DTTL Tax Global Transfer Pricing Guide 2014
DTTL Tax Global Transfer Pricing Guide 2014
DTTL Tax Global Transfer Pricing Guide 2014
Country Guide
Contents
3 Foreword
4 Argentina
7 Australia
13 Austria
16 Belgium
19 Brazil
22 Bulgaria
25 Canada
29 Chile
32 China
37 Colombia
40 Costa Rica
43 Croatia
47 Czech Republic
50 Denmark
53 Dominican Republic
56 Ecuador
60 El Salvador
63 Estonia
66 Finland
69 France
72 Germany
76 Greece
80 Guatemala
83 Hong Kong
86 Hungary
90 India
93 Indonesia
97 Ireland
100 Israel
103 Italy
107 Japan
110 Kazakhstan
114 Kenya
117 Korea
120 Latvia
123 Lithuania
126 Luxembourg
129 Malaysia
134 Mexico
137 Netherlands
140 New Zealand
144 Norway
147 OECD
150 Peru
153 Philippines
156 Poland
160 Portugal
163 Romania
166 Russia
169 Singapore
172 Slovakia
175 Slovenia
178 South Africa
182 Spain
186 Sweden
189 Switzerland
192 Taiwan
195 Thailand
198 Turkey
201 Ukraine
204 United Kingdom
208 United States
211 Uruguay
213 Venezuela
216 Vietnam
219 Contacts
Foreword
The 2014 Global Transfer Pricing Country Guide is one of
the most comprehensive and authoritative guides of its
kind, compiling essential information regarding the transfer
pricing regimes in 64 jurisdictions around the world and
the OECD. This 2014 edition of the Global Transfer Pricing
Country Guide has been reviewed and updated as of 31
December 2013.
Given the complexity of transfer pricing issues, the Global
Transfer Pricing Country Guide should be the starting
point rather than the finish line for all your transfer pricing
inquiries. With 97 percent of jurisdictions evaluated,
Deloitte ranked in the top two tiers in International Tax
Reviews Word Tax Ratings 2104. The transfer pricing
specialists in Deloitte member firms around the world have
the knowledge and experience to help you on your journey.
Argentina
Whats new
The Argentinean tax authorities have recently taken
an active position regarding transfer pricing audits,
resulting in several tax court rulings. During 2013, the
tax authorities modified their documenting methodology, and now require the annual filing of the
transfer pricing report electronically.
For FY 2014, the tax authorities have introduced
a Record of Related Parties for taxpayers and/or
responsible persons residing in the country that are
related to parties residing in Argentina or abroad.
Additionally, a monthly reporting scheme has been
established that must be observed by those required
to get registered with the Record of Related Parties
regarding transactions carried out in the domestic
market with related parties.
General information
Tax authority and law
Argentine Tax Office (Administracin Federal de Ingresos
Pblicos); Law 20.628 and amendments (Article 8,
Article 15, and new article added after Article 15).
Regulations, rulings, guidelines
Decree 1344/98. General Resolution No. 1122/01.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply when transactions are entered
into with foreign affiliates, entities in tax havens, and
foreign entities with an economic link.
For FY 2014, the Argentine tax authorities have issued a
list of countries considered cooperative for tax transparency purposes; any country or jurisdiction not included on
the published list of cooperative countries will be deemed
to be a noncooperative country, and will be subject to all
tax provisions that apply to low- or no-tax jurisdictions.
The new list replaces the previous black list of jurisdictions considered tax havens.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Neither the local transfer pricing rules nor the tax authorities prohibit or disallow the use of transfer pricing analyses
to calculate profits attributable to a permanent establish-
Horacio Dinice
+54 11 4321 3002
[email protected]
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
There is no specific provision on this issue. However, it
usually depends on the documentation and the way in
which taxpayers prove the rationality of the charges.
Are cost contribution or cost sharing
payments deductible?
Yes, but payments must satisfy the arms length standard
and have a direct relation to the income generated, and
documentation must be kept.
