfer pricing penalties

I n a ddition, th e p os s ib l e a dj us tm ent of ta x a b l e incom e on a tr a ns f er p r icing b a s is m a y r es ul t in a p ena l ty of up to 3 0 % of th e under s ta ted ta x l ia b il ities a nd m a y f ur th er r es ul t in incr ea s ed inter es t f or l a te ta x p a y m ents .

3 6 7


S er b ia

(continued)

Penalty relief T h er e is no p ena l ty r el ief a v a il a b l e; h ow ev er , ta x p a y er s m a y b e a p p r ov ed f or a n a dditiona l p er iod of up to 9 0 da y s to com p l y w ith th e tr a ns f er p r icing docum enta tion r eq uir em ents (i. e. , to s ub m it to th e ta x a uth or ities th e p r es cr ib ed tr a ns f er p r icing docum ent).

Statute of limitations on transfer pricing assessments s ta r ts f r om

th e b eg inning of th e y ea r f ol l ow ing th e y ea r in w h ich th e r es p ectiv e ta x l ia b il ity a r os e.


p a r ty tr a ns a ctions .



3 6 8

S ing ap o r e Taxing authority and tax law


• T r a ns f er p r icing g uidel ines , p ub l is h ed 2 3 F eb r ua r y 2 0 0 6 • T r a ns f er p r icing cons ul ta tion, p ub l is h ed 3 0 J ul y 2 0 0 8 • • T r a ns f er p r icing g uidel ines f or r el a ted- p a r ty l oa ns a nd r el a ted- p a r ty s er v ices , p ub l is h ed 2 3 F eb r ua r y 2 0 0 9 4


• E a ch p a r ticip a nt’ s s h a r e of th e cos ts m us t b e b or ne in th e f or m

of ca s h or oth er m oneta r y contr ib utions .

• T h e s er v ices a r e not p r ov ided to a ny unr el a ted- p a r ty . • T h e p r ov is ion of th e s er v ices is not th e p r incip a l a ctiv ity of th e s er v ice p r ov ider . I f th e cos t of p r ov iding th e s er v ices does not ex ceed 1 5 % • • T h er e is docum enta tion s h ow ing th a t th e p a r ties intended to enter into th e cos t- p ool ing a r r a ng em ent b ef or e th e p r ov is ion of th e s er v ice. P r icing G uidel ines a l s o conta in a tw o- tier ed a p p r oa ch in w h ich b oth g r oup - a nd entity - l ev el docum enta tion is r eq uir ed. T h er e is no

3 6 9


S ing ap o r e

(continued)

Documentation requirements docum enta tion to s ub s ta ntia te th e ta x p a y er ’ s tr a ns f er p r icing ins tea d of j us tif y ing p os itions onl y a f ter th e ev ent. C ontem p or a neous tr a ns f er p r icing docum enta tion r ef er s to docum enta tion a nd inf or m a tion th a t ta x p a y er s h a v e r el ied up on to deter m ine th e tr a ns f er p r ice

C ateg o r y o f r el ated - p ar ty tr ans ac tio ns

Threshold (SGD) per financial year

P ur ch a s e of g oods f r om

1 5 m il l ion

a l l r el a ted p a r ties

1 5 m il l ion L oa ns ow ed to a l l r el a ted p a r ties

1 5 m il l ion

L oa ns ow ed b y a l l r el a ted p a r ties

1 5 m il l ion 1 m il l ion p er ca teg or y of tr a ns a ctions

• • • • • •

• • b or r ow ing a nd l ending • •


3 7 0

S ing ap o r e

(continued)

Priorities/pricing methods s tip ul a tes th a t th e tr a ns f er p r icing m eth od th a t p r oduces th e m os t r el ia b l e r es ul ts s h oul d b e s el ected a nd a p p l ied. H ow ev er , th er e is a n f or s ub s ta ntia ting th e a r m ’ s - l eng th na tur e of inter es t ch a r g es .

• • •

Return disclosures/related-party disclosures Transfer pricing-specific returns Documentation deadlines

T a x p a y er s a r e encour a g ed to up da te th eir tr a ns f er p r icing docum enta tion a t l ea s t once ev er y th r ee y ea r s , w h il e r el a ted- p a r ty tr a ns a ctions s h oul d b e tes ted a nnua l l y a g a ins t th e a r m ’ s - l eng th r es ul ts .

Transfer pricing penalties incom e, th e p ena l ty r a ng e is 1 0 0 % to 4 0 0 % of th e under p a id ta x . 4

Penalty relief A deq ua te a nd contem p or a neous tr a ns f er p r icing docum enta tion to s up p or t th e p r icing of th e ta x p a y er ’ s r el a ted- p a r ty tr a ns a ctions w il l h el p in m itig a ting p ena l ties , p a r ticul a r l y r ecor d- k eep ing r eq uir em ents f or ta x .

3 7 1


S ing ap o r e

(continued)

Statute of limitations on transfer pricing assessments • I f th e y ea r of a s s es s m ent is 2 0 0 7 or ea r l ier , th e s ta tute of l im ita tions is s ix y ea r s f r om tr a ns f er p r icing is s ue r el a tes .

th e end of th e y ea r of a s s es s m ent to w h ich th e

• I f th e y ea r of a s s es s m ent is 2 0 0 8 or l a ter , th e s ta tute of l im ita tions is f our y ea r s f r om tr a ns f er p r icing is s ue r el a tes .

th e end of th e y ea r of a s s es s m ent to w h ich th e

ta x r etur n b y 3 0 N ov em b er 2 0 1 6 . T h e a p p l ica b l e y ea r of a s s es s m ent in th is ca s e is 2 0 1 6 , w h ich cor r es p onds w ith th e b a s is p er iod th a t is


4 p r icing . C ons eq uentl y , th e num b er of tr a ns f er p r icing cons ul ta tions (T P C s ) a nd tr a ns f er p r icing q uer ies h a s incr ea s ed. T h e T P C is T a x p a y er s a r e s el ected b a s ed on r is k indica tor s , s uch a s th e v a l ue of r el a ted- p a r ty tr a ns a ctions , th e p er f or m a nce of th e ta x p a y er ’ s

• T r a ns a ctions w ith cr os s - b or der r el a ted p a r ties th a t a r e of a h ig h v a l ue r el a tiv e to th e ta x p a y er ’ s oth er tr a ns a ctions • T r a ns a ctions w ith r el a ted p a r ties s ub j ect to a m or e f a v or a b l e ta x tr ea tm ent • it a s s um ed • O p er a ting r es ul ts th a t a r e not in l ine w ith b us ines s es in com p a r a b l e cir cum s ta nces • • • I ndica tions (s uch a s th r oug h eng a g em ent w ith ta x a uth or ities , a countr y ’ s a udit f ocus , etc. ) th a t th e tr a ns a ctions a r e l ik el y to b e s ub j ect to tr a ns f er p r icing a udit b y ta x a uth or ities

tr a ns f er p r icing a udit, incl uding a r eq ues t f or tr a ns f er p r icing docum enta tion up f r ont up on th e com m encem ent of a n a udit.


3 7 2

S ing ap o r e

(continued)

APA opportunity

• A P A p er iod to initia te dis cus s ions r eg a r ding th e A P A r eq ues t •

• • • T h e na tur e of ta x p a y er r es our ces a nd com m itm ents th a t s h oul d b e m a de w h en a n A P A is r eq ues ted •

Impact of new OECD BEPS Action 8–10 guidelines N ot A p p l ica b l e.

3 7 3


S l o v ak R ep u b l ic Taxing authority and tax law

Relevant regulations and rulings • • w er e p ub l is h ed in th e Slovak Financial Newsletter b ut a r e not l eg a l l y b inding . N ev er th el es s , th e ta x a uth or ities g ener a l l y f ol l ow th em p r a ctice.

contents of tr a ns f er p r icing docum enta tion.

• •

4

4 4

• •

4 4

4 4

OECD Guidelines treatment T h e ta x a uth or ity us ua l l y f ol l ow s th e p r ov is ions of th e O E C D G uidel ines (e. g . , th e a ccep ta b l e m eth ods l is ted in th e I ncom e T a x A ct 4 of th e O E C D G uidel ines (e. g . , el im ina tion of p r ef er ence in a p p l y ing th e s el ected tr a ns f er p r icing m eth od).



3 7 4

in

S l o v ak R ep u b l ic

(continued)

A s of 2 0 1 5 , tr a ns f er p r icing docum enta tion m us t b e p r ep a r ed f or a l l r el a ted- p a r ty tr a ns a ctions (b oth f or eig n a nd dom es tic) r eg a r dl es s

dep endent on oth er f a ctor s des cr ib ed f ur th er b el ow . D ocum enta tion m us t b e p r ep a r ed s ep a r a tel y f or ea ch tr a ns a ction or h om og enous g r oup of tr a ns a ctions w ith th e s a m e r el a ted- p a r ty . •

E nter ed into w ith one entity •

tr a ns a ctions w ith th e s a m e conditions •

cl os el y connected tr a ns a ctions or tr a ns a ctions conditiona l to ea ch oth er •

com p a r a b l e in ter m s of a s s ets us ed, f unctions a nd r is k s

A g g r eg a tion s h oul d g iv e a b etter p ictur e on th e p a r ticul a r T P m eth ods us ed. I t g ener a l l y r eq uir es ex p l a na tion in th e docum enta tion.

“ F u l l ” d o c u mentatio n F or th e f ol l ow ing ca teg or ies of ta x p a y er s , th e 2 0 1 5 G uida nce p r es cr ib es th e r eq uir ed contents of th e tr a ns f er p r icing docum enta tion, • •

ta x p a y er s enter ing into tr a ns a ctions w ith r el a ted p a r ties w h o a r e ta x p a y er s of non- tr ea ty countr ies

1

•

ta x p a y er s r eq ues ting b inding ta x a uth or ity decis ion w ith in th e A dv a nced P r icing A g r eem ent (A P A ) p r ocedur e •

ta x p a y er s r eq ues ting cor r es p onding tr a ns f er p r icing a dj us tm ents to th eir ta x b a s e (w ith th e ex cep tion of cor r es p onding a dj us tm ents r es ul ting f r om th eir dom es tic r el a ted- p a r ty tr a ns a ctions ) •

4 tw o cons ecutiv e ta x p er iods

•

“Shortened” documentation

a m ounts , conditions of th e tr a ns a ction).

1

3 7 5



(continued)

“Basic” documentation

im p or ta ntl y , th e b a s ic docum enta tion does not r eq uir e p r ov ing com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e, e. g . a b ench m a r k ing a na l y s is is not in th e s tip ul a ted contents of docum enta tion. docum enta tions inf or m a tion on ca s h a nd in- k ind contr ib utions p r ov ided on th eir b eh a l f f r om 4

th eir f or eig n r el a ted p a r ties . 4

4

4

• tr a ns f er p r icing r ul es a nd docum enta tion r eq uir em ents f or dom es tic r el a ted p a r ties • intr oduction of univ er s a l docum enta tion ob l ig a tion a nd m inim um

m a ter ia l ity th r es h ol d

• • • 4

4

s ta ted th a t docum enta tion p r es ented in E ng l is h , G er m a n or F r ench m a y a l s o b e a ccep ted. T h er e h a s b een p os itiv e ex p er ience in s ub m itting docum enta tion in E ng l is h .

Priorities/pricing methods th ey com p l y w ith th e a r m ’ s - l eng th p r incip l e.

Return disclosures/related-party disclosures r el a ted p a r ties a nd th e a r m ’ s - l eng th p r ices th a t decr ea s ed th e ta x b a s e / incr ea s ed th e ta x l os s . T h e ta x b a s e m us t b e incr ea s ed b y th is dif f er ence a t th e s a m e tim e. T h e cor p or a te incom e ta x r etur n incl udes a s um m a r y ta b l e w h er e th e a m ounts of v a r ious ty p es of r el a tedp a r ty s a l es a nd p ur ch a s es m us t b e s ta ted (r eg a r dl es s of w h eth er th ey div er g e f r om a r m ’ s - l eng th p r ices ). T r a ns f er p r icing docum enta tion does not need to b e encl os ed w ith th e ta x r etur n.


3 7 6


(continued)

Transfer pricing-specific returns Documentation deadlines T r a ns f er p r icing docum enta tion does not h a v e to b e dis cl os ed unl es s th e ta x a uth or ities r eq ues t it, in w h ich ca s e it m us t b e s ub m itted w ith in 1 5 da y s up on th e r eq ues t. A s of J a nua r y 2 0 1 4 , s ub m is s ion of docum enta tion m a y b e r eq uir ed w ith out op ening a ta x a udit p r ior to th e r eq ues t.


or 1 0 % of a dditiona l ta x a s s es s m ent p er a nnum (p er ea ch y ea r of s ta tute of l im ita tion p er iod), w ith in th e a g r eed l im its f or a s s es s a b l e p ena l ties , i. e. b etw een th e m inim um p ena l ty ca p of 1 % a nd m a x im um p ena l ty ca p of 1 0 0 % of th e a dditiona l ta x a s s es s m ent.

h a v e to ta k e into a ccount a l l th e cir cum s ta nces th a t l ed to th e b r ea ch of non- m oneta r y ob l ig a tions (e. g . im p or ta nce, dur a tion a nd cons eq uences of th e b r ea ch ).

Penalty relief A s of 2 0 1 6 , th er e is a g ener a l op tion to s ub m it a s up p l em enta r y ta x r etur n w ith in 1 5 da y s f r om th e b eg inning of th e ta x a udit, w h ich of f er s ta x p a y er s a p os s ib il ity to decr ea s e th e im p os ed p ena l ty , com p a r ed to ta x a udit deter m ina tion of th e ta x a s s es s m ent, i. e. , a p ena l ty


Frequency of tax audit and transfer pricing scrutiny by the tax authority tr a ns a ctions w il l b e r ev iew ed a s p a r t of th a t a udit is m edium

to h ig h .

is s ues th a t h a v e b een com m enced.

3 7 7



(continued)

docum enta tion, tr a ns f er p r icing a udits do not f ocus onl y on s uch ta x p a y er s . T h e l ik el ih ood of a tr a ns f er p r icing a udit is r oug h l y th e s a m e

APA opportunity 4 T h e I ncom e T a x A ct does not ex p l icitl y s tip ul a te th a t th e ta x a uth or ity m a y a p p r ov e th e p a r ticul a r p r ice or m a r g in p er centa g e us ed. com p a r a b l e tr a ns a ctions or entities ). G iv en th is , a n A P A s h oul d p r ov ide a r ea s ona b l e l ev el of com f or t f or ta x p a y er s . 4

4

Impact of new OECD guidelines


3 7 8

S l o v enia Taxing authority and tax law Finančna Uprava Republike Slovenije

• C or p or a te I ncom e T a x A ct (Zakon o davku od dohodkov pravnih oseb) •

Pravilnik o transfernih cenah) •

Pravilnik o priznani obrestni meri)

• T a x P r ocedur e A ct (Zakon o davčnem postopku)

Relevant regulations and rulings r ul es on tr a ns f er p r icing m eth ods , com p a r a b il ity a na l y s is , us e of a r a ng e, g r oup ing of tr a ns a ctions , s er v ice a nd r oy a l ty ch a r g es , cos t contr ib ution a g r eem ents a nd r el a ted- p a r ty r el a tions h ip s . A r ticl e 1 8 of th e C or p or a te I ncom e T a x A ct s ets th e b a s is f or docum enta tion r eq uir em ents , w h ich a r e th en el a b or a ted up on in th e T a x P r ocedur e A ct. A r ticl e 1 9 of th e C or p or a te I ncom e T a x A ct p r ov ides th e g ener a l r ul es on th e a ck now l edg ed inter es t r a te on inter com p a ny l oa ns . T h e s a f e h a r b or f or inter es t r a tes on inter com p a ny l oa ns . A r ticl e 3 8 2 of th e T a x P r ocedur e A ct p r ov ides g ener a l inf or m a tion on tr a ns f er p r icing docum enta tion r eq uir em ents . P r ov ided th a t th e p r ov ided under A r ticl e 2 5 5 . A r ticl es 3 9 7 a nd 3 9 8 of th e T a x P r ocedur e A ct p r ov ide r eg ul a tions r eg a r ding tr a ns f er p r icing p ena l ties .



