Transfer Pricing Library

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OECD deal on taxation of MNEs – Global Minimum Tax of 15%

OECD deal on taxation of MNEs - Global Minimum Tax of 15%
Major reform of the international tax system finalised today at the OECD will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023. The landmark deal, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits. Following years of intensive negotiations to bring the international tax system into the 21st century,

OECD: Fighting Tax Crime – The Ten Global Principles, Second Edition

OECD: Fighting Tax Crime – The Ten Global Principles, Second Edition
“Fighting Tax Crime – The Ten Global Principles” is a comprehensive guide to fighting tax crimes published by the OECD. Read the online report here. The report sets out ten essential principles covering the legal, institutional, administrative, and operational aspects necessary for developing an efficient and effective system for identifying, investigating and prosecuting tax crimes, while respecting the rights of accused taxpayers. The guidance also addresses new challenges, such as tackling professionals who enable tax and white-collar crimes, and fostering international co-operation in the recovery of assets. Drawing on the experiences of jurisdictions in all continents, the report also highlights

2021: ATO Draft Practical Compliance Guidelines on Intangibles Arrangements, PCG 2021/D4

2021: ATO Draft Practical Compliance Guidelines on Intangibles Arrangements, PCG 2021/D4
The Australian Taxation Office (ATO) has issued draft Compliance Guidelines on intangible arrangements, PCG 2021/D4. These Guidelines will (when finalised)  set out the ATO’s compliance approach to international arrangements connected with the development, enhancement, maintenance, protection and exploitation of intangible assets, specifically, the potential application of the transfer pricing, general anti-avoidance rule (GAAR) and the diverted profits tax (DPT) provisions. The capital gains tax and capital allowances provisions will also be discussed in this Guideline where these may be considered alongside, or relevant to, the ATO’s transfer pricing, GAAR or DPT risk assessment. The draft Guidelines sets out ATO’s compliance

Paraguay’s TP Decree in effect as of April 2021

Paraguay's TP Decree in effect as of April 2021
Paraguay’s new Transfer Pricing Decree in effect as of April 2021. Click here for English Translation Decreto N° 4644-2020

UN releases New 2021 Practical Manual on Transfer Pricing

UN releases New 2021 Practical Manual on Transfer Pricing
On 27 April UN released a new 2021 Practical Manual on Transfer Pricing. “…this third edition of the Manual makes improvements in usability and practical relevance, updates and improves the existing text, including on Country Practices (Part D) and has new content, in particular, on financial transactions, profit splits, centralized procurement functions and comparability issues. Improved capacity development based on the Manual has encouraged and contextualized developing country feedback, helped identify these priority areas for improvement and contributed to better targeting the messages in the Manual and examples used.” The changes in the new edition of the Manual include: •

UN agrees on inclusion of Article 12B to the UN Model Tax Treaty – computer software

UN agrees on inclusion of Article 12B to the UN Model Tax Treaty - computer software
On 26. April 2021 the UN released agreed changes to the commentary on Article 12 of the United Nations Model Double Taxation Convention reflecting decisions made with respect to the inclusion of Article 12B and the treatment of computer software. UN model Proposed Art 12 Commentary

EU: Public Country-by-Country Reporting?

EU: Public Country-by-Country Reporting?
Proposal directive of public country-by-country reporting in the EU Ministers held an exchange of views (public session) on how to take the proposed directive forward. Tax transparency is a fundamental principle in any democratic society. It enables policy makers to take informed decisions and to ensure that all economic actors contribute in a fair and equitable manner to the economy of the various countries where they conduct their business. Today’s debate has opened the way for the proposed directive to move forward as a matter of priority. Pedro Siza Vieira, Portuguese Minister of State for the Economy and Digital Transition

Spain releases note on arm’s length range and benchmarking.

Spain releases note on arm's length range and benchmarking.
On 25 February 2021, a note was released by the Spanish Tax Agency on number of practical issues relating to application of the arm’s-length range. The note – which is based on the OECD transfer Pricing Guidelines, guidance on benchmark studies issued by the Joint Transfer Pricing Forum, and relevant Spanish case laws – answers the following questions – How is the range of values determined? – Is it possible to determine a range of values in which the figures are relatively equally reliable? – How to proceed if a range is determined in which all figures are not relatively

OECD Guidance on the transfer pricing implications of the COVID-19 pandemic

OECD Guidance on the transfer pricing implications of the COVID-19 pandemic
Unique economic conditions arising from COVID-19 and government responses to the pandemic have led to practical challenges for the application of the arm’s length principle. For taxpayers applying transfer pricing rules for the financial years impacted by the COVID-19 pandemic and for tax administrations that will be evaluating this application, there is an urgent need to address these practical questions. The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2017 (“OECD TPG”) are intended to help tax administrations and multinational enterprises (“MNEs”) find mutually satisfactory solutions to transfer pricing cases and should continue to be relied upon when