Are cost contribution or cost sharing
payments subject to withholding tax?
It depends on the nature of the charges; for example, does
the cost contribution or cost sharing payment
include services?
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible if they satisfy the arms length
standard, have a direct relation with the income
generated, and documentation is kept.
Documentation and tax return disclosures
Documentation requirements
Taxpayers must submit the following to the tax authorities:
Forms for transactions performed between foreign
related parties: F742 (semiannual), F743, and
F969 (annual);
Forms for transactions performed between foreign
unrelated parties: F741 (for commodities, semiannual),
F867 (for import and export of noncommodity
goods, annual);
Transfer pricing report and CPA certification on certain
contents of the transfer pricing report to be electronically
filed through Form F 4.501 (annual);
Form for transactions performed between local related
parties: F968 (monthly) for transactions entered into
after January 2014; and
Record of Related Parties: registration of related parties
(local and foreign).
Australia
Whats new
Australias transfer pricing landscape has changed
significantly over the past year. The enactment of
new transfer pricing laws represents the biggest
overhaul of Australias transfer pricing rules in 30
years. The new laws focus on Australian taxpayers
profitability and the commerciality of their relatedparty arrangements in totality, significantly broadening the ATOs ability to challenge taxpayers
transfer pricing positions. The new laws are selfexecuting in their operation, which means taxpayers
must now actively assess their transfer pricing
positions and proactively make adjustments to ensure
arms length outcomes on an annual basis.
General information
Tax authority and law
Relevant dates
Applicable legislation
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes. Under Australian common law, commissionaire
arrangements take effect as undisclosed agencies. A
commissionaire arrangement may be ineffective at
reducing taxable Australian profit when it gives rise to a
dependent agent PE of the nonresident principal
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes, subject to the general rules of deductibility under s.
8-1, ITAA 1997.
Are cost contribution or cost sharing
payments subject to withholding tax?
No.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Consideration would have to be given to Australias
domestic tax treatment around revenue versus capital
expenditure and receipts, on a case-by-case basis.
Documentation and tax return disclosures
Tax return disclosures
When certain conditions are triggered, the IDS must
be lodged as part of the Australian taxpayers income
tax return. The IDS is a lengthy form that contains five
sections; section A is specifically related to transfer
pricing arrangements.
10
11
12
Austria
Whats new
There have been no important changes to Austrias
transfer pricing regime during 2013. Discussions
regarding the OECDs base erosion and profit shifting
(BEPS) initiatives have been quite common within
the Austrian tax authorities. However, no concrete
transfer pricing measures in connection to BEPS have
been disclosed so far. Because Austria is part of the
OECD, the Austrian tax authorities are quite familiar
with current OECD discussions.
General information
Tax authority and law
Federal Ministry of Finance; Section 6 para. 6 Income Tax
Act, Section 8 para 1 and 2 Corporate Income Tax Act.
Regulations, rulings, guidelines
In October 2010, the Austrian Ministry of Finance issued
specific transfer pricing guidelines as a decree, which is
binding on the Austrian tax authorities but nonbinding
on taxpayers and the courts. These are the first domestic
transfer pricing guidelines ever published by the Austrian
Ministry of Finance, and they refer to the OECD transfer
pricing guidelines, as amended in 2010, as well as to the
OECD Report on the Attribution of Profits to Permanent
Establishments.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Two enterprises are deemed associated if one participates
directly or indirectly in the management, control, or capital
of the other, or if both are under common control.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The arms length principle is generally accepted when
profits attributable to a permanent establishment or
branch have to be calculated. The tax authorities apply
the authorized OECD approach (AOA) as long as it does
not contradict the old Article 7 of the OECD Model Tax
Convention on Income and on Capital.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit split
method, and the transactional net margin method (TNMM).
Priority of methods
Austria follows the 2010 OECD transfer pricing guidelines,
whereby the selection of a transfer pricing method always
aims to find the most appropriate method for a particular
case. In cases when more than one method can be applied
in an equally reliable manner, the traditional transaction
methods are preferable to the transactional profit methods.