3 7 9


S l o v enia

(continued)

The master file

• A des cr ip tion of th e ta x a b l e p er s on • • A n ex p l a na tion of th e ty p e of connections b etw een th e com p a nies in th e g r oup • A n ex p l a na tion of th e m eth od us ed in th e deter m ina tion of tr a ns f er p r ices • A des cr ip tion of th e b us ines s a ctiv ities a nd b us ines s s tr a teg ies (incl uding a ny g ener a l econom ic a nd oth er f a ctor s , a n a s s es s m ent of th e com p etitiv e env ir onm ent, a nd m or e)

Country-specific documentation

• • A f unctiona l a na l y s is deter m ining th e m a in f unctions p er f or m ed a nd r is k s under ta k en b y th e ta x p a y er a nd outl ining w h ich a dj us tm ents m a y need to b e m a de in r el a tion to com p a r a b l e s itua tions • A des cr ip tion of a ny com p a r a b l es s ea r ch p er f or m ed • A des cr ip tion of b us ines s s tr a teg ies • A des cr ip tion of g oods a nd s er v ices tr a ns f er r ed or r ender ed • A des cr ip tion of th e m eth od a p p l ied f or es ta b l is h ing th e a r m ’ s - l eng th p r ice • A ny oth er inf or m a tion th a t m ig h t b e r el ev a nt f r om

a tr a ns f er p r icing p er s p ectiv e

C b C rep ort s

a f ter 1 J a nua r y 2 0 1 6 . P r ov ided th a t th e p r op os a l is a dop ted, s uch r ep or ts w il l h a v e to incl ude th e f ol l ow ing da ta , col l a ted f or ea ch ta x • • • I ncom e ta x p a id a nd incom e ta x a ccr ued • • • N um b er of em p l oy ees • T a ng ib l e a s s ets oth er th a n ca s h a nd ca s h eq uiv a l ents


3 8 0

S l o v enia

(continued)

• T a x j ur is diction • J ur is diction of es ta b l is h m ent (w h en not th e s a m e a s th e ta x j ur is diction) •


Return disclosures/related-party disclosures Transfer pricing–specific returns A s m entioned a b ov e, r el a ted- p a r ty tr a ns a ctions m us t b e r ep or ted a s p a r t of th e inf or m a tion incl uded on th e a nnua l cor p or a te incom e

• m us t dis cl os e th e na m e of th e r el a ted- p a r ty , its s ta te of r es idence a nd ta x num b er , th e cum ul a tiv e a m ount of th e l oa n g iv en or r eceiv ed a nd th e r el a tions h ip w ith th e r el a ted- p a r ty . • in a ta x p er iod, th e ta x p a y er m us t dis cl os e th e na m e of th e r el a ted- p a r ty , its s ta te of r es idence a nd ta x num b er , th e cum ul a tiv e a m ount of r eceiv a b l es or l ia b il ities tow a r d th e r el a ted- p a r ty a nd th e r el a tions h ip w ith th e r el a ted- p a r ty . A s im il a r a tta ch m ent is r eq uir ed if th e r es ident ta x p a y er h a s ta x l os s es g ener a ted f r om p r ev ious p er iods , if it is ta x ed a t a 0 % cor p or a te incom e ta x r a te or a t a l ow er r a te th a n th e g ener a l one, or if th e r es ident r el a ted- p a r ty is ta x - ex em p t.

Documentation deadlines T h e docum enta tion s h oul d b e p r ov ided to th e ta x a uth or ity up on r eq ues t, us ua l l y m a de in th e cour s e of a ta x a udit. I f it is im p os s ib l e to s ub m it th e docum enta tion im m edia tel y , a n ex tens ion of up to 9 0 da y s (dep ending on th e ex tent a nd com p l ex ity of th e inf or m a tion) m a y w ith a n ex tens ion of 6 0 da y s g r a nted to do s o. I n l ine w ith th e p r op os ed a m endm ents of th e T a x P r ocedur e A ct, th e C b C r ep or t w oul d h a v e to b e s ub m itted to th e ta x a uth or ities w ith in

3 8 1


S l o v enia

(continued)

Transfer pricing penalties 4 4

Penalty relief dis cl os ur e, th e ta x p a y er s h oul d a dj us t th e ta x l ia b il ity a ccor ding l y . p a y m ent inter es t a r e p a id s im ul ta neous l y w h il e m a k ing th e dis cl os ur e, th e ta x p a y er a v oids f a cing p ena l ties f or a ta x of f ens e.


r es et, w ith out ta k ing into a ccount a ny p r ev ious l a p s e of tim e. N ev er th el es s , th e r ig h t of th e ta x a uth or ities to a s s es s a nd col l ect ta x w il l cea s e a f ter 1 0 y ea r s . T h e tr a ns f er p r icing docum enta tion m us t b e a r ch iv ed f or 1 0 y ea r s .

Frequency of tax audit and transfer pricing scrutiny by the tax authority I n g ener a l , th e r is k of a n a nnua l ta x a udit is m edium . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit is h ig h . A l s o, th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e ta x a udit is h ig h .

• I ntr a g r oup s er v ices • I nta ng ib l e g oods (e. g . , r oy a l ties a nd l icens ing ) • F ina ncia l tr a ns a ctions (e. g . , l oa ns a nd ca s h p ool ing )

APA opportunity

• T h e ta x a b l e entity a nd th e ta x a uth or ities h a v e m et b ef or eh a nd a nd a g r eed on th e f ea s ib il ity of a n A P A . • T h e tr a ns a ction th a t is s ub j ect to th e A P A h a s econom ic s ub s ta nce.


3 8 2

S l o v enia • T h e ta x a b l e entity h a s a g enuine intention to p er f or m

(continued) s uch a tr a ns a ction.

• T h e ta x a b l e entity a nd th e ta x a uth or ities a g r ee on concl uding a n A P A . • T h e tr a ns a ction th a t is s ub j ect to th e A P A w il l b e p er f or m ed f or a l ong er p er iod of tim e a nd is not due to end s h or tl y a f ter th e A P A is concl uded. T h e dur a tion of th e A P A w il l b e deter m ined a t th e ta x a uth or ities ’ dis cr etion. A dm inis tr a tiv e f ees w il l a p p l y .


3 8 3


S o u th A f r ic a Taxing authority and tax law


a g r eem p a r ties w h a tw to a s th

ent or a r r a ng em ent b etw een connected p er s ons dif f er s f r om th e ter m s a nd conditions th a t w oul d h a v e b een a g r eed to if th e to th e tr a ns a ction w er e indep endent. A ny dif f er ence in p r ice b etw een w h a t w a s ch a r g ed b etw een th e connected p er s ons a nd oul d h a v e b een ch a r g ed b etw een indep endent p a r ties needs to b e a dj us ted in th e ta x r etur n of th e ta x p a y er . T h is is of ten r ef er r ed e p r im a r y a dj us tm ent.

T o th e ex tent th a t th e ta x p a y er h a s not r ecov er ed th e dif f er ence b etw een th e a r m ’ s - l eng th ch a r g e a nd th e a ctua l ch a r g e f r om

th e f or eig n


Practical Manual on Transfer Pricing for Developing Countries.

Documentation requirements C ur r entl y , th er e is no s ta tutor y r eq uir em ent to p r ep a r e tr a ns f er p r icing docum enta tion; h ow ev er , th e incom e ta x r etur n does r eq uir e 4

p er ta ining to r ecor d- k eep ing r eq uir em ents , f or y ea r s of a s s es s m ent s ta r ting on or a f ter 1 O ctob er 2 0 1 6 . T h is l eg is l a tion s ets out

th e l eg is l a tion. Worldwide Transfer Pricing Reference Guide

3 8 4

S o u th A f r ic a

(continued)


dif f er ences in r is k s a s s um ed b y entities op er a ting in a dif f er ent j ur is diction. P r a ctice N ote 7 s ta tes th a t th e ex p ected im p a ct of g eog r a p h ic dif f er ences a nd oth er f a ctor s on th e p r ice w oul d need to b e a s s es s ed.

Return disclosures/related-party disclosures 4 to p r ov ide th e v a l ues of indiv idua l cr os s - b or der tr a ns a ctions enter ed into w ith f or eig n- connected p er s ons . T h is incl udes p r ov iding inf or m a tion, s uch a s th e a m ounts r eceiv ed/ r eceiv a b l e f r om f or eig n r el a ted p a r ties a nd a m ounts p a id/ p a y a b l e to f or eig n r el a ted p a r ties , w h eth er th er e h a v e b een a ny ch a ng es to th e com p a ny ’ s tr a ns f er p r icing m eth odol og ies . I n a ddition, ta x p a y er s a r e r eq uir ed to p r ov ide



Transfer pricing penalties a dditiona l ta x r es ul ting f r om

a n a dj us tm ent (in th e ev ent of def a ul t, om is s ion, incor r ect dis cl os ur e or m is r ep r es enta tion).

Penalty relief es ta b l is h tr a ns f er p r ices th a t com p l y w ith th e a r m ’ s - l eng th p r incip l e a nd h a v e p r ep a r ed docum enta tion a s ev idence of s uch com p l ia nce, m itig a tion a g a ins t th e m a x im um

p ena l ty f or th e under p a y m ent of incom e ta x of 2 0 0 % , a s p r ov ided b y th e T a x A dm inis tr a tion A ct.

3 8 5


S o u th A f r ic a

(continued)


m a ter ia l f a cts .


T h e l ik el ih ood of a g ener a l a nnua l ta x a udit is cur r entl y a s s es s ed a s m edium , a nd th e l ik el ih ood of tr a ns f er p r icing f or m ing a p a r t of s uch a n a udit is h ig h . T h e m a j or f ocus f r om a n a udit p er s p ectiv e under th e ex is ting l eg is l a tion h a s b een im p l em enting s ta ted p ol icies ,

th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h , es p ecia l l y in a s itua tion in w h ich th e ta x p a y er ’ s tr a ns f er p r icing m eth odol og y is cons ider ed not to b e th e m os t a p p r op r ia te m eth odol og y , or in w h ich th e p r icing m eth odol og y h a s b een s el ected b ut p r a ctica l l y ca nnot b e tes ted or im p l em ented.

APA opportunity f r om

p r ov iding a n a dv a nce r ul ing to es ta b l is h a p r ice.



3 8 6

S o u th K o r ea Taxing authority and tax law

Relevant regulations and rulings • P r es identia l E nf or cem ent D ecr ee (P E D ) •

OECD Guidelines treatment a ccep t it in p r a ctice.


docum ents a r e r eq uir ed to b e s ub m itted in K or ea n, unl es s p r ea p p r ov a l is p r ov ided to s ub m it th em

in E ng l is h .

p a r ent com p a ny is l oca ted in h a s not enter ed th e a g r eem ent on th e a utom a tic ex ch a ng e of C b C r ep or t. A p p l ica b l e ta x p a y er m us t ta x p a y er .

3 8 7


S o u th K o r ea

(continued)

Priorities/pricing methods p r icing m eth ods , th e ta x p a y er is to s el ect th e m os t r ea s ona b l e m eth od b a s ed on th e a v a il a b il ity a nd r el ia b il ity of da ta .


1 . A f or m

s ta ting th e tr a ns f er p r icing m eth od s el ected a nd th e r ea s on f or s el ecting th e m eth od f or ea ch r el a ted- p a r ty tr a ns a ction; th er e

2 . A s um m a r y of cr os s - b or der tr a ns a ctions w ith f or eig n r el a ted p a r ties

Transfer pricing-specific returns Documentation deadlines to b e el ig ib l e f or a n under r ep or ting p ena l ty w a iv er f or p r ep a r ing th e contem p or a neous tr a ns f er p r icing docum enta tion, th e tr a ns f er

th a t ca s e, th e ta x p a y er m a y b e r eq ues ted to p r ov ide th e m a ter ia l s w ith no g r a ce p er iod (i. e. , it m a y b e r eq ues ted on da y one of th e ta x a udit).

y ea r - end.


3 8 8

S o u th K o r ea

(continued)

Transfer pricing penalties • T h e under r ep or ting p ena l ty is a p p r ox im a tel y 1 0 % of th e a dditiona l ta x es r es ul ting f r om

a tr a ns f er p r icing a dj us tm ent.

• T h e under p a y m ent p ena l ty , w h ich is a n inter es t p a y m ent in na tur e, is ca l cul a ted a s 0 . 0 3 % of th e a dditiona l ta x es on a tr a ns f er p r icing a dj us tm ent p er da y (1 0 . 9 5 % p er y ea r ) on th e cum ul a tiv e da y s . C ounting th e cum ul a tiv e da y s of th e under p a y m ent s ta r ts f r om th e da y a s s es s m ent is m a de.

1 J a nua r y 2 0 1 6 .

Penalty relief tr a ns f er p r icing m eth ods a p p l ied to th e cr os s - b or der r el a ted- p a r ty tr a ns a ctions r ep or ted in th e cor p or a te incom e ta x r etur n, a nd s uch docum enta tion s up p or ts th e r ea s ona b l enes s of th e tr a ns f er p r icing m eth ods r ep or ted, th e p ena l ty f or under r ep or ting w il l b e w a iv ed if a tr a ns f er p r icing a dj us tm ent is m a de. T o b e el ig ib l e f or a n under r ep or ting p ena l ty w a iv er , th e tr a ns f er p r icing docum enta tion m us t b e

neg l ig ence b y a ta x p a y er r eg a r ding th e r el a ted- p a r ty tr a ns a ctions (i. e. , contents of a contem p or a neous tr a ns f er p r icing docum enta tion). I n g ener a l , contem p or a neous tr a ns f er p r icing docum enta tion s h oul d incl ude inf or m a tion a b out th e ta x p a y er ’ s b us ines s (incl uding f unctions p er f or m ed a nd f a ctor s th a t ca n a f f ect th e p r icing of inter com p a ny tr a ns a ctions w ith r el a ted p a r ties ), deta il s a b out cr os s - b or der r el a ted- p a r ty tr a ns a ctions , a n ex p l a na tion of th e tr a ns f er p r icing m eth od s el ected a nd r ea s ons f or not s el ecting oth er tr a ns f er p r icing m eth ods p r es cr ib ed in th e r eg ul a tions , a nd deta il s a b out th e com p a r a b l e com p a ny or tr a ns a ction da ta us ed. T h e r eg ul a tion a l s o s tip ul a tes th a t th e com p a r a b l e da ta us ed s h oul d b e r ep r es enta tiv e a nd s h oul d not h a v e b een s el ectiv el y ch os en to a n A P A or s el ected b y ta x a uditor s in a ta x a udit, th e ta x p a y er needs to j us tif y th e us e of th e dif f er ent tr a ns f er p r icing m eth od.

m a inta ined s up p or ting docum enta tion, th en th er e is no neg l ig ence.

3 8 9


S o u th K o r ea

(continued)

Statute of limitations on transfer pricing assessments da te.


ta x a udits . a l l oca tions f r om ov er s ea s r el a ted p a r ties . G ener a l l y , if tr a ns f er p r icing is r ev iew ed a s p a r t of a ta x a udit, th e ta x a uditor s a r e l ik el y to ch a l l eng e th e m eth od us ed b y th e ta x p a y er a nd m a y p r op os e a l ter na te m eth ods th a t a r e l es s f a v or a b l e to th e ta x p a y er .

APA opportunity

concl uded, th e countr ies th a t a r e counter p a r ties to A P A s , th e tim e ta k en to p r oces s A P A a p p l ica tions a nd oth er r el a ted inf or m a tion. T h e 4 T h e a nnua l r ep or t a l s o s h ow ed th a t 4 7 A P A s w er e a p p l ied f or in 2 0 1 3 . A s f or p r oces s ed A P A s in 2 0 1 3 , 1 8 w er e b il a ter a l A P A s a nd 2 0 w er e unil a ter a l A P A s . h a s b een p r op os ed f or th e L C I T A a s A r ticl e 6 (3 ). A r es ident w h o a p p l ies f or a unil a ter a l A P A m a y a l s o a p p l y f or a n a dv a nce cus tom s

r es ul ts f r om

tr a ns f er p r icing a l ig n w ith th e r es ul ts f r om

cus tom s .