Peru – report on use of the most appropriate method to determine the market value of services

Peru - report on use of the most appropriate method to determine the market value of services
In december 2020 the tax authorities in Peru issued a new administrative ordinance related to use of the most appropriate method to determine the market value of services. Click here for English translation Click here for translation PERU i135-2020-7T0000

New German Administrative Ordinance on transfer pricing issues AO 2020, DOK 2020/1174240

New German Administrative Ordinance on transfer pricing issues AO 2020, DOK 2020/1174240
In december 2020 the Federal Ministry of Finance in German issued a new administrative ordinance related to various transfer pricing issues. Among the issues are enhanced requirement to cooperate and submit additional documentation related to controlled transactions, but most notable may be the conditions under which estimated tax assessments can be issued. Below is an unofficial translation of the document. Click here for the original document  2020-12-03-Verwaltungsgrundsaetze-2020 (Unofficial Eng trans)nw

2020: ATO Alert on arrangements and schemes connected with DEMPE of intangibles

2020: ATO Alert on arrangements and schemes connected with DEMPE of intangibles
The ATO is currently reviewing international arrangements that mischaracterise Australian activities connected with the development, enhancement, maintenance, protection and exploitation (DEMPE) of intangible assets. Such arrangements may be non-arm’s length or structured to avoid tax obligations, resulting in inappropriate outcomes for Australian tax purposes. One of the issues is whether functions performed, assets used and risks assumed by Australian entities in connection with the DEMPE of intangible assets are properly recognised and remunerated in accordance with the arm’s length requirements of the transfer pricing provisions in the taxation law. These arrangements are particularly in focus where intangible assets and/or associated

New TPG Chapter X on Financial Transactions (and additions to TPG Chapter I) released by OECD

New TPG Chapter X on Financial Transactions (and additions to TPG Chapter I) released by OECD
In February 2020, OECD released the report Transfer Pricing Guidance on Financial Transactions. The guidance in the report describes the transfer pricing aspects of financial transactions and includes a number of examples to illustrate the principles discussed in the report. Section B provides guidance on the application of the principles contained in Section D.1 of Chapter I of the OECD Transfer Pricing Guidelines to financial transactions. In particular, Section B.1 of this report elaborates on how the accurate delineation analysis under Chapter I applies to the capital structure of an MNE within an MNE group. It also clarifies that the

2019: ATO draft on compliance approach to the arm’s length debt test

2019: ATO draft on compliance approach to the arm’s length debt test
The draft Guideline provides guidance to entities in applying the arm’s length debt test in Division 820 of the Income Tax Assessment Act 19972 and should be read in conjunction with draft Taxation Ruling TR 2019/D2 Income tax: thin capitalisation – the arm’s length debt test. This Guideline also provides a risk assessment framework that outlines our compliance approach to an application of the arm’s length debt test in certain circumstances that are identified as low risk. The arm’s length debt test is one of the tests available to establish an entity’s maximum allowable debt for thin capitalisation purposes. The

2019 Update-UN-Practical-Manual-on-Transfer-Pricing

2019 Update-UN-Practical-Manual-on-Transfer-Pricing
On 8 April 2019 the UN subcommittee issued it’s first discussion draft on the future updates to the UN Practical-Manual-on-Transfer-Pricing on Financial transactions, BEPS consistency and Risk Assessment and Audit practices. Attachment A: the proposed new Chapter B on Financial Transactions. The draft discusses the importance of corporate financing decisions within multinational groups and how those decisions could lead to tax base The Chapter discusses interaction with rules and measures against base erosion; common types of intra- group financial transactions and of group financing departments; the process of actual delineation and relevant characteristics of financial transactions; the process and system

June 2019: IRS Transfer Pricing Examination Process – Risk Assessment

June 2019: IRS Transfer Pricing Examination Process - Risk Assessment
The report on Transfer Pricing Examination Process (TPEP) provides a framework and guide for transfer pricing examinations. The guide will be updated regularly by the IRS based on feedback from examiners, taxpayers, practitioners and others. P5300

April 2019: UN Manual – Financial Transactions and Profit Splits

April 2019: UN Manual - Financial Transactions and Profit Splits
A new version of the UN Practical Manual on Transfer Pricing for Developing Countries is due by 2021. According to the mandate the new manual will make further improvements in usability and practical relevance, updates and improvements to existing text, including on Country Practices (Part D) and will have new content, in particular, on financial transactions; profit splits, centralized procurement functions and comparability issues. A draft paper was published 8 April 2019 containing further guidance on: • Financial Transactions (Attachment A); • Profit Splits (Attachment B); and • Establishing Transfer Pricing Capability, Risk Assessment and Transfer Pricing Audits (Attachment C).