Availability of benchmarking/comparative data
Pan-European data is used.
Are foreign comparables acceptable
to local tax authorities?
Yes.
Services issues
Are management fees deductible?
Yes. Austria follows the OECD transfer pricing guidelines in
this regard.
Are management fees subject to withholding?
Generally, no. However, royalties and payments for the
provision of technical or commercial consulting services
carried out in Austria are subject to withholding tax.
Andrea Lahodny
+43 0 1 537 00 6200
[email protected]
13
14
15
Belgium
Whats new
The Belgian tax authorities recently have increased
their focus on transfer pricing, seemingly in an effort
to prevent base erosion and profit shifting. Evidence
of this trend are systematic transfer pricing audits and
a significant expansion of their transfer pricing team
with regional tax inspectors. This increased scrutiny
has compelled taxpayers to pay significantly more
attention to the appropriateness of their transfer
pricing policies and documentation.
General information
Tax authority and law
Administration of Direct Taxes. In 2006, a Special Transfer
Pricing Audit Cell was created. General tax law on
avoidance of profit shifting applies (articles 26, 49, 54, 55,
56, 79, 207, and 344 of the Income Tax Code). Law of 21
June 2004 introduced transfer-pricing-specific cross-border
rules and correlative adjustments under Articles 185, 2,
and 235 ITC. For APAs, mutual agreement, or arbitration
procedure, the OECDs arms length standard, as introduced by article 185 2 ITC, applies.
Regulations, rulings, guidelines
Administrative Transfer Pricing Circular Letter of
28.06.1999; Administrative Arbitration Convention
Circular Letter of 07.07.2000 and Administrative Circular
Letter of 25.05.2003 (addendum to Circular Letter of
07.07.2000); Administrative Circular Letter of 04.07.2006
regarding article 185 2 ITC; Administrative Circular Letter
of 14.11.2006 on transfer pricing documentation and
transfer pricing audits.
Rulings are published (in French or Dutch) on
http://www.ruling.be/.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Belgium has a very broad interpretation of
interdependence criteria, which includes not only legal but
also factual control (e.g., common management).
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The Belgian Tax Code does not contain any specific rules
on the attribution of profits to permanent establishments
or branches. The Belgian tax authorities endorse the OECD
Patrick Cauwenbergh
+32 2 600 69 27
pcauwenbergh@
deloitte.com
Andr Schaffers
+ 32 2 600 67 15
aschaffers@
deloitte.com
16
Documentation requirements
Belgium has no statutory documentation requirements.
Recommended documentation should follow the OECD
transfer pricing guidelines. Administrative Circular of
14.11.2006 on transfer pricing documentation refers
explicitly to EU-TPD (from the Code of Conduct of the
European Unions Joint Transfer Pricing Forum). There is
no contemporaneous documentation obligation, but lack
of documentation creates a substantial risk of a thorough
transfer pricing audit and the imposition of penalties.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
There are no formal requirements on timing/form for documentation. The Belgian tax authorities position, echoed
to some extent in the Belgian transfer pricing circulars,
is generally that documentation (including comparables
searches) needs to be OECD-compliant and updated every
three years, unless there is a change in facts and circumstances that may impact the transfer pricing policy.
Deadline to prepare documentation
There is no statutory deadline for the preparation
of documentation.
Deadline to submit documentation
Within 30 days of a request. Administrative Circular
of 14.11.2006 on transfer pricing documentation
encourages tax inspectors to grant extensions if it is
practically impossible to provide transfer pricing
documentation within the 30-day period.
Deadline to file income tax return
The deadline to file the income tax return is indicated
on the tax return form, and varies between one month
from receipt of the form and six months from the end
of the taxpayers accounting year. Individual extensions
are possible at the taxpayers request. However, on 29
April 2013, the tax authorities published Circular letter N
Ci.RH.81/626.947 (AA Fisc. N 15/2013), reiterating that
granting an extension for the filing of a tax return should
be an exception. Henceforth, extensions will be available
only if it can be justified by serious reasons or in case
of force majeure. In addition, the previously available
possibility of obtaining a collective extension has
been abolished.