3 9 0

S p ain Taxing authority and tax law

Relevant regulations and rulings T h e tr a ns f er p r icing r eg ul a tions a r e conta ined in L a w 2 7 / 2 0 1 4 , a p p r ov ed on 2 7 N ov em b er 2 0 1 4 , A r ticl e 1 8 of th e C I T L . b eg inning a f ter 1 D ecem b er 2 0 0 6 ). 4 ob l ig a tions . T h e new tr a ns f er p r icing docum enta tion r eq uir em ents , a s w el l a s th e C b C r ep or ting ob l ig a tions , w il l need to b e com p l ied w ith



• • D es cr ip tions of th e m a in a ctiv ities of th e g r oup , incl uding th e p r incip a l g eog r a p h ic m a r k ets w h er e it op er a tes , p r incip a l s our ces of r ev enue a nd s up p l y ch a in of a ctiv ities r ep r es enting a t l ea s t 1 0 % of th e g r oup tur nov er • cor p or a te ta x p a y er , dir ectl y or indir ectl y • • G ener a l des cr ip tions of th e f unctions p er f or m ed a nd th e r is k s a s s um ed b y th e dif f er ent g r oup entities , to th e ex tent th a t th ey a f f ect th e • L is t of inta ng ib l es (incl uding p a tents , tr a dem a r k s a nd com m er cia l b r a nds ) ow ned b y th e g r oup , to th e ex tent th a t th ey a f f ect th e

• O v er a l l des cr ip tion of th e g r oup ’ s f unding s tr uctur e, incl uding m a in a g r eem ents w ith entities outs ide th e g r oup • l oca tion 3 9 1


S p ain

(continued)

• D es cr ip tion of th e g r oup ’ s tr a ns f er p r icing p ol icies , incl uding th e p r icing m eth odol og y us ed to j us tif y th e g r oup ’ s p ol icies ’ com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e • • • C or p or a te g r oup ’ s a nnua l r ep or t or eq uiv a l ent 4

• A deta il ed des cr ip tion of th e ta x p a y er ’ s b us ines s a nd b us ines s s tr a teg y , incl uding ch a ng es in th e b us ines s s tr a teg y com p a r ed w ith th e p r ev ious ta x y ea r • A deta il ed des cr ip tion of m a na g em ent s tr uctur e, incl uding g eog r a p h ica l s cop e of its f unctions a nd r ep or ting l ines . • • •

•

A m ounts of th e tr a ns a ctions

•

C h a r a cter is tics of p r op er ty a nd s er v ices •

F unctiona l a na l y s is (f unctions p er f or m ed, a s s ets us ed, r is k s a s s um ed) •

C ontr a ctua l ter m s E conom ic cir cum s ta nces

• • A n ex p l a na tion a b out th e s el ection a nd a p p l ica tion of th e tr a ns f er p r icing m eth ods , w h y th e m eth ods w er e s el ected a nd h ow th ey w er e a p p l ied • A ny oth er r el ev a nt inf or m a tion us ed b y th e ta x p a y er to v a l ue r el a ted- p a r ty tr a ns a ctions , a s w el l a s a ny a g r eem ent enter ed into w ith s h a r eh ol der s th a t m a y a f f ect th e tr a ns a ction v a l ua tion T h e ta x a dm inis tr a tion coul d r eq uir e f ur th er inf or m a tion dur ing a ta x a udit in r eg a r d to th e r el a ted- p a r ty tr a ns a ctions . 4 • • m a r k et v a l ue (ta k ing into a ccount th e tota l tr a ns a ctions ca r r ied out w ith th e s a m e r el a ted- p a r ty ) • •

P er f or m ed b etw een entities w ith in ta x cons ol ida tion g r oup s

•

P er f or m ed b etw een econom ic inter es t g r oup ing s or tem p or a r y b us ines s a l l ia nces a nd th eir s h a r eh ol der s •

C a r r ied out w ith in th e s cop e of a n initia l p ub l ic of f er ing •


3 9 2

S p ain

(continued)

com m er cia l l a w r ul es ) th a t a r e not a t th e s a m e tim e a dep endent of a ny oth er entity , to th e ex tent th a t th e cons ol ida ted g r oup ’ s net

• O r • com p l y w ith th e ex ch a ng e of inf or m a tion


A l l of th es e m eth ods h a v e th e s a m e p r ef er entia l l ev el . T h e s el ection of th e tr a ns f er p r icing m eth ods s h oul d b e b a s ed on th e na tur e of r el a ted- p a r ty tr a ns a ctions , th e a v a il a b il ity of inf or m a tion a nd th e com p a r a b il ity a na l y s is .

Return disclosures/related-party disclosures Transfer pricing–specific returns ta x p a y er s .


Transfer pricing penalties r es ul t f r om

not h a v ing cor r ect docum enta tion or f r om

not a p p l y ing th e a r m ’ s - l eng th p r incip l e (m a r k et v a l ue).

ina ccur a te or f a l s e f a cts .

3 9 3


S p ain

(continued)

T h er e w il l b e no p ena l ties if th e docum enta tion ob l ig a tion h a s b een com p l ied w ith , ev en if th e ta x a uth or ities r ea s s es s th e v a l ue of th e tr a ns a ctions .

• D iv idends , w h enev er s uch dif f er ence is in f a v or of th e s h a r eh ol der • C ontr ib utions b y th e s h a r eh ol der to th e entity ’ s eq uity , w h enev er th e dif f er ence is in f a v or of th e entity 4 of th e O E C D G uidel ines ). T h e a b ov e s a nctions a r e com p a tib l e w ith a g g r a v a ting cir cum s ta nces , s uch a s r es is ting , ob s tr ucting , ex cus ing or neg a ting th e ta x a uth or ities ’ a ctions .

Penalty relief ev en if th e ta x a uth or ities p r op os e a r ea s s es s m ent.

Statute of limitations on transfer pricing assessments A g ener a l s ta tute of l im ita tions of f our y ea r s a p p l ies . T h e ter m

w il l b e inter r up ted in th e ca s e of a ta x a udit. I f a new incom e ta x r etur n is

Frequency of tax audit and transfer pricing scrutiny by the tax authority f or s uch com p a nies is h ig h . l ik el ih ood of a udit f or oth er s is l ow . H ow ev er , th e ta x a uth or ities es ta b l is h th eir a nnua l a udit p l a ns b a s ed on th e r is k a s s es s m ent of ea ch ta x p a y er , s o com p a nies f or w h ich r is k f a ctor s a p p l y m a y b e ex p os ed to a n incr ea s ed r is k . T h e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of a n a udit is h ig h if th e ta x p a y er r eg ul a r l y enter s into cr os s - b or der r el a tedp a r ty tr a ns a ctions . F or a l l oth er ca s es , th e l ik el ih ood of a tr a ns f er p r icing r ev iew dur ing a g ener a l a udit is m edium . ta x a uth or ities m or e of ten a g g r es s iv el y ch a l l eng e th e com p a r a b il ity a na l y s is b y a p p l y ing th e m os t r ecent O E C D g uida nce to th e nine- s tep p r oces s a nd inter q ua r til e r a ng e a p p l ica tion. T h e ta x a uth or ities h a v e s ta ted th a t tr a ns f er p r icing a udits a r e a n a r ea of m a j or a ttention, p a r ticul a r l y w ith r eg a r d to b us ines s r es tr uctur ing s a nd inta ng ib l e tr a ns a ctions .


3 9 4

S p ain

(continued)

APA opportunity T a x p a y er s m a y r eq ues t th a t th e ta x a uth or ities is s ue r ul ing s on r el a ted- p a r ty tr a ns a ctions b ef or e th ey a r e ca r r ied out. T h is r eq ues t h a s oth er ta x a uth or ities to deter m ine th e m a r k et v a l ue of th e tr a ns a ctions j ointl y (i. e. , b il a ter a l A P A s ). T h e new r eg ul a tion h a s im p r ov ed th e p r ev ious r eg im e on A P A s b y ex tending th e v a l id ter m

to a s ix - y ea r p er iod (encom p a s s ing th e

r ea s s es s m ent. T h is w a y , th e A P A m a y b r ing ta x p a y er s a n op p or tunity to s ettl e dis p utes w ith th e ta x a dm inis tr a tion.


3 9 5


S r i L ank a Taxing authority and tax law

Relevant regulations and rulings T r a ns f er p r icing r eg ul a tions a r e conta ined in Extraordinary Gazette 4

4


Documentation requirements T r a ns f er p r icing r eg ul a tions r eq uir e ex tens iv e contem p or a neous docum enta tion. T a x p a y er s a r e r eq uir ed to k eep a l l of it in E ng l is h , ev idencing th a t a s s ocia ted under ta k ing tr a ns a ctions h a v e b een es ta b l is h ed on a n a r m ’ s - l eng th b a s is . H ow ev er , s uch docum enta tion is y ea r of a s s es s m ent.



• • • s ta tem ents .


3 9 6

S r i L ank a

(continued)


Extraordinary Gazettes

Gazettes a l s o r eq uir e a n indep endent A p p r ov ed A ccounta nt to cer tif y th a t th e dir ector ’ s dis cl os ur es h a v e b een m a de a nd th e neces s a r y docum enta tion h a s b een ex a m ined b y th e A p p r ov ed or b ef or e 3 0 N ov em b er 2 0 1 6 .

Documentation deadlines T h e docum enta tion th a t is r eq uir ed if th e th r es h ol d m entioned a b ov e is ex ceeded s h oul d b e f ur nis h ed up on r eq ues t. T h e r eg ul a tions


b oth .

Penalty relief P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s a p p l ica tion of th e a r m ’ s - l eng th p r incip l e.

Statute of limitations on transfer pricing assessments I n th e ca s e of f r a ud or w il l f ul ev a s ion, th e s ta tute of l im ita tions w il l not a p p l y .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit dep ends on th e f a cts a nd cir cum s ta nces . I n g ener a l , th e l ik el ih ood of tr a ns f er p r icing s cr utiny dur ing a ta x a udit is h ig h . tr a ns a ctions w ith a s s ocia ted under ta k ing s h a s b een ob s er v ed.

3 9 7


S r i L ank a

(continued)



3 9 8

S w ed en Taxing authority and tax law


4 •

Skatteförfarandelagen (2011:1244)) incl ude docum enta tion r eq uir em ents r eg a r ding tr a ns f er p r icing •

om prissättningsbesked vid internationella transaktioner)

enter p r is es . I t a l s o is s ues g ener a l ta x a tion g uidel ines a nd op inions , incl uding inf or m a tion a b out tr a ns f er p r icing .


r es tr uctur ing s .


• • I nf or m a tion r eg a r ding th e ch a r a cter is tics a nd s cop e of th e tr a ns a ctions • A f unctiona l a na l y s is • A des cr ip tion of th e ch os en p r icing m eth od • A com p a r a b il ity a na l y s is I n a ddition to identif y ing th e f unctions p er f or m ed, th e f unctiona l a na l y s is s h oul d r ev ea l th e r is k s a s s um ed a nd a s s ets us ed, a s w el l com p a r a b il ity f a ctor s des cr ib ed in th e O E C D G uidel ines is h ig h l ig h ted.

N or w eg ia n or E ng l is h .

tr a ns a ctions inv ol v ing th e s a l e of inta ng ib l e a s s ets .

3 9 9


S w ed en

(continued)

• • T h e counter p a r ty to th e tr a ns a ction a nd inf or m a tion a b out th a t entity ’ s b us ines s op er a tions • I nf or m a tion a b out th e inter com p a ny tr a ns a ctions , incl uding th e ty p e of tr a ns a ction, a m ounts a nd v a l ue • T h e m eth od a p p l ied to th e tr a ns a ction to com p l y w ith th e a r m ’ s - l eng th p r incip l e •


Return disclosures/related-party disclosures r etur n m a y el im ina te th e r is k of p ena l ties .


Transfer pricing penalties 4 im p os ed. I n tr a ns f er p r icing ca s es , p ena l ties a t a r a te of 4 0 % a r e g ener a l l y im p os ed.

Penalty relief T h e r is k of p ena l ties m a y b e el im ina ted if th er e is f ul l dis cl os ur e of th r el ev a nt inf or m a tion is p r ov ided. I n th e p r ep a r a tor y w or k f or th e l a w s ta ted th a t if a n incom e a dj us tm ent is m a de b eca us e th e ta x p a y er ’ s r educed or el im ina ted if th e ta x p a y er h a s p r ep a r ed p r op er tr a ns f er p

e tr a ns a ctions under ta k en a nd th e m eth ods us ed, a nd a l l oth er th a t intr oduced tr a ns f er p r icing docum enta tion r eq uir em ents , it is p r ices a r e not deem ed to b e a t a r m ’ s - l eng th , th e p ena l ties m ig h t b e r icing docum enta tion.


4 0 0

S w ed en

(continued)

Statute of limitations on transfer pricing assessments Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium to h ig h . T h e l ik el ih ood dep ends on a num b er of f a ctor s , s uch a s th e indus tr y in w h ich th e com p a ny op er a tes , th e occur r ence of cer ta in tr a ns a ctions , th e outcom e of p r ev ious ta x a udits a nd th e ch a ng es in tur nov er

f ocus onl y on tr a ns f er p r icing . T h e l ik el ih ood is l ow to h ig h th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit. T h e l ik el ih ood dep ends , f or ex a m p l e, on th e tr a ns a ctions inv ol v ed, th e tr a ns f er p r icing m eth ods a p p l ied, w h eth er docum enta tion a nd a g r eem ents h a v e b een p r ep a r ed, a nd w h eth er th e docum enta tion a nd a g r eem ents a r e a dh er ed to in p r a ctice.


4 0 1


S w itz er l and Taxing authority and tax law

Relevant regulations and rulings is der iv ed f r om

th e a r m ’ s - l eng th p r incip l e in A r ticl e 5 8 of th e F eder a l D ir ect T a x A ct on a f eder a l l ev el , a s w el l a s in A r ticl e 2 4 of th e

dev ia tions f r om

th e a r m ’ s - l eng th p r incip l e.

A num b er of a dm inis tr a tiv e dir ectiv es (incl uding cir cul a r s a nd cir cul a r l etter s ) im p l icitl y or ex p l icitl y r ef er to th e deter m ina tion of tr a ns f er • •

4

• C ir cul a r L etter N o. 6 f r om • C ir cul a r f r om

4

6 J une 1 9 9 7 , r eg a r ding h idden eq uity

2 3 F eb r ua r y 2 0 1 6 r eg a r ding inter es t p a y m ents b etw een r el a ted g r oup entities (up da ted a nnua l l y )

r el ea s ed b y th e F eder a l C ouncil .



4


4 0 2

S w itz er l and

(continued)

Priorities/pricing methods 4 4 l eng th p r incip l e (i. e. , f or ea ch indiv idua l ta x p a y er on th e b a s is of com p a r a b l e uncontr ol l ed tr a ns a ctions cons ider ing a p p r op r ia te m a r g in r a ng es ). T h e cir cul a r l etter a l s o im p l icitl y s ta tes th a t th e cos t- p l us m eth od is th e m os t a p p r op r ia te m eth od f or s er v ice com p a nies to p r ice cos t- p l us m eth od s h a l l b e a ccep ted onl y in ex cep tiona l ca s es .

a uth or ities .

Return disclosures/related-party disclosures T h er e a r e no f or m a l r el a ted- p a r ty dis cl os ur e r eq uir em ents . H ow ev er , in th e ca s e of a ta x a udit or r eq ues t f r om th e ta x p a y er m us t p r ov ide th e r eq ues ted inf or m a tion, to a r ea s ona b l e ex tent.

com p etent a uth or ities ,

Transfer pricing-specific returns Documentation deadlines T h er e a r e cur r entl y no s p ecia l p r ov is ions f or docum enta tion dea dl ines . H ow ev er , up on r eq ues t, p r oof of th e a r m ’ s - l eng th ch a r a cter of tr a ns a ctions ty p ica l l y h a s to b e p r ov ided w ith in 3 0 da y s .

Transfer pricing penalties in ca s es of f r a ud or neg l ig ence. A l th oug h g ener a l l y no p ena l ties a p p l y , in th e ev ent of a dj us tm ents , inter es t ch a r g es f or l a te p a y m ents a r e due in s uch ca s es .

Penalty relief T h er e a r e no s p ecia l p r ov is ions f or p ena l ty r eductions .

Statute of limitations on transfer pricing assessments T h e g ener a l r ul e p r ov ides f or up to 1 0 y ea r s f r om

th e end of th e ta x y ea r if th e ta x a uth or ities dis cov er new f a cts or cir cum s ta nces .

4 0 3


S w itz er l and

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority a r r a ng em ents , a nd th e l ik el ih ood f or a n a udit ca n b e cons ider ed to b e m edium . I n th e ca s e of a n a udit, th er e is a h ig h l ik el ih ood th a t th e

APA opportunity

Impact of new OECD BEPS Action 8–10 guidelines incr ea s ing l y a s k ing q ues tions on s ub s ta nce a nd r eq ues ting dis cl os ur e of th e entir e v a l ue ch a in.


4 0 4

T aiw an Taxing authority and tax law

Relevant regulations and rulings • A r ticl e 4 3 - 1 of I T L • A r ticl e 5 0 of th e F ina ncia l H ol ding C om p a ny L a w (F H C L ) •

4 g uidel ines ) b eca m e ef f ectiv e 3 0 D ecem b er 2 0 0 4 .

OECD Guidelines treatment Documentation requirements E x cep t f or im m a ter ia l r el a ted- p a r ty tr a ns a ctions , ex tens iv e contem p or a neous docum enta tion is r eq uir ed. A ccor ding to th e tr a ns f er p r icing g uidel ines , a n enter p r is e m us t h a v e th e tr a ns f er p r icing r ep or t a nd r el ev a nt docum enta tion p r ep a r ed w h en th e a nnua l incom e ta x I f th e enter p r is e m eets th e s a f e- h a r b or th r es h ol d a nd does not p r ep a r e a tr a ns f er p r icing r ep or t, th e ta x a uth or ity m a y s til l r eq ues t

p r es ented in th e tr a ns f er p r icing g uidel ines . 1

D ecem b er 2 0 0 8 a nd a f ter w a r d. T h e r ul ing s ta tes th a t th e enter p r is e is not r eq uir ed to p r ep a r e a tr a ns f er p r icing r ep or t if a ny of th e • O r • • m il l ion f or th e p r eceding 1 0 ta x y ea r s to r educe th e incom e ta x or undis tr ib uted ea r ning s s ur p l us ta x

1

•

4

4 0 5


T aiw an

(continued)

• O r •

• • • D es cr ip tion of contr ol l ed tr a ns a ctions •

•

•

I ndus tr y a nd econom ic a na l y s is •

F unctions a nd r is k s a na l y s is A p p l ica tion of th e a r m ’ s - l eng th p r incip l e

•

•

•


T r a ns f er p r icing m eth ods s el ected b y th e enter p r is es T r a ns f er p r icing m eth ods s el ected b y r el a ted p a r ties under th e s a m e contr ol

• • •

Priorities/pricing methods m os t- a p p r op r ia te- m eth od a p p r oa ch w ith in th e O E C D G uidel ines .