March 2019: EU report on financial crimes, tax evasion and tax avoidance

March 2019: EU report on financial crimes, tax evasion and tax avoidance
In March 2018 a special EU committee on financial crimes, tax evasion and tax avoidance (TAX3) was established. Now, one year later, The EU Parliament has approved a controversial report from the committee. According to the report close to 40 % of MNEs’ profits are shifted to tax havens globally each year with some European Union countries appearing to be the prime losers of profit shifting, as 35 % of shifted profits come from EU countries. About 80 % of the profits shifted from EU Member States are channelled to or through a few other EU Member States. The latest

May 2019: New Beneficial Ownership Toolkit will help tackle tax evasion

May 2019: New Beneficial Ownership Toolkit will help tackle tax evasion
A beneficial ownership toolkit was released 20. May 2019 in the context of the OECD’s Global Integrity and Anti-Corruption Forum. The toolkit, prepared by the Secretariat of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in partnership with the Inter-American Development Bank, is intended to help governments implement the Global Forum’s standards on ensuring that law enforcement officials have access to reliable information on who the ultimate beneficial owners are behind a company or other legal entity so that criminals can no longer hide their illicit activities behind opaque legal structures. The toolkit was developed

March 2019: ATO – Risk assessment of inbound distribution arrangements

March 2019: ATO - Risk assessment of inbound distribution arrangements
The Guideline outlines ATO’s compliance approach to the transfer pricing outcomes associated with the following activities of inbound distributors: distributing goods purchased from related foreign entities for resale, and distributing digital products or services where the intellectual property in those products or services is owned by related foreign entities Such activities, together with any related activities involving the provision of ancillary services, are referred to in this Guideline as ‘inbound distribution arrangements’. This Guideline applies to inbound distribution arrangements of any scale. The framework in the Guideline is used to assess the transfer pricing risk of inbound distribution arrangements and

March 2019: EU list of Non-Cooperative Tax Jurisdictions – Tax Havens

March 2019: EU list of Non-Cooperative Tax Jurisdictions - Tax Havens
12 March 2019 the EU Council added ten jurisdictions to the list of Non-Cooperative Tax Jurisdictions – Tax Havens. Non-Cooperative Tax Jurisdictions are those that refused to engage with the EU or to address tax good governance shortcomings. As of March 2019 the EU list of Non-Cooperative Tax Jurisdictions includes 15 countries: American Samoa Barbados Guam Samoa Trinidad and Tobago US Virgin Islands Aruba Belize Bermuda Dominica Fiji Marshall Islands Oman United Arab Emirates Vanuatu EU black list 2019

UK – Profit Diversion Compliance Facility (PDCF) Published by HMRC January 2019

UK - Profit Diversion Compliance Facility (PDCF) Published by HMRC January 2019
HMRC Profit Diversion Compliance Facility Chapter 1 – introduction 1.1 Background Companies should recognise and pay tax on profits where the economic activities to generate those profits are carried out. HMRC has found that some Multinational Enterprises (MNEs) have adopted cross border pricing arrangements which are based on an incorrect fact pattern and/or are not consistent with the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines (TPG), as clarified through Actions Points 8-10 of the OECD Base Erosion and Profit Shifting Project. This is for 2 main reasons: Firstly, some have made incorrect assumptions, or not implemented arrangements as originally intended

Israel – Guidance on Limited Risk Distribution – Circular 12/2018

Israel - Guidance on Limited Risk Distribution - Circular 12/2018
Circular on transfer pricing – profitability rates and ranges for certain transactions – Limited Risk Distributors (LRDs) tnf-israel-12-oct9-2018

Israel – Guidance on Limited Risk Distribution – Circular 11/2018

Israel - Guidance on Limited Risk Distribution - Circular 11/2018
Circular on transfer pricing – profitability rates and ranges for certain transactions – Limited Risk Distributors (LRDs) tnf-israel-11-oct9-2018

The Taxation of Offshore Indirect Transfers – A Toolkit (DRAFT Version 2)

The Taxation of Offshore Indirect Transfers - A Toolkit (DRAFT Version 2)
The Platform for Collaboration on Tax (IMF, OECD, UN and the WBG) has published a toolkit on the taxation of Offshore Indirect Transfers. The tax treatment of ‘offshore indirect transfers’ (OITs) – in essence, the sale of an entity owning an asset located in one country by a resident of another – has emerged as a significant issue in many developing countries. It has been identified in IMF technical assistance work and scoping by the OECD, but was not covered by the G20-OECD project on Base Erosion and Profit Shifting (BEPS). In relation to the extractive industries, OITs are also the