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18
Brazil
Whats new
The transfer pricing methods for testing the pricing
of intercompany transactions established by Brazilian
law vary according to the nature of the transaction
(import or export operations) rather than according
to the taxpayers functional profile. Brazils transfer
pricing methods establish maximum import prices
and minimum export prices. To avoid transfer pricing
adjustments, the import price charged should be
lower than the parameter price; conversely, export
prices should be higher. The law has recently been
changed to avoid misinterpretations of the rules
and possible uncertainties in the future. The resale
minus method (PRL), which is the most commonly
used transfer pricing method for import transactions, now provides for three different statutory
gross profit margins (40, 30, and 20 percent), which
vary in accordance with the sector or activity where
the imported products are applied. Despite significant changes, there is still a major gap between the
Brazilian transfer pricing rules and the OECD transfer
pricing guidelines.
General information
Tax authority and law
Brazilian Revenue Services (Receita Federal do Brasil
RFB); Laws 9,430/96 and 9,959/00 (generally applicable
to all calendar years before 2013) and Laws 12,715/12
and 12,766/12 (generally applicable to all calendar years
starting on or after January 1, 2013) and Normative
Rulings from the RFB.
Regulations, rulings, guidelines
Normative Rulings #243/02, 321/03, 382/03, 602/05,
703/06, 801/07, 898/08, 1,124/11, 1,312/12, and 1,322/13.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Article 2 of Normative Ruling 1,312/12 provides detailed
information on related entities. Entities located in jurisdictions Brazil considers tax havens or low-tax jurisdictions are
considered related for transfer pricing purposes, regardless
of investment equity.
Carlos Ayub
+55 11 5186 1227
carlosayub@
deloitte.com
19
20
21
Bulgaria
Whats new
Bulgarias tax authorities are showing increased
interest in transfer pricing issues. Some amendments
to the tax legislation focus specifically on relatedparty transactions and their disclosure. Beginning in
2014, taxpayers must declare their annual turnover
on those transactions in their annual tax returns.
Taxpayers are also encouraged to reveal distributions
of hidden profits. Voluntary disclosures would allow
taxpayers to benefit from penalty relief amounting to
20 percent of the hidden profit.
General information
Tax authority and law
The National Revenue Agency (NRA) at the Ministry
of Finance; Corporate Income Taxation Act (CITA) and
Ordinance H-9/14 August 2006 on the procedure for
application of transfer pricing methods.
Regulations, rulings, guidelines
Bulgarias revenue authorities released a Transfer Pricing
Manual in 2010 that follows closely the 1995 OECD
Transfer Pricing Guidelines for Multinational Enterprises
and Tax Administrations. The EUs Code of Conduct for
Transfer Pricing Documentation for Associated Enterprises
also was used to develop the manual.
The transfer pricing manual is not legally binding.
However, adherence to its principles could mitigate
potential challenges by the authorities in the course of tax
audits or tax checks.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The TSSPC provides a broad definition of related
parties. The criteria for relatedness are: a minimum of
5 percent direct shareholding; employment; exercising
control; common control; common management bodies
(or persons participating therein); commercial agency;
donation; kinship. A specific legal definition of control
applies for this purpose.
A rebuttable presumption of relatedness applies if:
One of the parties is registered in a jurisdiction (outside
the EU) with a corporate income tax rate of 4 percent
or lower, and the tax administration of the country of
registration refuses or is unable to provide information
on the transaction/relationship under scrutiny, despite an
existing double taxation agreement in force;
Aleksandar Stefanov
+359 2 8023 186
astefanov@
deloittece.com
Georgi Sarakostov
+359 2 8023 118
gsarakostov@
deloittece.com
22
Services issues
Are management fees deductible?
Yes, according to the general rules of deductibility.