Return disclosures/related-party disclosures 4 • T h e inv es ting s tr uctur e • • T h e r el a ted- p a r ty tr a ns a ction a m ounts b y ty p e, incl uding tr a ns f er of ta ng ib l e a s s ets , us e of ta ng ib l e a s s ets , tr a ns f er of inta ng ib l e a s s ets , • T h e r el a ted- p a r ty tr a ns a ction b a l a nces • •


4 0 6

T aiw an

(continued)

T h e ta x a uth or ity h a s is s ued s a f e- h a r b or r ul es f or r el a ted- p a r ty tr a ns a ction dis cl os ur es in tw o r ul ing s . 2 enter p r is e m us t dis cl os e r el a ted- p a r ty tr a ns a ctions on its incom e ta x r etur n if th e s um of its a nnua l op er a ting a nd nonop er a ting r ev enue • T h e enter p r is e h a s r el a ted p a r ties outs ide T a iw a n (incl uding th e h ea dq ua r ter s a nd b r a nch es ) • incom e ta x or undis tr ib uted ea r ning s s ur p l us ta x •


Documentation deadlines A ccor ding to th e tr a ns f er p r icing g uidel ines , th e ta x p a y er m us t h a v e th e tr a ns f er p r icing r ep or t a nd r el ev a nt docum ents p r ep a r ed w h en note on th e r etur n w h eth er th e enter p r is e h a s p r ep a r ed a tr a ns f er p r icing r ep or t in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines . T h e I n a ccor da nce w ith th e tr a ns f er p r icing g uidel ines , up on a udit, th e enter p r is e h a s to p r ov ide th e N T A w ith th e r ep or t w ith in one m onth .

Transfer pricing penalties P ur s ua nt to th e tr a ns f er p r icing g uidel ines , up to 2 0 0 % of th e ta x s h or tf a l l coul d b e im p os ed if a s s es s ed b y th e ta x a uth or ity , under cer ta in cir cum s ta nces .

Penalty relief C ur r entl y , th er e is no p ena l ty r el ief r eg im e in p l a ce.



2

• 4 4 3

4

4 4 4

4 0 7


T aiw an

(continued)

• indus tr y a v er a g e. • • T h e enter p r is e f a il s to dis cl os e r el a ted- p a r ty tr a ns a ctions in a ccor da nce w ith th e r el a ted- p a r ty tr a ns a ctions dis cl os ur e r eq uir em ents . • T h e enter p r is e f a il s to deter m ine w h eth er its r el a ted- p a r ty tr a ns a ctions a r e w ith in a n a r m ’ s - l eng th r a ng e a nd f a il s to p r ep a r e docum ents in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines . • T h e enter p r is e f a il s to ch a r g e r el a ted p a r ties in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines or ch a r g es a n a b nor m a l a m ount. • T h e enter p r is e f a il s to p r ov ide th e tr a ns f er p r icing r ep or t up on a ta x a udit. • T h e ta x a uth or ity a dj us ted th e tr a ns f er p r icing of th e enter p r is e, in w h ich ca s e th e ta x y ea r s p r eceding a nd s ub s eq uent to th e y ea r of a tr a ns f er p r icing a udit a r e l ik el y to b e s el ected f or a udit. • • • A ny oth er tr a ns a ction f a il s to m eet th e a r m ’ s - l eng th r eq uir em ents in a ccor da nce w ith th e tr a ns f er p r icing g uidel ines . a udits . cor p or a te incom e ta x a udits m a y incl ude a r eq ues t a nd r ev iew of th e docum enta tion, a s w el l a s r el a ted s up p or ting m a ter ia l s . I n th e p a s t y ea r , th er e h a s b een incr ea s ed a ctiv ity b y th e N T A , es p ecia l l y w ith r es p ect to r eq ues ts to s ee docum enta tion r ep or ts . I n p a r ticul a r , com p a nies conducting b us ines s th r oug h ta x h a v ens h a v e a ttr a cted m or e s cr utiny , a l ong w ith th os e m a k ing l os s es . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e a udit is h ig h , b a s ed on a ny of th e f a ctor s or • • • • • • a nd ex p ects inter es t incom e to b e p a id to th e l ender •

APA opportunity A P A s a r e a v a il a b l e under A r ticl es 2 3 th r oug h 3 2 of th e tr a ns f er p r icing g uidel ines .

• •


4 0 8

T aiw an

(continued)

• D ocum enta tion, a s r eq uir ed under s ub p a r a g r a p h s 1 to 4 a nd s ub p a r a g r a p h s 6 to 1 0 , p a r a g r a p h 1 of A r ticl e 2 4 , h a s b een w el l - p r ep a r ed. • A tr a ns f er p r icing r ep or t, a s p r es cr ib ed under s ub p a r a g r a p h 5 , p a r a g r a p h 1 of A r ticl e 2 4 , h a s b een p r ep a r ed. • •

4 4 4 • T h e enter p r is e f a il s to p r ov ide th e ta x a uth or ity w ith th e a nnua l r ep or t r eg a r ding th e im p l em enta tion of th e A P A . • T h e enter p r is e f a il s to k eep th e r el ev a nt docum ents in a ccor da nce w ith tr a ns f er p r icing g uidel ines . • T h e enter p r is e f a il s to f ol l ow th e p r ov is ions of th e A P A . • T h e enter p r is e concea l s m a ter ia l f a cts , p r ov ides f a l s e inf or m a tion or conducts w r ong f ul a cts .


l ow - v a l ue- a dded s er v ices w il l b e p r ov ided in th e tr a ns f er p r icing g uidel ines in th e nea r f utur e.

4 0 9


T anz ania Taxing authority and tax law 4

4


4

OECD Guidelines treatment N ev er th el es s , th e I T A 2 0 0 4 a nd th e 2 0 1 4 tr a ns f er p r icing r eg ul a tions p r ev a il if th er e a r e a ny incons is tencies b etw een th em

a nd th e

Documentation requirements • • N a tur e of th e b us ines s or indus tr y a nd m a r k et conditions • T h e contr ol l ed tr a ns a ctions • • C om p a r a b il ity , f unctiona l a nd r is k a na l y s is • • A p p l ica tion of tr a ns f er p r icing m eth od • D ocum ents th a t p r ov ide th e f ounda tion f or or oth er w is e s up p or t or w er e r ef er r ed to in dev el op ing th e tr a ns f er p r icing a na l y s is • I ndex a nd a ny oth er inf or m a tion, da ta or docum ent cons ider ed r el ev a nt b y th e C om m is s ioner

Priorities/pricing methods a p p l ied. N otw ith s ta nding th e a b ov e, th e tr a ns f er p r icing r eg ul a tions r eiter a te th a t th e m os t a p p r op r ia te m eth od s h oul d b e a p p l ied w ith r eg a r d to

Return disclosures/related-party disclosures T h e ta x p a y er is r eq uir ed to dis cl os e th e a m ount of s a l es , p ur ch a s es a nd l oa ns m a de or r eceiv ed f r om


4 1 0

a s s ocia tes in a nd outs ide of

T anz ania

(continued)


Documentation deadlines s ub m itted to th e ta x a uth or ity w ith in 3 0 da y s .

Transfer pricing penalties T h e g ener a l r ul es of p ena l ties f or noncom p l ia nce a nd inter es t f or under p a y m ent of ta x under th e I T A 2 0 0 4 a p p l y .

Penalty relief r ea s ona b l e ca us e.


Frequency of tax audit and transfer pricing scrutiny by the tax authority T h er e a r e no s p ecia l tr a ns f er p r icing a udits s ta ted in th e l a w . H ow ev er , th e ta x a uth or ity s ta ted th a t th e inter com p a ny tr a ns a ctions w il l b e a udited in th e g ener a l ta x a udits , b ut a s p ecia l tr a ns f er p r icing tea m w il l b e inv ol v ed dur ing th e a udit. T h e ta x a uth or ity h a s r ecentl y r eq ues ted T P docum enta tion f or th e r ev iew . N o T P a dj us tm ent h a s b een m a de s o f a r .

APA opportunity T h e tr a ns f er p r icing r eg ul a tions p r ov ide f or a n op p or tunity to enter into unil a ter a l , b il a ter a l or m ul til a ter a l A P A s . I n a s em ina r f or ta x p a y er s on tr a ns f er p r icing , th e ta x a uth or ities h a v e indica ted th a t, until f ur th er notice, no A P A s w il l b e s tip ul a ted until l oca l ex p er tis e h a s b een b uil t.


coop er a tion a m ong A f r ica n ta x a uth or ities , w h ich w or k s tow a r d incr ea s ing th e l ev el of v ol unta r y ta x com p l ia nce w h il e com b a ting ta x

w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea . 4 1 1


T h ail and Taxing authority and tax law


4

• •

4 •

• D oub l e ta x a g r eem ents b etw een T h a il a nd a nd oth er countr ies •

4 •

4

dis continue a b il a ter a l A P A a nd ta x p a y er com p l ia nce a f ter a b il a ter a l A P A is concl uded.

2 0 1 5 or ea r l y 2 0 1 6 .

OECD Guidelines treatment T h e T h a i tr a ns f er p r icing g uidel ines g ener a l l y f ol l ow th e O E C D G uidel ines , incl uding a l l ow ing a l l of th e m eth ods a ccep ta b l e under th e O E C D G uidel ines . T h is incl udes s up p or ting m a ter ia l b ey ond th e s cop e of th e O E C D G uidel ines . T h e O E C D G uidel ines a r e not b inding on

Documentation requirements • T h e s tr uctur e a nd r el a tions h ip s b etw een b us ines s entities w ith in th e s a m e g r oup , incl uding th e s tr uctur e a nd na tur e of b us ines s ca r r ied on b y ea ch entity • • T a x p a y er s ’ b us ines s s tr a teg ies a nd th e r ea s ons f or a dop ting th os e s tr a teg ies •


4 1 2

T h ail and

(continued)

• • • • • docum ented) • E v idence s up p or ting th e neg otia tion p os itions ta k en b y th e ta x p a y er in r el a tion to th e tr a ns a ctions w ith b us ines s entities in th e s a m e g r oup a nd th e b a s is f or th os e neg otia ting p os itions • O th er r el ev a nt docum enta tion (if a ny ) s up p or ting th e tr a ns f er p r ices


Return disclosures/related-party disclosures C ur r entl y , th er e is neith er dis cl os ur e of th e ex is tence nor nonex is tence th a t tr a ns f er p r icing docum enta tion is r eq uir ed to b e s ub m itted



4

Transfer pricing penalties T h er e is no ex p l icit p ena l ty f or tr a ns f er p r icing a s s es s m ents , nor is th er e a n ex p l icit p ena l ty f or not h a v ing tr a ns f er p r icing docum enta tion. m onth s ur ch a r g e m a y b e im p os ed. T h e 1 . 5 % m onth l y s ur ch a r g e is ca p p ed a t 1 0 0 % of th e ta x s h or tf a l l a m ount.

4 1 3


T h ail and

(continued)

Penalty relief I n th e ev ent of a tr a ns f er p r icing a dj us tm ent, th er e is no f or m a l p ena l ty r el ief f or h a v ing tr a ns f er p r icing docum enta tion in p l a ce. a f or m of inter es t a nd ca nnot b e r educed. C ontem p or a neous docum ents ca nnot b e us ed to r educe th e p ena l ty f or a tr a ns f er p r icing s h or tf a l l . H ow ev er , docum enta tion is a n im p or ta nt tool in th e def ens e of tr a ns f er p r icing , s h oul d a ta x a udit ta k e p l a ce.

Statute of limitations on transfer pricing assessments y ea r s up on s us p icion of ta x ev a s ion or f r a ud.


docum enta tion. F a il ur e to do s o w il l l ik el y l ea d to a ta x a udit. a r ea of tr a ns f er p r icing .

deductib il ity of ex p ens es a r is ing f r om

inter com p a ny tr a ns a ctions ), a f ur th er inv es tig a tion w il l b e conducted.

I n m os t ca s es , th e ta x p a y er under inv es tig a tion w il l b e r eq uir ed to a dd th e ex p ens es (to th e ex tent deem ed ex ces s iv e) b a ck to its ta x a b l e

APA opportunity deg r ee of cer ta inty a nd el im ina te doub l e ta x a tion, a s p r ov ided in doub l e ta x tr ea ties b etw een T h a il a nd a nd oth er j ur is dictions . C ur r entl y ,

concl uded to da te (2 2 b etw een T h a il a nd a nd J a p a n a nd 1 b etw een T h a il a nd a nd K or ea ). C ur r entl y , 2 0 b il a ter a l A P A s a r e b eing r ev iew ed a nd neg otia ted.



4 1 4

T u r k ey Taxing authority and tax law

Relevant regulations and rulings T r a ns f er p r icing is r eg ul a ted b y A r ticl e 1 3 of th e C or p or a te T a x C ode num b er ed 5 5 2 0 , p ub l is h ed 2 1 J une 2 0 0 6 . A r ticl e 1 3 of th e

eng a g es in p ur ch a s e of g oods a nd s er v ices w ith r el a ted p a r ties a t p r ices or a t a m ounts w h ich th ey deter m ine do not com p l y w ith th e T r a ns f er p r icing p r ov is ions h a v e b een ef f ectiv e s ince J a nua r y 2 0 0 7 . T h er e a r e tw o ca b inet decr ees , p ub l is h ed in D ecem b er 2 0 0 7 a nd

OECD Guidelines treatment T h e p r ea m b l e to th e l a w s ta tes th a t th e p r ov is ions of inter na tiona l r eg ul a tions , es p ecia l l y th e O E C D G uidel ines , a r e ta k en a s r ef er ence. H ow ev er , th er e is no p a r ticul a r r ef er ence to th e O E C D G uidel ines in th e a ctua l content of th e r eg ul a tions , incl uding A r ticl e 1 3 of th e

I n l oca l tr a ns f er p r icing r ul es , b us ines s r es tr uctur ing s a r e not r ef er enced. H ow ev er , th er e a r e s tr ict p r ov is ions in l oca l ta x codes r eg a r ding a nti- a b us e r ul es a nd th e s ub s ta nce- ov er - f or m p r incip l e.

s ta te th a t th e ta x a uditor s a r e s til l not f ul l y a l ig ned w ith th e O E C D G uidel ines a nd th a t th er e is a v er y s tr ong tendency tow a r d us ing th e l is ted in th e O E C D G uidel ines .

Documentation requirements T a x p a y er s a r e r eq uir ed to s ub m it, a s a n a tta ch m ent to th e cor p or a te incom e ta x r etur n, a tr a ns f er p r icing f or m tr a ns a ctions .

4 1 5

deta il ing r el a ted- p a r ty


T u r k ey

(continued)

I n a ddition to th e tr a ns f er p r icing f or m , ta x p a y er s a r e r eq uir ed to p r ep a r e (a nd s ub m it up on r eq ues t b y th e ta x a uth or ity ) a n a nnua l • r el a ted- p a r ty tr a ns a ctions • w ith r el a ted p a r ties • O th er ta x p a y er s to p r ep a r e th e r ep or t f or p ur p os es of dis cl os ing tr a ns a ctions conducted w ith f or eig n r el a ted p a r ties A l l of th e docum enta tion a b ov e is to b e p r ep a r ed in T ur k is h . th r oug h T r a ns f er P r icing .

• g r oup ’ s b us ines s es . • s er v ices , r oy a l ties a nd inter es ts . • em p l oy ees a nd a s s ets .

Priorities/pricing methods T h er e is no p r ior ity a m ong th e m eth ods . H ow ev er , th er e is a p r ior ity a m ong com p a r a b l es , a nd if th er e a r e inter na l com p a r a b l es , th ey enoug h ) ca n ex ter na l com p a r a b l es th en b e us ed.