Guidance on the application of the HTVI approach

Guidance on the application of the HTVI approach
This June 2018 report contains guidance for tax administrations on the application of the approach to hard-to-value intangibles (HTVI). The HTVI approach was adopted as part of the Actions 8-10 Report in 2015 and it was subsequently incorporated in Chapter VI of the OECD Transfer Pricing Guidelines. The guidance  is aimed at reaching a common understanding and practice among tax administrations on how to apply adjustments resulting from the application of the approach to HTVI. The guidance includes a number of examples to clarify the application of the HTVI approach in different scenarios and addresses the interaction between the HTVI approach and

Italien Transfer Pricing Guidelines, Ministerial Decree of 14 May 2018, published in the Official Gazette no. 118/2018

Italien Transfer Pricing Guidelines, Ministerial Decree of 14 May 2018, published in the Official Gazette no. 118/2018
Italien legislation on transfer pricing is contained in Article 110, paragraph 7 of the Consolidated Income Tax Act, where the first sentence states that “the components of income deriving from transactions with companies not resident in the territory of the State, which directly or indirectly control the company, are controlled by it or are controlled by the same company that controls the company, are determined by reference to the terms and prices that would have been agreed between independent parties operating in conditions of free competition and in comparable circumstances, if an increase in income is the result”. The rule

OECD Article 9 (with commentary)

ARTICLE 9 ASSOCIATED ENTERPRISES 1. Where an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued

September 2017: Handbook on Effective Tax Risk Assessment using CbC Reports

September 2017: Handbook on Effective Tax Risk Assessment using CbC Reports
The Handbook on Effective Tax Risk Assessment explores how information contained in CbC reports can be used for risk assessment and which types of tax risk indicators that may be identified using the information contained in CbC Reports. In chapter 4 some of the main tax risk indicators that may be identified using CbC Reports are described: The footprint of a group in a particular jurisdiction A group’s activities in a jurisdiction are limited to those that pose less risk There is a high value or high proportion of related party revenues in a particular jurisdiction The results in a

September 2017: Transfer Pricing Risk Assessment in the Mining Industry

September 2017: Transfer Pricing Risk Assessment in the Mining Industry
The African Tax Administration Forum (ATAF) and the German Federal Ministry for Economic Cooperation and Development (BMZ), through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, have developed this toolkit for African tax authorities seeking to assess transfer pricing risk in the mining industry. The purpose is to strengthen authorities’ capacity to determine whether they should audit particular high-risk “related party transactions.” The toolkit employs a specific risk review approach, which focuses on particular transfer pricing issues that present a high risk to revenue (as distinct from a comprehensive risk review, which tax authorities use when they cannot detect where

December 2016: EU Study on Comparable Data used for transfer pricing

December 2016: EU Study on Comparable Data used for transfer pricing
The Study on Comparable data used for Transfer Pricing in the EU provides an overview and assessment of the availability and quality of market data ('comparables') used for transfer pricing purposes in the EU. Furthermore it assesses and evaluates situations characterising the lack and/or non-reliability of comparable data as well as the situation for pan-European comparable searches.

Statement released by New Zealand’s Inland Revenue on determining whether an Arrangement is Tax Avoidance

Statement released by New Zealand's Inland Revenue on determining whether an Arrangement is Tax Avoidance
On 13 June 2013, a Statement was released by New Zealand’s Inland Revenue Service on the interpretation of Tax Avoidance provisions. This statement outlines the Commissioner’s view of the law on tax avoidance in New Zealand and sets out the approach the Commissioner will take to application of the general anti-avoidance provision, based on the three-stage test for assessing whether an arrangement is tax avoidance as provided by the Supreme Court Judgment in the Ben Nevis case. In Ben Nevis case the Supreme Court indicated it intended to settle the approach regarding the relationship between s BG 1 and the

April 2013: Draft Handbook on Transfer Pricing Risk Assessment

April 2013: Draft Handbook on Transfer Pricing Risk Assessment
The 2013 Draft Handbook on Transfer Pricing Risk Assessment is a detailed, practical resource that countries can follow in developing their own risk assessment approaches. The handbook supplements useful materials already available with respect to transfer pricing risk assessment. The OECD Forum on Tax Administration published a report entitled “Dealing Effectively with the Challenges of Transfer Pricing” in January 2012. One chapter of that report also addresses transfer pricing risk assessment. Draft-Handbook-TP-Risk-Assessment-ENG