Although some countries may refer to a “penalty”, the same or similar imposition by another country may be classified as “interest”. Some countries’ “penalty” regimes may therefore include an “additional tax”, or “interest”, for understatements which result in late payments of tax beyond the due date. This is often designed to ensure the revenue recovers at least the real time value of money (taxes) lost.
TPG2017 Chapter IV paragraph 4.22
Category: B. Transfer pricing compliance practices, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter IV: Administrative Dispute Resolution | Tag: Penalty vs interest vs additional tax, Penalty/Fine
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- TPG2022 Chapter IV paragraph 4.23Civil monetary penalties for tax understatement are frequently triggered by one or more of the following: an understatement of tax liability exceeding a threshold amount, negligence of the taxpayer, or wilful intent to evade tax (and also fraud, although fraud can trigger much...
- TPG2022 Chapter V paragraph 5.41Documentation-related penalties imposed for failure to comply with transfer pricing documentation requirements or failure to timely submit required information are usually civil (or administrative) monetary penalties. These documentation-related penalties are based on a fixed amount that may be assessed for each document missing...
- TPG2022 Chapter IV paragraph 4.20There are a number of different types of penalties that tax jurisdictions have adopted. Penalties can involve either civil or criminal sanctions – criminal penalties are virtually always reserved for cases of very significant fraud, and they usually carry a very high burden...
- TPG2022 Chapter IV paragraph 4.28Since penalties are only one of many administrative and procedural aspects of a tax system, it is difficult to conclude whether a particular penalty is fair or not without considering the other aspects of the tax system. Nonetheless, OECD member countries agree that...
- TPG2022 Chapter IV paragraph 4.26Because cross-border transfer pricing issues implicate the tax base of two jurisdictions, an overly harsh penalty system in one jurisdiction may give taxpayers an incentive to overstate taxable income in that jurisdiction contrary to Article 9. If this happens, the penalty system fails...
- TPG2022 Chapter IV paragraph 4.25Improved compliance in the transfer pricing area is of some concern to OECD member countries and the appropriate use of penalties may play a role in addressing this concern. However, owing to the nature of transfer pricing problems, care should be taken to...
- TPG2022 Chapter IV paragraph 4.5This section describes three aspects of transfer pricing compliance that should receive special consideration to help tax jurisdictions administer their transfer pricing rules in a manner that is fair to taxpayers and other jurisdictions. While other tax law compliance practices are in common...
- TPG2022 Chapter IV paragraph 4.21Some civil penalties are directed towards procedural compliance, such as timely filing of returns and information reporting. The amount of such penalties is often small and based on a fixed amount that may be assessed for each day in which, e.g. the failure...
- Preferential Tax Regimes – Harmful Tax PracticesOn 13 November 2018, the Inclusive Framework on BEPS approved updates to the results of reviews of preferential tax regimes conducted in connection with BEPS Action 5. The data below presents the conclusions of the work on regime reviews. The results are a...
Related Case Law
- South Africa vs Sasol, 30 June 2017, Tax Court, Case No. TC-2017-06 – TCIT 13065The taxpayer is registered and incorporated in the Republic of South Africa and carries on business in the petrochemical industry. It has some of its subsidiaries in foreign jurisdictions. Business activities include the importation and refinement of crude oil. This matter concerns the...
- Chile vs Monsanto Chile S.A, December 2018, Tax Court, Case N° RUC N° 14-9-0000002-3Monsanto Chile – since 2018 a subsidiary of Bayer – is engaged in production of vegetable seeds and Row Crop seeds. The company uses its own local farmers and contractors, employs some 250 people and hires a maximum of 2,000 temporary workers in...
- Spain vs Representaciones Creta S.L., October 2018, Tribunal Supremo, Case No 1504/2018, STS 3632/2018 – ECLI:ES:TS:2018:3632Tax penalties/fines had been issued following a transfer pricing adjustments in regards of controlled transactions exempt from Spanish TP documentation requirements. An appeal was filed by the taxpayer claiming to be excluded from the Spanish penalty regime. The appeal was dismissed by the...
- Germany vs “TP-Doc GmbH”, June 2011, Bundesfinanzhof, Case No X B 37/11The Bundesfinanzhof confirmed the statutory authority of the tax authorities to issue penalties where a taxpayer have not fulfilled transfer pricing documentation requirement. Click here for English translation Click here for other translation...