Return disclosures/related-party disclosures T a x p a y er s a r e r eq uir ed to dis cl os e inf or m a tion a b out a l l r el a ted- p a r ty tr a ns a ctions (dom es tic a nd cr os s - b or der ) p er f or m ed w ith r el a ted p a r ties w ith m inim um 1 0 % s h a r e, r eg a r dl es s of th e m a g nitude, on th eir tr a ns f er p r icing f or m s . I n a ddition, ta x p a y er s a r e r eq uir ed to • N a m e or titl e of th e l oca l r el a ted- p a r ty • • N a m e of th e f or eig n r el a ted- p a r ty a nd th e countr y in w h ich it r es ides

b or r ow ing f unds , m a r k eta b l e s ecur ities , ins ur a nce a nd oth er tr a ns a ctions ; a nd intr a g r oup s er v ices . T a x p a y er s m us t a l s o dis cl os e th e tr a ns f er p r icing m eth ods a p p l ied in th e r el a ted- p a r ty tr a ns a ctions .


4 1 6

T u r k ey

(continued)

Transfer pricing-specific returns T a x p a y er s a r e r eq uir ed to s ub m it a tr a ns f er p r icing f or m a tta ch m ent to th e cor p or a te incom e ta x r etur n.

deta il ing r el a ted- p a r ty tr a ns a ctions . T h is f or m

s h oul d b e s ub m itted a s a n

O n th e tr a ns f er p r icing f or m , th e ta x p a y er h a s to dis cl os e inf or m a tion a b out its r el a ted p a r ties (b oth dom es tic a nd inter na tiona l ) th a t eng a g e in inter com p a ny tr a ns a ctions w ith th e ta x p a y er , th e na tur e (p ur ch a s e of r a w m a ter ia l s , l icens ing of inta ng ib l e a s s ets , etc. ) a nd a m ounts of th e tr a ns a ctions , a nd th e tota l a m ount of inter com p a ny tr a ns a ctions p r iced a ccor ding to ea ch tr a ns f er p r icing m eth od a p p l ied b y th e ta x p a y er .

•

•

4

ta x r etur n.

Documentation deadlines • •

• • 4 r etur n).

•


• F or cor p or a te incom e ta x p ur p os es , 2 0 % of cor p or a te incom e ta x is r eca l cul a ted a s if th e dis g uis ed dis tr ib ution h a d not b een m a de. • D iv idend w ith h ol ding ta x of 1 5 % is ca l cul a ted f or th e net a m ount of th e dis g uis ed dis tr ib ution. A dditiona l l y , a l a te- p a y m ent inter es t p ena l ty (1 . 4 % m onth l y ) a nd a ta x l os s p ena l ty (w h ich is th e s a m e a s th e ta x l os s a m ount) a r e ch a r g ed to th e ta x p a y er . 4 1 7


T u r k ey

(continued)

Penalty relief p r op er tr a ns f er p r icing docum enta tion. I t is a l s o p os s ib l e to com e to a s ettl em ent r eg a r ding th e ta x l os s a m ount a nd th e ta x p ena l ty a s s es s ed. I n s ettl em ent neg otia tions , ta x p a y er s m a y a s s er t a g ood- f a ith def ens e.



us ua l l y s ub j ect to cl os er ex a m ina tion. T h e r is k of tr a ns f er p r icing s cr utiny dur ing a ta x a udit is h ig h , a s ta x ins p ector s g ener a l l y f ocus on r el a ted- p a r ty tr a ns a ctions . T h e f r eq uency of tr a ns f er p r icing a udits h a s incr ea s ed, a nd th es e a udits a r e m a inl y f ocus ed on intr a g r oup ch a r g es , s uch a s m a na g em ent m a na g em ent s er v ices (e. g . , p r ep a r a tion of a p r ocur em ent a g r eem ent, r edes ig n of a com p ens a tion p ol icy or l eg a l a dv is or y f or a cour t a r e l ik el y to b e tr ea ted a s r oy a l ties (a nd th er ef or e s ub j ect to w ith h ol ding ta x ), b a s ed on th e cl a im is us ed.

th a t indus tr ia l or com m er cia l ex p er ience

T h e l ik el ih ood of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y is s im il a r l y h ig h . A m ong ta x ins p ector s , th er e is a s tr ong tendency f or com p a r a b l es , w h ich th e ta x p a y er ca n ch a l l eng e if th e ca s e is ta k en to l itig a tion.

APA opportunity C om p a nies ca n a p p l y f or th eir cr os s b or der inter com p a ny tr a ns a ctions to unil a ter a l , b il a ter a l or m ul til a ter a l A P A ’ s .

a r ea .


4 1 8

U g and a Taxing authority and tax law

Relevant regulations and rulings 4 C a p 3 4 0 , a nd b eca m e ef f ectiv e 1 J ul y 2 0 1 1 .

“Where any person, not being an employee, acts in accordance with the directions, requests, suggestions, or wishes of another person whether or not they are in a business relationship and whether those directions, requests, suggestions, or wishes are communicated to the first-mentioned person, both persons are treated as associates of each other.”

OECD Guidelines treatment w ith th e D om es tic T a x ing A cts , th e p r ov is ions in th e D om es tic T a x ing A cts ta k e p r ecedence.

Documentation requirements inf or m a tion th a t s h oul d b e incl uded in tr a ns f er p r icing docum enta tion. G ener a l l y , th e r eq uir ed inf or m a tion incl udes ; •

C om p a ny D eta il s •

T r a ns a ction D eta il s •

D eter m ina tion of a r m ’ s - l eng th p r ice •

4 1 9


U g and a

(continued)

Priorities/pricing methods a nd da ta a v a il a b l e. • • • • •

Return disclosures/related-party disclosures • • T h e deta il s of th e tr a ns a ction under cons ider a tion • T h e tr a ns f er p r icing m eth od, incl uding th e r ea s ons f or its s el ection • T h e a s s um p tions , s tr a teg ies a nd p ol icies a p p l ied in s el ecting th e m eth od • T h e a p p l ica tion of th e m eth od, th e ca l cul a tions m a de a nd th e p r ice a dj us tm ent f a ctor s cons ider ed • T h e tr a ns f er p r icing p ol icy a g r eem ent •

Transfer pricing-specific returns com e up w ith a r el a ted- p a r ty dis cl os ur e f or m a udit p r ocedur e.

th a t h a s b een cir cul a ted to m os t m ul tina tiona l entities a s p a r t of th e initia l tr a ns f er p r icing

Documentation deadlines to a dh er e to th is coul d r es ul t in im p r is onm ent or com m er cia l p ena l ty or b oth , a s h ig h l ig h ted b el ow .


4 2 0

U g and a

(continued)

Transfer pricing penalties in p l a ce tr a ns f er p r icing docum enta tion under th e tr a ns f er p r icing r eg ul a tions , th e p er s on is l ia b l e, up on conv iction, to im p r is onm ent f or

ta x p a id is l es s th a n 9 0 % of th e a ctua l ta x l ia b il ity . T h e p ena l ty f or l a te p a y m ent is 2 % p er m onth of th e s h or tf a l l a nd 2 % of th e g r os s ta x

Penalty relief a uth or ity or a p p ea l s of ta x decis ions m a de b ef or e th e T a x A p p ea l s T r ib una l or th e C our ts of l a w .

Statute of limitations on transfer pricing assessments w il l f ul neg l ect b y or on b eh a l f of th e ta x p a y er or up on th e dis cov er y of new inf or m a tion.

Frequency of tax audit and transfer pricing scrutiny by the tax authority a v oida nce r ul es .

APA opportunity A p p l ica tions f or unil a ter a l a nd b il a ter a l A P A s a r e a l l ow ed.


4 2 1


U k r aine Taxing authority and tax law


G uidel ines .

• •

4 tr a ns f er p r icing ). •

4 • • tr a ns f er p r icing . T h e ta x a uth or ities p r ov ide a dm inis tr a tiv e inter p r eta tion a nd g uida nce w ith r es p ect to th e a p p l ica tion of th e tr a ns f er p r icing r ul es , th e r el ea s e of cons ul ta tion l etter s , or der s a nd op inions ex p r es s ed in p r es s a nd a t p ub l ic ev ents .

OECD Guidelines treatment th e a m ount of th eir ta x a b l e incom e p ur s ua nt to th e a r m ’ s - l eng th p r incip l e. T h e a r r a y of m eth ods a nd docum enta tion r eq uir em ents cl os el y f ol l ow s th e O E C D G uidel ines .


•

4

1


4 2 2

U k r aine

(continued)

• A nonr es ident p er s on w h o is not a r el a ted- p a r ty , if th is p er s on is a cting a s a n inter m edia r y in a tr a ns a ction b etw een r el a ted p a r ties , does • N onr es ident p er s ons , w h eth er r el a ted or not, if th ey a r e r eg is ter ed in s ta tes (ter r itor ies ) a p p r ov ed b y th e O r der of th e C a b inet of • F or eig n tr a de tr a ns a ctions on s a l es of g oods th r oug h nonr es ident p er s ons under com m is s ion a g r eem ents •

T ota l incom e of th e ta x p a y er der iv ed f r om

a l l ty p es of a ctiv ities , w h ich a r e a ccounted f or w h en deter m ining th e ob j ect of cor p or a te

•

F or rep ort ing y ears 2 0 1 3 and 2 0 1 4 :

• N onr es ident r el a ted p a r ties • • ta x es a t a l ow er r a te), or us e s ing l e ta x or a g r icul tur a l ta x r eg im es m il l ion. T r a ns f er p r icing docum enta tion r eq uir em ents a r e g ener a l l y b a s ed on O E C D p r incip l es . T h e tr a ns f er p r icing docum enta tion s h oul d • C om p r eh ens iv e inf or m a tion a b out th e r el a ted p a r ties • I nf or m a tion a b out th e g r oup (s tr uctur e, des cr ip tion of a ctiv ities , g r oup tr a ns f er p r icing p ol icies ) • D es cr ip tion of th e tr a ns a ction (ter m s a nd conditions ) • D es cr ip tion of th e g oods (w or k , s er v ices ), incl uding p h y s ica l ch a r a cter is tics , q ua l ity a nd r ep uta tion in th e m a r k et, countr y of or ig in a nd m a nuf a ctur er , tr a dem a r k s • T er m s a nd conditions of th e p a y m ents • F a ctor s th a t im p a ct th e p r ice • F unctiona l a na l y s is a nd r is k a na l y s is • • • I nf or m a tion a b out cor r es p onding a dj us tm ents m a de b y th e ta x p a y er (if a ny )

4 2 3


U k r aine

(continued)


oth er m eth ods in s uch s itua tions , a ta x p a y er s h a l l s ub m it to th e ta x a uth or ities a w r itten r ep or t th a t s h a l l incl ude da ta a b out P L I s of

Return disclosures/related-party disclosures T a x p a y er s s h a l l r ep or t a l l s el f - a dj us tm ents of ta x l ia b il ities a r is ing due to a p p l ica tion of tr a ns f er p r icing r ul es in a s p ecia l tr a ns f er p r icing


Documentation deadlines T a x p a y er s a r e ob l ig a ted to s ub m it tr a ns f er p r icing docum enta tion w ith in one m onth f r om

th e da y f ol l ow ing th e da te of r eceip t of a

r ep or ting p er iod.


4 4

4

4

h a s one ca l enda r m onth to com p l y . T h e p ena l ty f or not s ub m itting th e tr a ns f er p r icing docum enta tion is 3 % of th e s um


4 2 4

of th e contr ol l ed

U k r aine

(continued)

T h e p ena l ty f or under s ta tem ent of ta x l ia b il ities a s a r es ul t of noncom p l ia nce w ith tr a ns f er p r icing r ul es is f r om 2 5 % up to 5 0 % of th e under s ta ted ta x (no p ena l ty is a p p l ica b l e f or th e 2 0 1 3 , 2 0 1 4 a nd 2 0 1 5 r ep or ting y ea r s ). I n a ddition, under s ta ted ta x is s ub j ect to a l a te

Penalty relief 4 2 0 1 5 . N o p ena l ty r el ief is p r ov ided f or p er iods a f ter 1 J a nua r y 2 0 1 6 .


Frequency of tax audit and transfer pricing scrutiny by the tax authority A ccor ding to th e L a w , tr a ns f er p r icing a udits s h oul d b e p er f or m ed indep endentl y th e r ig h t to conduct m or e th a n one a udit of a contr ol l ed tr a ns a ction of th e ta x p a y a n a nnua l ta x a udit m a y b e a s s es s ed a s h ig h , a nd s o is th e l ik el ih ood of a tr a ns f er m eth odol og y w il l b e ch a l l eng ed dur ing th e cour s e of a n a udit is cur r entl y unk now

f r om oth er ta x a udits . T h e ta x a uth or ities s h a l l not h a v e er dur ing a ca l enda r y ea r . I n g ener a l , th e l ik el ih ood of p r icing r ev iew . T h e l ik el ih ood th a t th e tr a ns f er p r icing n b eca us e of th e nov el ty of th e l eg is l a tion a nd a b s ence

C or r es p onding a dj us tm ents in ca s e of tr a ns a ctions w ith nonr es idents a r e not p r es cr ib ed b y th e L a w .

APA opportunity 4 a uth or ities a nd th e ta x p a y er (b il a ter a l a nd m ul til a ter a l A P A s a r e p er m is s ib l e). C ur r entl y , th er e a r e no A P A s s ig ned b y th e ta x a uth or ities .


ex tent a nd p r a ctica l p ecul ia r ities of s uch im p l em enta tion r em a in uncl ea r .

4 2 5


U nited K ing d o m Taxing authority and tax law


4

in a w a y th a t w il l p r ev ent th er e b eing tr a ns a ctions f or tr a ns f er p r icing p ur p os es , ev en w h en a th ir d p a r ty is incl uded in th e ch a in. Exemption for small and medium-sized enterprises (SME): 4 p r ov ides a n ex em p tion f r om tr a ns f er p r icing r ul es f or th e v a s t m a j or ity of tr a ns a ctions ca r r ied out b y a b us ines s th a t is a s m a l l or

a nd one (or b oth ) of eith er th e a nnua l tur nov er l im it or th e b a l a nce s h eet tota l l im it. T h e a nnua l tur nov er l im it f or s m a l l enter p r is es is 4

Change to compensating adjustment rules in relation to UK/UK transactions: T h e r ul es now r es tr ict th e us e of th e com p ens a ting a dj us tm ent m ech a nis m in th e tr a ns f er p r icing l eg is l a tion. T h e l eg is l a tion p r ev ents a cl a im f or a com p ens a ting a dj us tm ent b eing m a de b y a p er s on (oth er th a n a com p a ny ) w ith in a ch a r g e f or incom e ta x , w h er e th e counter p a r ty to th e tr a ns a ction is a com p a ny .

th a t th e m a nua l w il l b e ch a ng ed in th is r eg a r d in 2 0 1 7 .



4 2 6

U nited K ing d o m

(continued)

us ed f or a ccounting p er iods ending on or a f ter 1 A p r il 2 0 1 1 , w h il e th e 1 9 9 8 v er s ion a p p l ies to ea r l ier p er iods . F ur th er m or e, th e F ina nce b eg inning on or a f ter 1 A p r il 2 0 1 6 , th e 2 0 1 6 v er s ion of th e O E C D T r a ns f er P r icing G uidel ines a r e to b e us ed in p l a ce of th e 2 0 1 0 v er s ion.


f ul l nondis cr im ina tion a r ticl e do not need to docum ent com p l ia nce w ith th e a r m ’ s - l eng th p r incip l e f or th os e tr a ns a ctions .

g uida nce cur r entl y div ides docum enta tion into p r im a r y a ccounting r ecor ds , ta x a dj us tm ent r ecor ds a nd, m os t im p or ta ntl y , ev idence.

• • A des cr ip tion of th e na tur e of th e b us ines s • T h e contr a ctua l or oth er under s ta nding s b etw een th e p a r ties • A des cr ip tion of th e m eth od us ed to es ta b l is h or tes t th e a r m ’ s - l eng th r es ul t, w ith a n ex p l a na tion of w h y th e m eth od is ch os en • A n ex p l a na tion of com m er cia l a nd m a na g em ent s tr a teg ies , f or eca s ts f or th e b us ines s or tech nol og ica l env ir onm ent, com p etitiv e conditions a nd r eg ul a tor y f r a m ew or k

ex p ect m ul tina tiona l com p a nies to h a v e docum enta tion com p l ia nt w ith th a t f or m

a nd a v a il a b l e on r eq ues t.


intel l ectua l p r op er ty l icens es ), unl es s th er e h a s b een a n a na l y s is a r ound th e r el ev a nt p a r ties ’ b a r g a ining p os itions in a g r eeing to th e

4 2 7


U nited K ing d o m

(continued)



Documentation deadlines Transfer pricing penalties 4 2 0 0 7 . T h es e p r ov is ions a r e couch ed in ter m s of ca r el es s or del ib er a te ina ccur a cies , r a th er th a n neg l ect. T h ey a r e ta x - g ea r ed a t up to

a dj us tm ent. 3 0 % ), a nd del ib er a te ina ccur a cies , f or w h ich th e p ena l ties w il l b e h ig h er (up to 7 0 % ).

