Transfer Pricing Library

TP Library

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 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

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: 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

The EU Anti Tax Avoidance Package – Anti Tax Avoidance Directives (ATAD I & II) and Other Measures

The EU Anti Tax Avoidance Package - Anti Tax Avoidance Directives (ATAD I & II) and Other Measures
Anti Tax Avoidance measures are now beeing implemented across the EU with effect as of 1 January 2019. The EU Anti Tax Avoidance Package (ATAP) was issued by the European Commission in 2016 to counter tax avoidance behavior of MNEs in the EU and to align tax payments with value creation. The package includes the Anti-Tax Avoidance Directive, an amending Directive as regards hybrid mismatches with third countries, and four Other measures. The Anti-Tax Avoidance Directive (ATAD), COUNCIL DIRECTIVE (EU) 2016/1164 of 12 July 2016, introduces five anti-abuse measures, against tax avoidance practices that directly affect the functioning of the internal market. 1) Interest Limitation Rule  –

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

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

Preferential Tax Regimes – Harmful Tax Practices

Preferential Tax Regimes - Harmful Tax Practices
On 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 consolidated update of the regimes reported in Harmful Tax Practices – 2017 Progress Report on Preferential Regimes. Countries with harmfull tax practices – preferential tax regimes – are defined based on the following factors: Where no or low effective tax rates (or negotiable tax rates or bases) are imposed on income from highly mobile assets and activities

Marketing and Procurement Hubs – Tax Avoidance

Marketing and Procurement Hubs - Tax Avoidance
The Australian Taxation Office has issued new guidance for multinational groups using offshore marketing- and procurment hubs for tax avoidance purposes. The guidance adresses tax schemes where MNEs uses offshore hubs to shift profits and thereby avoid Australian taxes. Offshore hub arrangements are catagorised by the ATO as white, green, blue, yellow, amber, or red – based on the risk assesment for tax purposes of the transfer pricing setup. The new guidance is a result of recent Australian investigations and hearings into tax avoidance schemes used by Multinational Groups. Tax avoidance in Australia Australian Senate Hearings into Tax Avoidance The

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

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

Tax avoidance in Australia

Tax avoidance in Australia
In May 2018 the final report on corporate tax avoidance in Australia was published by the Australian Senate. The report contains the findings, conclusions and recommendations based on 4 years of hearings and investigations into tax avoidance practices by multinationals in Australia. Australian-final-report-on-tax-avoidance

EU Transparency on Income Allocation and Tax Arrangements – DAC 1 to 6

EU Transparency on Income Allocation and Tax Arrangements - DAC 1 to 6
Tax authorities in the EU have agreed to cooperate more closely and exchange information so as to be able to apply their taxes correctly and combat tax fraud and tax evasion. Exchange of Information within the EU is based on Council Directive 2011/16/EU. The Directive and the later amendments in DAC 2 – 6 provides for exchange of information in three forms: spontaneous, automatic and on request. Spontaneous exchange of information takes place if a country discovers information on possible tax evasion relevant to another country, which is either the country of the income source or the country of residence. Exchange of information on

OECD’s interactive map of tax jurisdictions

Try OECD’s interactive map of tax jurisdictions here:

EU blacklist of non-cooperative tax jurisdictions

EU blacklist of non-cooperative tax jurisdictions
On December 5, 2017, the EU published it’s blacklist of non-cooperative tax jurisdictions (tax havens). 1. American Samoa American Samoa does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, does not apply the BEPS minimum standards and did not commit to addressing these issues by 31 December 2018. 2. Bahrain Bahrain does not cover all EU Member States for the purpose of automatic exchange of information, has not signed and ratified the OECD Multilateral Convention on Mutual

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 bet ween 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

OECD: Report on harmful tax practices, 16 October 2017

OECD: Report on harmful tax practices, 16 October 2017
The OECD report on harmful tax incentives provides details on reviews of 164 preferential tax regimes. Some preferential tax regimes are considered harmful – where these encourage the erosion of other jurisdictions’ tax bases. All 102 members of the BEPS Inclusive Framework have committed to ensuring that any regimes offered meet the criteria that have been agreed as part of BEPS Action 5. Crucially, this includes a requirement that taxpayers benefiting from a regime must themselves undertake the core business activity, ensuring the alignment of taxation with genuine business substance. Of the 164 regimes reviewed in the last twelve months:

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

Australian Parliament Hearings – Tax Avoidance

Australian Parliament Hearings - Tax Avoidance
In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing: Tax Avoidance, Australian Senate Hearing, 22 August 2017

German royalty barrier to counter IP box-regimes

German royalty barrier to counter IP box-regimes
Some countries in Europe offer so-called IP or Patent boxes. To counter such tax practices, effective from 31 December 2017, Germany has introduced a new royalty barrier in ‘Law against Harmful Tax Practices in Connection with the Assignment of Rights. The law limits tax deductibility of expenses for the assignment of rights in order to prevent royalty income from not being taxed or taxed at a low rate and taxes income in the country where value is/was created. Deduction of expenses for the assignment of rights is restricted, where the following two cumulative requirements are met: 1) Royalty income for

Signing of the Multilateral Convention to prevent Base Erotion and Profit Shifting “Multilateral Instrument”

Signing of the Multilateral Convention to prevent Base Erotion and Profit Shifting "Multilateral Instrument"
On 7 June 2017, over 70 Ministers and other high-level representatives participated in the signing ceremony of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). Signatories include jurisdictions from all continents and all levels of development. A number of jurisdictions have also expressed their intention to sign the MLI as soon as possible and other jurisdictions are also actively working towards signature. multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS

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.

Belgium,March 2016: New list of “tax havens” published for 2016

According to a royal decrete dividends received deduction is not available in Belgium where the recieving company is resident in a country defined to be a “tax haven” A tax haven is defined as a country where: (1) the nominal rate of the corporate income tax is less than 15%; or (2) the effective corporate tax burden is less than 15%. The Belgien list of “tax haven” jurisdictions for 2016 contains the following countries: Abu Dhabi, Ajman, Andorra, Bosnia and Herzegovina, Dubai, Gibraltar, Guernsey, Jersey, Kyrgyzstan, Kuwait, Kosovo, Liechtenstein, Macao, Macedonia, Maldives, Isle of Man, Marshall Islands, Micronesia, Moldova, Monaco,

UK Parliament, House of Commons, Committee of Public Accounts, Hearings on Tax Avoidance Schemes

UK Parliament, House of Commons, Committee of Public Accounts, Hearings on Tax Avoidance Schemes
Follow the work of the UK Parliament, House of Commons Committee of Public Account, on corporate tax avoidance schemes. http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/taxation/ Statements from Amazon, Google and Starbucks, November 2012 UK Parlement, September 2012 Google Amazon Starbucks Statement from Google June 2013 UK Parlement, June 2013, Tax Avoidance–Google

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