Are management fees subject to withholding?
Yes, provided they include: (i) services of a consulting
nature; (ii) marketing research; or (iii) royalties. The
domestic tax rate is 10 percent, but it may be reduced or
eliminated under an applicable tax treaty.
May stock option costs be included in the cost
base for intercompany services charges?
No specific provisions in this regard.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. However, cost contribution arrangements (CCAs) are
not legally defined in Bulgarian legislation, and there are
no specific provisions for their tax treatment, only highlevel guidelines in the Transfer Pricing Manual. General tax
provisions are to be applied.
Are cost contribution or cost sharing
payments deductible?
General rules of deductibility apply. To be allowed to
deduct payments, the taxpayer should provide evidence
of the actual receipt of CCA benefits and corresponding
actual expenses.
Documentation requirements
There are no legally binding transfer pricing documentation requirements in Bulgaria. It is recommended that
taxpayers follow the Transfer Pricing Manual guidelines
in this respect, which generally comply with the EUs
Code of Conduct for Transfer Pricing Documentation for
Associated Enterprises.
As a general rule, taxpayers bear the burden of proof
to evidence the arms length nature of related-party
transactions.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
There is no requirement for annual submission of
documentation. The documentation could be requested by
the NRA during a tax audit or tax check.
Transfer pricing documentation prepared for a previous tax
period can be used for subsequent tax periods, provided it
reflects current market conditions.
Deadline to prepare documentation
There is no statutory deadline to prepare documentation.
However, if documentation is requested in the course of a
tax audit, the general time limit for administrative proceedings of 14 days is applied, if no specific term is set by the
tax authorities performing the tax audit.
23
24
Canada
Whats new
The Canada Revenue Agency did not issue any new
policy statements, legislation, or memorandums
related to transfer pricing in 2013, but Canadian
courts did deal with transfer pricing questions.
The Tax Court of Canada held for the CRA in the
McKesson case involving what constitutes a reasonable discount rate in an accounts receivable factoring
arrangement. Conversely, the court held for the
taxpayer in Lehigh Cement Limited, relating to the
deductibility of dividends received from a related
nonresident corporation. And the Federal Court of
Canada in a case dealing with the complex nature
of the competent authority process, reviewed in
Tele Tech Canada the availability of double tax
relief under Articles XI and XXVI of the Canada-U.S.
income tax treaty.
General information
Tax authority and law
Canada Revenue Agency (CRA); Income Tax Act Section
247 (effective for tax years beginning after 1997).
Regulations, rulings, guidelines
CRA Information Circular 87-2R, International Transfer Pricing.
Canada generally follows the OECD Transfer Pricing
Guidelines for Multinational Enterprises and Tax
Administrations as amended on July 2010.
In addition, the CRA has published various Transfer Pricing
Memoranda (TPM) that provide general guidance and an
overview of the CRAs interpretation of transfer pricing rules.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Parent companies and subsidiaries are subject to
transfer pricing rules, as are companies subject to
common control. In addition, certain companies
that are deemed not to be dealing at arms length
are also subject to the transfer pricing rules.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Although the transfer pricing rules in section 247 of
the Canadian Income Tax Act (CITA) do not deal with
Markus Navikenas
+14032671859
mnavikenas@
deloitte.ca
Documentation requirements
Taxpayers must document pricing decisions in accordance with prudent business practices. Documentation
contemporaneous with transactions is required to avoid a
potential transfer pricing penalty. This policy is effective for
tax years beginning after December 31, 1997.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
For each taxation year or fiscal period, if any, in which a
transaction continues from a prior year, and contemporaneous documentation regarding that transaction had
previously been provided to the tax authorities, records or
documents that completely and accurately describe each
material change in the year or period regarding these
transactions must be retained.
In addition, taxpayers are required to perform on an
annual basis a sanity check on transactions carried on from
prior years to identify any material changes and ensure
that the transactions continue to be conducted at an arms
length price.
Any new transactions must be fully documented.