E x am p les of negligence and carelessness include: • N o a ttem p t to p r ice th e tr a ns a ction • entity • P ol icy , oth er w is e a r m ’ s - l eng th , not p r op er l y a p p l ied in p r a ctice

E x am p les of delib erat e inaccuracies include: • • A cos t- p l us r etur n to a com p a ny th a t h a s in r ea l ity contr ol l ed th e dev el op m ent of v a l ua b l e inta ng ib l es (not dem ons tr a b l e a s a s ub contr a ctor to g r oup m em b er s ) •

Penalty relief th r oug h tr a ns f er p r icing docum enta tion th a t f ul l y ev idences th a t th e a p p l ica tion of th e a r m ’ s - l eng th p r incip l e w a s cons ider ed p r op er l y in p r ep a r ing th e r el ev a nt ta x r etur n.


4 2 8

U nited K ing d o m

(continued)

S t at ut e of lim it at ions on t ransfer p ricing assessm ent s E f f ectiv e 1 A p r il 2 0 1 0 , a s s es s m ents m a y b e m a de f our y ea r s f ol l ow ing th e end of th e r el ev a nt a ccounting p er iod f or ins ta nces of ca r el es s nes s , a nd th is is ex tended to 2 0 y ea r s if th er e h a v e b een del ib er a te under s ta tem ents . T h is is on th e b a s is th a t th e er r or w a s not f ul l y dis cl os ed in th e b ody of th e ta x r etur n or oth er docum ents s ub m itted. T h e l eg is l a tion a p p l ica b l e b ef or e 1 9 9 9 op er a ted in a dif f er ent m a nner , a nd, a s a r es ul t, a n inv es tig a tion s ta r ted now w oul d not l ea d to tr a ns f er p r icing a dj us tm ents f or p er iods b ef or e 1 9 9 9 .


a s h ig h r is k in th is a r ea w il l th en b e s ub j ect to a n a udit. H ow ev er , th e l ik el ih ood th en of a ch a l l eng e to th e tr a ns f er p r icing m eth odol og y a p p l ica tion.

th a t m a y neces s ita te a n inq uir y . T h e s p ecia l is t h el p s th e ca s e tea m p r ep a r e a r is k a s s es s m ent a nd a b us ines s ca s e f or s ub m is s ion to a p a nel f or s ig n- of f b ef or e a n inq uir y m a y b e com m enced. T h e r es p ons ib l e p a nel is th en r eq uir ed to s a nction, or not, th e op ening of a n inq uir y a s th e initia l s ta g e g a te. T h e p a nel a l s o th en r eg ul a r l y r ev iew s p r og r es s dur ing th e inq uir y a nd s ig ns of f on a l l s ettl em ent

• • •

• T r a ns a ctions th a t do not a p p ea r to h a v e a com m er cia l p ur p os e • T r a ns a ction w ith r el a ted p a r ties in l ow - ta x ter r itor ies • • I n contex t, a num b er of th es e f a ctor s ta k en tog eth er m a y p r ov ide a com p el l ing r is k a s s es s m ent a nd, w h er e th e s um s w a r r a nt, a b us ines s ca s e f or op ening a n inq uir y .

onl y th os e m ul tina tiona l com p a nies r a ted h ig h - r is k f or cr os s - b or der m a tter s (th us w a r r a nting a tr a ns f er p r icing inq uir y b ey ond a r is k a s s es s m ent) w il l b e s ub j ect to a f ul l inq uir y w h en th e r el ev a nt r etur n is s ub m itted. A s s uch , th e num b er of a ctua l inq uir ies h a s f a l l en ov er r ecent y ea r s , b ut h ig h - r is k ca s es a r e s ub j ect to a deta il ed a nd ex tens iv e inq uir y . 4 2 9


U nited K ing d o m

(continued)

APA opportunity A P A op p or tunities a r e a v a il a b l e, a nd a dm is s ions to th e p r og r a m a r e not ex p ected to incr ea s e b ey ond cur r ent l ev el s , g iv en r es our ce cons tr a ints . T h e l eg is l a tion g ov er ning th e A P A p r oces s is s et out in P a r t 5 of th e T I O P A 2 0 1 0 . A s ta tem ent of p r a ctice g ov er ning th e

4

4

4

w er e a g r eed up on. dir ectl y im p a ct th e A P A .

l ender s .

tr a ns f er p r icing on a cur r ent a nd p r os p ectiv e b a s is . H is tor ica l l y , a g r eem ents r ea ch ed f ol l ow ing s uch dis cus s ions w er e couch ed s ol el y in

p r incip l e. A l th oug h s til l s h or t of a n A P A a nd its contr a ctua l ter m s , s uch a g r eem ents nev er th el es s p r ov ide up - f r ont com f or t a s to m eeting

th e p r oces s .

Impact of new OECD BEPS Action 8–10 guidelines T h e a m endm ents w il l a p p l y to a ccounting p er iods b eg inning on or a f ter 1 A p r il 2 0 1 6 a nd to tr a ns a ctions th a t w er e a l r ea dy in ef f ect on

4

des ig na ted a s s uch b y T r ea s ur y or der . C ur r entl y , a s noted a b ov e, th e 2 0 1 0 v er s ion is to b e us ed f or a ccounting p er iods b eg inning on th is inter p r eta tion. T h is r eq uir es th a t f or a ccounting p er iods b eg inning on or a f ter 1 A p r il 2 0 1 6 , th e 2 0 1 6 v er s ion of th e O E C D T r a ns f er P r icing G uidel ines a r e to b e us ed in p l a ce of th e 2 0 1 0 v er s ion.


4 3 0

U nited S tates Taxing authority and tax law


4 •

4

4

•

2 0 0 5 -4 6 . 4 r eg ul a tions th a t w oul d dea l w ith th e tr a ns f er of intel l ectua l p r op er ty (I P ) th r oug h p a r tner s h ip s a m ong r el a ted p a r ties a nd a p p l y p r incip l es 4 •

•

4 4 • 4

4 4

OECD Guidelines treatment th e O E C D G uidel ines do not p r ov ide s up p or t a nd w oul d not b e dir ectl y r el ev a nt to th e a p p l ica tion of a ny p r icing m eth ods . H ow ev er , if ta x p a y er s p ur s ue com p etent a uth or ity r el ief f r om doub l e ta x a tion or a b il a ter a l A P A , th e O E C D G uidel ines a r e r el ev a nt a nd m a y b e us ed to dem ons tr a te com p l ia nce w ith inter na tiona l p r incip l es .

Documentation requirements T r a ns f er p r icing docum enta tion is not r eq uir ed b y l a w . H ow ev er , in p r a ctice, it is r ecom m ended th a t ta x p a y er s m a inta in contem p or a neous docum enta tion to a v oid p ena l ties . T h e ex is tence of docum enta tion need not b e eith er dis cl os ed on, or p r ov ided w ith , th e r etur n. docum enta tion (f ur th er des cr ib ed b el ow ) th a t s ub s ta ntia tes th e ta x p a y er ’ s a s s er tion th a t it r ea s ona b l y concl uded th a t, g iv en th e a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e b es t- m eth od r ul e.

4 3 1


U nited S tates

(continued)

• A n ov er v iew of th e ta x p a y er ’ s b us ines s a nd a n a na l y s is of th e l eg a l a nd econom ic f a ctor s a f f ecting p r icing • • • A des cr ip tion of th e p r icing m eth od a nd r ea s ons th e m eth od w a s s el ected (a b es t- m eth od a na l y s is ) • A des cr ip tion of a l ter na tiv e m eth ods a nd w h y th ey w er e not s el ected • • A des cr ip tion of com p a r a b l es us ed, h ow com p a r a b il ity w a s ev a l ua ted a nd a ny a dj us tm ents th a t w er e m a de • A n ex p l a na tion of a ny econom ic a na l y s is a nd a ny p r oj ections us ed to dev el op th e p r icing m eth od • • A g ener a l index of th e p r incip a l a nd b a ck g r ound docum ents a nd a des cr ip tion of th e r ecor d- k eep ing s y s tem


T h e r eg ul a tions p r ov ide a b es t- m eth od r ul e f or deter m ining th e a p p r op r ia te m eth od to b e a p p l ied b y th e ta x p a y er f or ea ch inter com p a ny tr a ns a ction.



4



4 3 2

U nited S tates

(continued)

Transfer pricing penalties 4 s ub s ta ntia l or g r os s v a l ua tion m is s ta tem ent, r es p ectiv el y . T h e p ena l ties a r e ca l cul a ted a s a p er centa g e of th e under ¬ p a y m ent, or th e p ena l ty m a y a p p l y to a v a l ua tion m is s ta tem ent. T h er e is no p ena l ty f or f a il ur e to h a v e docum enta tion; h ow ev er , docum enta tion m a y h el p a v oid a p ena l ty .

Penalty relief P ena l ties m a y b e a v oided b y es ta b l is h ing r ea s ona b l e ca us e a nd g ood f a ith v ia th e p r ep a r a tion of docum enta tion of th e ta x p a y er ’ s 4

Statute of limitations on transfer pricing assessments l im ita tions f or f r a ud- r el a ted a dj us tm ents .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit dep ends on th e f a cts a nd cir cum s ta nces . T h e intr oduction of w h a t th e O E C D r ef er s to in its A ction

h a v e b een h ir ed. A s a r es ul t of th is em p h a s is , docum enta tion f r eq uentl y is r eq ues ted a t th e outs et of a ny ex a m ina tion of ta x p a y er s tr a ns a cting w ith f or eig n r el a ted p a r ties . T h e ov er a l l l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed dur ing th e initia l s ta g es of a ny a udit, w h er e th er e a r e inter na tiona l tr a ns a ctions , is h ig h . H ow ev er , ex p er ience h a s s h ow n th a t w el l - r ea s oned docum enta tion r educes th e l ik el ih ood of f ur th er s cr utiny .

APA opportunity 4 ca s e m a na g em ent p r ocedur es , dis cl os ur e r eq uir em ents a nd deta il ed g uida nce r eg a r ding th e s ub m is s ion a nd p r oces s ing of A P A r eq ues ts . 4

Impact of new OECD BEPS Action 8–10 guidelines N ot a p p l ica b l e.

4 3 3


U r u g u ay Taxing authority and tax law Dirección Nacional Impositiva, or D G I )


4



4

4

•

(Impuesto a las Rentas de las Actividades Económicas • • • p r icing s y s tem • • T h e tr a ns f er p r icing r ep or t to th e ex p ir y s ch edul es p r ov ided f or ea ch g r oup of ta x p a y er s . 4 • A b r ea k dow n of a ctiv ities a nd duties p er f or m ed • T h e r is k s under ta k en a nd a s s ets us ed to p er f or m

th os e a ctiv ities a nd duties

• T h e b r ea k dow n of th e el em ents , docum enta tion, cir cum s ta nces a nd ev ents v a l ued f or th e a b ov em entioned r ep or t

1

•

4


4

4 3 4

U r u g u ay

(continued)

• • T h e m eth od us ed to deter m ine th e tr a ns a ction p r ices , indica ting th e r ea s ons a nd g r ounds j us tif y ing it a s th e m os t a p p r op r ia te m eth od, a s w el l a s th e r ea s ons f or r ul ing out oth er m eth od • • • D eta il s of th e com p a r a b l es s el ected a nd s ub s eq uentl y r ej ected, s p ecif y ing th e r ej ection b a s es • • D eter m ina tion of th e m edia n a nd th e inter q ua r til e r a ng e • A des cr ip tion of th e b us ines s a ctiv ity , b us ines s ch a r a cter is tics a nd oth er r el ev a nt el em ents of com p a r a b l e entities •


tr a ns p a r ent m a r k ets , th os e p r ices m us t b e us ed. I f th e tr a ns a ctions a r e p er f or m ed th r oug h inter na tiona l inter m edia r ies th a t a r e not th e

Return disclosures/related-party disclosures • T h e tr a ns f er p r icing s tudy , incl uding th e k ey el em ents , s uch a s th e f unctions a nd a ctiv ities of th e com p a ny , r is k s a nd a s s ets us ed, th e m eth ods us ed, th e inter q ua r til e r a ng e, a nd deta il s of th e com p a r a b l es • A nnua l tr a ns f er p r icing r etur n F or m

3 0 0 1

Transfer pricing-specific returns ta x a uth or ities . I n th a t a nnua l r etur n, th e com p a ny m us t p r ov ide inf or m a tion a b out th e r el a ted- p a r ty tr a ns a ctions .

Documentation deadlines tr a ns f er p r icing a dj us tm ent is r eq uir ed to a ch iev e a n a r m ’ s - l eng th r es ul t in its tr a ns a ctions w ith b oth r el a ted p a r ties a nd unr el a ted p a r ties l oca ted in ta x h a v ens . I n s uch ca s es , th e tr a ns f er p r icing a na l y s is s h oul d b e p er f or m ed b y th a t tim e, ev en th oug h th e docum enta tion is

4 3 5


U r u g u ay • T h e tr a ns f er p r icing a nnua l r etur n (F or m

(continued)

3 0 0 1 ), incl uding deta il ed inf or m a tion r eg a r ding a l l cr os s - b or der inter com p a ny tr a ns a ctions a nd

•

4

Transfer pricing penalties tr a ns f er p r icing r ep or t a nd ta x r etur n) w il l b e a p p l ied on a g r a dua ted s ca l e, in a ccor da nce w ith th e s ev er ity of th e b r ea ch . T h e m a x im um

under p a y m ent if it is p a id b ef or e 5 da y s a f ter th e dea dl ine, 1 0 % if it is p a id b etw een 5 a nd 9 0 da y s a f ter th e dea dl ine, a nd 2 0 % if it is p a id m or e th a n 9 0 da y s p a s t th e dea dl ine. I n ea ch ca s e, cor r es p onding s ur ch a r g es a r e a dded.

b eing a b l e to im p or t g oods or ob ta in a b a nk l oa n.

Penalty relief T h er e cur r entl y a r e no p r ov is ions f or r eductions in p ena l ties .

Statute of limitations on transfer pricing assessments r a is ed 5 y ea r s a f ter th e com p a ny ’ s a ccounting p er iod ends , b ut th is is ex tended to 1 0 y ea r s w h en th e dif f er ence is due to f r a udul ent or neg l ig ent conduct b y th e ta x p a y er .

Frequency of tax audit and transfer pricing scrutiny by the tax authority T h e l ik el ih ood of a n a nnua l ta x a udit, in g ener a l , is m edium , w h il e th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th a t a udit is h ig h . T h e l ik el ih ood th a t, if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit, th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed is h ig h . k now n, th e ta x ing a uth or ity h a s ch a l l eng ed th e m eth odol og y a nd th e com p a nies ’ com p a r a b l es s ets . T h e ta x a uth or ity r el ies on a s p ecia l tea m

of p r of es s iona l s w h o h a v e f ocus ed on p er f or m ing ta x a udits f or th e b ig g es t com p a nies , k now n

• F unctiona l a na l y s is • • identif y ing inter na l a nd ex ter na l com p a r a b l es


4 3 6

U r u g u ay

(continued)

• C om p a r a b il ity a dj us tm ents m a de to th e s ta ted p a r ty • • O b s er v a tions of com p a nies th a t h a v e continuous l os s es f or m a ny y ea r s

APA opportunity

a l r ea dy p r ov ided inf or m a tion. A s of th e tim e of th is p ub l ica tion, onl y one A P A ca s e h a s b een a nnounced p ub l icl y , a nd it w a s r el a ted to a ch em ica l com p a ny th a t w a s

Impact of new OECD BEPS Action 8–10 guidelines r eq uir em ents r el a ted to tr a ns f er p r icing . G iv en th is , w h il e th er e a r e no ca s e l a w s y et, it w il l b e im p or ta nt to m onitor f ur th er dev el op m ents in th is a r ea .

4 3 7


Venez u el a Taxing authority and tax law

•

4 • •

Relevant regulations and rulings Official Gazette N o. 3 9 , 5 5 7 of 2 0 D ecem b er 2 0 1 0 . I t es ta b l is h es th e p r ocedur e f or th e ca l cul a tion a nd us e of th e a r m ’ s - l eng th r a ng e f or tr a ns f er p r icing p ur p os es . T h e m a in •

T h e us e of th e inter q ua r til e r a ng e a s th e a r m ’ s - l eng th r a ng e

• a g r eed- to b y indep endent p a r ties . I f , h ow ev er , it is not w ith in th e inter q ua r til e r a ng e, th e ta x p a y er m us t ta k e th e m edia n of th e r a ng e a s th e a r m ’ s - l eng th p r ice Official Gazette N o.

• •

T a x p a y er s w il l h a v e th e l im ited p os s ib il ity of deducting inter es t ex p ens es r es ul ting f r om

r el a ted p a r ties ’ l oa ns w h en th e a v er a g e

T h e a m ount b y w h ich th e deb t ex ceeds th e ta x p a y er ’ s eq uity w il l b e tr ea ted a s eq uity f or incom e ta x p ur p os es .

OECD Guidelines treatment Documentation requirements E f f ectiv e s ince 2 0 0 2 , ta x p a y er s a r e r eq uir ed to p r ep a r e a nd m a inta in ex tens iv e s up p or ting a nd contem p or a neous docum enta tion. T h e

m eth od s el ection, inv entor y v a l ua tion m eth od (if a p p l ica b l e), a na l y s is r es ul ts a nd oth er r el ev a nt inf or m a tion.

Priorities/pricing methods p r ior ity ov er oth er s .


4 3 8

Venez u el a

(continued)

Return disclosures/related-party disclosures N ot A p p l ica b l e



end.


a nd a com p a ny cl os ur e f or 1 0

th er e is a tr a ns f er p r icing a s s es s m ent, l a te p a y m ent inter es t m a y a l s o b e a dded to th es e a m ounts .

Penalty relief I f a ta x p a y er a p p l ies a l eg a l l y s a nctioned tr a ns f er p r icing m eth od, th is coul d b e cons ider ed a m itig a ting cir cum s ta nce in th e deter m ina tion of a n a s s es s m ent. T h is p ena l ty r el ief is b a s ed on p r ev ious ta x a udit p r ocedur es a nd a s s es s m ents , b ut th er e is no l eg a l p r ov is ion s up p or ting it.

Statute of limitations on transfer pricing assessments r etur n, incl uding r etur ns f or incom e ta x . H ow ev er , th e P T - 9 9 is not cons ider ed a ta x r etur n f or p ena l ty p ur p os es .

Frequency of tax audit and transfer pricing scrutiny by the tax authority r ev iew ed dur ing g ener a l ta x a udits . T h us f a r , a udits h a v e b een conducted on ta x p a y er s ir r es p ectiv e of indus tr y . in th e deter m ina tion of p r op er ta x a b l e incom e in inter com p a ny tr a ns a ctions (i. e. , ch a l l eng e m eth odol og y , com p a r a b l es , us e of m ul tip l e

1

4 3 9


Venez u el a

(continued)

• I ncons is tencies a m ong th e tr a ns f er p r icing r ep or t, incom e ta x r etur n a nd tr a ns f er p r icing inf or m a tion r etur n • • P L I s b el ow th e inter q ua r til e a r m ’ s - l eng th r a ng e • L ow er op er a ting m a r g ins , com p a r ed w ith op er a ting m a r g ins f r om

p r ior y ea r s or w ith op er a ting l os s es

• C ur r entl y , in th e tr a ns f er p r icing r ev iew p r oces s , th e tim e f r a m e to s ub m it th e inf or m a tion r eq ues ted r a ng es f r om da y s , a nd th er e is a r el ucta nce to g iv e ex tens ions .

tw o to th r ee b us ines s

T h e l ik el ih ood of a n a nnua l ta x a udit in g ener a l is h ig h , a s is th e l ik el ih ood th a t tr a ns f er p r icing w il l b e r ev iew ed a s p a r t of th e a udit. H ow ev er , th e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is r ev iew ed a s p a r t of th e a udit is l ow .

APA opportunity 4



4 4 0

Vietnam Taxing authority and tax law

Relevant regulations and rulings • A r ticl e 3 7 of th e L a w on T a x A dm inis tr a tion1 a r ticul a tes th e a r m ’ s - l eng th p r incip l e, w h ich em p ow er s ta x a uth or ities to a dj us t th e v a l ue of p ur ch a s es , s a l es , ex ch a ng es a nd a ccounting r ecor ds of g oods a nd s er v ices of ta x p a y er s if th a t v a l ue is not in a ccor da nce w ith m a r k et p r ices . •

incl udes A r ticl e 3 4 , s tip ul a ting th e a r m ’ s - l eng th p r incip l e. •

4

4

2 0 1 5 . •

2 3

6 6 ). C ir cul a r 6 6 p r ov ides g uidel ines f or th e ca l cul a tion of m a r k et p r ices in b us ines s tr a ns a ctions b etw een r el a ted p a r ties . 4

p r ov ides g uida nce a b out s om e a r ticl es of th e L a w on T a x A dm inis tr a tion, th e A m ended L a w on T a x A dm inis tr a tion N o. 2 1 / 2 0 1 2 / Q H 1 3 a nd D ecr ee 8 3 / 2 0 1 3 . •

5

•

p r ov ides deta il ed g uida nce a b out th e A P A a p p l ica tion p r oces s .

C ir cul a r 6 6 g ov er ns tr a ns a ctions b etw een r el a ted p a r ties th a t took p l a ce f r om

1 J a nua r y 2 0 1 0 . I t s ets f or th f or m a l a nd com p r eh ens iv e

th e a r m ’ s - l eng th r a ng e, b ench m a r k ing p r incip l es a nd a ccep ta b l e da ta b a s es , a s w el l a s r eiter a tes th e tw o m a nda tor y tr a ns f er p r icing s ub m is s ion (if r eq ues ted) of th e contem p or a neous tr a ns f er p r icing docum enta tion. (r ep l a cing F or m G C p r a ctica l m a tter , ta th e y ea r ca n b e com to p er f or m s uch a s

N -0 1 x p a y p a r tudy

/ Q L T in A p p endix er s w il l now b e r eq ed w ith th e outcom w il l r es ul t in m uch

1 - G C N / C C of C ir cul a r 6 6 ); F or m 0 3 is a p p l ica b l e f r om th e 2 0 uir ed to p er f or m a n a nnua l b ench m a r k ing s tudy . T h is is s o a e of th e b ench m a r k ing . A ny dif f er ence m us t b e dis cl os ed, a incr ea s ed ex p os ur e to tr a ns f er p r icing a dj us tm ents a nd h ig

1 4 ta x y ea r ctua l tr a ns f s r eq uir ed b h p ena l ties .

a nd a f ter w a r d. A s a er p r ices us ed dur ing y F or m 0 3 . F a il ur e T h e intr oduction

1

th a t th e b ur den of p r oof r es ts w ith th e ta x p a y er a nd th a t th e onl y ef f ectiv e def ens e r es ts w ith up - to- da te docum enta tion, incl uding b ench m a r k ing .

T h is l a w w a s ena cted b y th e N a tiona l A s s em b l y on 2 9 N ov em b er 2 0 0 6 a nd h a s b een ef f ectiv e s ince 2 0 0 7 . 2 3 4 5

4 4 1


Vietnam

(continued)

T h e N a tiona l A ction P l a n f or 2 0 1 2 to 2 0 1 5 , w h ich a im s to h a v e a t l ea s t 2 0 % of th e a nnua l ta x a udit ca s es dev oted to tr a ns f er p r icing p r og r a m

a r e to cr ea te a s tr ong er l eg a l f r a m ew or k f or tr a ns f er p r icing a nd ta x a dm inis tr a tion; p r ov ide tr a ining to b uil d h um a n r es our ces

ca p a city f or tr a ns f er p r icing a dm inis tr a tion. F ur th er m or e, th e ta x a uth or ities noted s om e ina deq ua cies in th e docum enta tion p r ov ided b y th e ta x p a y er s (i. e. , th e docum ents p r ov ided indus tr y a na l y s is a nd b ench m a r k ing ). N ota b l y , th oug h ta x r eg ul a tions a l l ow v a l id inv oices a nd inter com p a ny a g r eem ents a s s up p or ting tr a ns f er p r icing docum enta tion under C ir cul a r 6 6 . F ol l ow ing th e intr oduction of F or m 0 3 a nd th e a ctiv e im p l em enta tion of th e N a tiona l A ction P l a n, th e G D T h a s b een w or k ing on a dr a f t of th e decr ee on tr a ns f er p r icing , w h ich w il l r ep l a ce th e ex is ting C ir cul a r 6 6 once it is is s ued.

OECD Guidelines treatment C ir cul a r s 1 1 7 a nd 6 6 a r e g ener a l l y b a s ed on th e O E C D G uidel ines . H ow th e G D T w il l a p p l y th e O E C D G uidel ines in inter p r eting th e

Documentation requirements C ir cul a r 6 6 r eq uir es a n a v a il a b il ity of tr a ns f er p r icing docum enta tion th a t is p r ep a r ed contem p or a neous l y a nd m us t b e p r ov ided to th e ta x a uth or ity w ith in 3 0 w or k ing da y s of th e ta x a uth or ity ’ s r eq ues t. T h e docum enta tion is r eq uir ed to es ta b l is h w h en th e tr a ns a ction occur r ed a nd m us t b e up da ted th r oug h out th e p er f or m a nce of th e tr a ns a ction. F or com p l ia nce p ur p os es , a ta x p a y er is cons ider ed to a v a il a b l e da ta a nd th e a p p l ica b l e p r icing m eth ods , th e m eth od (a nd its a p p l ica tion) p r ov ided th e m os t r el ia b l e m ea s ur e of a n a r m ’ s - l eng th r es ul t under th e p r incip l es of th e m os t- a p p r op r ia te- m eth od r ul e.

• I nf or m a tion a b out tr a ns a ctions b etw een r el a ted p a r ties a nd th e ta x p a y er • I nf or m a tion a nd up da ted r ep or ts a b out th e s tr a teg y f or dev el op m ent, a dm inis tr a tion a nd contr ol b etw een r el a ted p a r ties • T h e p r icing p ol icy f or tr a ns a ctions in r el a tion to ea ch g r oup of p r oducts in a ccor da nce w ith th e g ener a l g uida nce of r el a ted p a r ties a nd th e ta x p a y er • D ocum ents a nd r ep or ts a b out th e p r oces s of dev el op m ent, b us ines s s tr a teg y , p r oj ects , p r oduction, b us ines s or inv es tm ent p l a ns • tr a ns a ctions • A dia g r a m of tr a ns a ctions a nd docum ents des cr ib ing tr a ns a ctions , incl uding inf or m a tion a b out p a r ties to tr a ns a ctions a nd or der s a nd p r ocedur es f or p a y m ent a nd del iv er y of p r oducts • of p r oducts , tota l a m ount of p r oducts p r oduced or tr a ded a nd s ol d in th e p er iod (s p ecif y ing s uch item s on th e b a s is of th e r el a ted tr a ns a ction a nd a n indep endent tr a ns a ction, if a ny ), a nd q ua ntity of p r oducts • I nf or m a tion, docum ents a nd s our ce docum contr a cts a nd a g r eem ents r el a ted to tr a ns v a l ue of tr a ns a ction, ter m s of p a y m ent, p a m a na g em ent r eg a r ding th e p r oces s of neg Worldwide Transfer Pricing Reference Guide

ents concer ning th e p r oces s of neg otia ting , s ig ning , p er f or m ing a nd l iq uida ting econom ic a ctions (us ua l l y incl uding a des cr ip tion of p r oducts , p l a ce of tr a ns a ction, f or m of tr a ns a ction, y m ent docum enta tion, p er iod of p er f or m a nce, m inutes of m eeting s or ins tr uctions of otia tion a nd s ig ning , a nd p er f or m a nce of a tr a ns a ction) 4 4 2

Vietnam

(continued)

• I nf or m a tion, docum ents a nd s our ce docum ents r el a ted to econom ic conditions of th e m a r k et a t th e tim e of th e r el a ted tr a ns a ctions a f f ecting th e m eth od of ca l cul a tion of a p r ice f or tr a ns a ctions (f or ex a m p l e, ch a ng es in ex ch a ng e r a tes a nd p ol icies of th e g ov er nm ent • T h e p r icing p ol icy f or s el l ing a nd p ur ch a s ing p r oducts a nd th e p r ocedur es f or contr ol a nd a p p r ov a l of p r ices • I nf or m a tion, docum ents a nd s our ce docum ents us ed to s el ect th e m os t a p p r op r ia te m eth od, incl uding da ta us ed f or com p a r a tiv e • O th er inf or m a tion or docum ents us ed to s el ect a nd a p p l y th e m eth ods

Priorities/pricing methods to s el ect th e m os t a p p r op r ia te m eth od to deter m ine w h eth er th e p r icing a r r a ng em ent is a t a r m ’ s - l eng th under th e p r ev a il ing r eg ul a tions .

Return disclosures/related-party disclosures y ea r s f r om

2 0 1 0 to 2 0 1 3 a nd F or m

0 3 - 7 / T N D N (under C ir cul a r 1 5 6 ) a p p l ies f or th e ta x y ea r 2 0 1 4 a nd onw a r d.

Transfer pricing-specific returns Documentation deadlines T h e docum enta tion m us t b e es ta b l is h ed a t th e tim e of th e tr a ns a ction a r is en a nd up da ted th r oug h out th e p er f or m a nce of th e

I f enter p r is es h a v e p l a us ib l e r ea s ons , a one- tim e 3 0 - da y ex tens ion m a y b e g r a nted, a nd b e ef f ectiv e once th e initia l 3 0 - da y p er iod h a s p a s s ed.


• th e y ea r of s ettl em ent of enter p r is e incom e ta x , or f a il to p r oduce a nd s up p l y inf or m a tion, da ta a nd docum ents w ith in 3 0 w or k ing da y s of th e ta x a uth or ities ’ r eq ues t

4 4 3


Vietnam

(continued)

• I f com p a nies h a v e b a s ed th em s el v es on unl a w f ul or inv a l id docum ents , da ta a nd ev idence, or f a il to s p ecif y th e s our ces of docum ents , • tr a ns a ctions a s unr el a ted tr a ns a ctions f or com p a r is on • F a il ur e to com p l y w ith th e a r m ’ s - l eng th p r incip l e a nd th e docum enta tion r eq uir em ent im p l ies a n ex p os ur e to th e r ea s s es s m ent of

I n a ddition, th e inter es t p ena l ty of 0 . 0 3 % p er da y ov er th e outs ta nding ta x due m a y a l s o b e im p os ed if a tr a ns ¬ f er p r icing a dj us tm ent is m a de. F ur th er , ta x p a y er s a r e a l s o s ub j ect to a ta x p ena l ty of 2 0 % of a dditiona l ta x in th e ca s e of a n incor r ect decl a r a tion. A dditiona l

ev a s ion. A ccor ding to th e l a tes t C r im ina l C ode ef f ectiv e on 1 J ul y 2 0 1 6 , f or th e a ct of ta x ev a s ion, th e ta x p a y er m a y b e s ub j ect to ta x p ena l ties under cr im ina l p r oceeding s .

Penalty relief P ena l ties m a y b e m itig a ted b y tim el y a nd a deq ua te dis cl os ur e of th e r el a ted- p a r ty tr a ns a ctions on F or m G C N - 0 1 / T N D N (A p p endix 1 - G C N / H T Q T of C ir cul a r 1 1 7 ), or F or m G C N - 0 1 / Q L T (A p p endix 1 - G C N / C C of C ir cul a r 6 6 ), or F or m 0 3 - 7 / T N D N (a tta ch ed to C ir cul a r 1 5 6 ), a nd b y th e p r ep a r a tion a nd tim el y p r oduction of tr a ns f er p r icing docum enta tion.


• F or v iol a tions of ta x p r ocedur es , a dm inis tr a tiv e p ena l ties ca n b e im p os ed w ith in tw o y ea r s f r om

th e da te com m itting v iol a tions .

• F or a cts cons tituting ta x ev a s ion or ta x f r a ud not s er ious enoug h f or p ena l l ia b il ity ex a m ina tion, a cts of l a te ta x p a y m ent a nd decl a r a tion T h e da te of com m is s ion is th e s ta tutor y dea dl ine f or s ub m itting th e r eq uir ed ta x r etur n, or th e da te w h en th e ta x a uth or ity is s ues a ta x r ef und, ex em p tion or r eduction decis ion in th e ca s e of a ta x r ef und, ex em p tion or r eduction. N ote th a t b ey ond th e a b ov e p er iods (tw o

2 1 / 2 0 1 2 / Q H 1 3 , th e s ta tute of l im ita tions a p p l ica b l e f or ta x col l ection is 1 0 y ea r s .

Frequency of tax audit and transfer pricing scrutiny by the tax authority g ener a l ta x a udit is m edium

to h ig h . T h e l ik el ih ood th a t th e tr a ns f er p r icing m eth odol og y w il l b e ch a l l eng ed if tr a ns f er p r icing is a s ub j ect


4 4 4

Vietnam

(continued)

4

T h es e r ecent dev el op m ents w ith r es p ect to enh a nced l eg is l a tion, th e ta x a uth or ity ’ s ca p a city b uil ding , th e es ta b l is h m ent of dedica ted tr a ns f er p r icing ins p ection div is ions a t b oth th e G D T a nd l oca l ta x dep a r tm ents , a s w el l a s th e incr ea s ing l y s op h is tica ted ev idence in

APA opportunity A f ter A P A s w er e intr oduced in th e A m ended L a w on T a x A dm inis tr a tion N o. 2 1 / 2 0 1 2 / Q H 3 , its im p l em enta tion r eg ul a tions w er e is s ued

F eb r ua r y 2 0 1 4 .

• • • • • P r ov incia l ta x dep a r tm ents h el p neg otia te, p r oces s a nd m onitor A P A a p p l ica tions w ith in th eir a uth or ity . • p r ef er ence. • dur ing th e A P A a p p l ica tion p r oces s s h a l l not b e us ed a s ev idence f or f ur th er ta x a udit, ta x ins p ection or ta x im p os ition on th e ta x p a y er s . • • A dm inis tr a tion. • p r oces s . • w ith in 3 0 w or k ing da y s of th e end of th e cons ul ta tion p r oces s .

4 4 5


Vietnam

(continued)

• a p p r ov a l f r om

th e G D T . A n ex tens ion of 3 0 ca l enda r da y s is a v a il a b l e f or r ea s ona b l e cir cum s ta nces .

• a p os s ib l e ex tens ion of 6 0 ca l enda r da y s under r ea s ona b l e cir cum s ta nces . • • a g g r es s iv enes s in ens ur ing ta x p a y er s ’ com p l ia nce, th e num b er of com p a nies th a t a r e cur r entl y in th e p r oces s of or cons ider ing f or A P A


4


4 4 6

Z am b ia Taxing authority and tax law

Relevant regulations and rulings • r el a tions • or im p os ed if p er s ons w er e not a s s ocia ted w ith ea ch oth er th e a ctua l conditions m a de or im p os ed in th a t tr a ns a ction or tr a ns a ctions a r e dif f er ent f r om th e a r m ’ s - l eng th conditions a nd th er e is , ex cep t f or th is s ection, a r eduction in th e a m ount of incom e ta k en into a ccount in com p uting th e incom e of one of th e a s s ocia ted p er s ons

ins tea d of th e a ctua l conditions , a nd a com p uta tion on th a t b a s is is r ef er r ed to a s a com p uta tion on th e a r m ’ s - l eng th b a s is . I f in th e incom e y ea r a nd b y r ea s on of th e a ctua l conditions , a n a m ount of incom e r eceiv ed b y th a t oth er p er s on a s s ocia ted w ith th e

ta x p a y er to th e C om m is s ioner - G ener a l , th e s econd ta x p a y er ’ s incom e ch a r g ea b l e to ta x in th e incom e y ea r s h a l l b e com p uted on th e 4 F or th e p ur p os es of th is s ection, r ef er ences to a r eduction in a n a m ount of incom e incl ude r ef er ences to a r eduction to nil or to th e a ccr ua l of a l os s or a n incr ea s ed l os s , a nd r ef er ences to a n incr ea s e in incom e incl ude r ef er ences to th e r eduction in a l os s w h eth er to a s m a l l er a m ount or to nil . 4 com p uting th e a m ount of th e s econd ta x p a y er ’ s incom e ch a r g ea b l e to ta x f or th e incom e y ea r . F or th e p ur p os es of s ub s ection (6 ) in a ca s e w h er e no l os s a ccr ues or a s m a l l er l os s a ccr ues , a s m entioned in p a r a g r a p h (a ) of s ub s ection 4 into a ccount a dif f er ent a m ount of incom e f r om under s ub s ection (4 ) a ccor ding l y .

th a t on w h ich ea r l ier com p uta tions w er e b a s ed, th e s econd ta x p a y er m a y a m end a cl a im 4

•

4

4

• I t is m a de w ith in th r ee y ea r s of th e da te on w h ich th a t r etur n or , if ea r l ier , th a t a s s es s m ent is m a de, or s uch l ong er p er iod a s th e C om m is s ioner - G ener a l m a y a l l ow .

4 4 7


Z am b ia

(continued)

A cl a im m a y not b e a m ended under s ub s ection (8 ) b y r ea s on of a n a s s es s m ent or a m ended a s s es s m ent unl es s th e a m ended cl a im m a de w ith in one y ea r of th e da te on w h ich th e a s s es s m ent or a m ended a s s es s m ent is m a de.

is

4 4 a m ount of th a t cr edit, th e f or eig n ta x to b e ta k en into a ccount a s h a v ing b een p a id or a s b eing p a y a b l e b y th e cl a im a nt s h a l l ex cl ude a ny a m ount of f or eig n ta x th a t w oul d not h a v e b een p a id or p a y a b l e if th e com p uta tion of th e incom e on w h ich th e f or eig n ta x is ch a r g ea b l e h a d, s o f a r a s it incl udes incom e to w h ich th e cl a im or a m ended cl a im r el a tes , b een m a de on th e a r m ’ s - l eng th b a s is ; a nd th e a m ount of incom e to b e ta k en into a ccount a s h a v ing b een r eceiv ed b y th e cl a im a nt a nd in r es p ect of w h ich th e cl a im a nt is or m a y b e g iv en cr edit f or f or eig n ta x s h a l l b e deter m ined, s o f a r a s it incl udes incom e to w h ich th e cl a im or a m ended cl a im r el a tes , on th e a r m ’ s - l eng th b a s is . A ny a dj us tm ent r eq uir ed to b e m a de b y v ir tue of th is s ection s h a l l b e m a de b y w a y of dis ch a r g e or r ep a y m ent of ta x , b y a n a m ended a s s es s m ent or oth er w is e, a nd m a y b e m a de notw ith s ta nding th a t th e a dj us tm ent r el a tes to a ch a r g e y ea r th a t ended m or e th a n s ix y ea r s 4 N otw ith s ta nding a ny p r ov is ion in th e I ncom e T a x A ct, f or a ny tr a ns a ction f or th e s a l e of b a s e m eta l s or a ny s ub s ta nce conta ining b a s e m eta l s or p r ecious m eta l s , dir ectl y or indir ectl y , b etw een r el a ted or a s s ocia ted p a r ties , th e a p p l ica b l e s a l e p r ice of s uch m eta l s or • • • T h e m onth l y a v er a g e ca s h p r ice of a ny oth er m eta l ex ch a ng e m a r k et a s a p p r ov ed b y th e C om m is s ioner - G ener a l to th e ex tent th a t th e O r • C om m is s ioner - G ener a l , l es s a ny dis counts on a ccount of p r oof or l ow q ua l ity or g r a de • P a r ties connected dir ectl y or indir ectl y th r oug h s h a r eh ol ding , eq uity or p a r tner s h ip s • A ny j oint v entur e ow ned or op er a ted j ointl y w ith or a n unr el a ted- p a r ty • C onnected p er s ons O r • P a r ties connected th r oug h m a na g em ent a nd contr ol

• O ne of th em is a n indiv idua l a nd th e oth er is th a t p er s on’ s s p ous e, a r el a tiv e of th a t p er s on or of th a t p er s on’ s s p ous e, or th e s p ous e of s uch a r el a tiv e O r • •

A p er s on w h o, in r el a tion to th a t s ettl em ent, is a s ettl or O r •

A p er s on w h o is connected w ith a p er s on f a l l ing w ith in s ub p a r a g r a p h (i)


4 4 8

Z am b ia

(continued)

OECD Guidelines treatment Documentation requirements Priorities/pricing methods Return disclosures/related-party disclosures Transfer pricing-specific returns N ot a p p l ica b l e.


Transfer pricing penalties Penalty relief P ena l ty r el ief ca n b e a v a il ed th r oug h neg otia tions w ith th e ta x a uth or ity .


4 4 9


Z am b ia

(continued)

Frequency of tax audit and transfer pricing scrutiny by the tax authority APA opportunity Impact of new OECD BEPS Action 8–10 guidelines


4 5 0

Z im b ab we Taxing authority and tax law Chapter 23:06)

Relevant regulations and rulings dis a l l ow ed a nd is a l s o tr ea ted a s a div idend w h eth er th e p a y ee is l oca l or of f s h or e. m a na g em ent ex p enditur es p a id b y a s ub s idia r y to th e h ol ding com p a ny or b y a h ol ding com p a ny to a s ub s idia r y or b y a b r a nch to its f or eig n p a r ent com p a ny to 1 % of th e r es t of th e com p a ny ’ s ex p enditur e q ua l if y ing f or deduction. T h e dis a l l ow ed a m ount is a l s o tr ea ted a s a div idend w h eth er th e p a y ee is l oca l or of f s h or e.

4 r el a ted p a r ties , w h ich , in th e op inion of th e com m is s ioner , dif f er f r om oth er a t a r m ’ s - l eng th .

th os e th a t w oul d b e m a de b etw een tw o p er s ons dea l ing w ith ea ch

• • T h a t h a v e th e ef f ect of a v oiding , p os tp oning or r educing th e l ia b il ity f or incom e ta x • T h a t h a v e b een enter ed into b y a b nor m a l m ea ns or in a n a b nor m a l m a nner • C r ea ting a b nor m a l r ig h ts a nd ob l ig a tions th a t w oul d not nor m a l l y b e cr ea ted b y p er s ons dea l ing a t a r m ’ s - l eng th • O f w h ich th e com m is s ioner is of th e op inion th a t a v oida nce, p os tp onem ent or r eduction of th e l ia b il ity w a s th e s ol e or one of th e m a in p ur p os es of th e tr a ns a ction, op er a tion or s ch em e w h ich th e a s s ocia te r eceiv es or enj oy s incom e f r om

th a t p r op er ty .

b etw een r el a ted p a r ties . T h e 3 5 th s ch edul e of th e I ncom e T a x A ct p r ov ides g uidel ines a nd m eth ods on h ow to deter m ine w h eth er a contr ol l ed tr a ns a ction m eets th e r eq uir em ents of th e a r m ’ s - l eng th p r incip l e.

OECD Guidelines treatment Documentation requirements T a x p a y er s a r e cur r entl y not ob l ig a ted to s ub m it tr a ns f er p r icing docum enta tion b ut a r e ex p ected to h a v e it p r ep a r ed a nd r ea dy up on

4 5 1


Z im b ab we

(continued)

Priorities/pricing methods • • • C os t- p l us • •

F or eig n com p a r a b l es a r e a ccep ted in th e a b s ence of l oca l com p a r a b l es . C om p a r a b l e da ta us ed m us t b e a v a il a b l e to b oth th e ta x p a y er T h er e is no p r a ctice of us ing s ecr et com p a r a b l es .

Return disclosures/related-party disclosures Transfer pricing-specific returns Documentation deadlines tea m .

Transfer pricing penalties P ena l ties r a ng e up to 1 0 0 % of th e ta x p a y a b l e.

Penalty relief P ena l ties ca n b e w a iv ed or r educed th r oug h neg otia tion w ith th e ta x a uth or ity .


4 5 2

Z im b ab we

(continued)

Statute of limitations on transfer pricing assessments T h e s ta tute of l im ita tions is s ix y ea r s f r om

th e r el ev a nt y ea r or da te of th e a s s es s m ent.

Frequency of tax audit and transfer pricing scrutiny by the tax authority b r a nch es . T h er e is no a udit cy cl e.

APA opportunity T h er e is cur r entl y no A P A p r og r a m

in p l a ce.


4 5 3


T r ans f er P r ic ing E Y C o ntac ts

G l o b al L ead er

A r ea c o ntac ts • Americas

• Asia-Pacific

• EMEIA

C ur t K ins k y


4

4 5 4

• Japan

4

J u r is d ic tio n c o ntac ts • Albania

• Bangladesh

A nis a J a s ini 4 4

• Chile

4

• Algeria

4

• Belarus

4

4 • Angola

4

T r a v is Q iu

• Colombia

• Bolivia

4

4

4

• Argentina

4

• China

• Belgium

4

• Armenia

K a m o K a r a p ety a n 4

• Australia

A ndr es P a r r a 4 4

4 4

• Costa Rica

• Brazil

4

4

P a ul D e H a a n

• Bulgaria

4 4

4

• Austria

• Croatia

• Cameroon

4

4

• Bahrain

4

• Cyprus

• Canada

G uy T a y l or 4

T om

4

4

T s iop oul os 4 4 44

• Czech Republic

• Cape Verde

4 4

4 5 5


• Denmark

H enr ik A r h nung 4 4

• Dominican Republic

L uis O ca ndo

44

• Ecuador

4

• Georgia

• Iceland

4

4

• Germany

• India

4

4

• Ghana

• Indonesia

• Gibraltar

• Iraq

• Greece

• Ireland

4

• Egypt

G uy T a y l or 4

4 • El Salvador

4 • Estonia

C h r is tos K our ouniotis

4 • Guam

4 • Fiji

• Italy

L a nce K K a m ig a k i 4

44

• Guatemala

4

• Japan

4

4

• Finland

• Honduras

• France

• Hong Kong (SAR)

K ennet P etter s s on 4

• Jordan

P a ul D e H a a n

J us tin K y te

• Gabon

4

4

• Kazakhstan

• Kenya

F r a ncis N K a m a u 4

• Hungary

4


• Israel

4 5 6

• Korea

• Malawi

• Netherlands

4

4

• Kosovo

4

• Malaysia

A nis a J a s ini 4 4

• New Zealand

4

• Kuwait

4

4

• Maldives

G uy T a y l or 4

• Nicaragua

P a ul D e H a a n

4

• Laos

• Malta

• Nigeria

4 • Latvia

T om

4

• Mauritius

4

4

P h il ib er t 4 4

• Norway

4

4

4

• Lebanon

• Mexico

• Oman

• Libya

• Mongolia

• Pakistan

• Lithuania

• Montenegro

• Panama

G uy T a y l or 4

G uy T a y l or 4

L eona s L ing is 4

G uy T a y l or 4

4

• Luxembourg

N icol a s G il l et 4 4

A l k es h J os h i 4

• Morocco

4

• FYR of Macedonia

K a m a l H im m ich

4

4 • Papua New Guinea

• Myanmar

4 • Madagascar

• Paraguay

• Namibia

G us ta v o C ol m a n 4 4

4

4 5 7


• Peru

4

• Singapore

• Thailand

• Slovak Republic

• Turkey

L uis C or ona do

44 4

• Philippines

4

P a p a tch a y a A k k a r a r ut 4

4

4

• Poland

• Uganda

L ub ica L is ca k ov a 4

4

4 4 4

• Slovenia

• Portugal

• Ukraine

I g or C h uf a r ov 44 4

4 • South Africa

• Qatar

4 44

• UK

J us tin P L ieb enb er g

4

44

4

G uy T a y l or 4

44 • Spain

• Romania

4

4

4

4

4

• US

4

• Sri Lanka

• Russia

D um inda H ul a ng a m uw a 4 4

4

• Sweden

• Saudi Arabia

G uy T a y l or 4

• Uruguay

4 • Venezuela

4 • Switzerland

• Vietnam

P h a t T a n N g uy en 4 4

4 • Senegal

• Taiwan

• Zambia

• Serbia

• Tanzania

• Zimbabwe

T om

4

P h il ib er t 4 4

G eor g e C h ou

4


T om

P h il ib er t 4 4

N ig el F or s g a te 4

4 5 8

E Y

| A s s ur a nce | T a x | T r a ns a ctions | A dv is or y

A b out E Y E Y is a g l ob a l l ea der in a s s ur a nce, ta x , tr a ns a ction a nd a dv is or y s er v ices . T h e ins ig h ts a nd q ua l ity s er v ices w e del iv er h el p b uil d tr us t a nd conf idence outs ta nding l ea der s w h o tea m to del iv er on our p r om is es to a l l of our s ta k eh ol der s . I n s o doing , w e p l a y a cr itica l r ol e in b uil ding a b etter w or k ing w or l d f or our p eop l e, f or our cl ients a nd f or our com m unities .

g ua r a ntee, does not p r ov ide s er v ices to cl ients . F or m or e inf or m a tion a b out

A b o u t E Y ’ s T ax S er v ic es Y our b us ines s w il l onl y s ucceed if y ou b uil d it on a s tr ong f ounda tion a nd g r ow it in a s us ta ina b l e w a y . A t E Y , w e b el iev e th a t m a na g ing y our ta x ob l ig a tions r es p ons ib l y a nd p r oa ctiv el y ca n m a k e a cr itica l dif f er ence. O ur 5 0 , 0 0 0 ta l ented ta x p r of es s iona l s , in m or e th a n 1 5 0 countr ies , g iv e y ou tech nica l k now l edg e, b us ines s ex p er ience, cons is tency a nd a n unw a v er ing s er v ices y ou need.

4 E D N one T h is m a ter ia l h a s b een p r ep a r ed f or g ener a l inf or m a tiona l p ur p os es onl y a nd is not intended to b e r el ied up on a s a ccounting , ta x or oth er p r of es s iona l a dv ice. P l ea s e r ef er to y our a dv is or s f or s p ecif ic a dv ice.

ey . com

A ccess glob al t ax guides E l ectr onic v Tax Guide; a ta x g uides a f r om th e a p

er s ions of Worldwide Personal Tax Guide; Worldwide Corporate nd Worldwide VAT, GST and Sales Tax Guide, a s w el l a s oth er nd p ub l ica tions , a r e a v a il a b l e on ey . com a nd ca n b e dow nl oa ded p s tor e to y our ta b l et.

Global tax guides at your fingertips w w w . ey . com / G l ob a l T a x G uides w w w . ey . com / T a x G uides A p p

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