26
Self-initiated adjustments
Adjustments should be made if a taxpayer recognizes that
its transfer prices are not arms length. Adjustments should
accrue in the year in which a transaction occurs and be fully
documented. Adjustments favorable to the taxpayer are
subject to the discretion of the Minister of National Revenue.
Self-initiated adjustments may not qualify for consideration
for competent authority relief from double taxation with
some countries, including the United States, because the selfinitiated adjustment is not considered equivalent to the action
of a contracting state under the mutual agreement procedure
of the relevant tax treaty.
Statute of limitations on assessment
for transfer pricing adjustments
For Canadian private corporations, six years from
the date of the initial assessment after return filing;
for foreign controlled corporations and public
corporations, seven years from that date.
Taxpayer set-offs for other related-party transactions
The CRA is reluctant to accept set-offs, and prefers that
transactions be unbundled and priced separately;
set-off may be allowed for purposes of calculating a
penalty, subject to the documentation requirements.
TPM-06 provides information on the CRAs administrative positions regarding bundled transactions.
Interest and penalties
Additional assessment payment deadline
An additional payment is due when an assessment is
issued; interest begins to accrue from the due date of
the original tax return. However, provisions exist to allow
deferral of payment of additional taxes owed.
27
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
A request may be submitted after the proposed adjustment is communicated to the taxpayer in writing.
28
Chile
Whats new
There were no changes to Chiles transfer pricing
legislation during 2013. However, the Chilean IRS (SII)
issued a resolution regarding transfer pricing return
F.1907, as well as a resolution providing guidance
on advance pricing agreement procedures. The SII
was very active conducting tax audits for fiscal years
2009-2011, and collected USD 71 million related to
transfer pricing investigations.
General information
Tax authority and law
Internal Revenue Service (Servicio de Impuestos Internos
SII); Articles 38 and 41 E of Income Tax Law. The
SII has created a special Transfer Pricing Unit.
Regulations, rulings, guidelines
No transfer pricing regulations have yet been issued.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Article 38 of the Income Tax Law specifies that transactions
between related parties (as defined under Chilean law
and regulations) should be performed at market values.
It provides that parties are related when one participates,
directly or indirectly, in the management, control, or
capital of the other. Taxpayers that enter into transactions
with companies domiciled in tax havens must be considered related parties to those companies.
Article 41 E of the Income Tax Law specifies that crossborder transactions between related parties will be subject
to the transfer pricing rules. Parties are considered related:
When an entity or company is directly or indirectly
involved in the management, control, capital, profits or
income of the other party.
agency, branch or any other form of permanent
establishment with any related party.
Any transaction carried out with parties that are
resident, domiciled, established or incorporated in a
country or territory included in the list referred to in
number 2 of Article 41 D, except if a significant tax
information exchange agreement is signed or in force
with that country.
Natural persons that are spouses, directly related or
have kinship up to the fourth degree included.
When a party carries out one or more transactions with
a third party that, in turn, directly or indirectly carries out
with a related party of that party one or more transac-
Alvaro Mecklenburg
+56 2 2729 8314
amecklenburg@
deloitte.com
Alejandro Paredes
+ 56 2 2729 8216
[email protected]
29
nature of their intragroup transactions. The documentation must be available by the transfer pricing return filing
date (June of each year). The transfer pricing rules also
provide penalty protection for taxpayers that provide
supporting documentation regarding their transfer prices.
Deadline to submit documentation
The transfer pricing study must be submitted upon request.
Deadline to file income tax return
The income tax return must be submitted in June on an
annual basis.
Acceptable languages for documentation
Documentation must be in Spanish.
Transfer pricing adjustments
Must the transfer prices reflected on an
income tax return be the same as those
reflected in financial statements? In other
words, are book/tax differences allowed?
There is no specific statutory provision regarding this issue.
Self-initiated adjustments
Adjustments are permitted.
Statute of limitations on assessment
for transfer pricing adjustments
The general statute of limitations is three years
from the date of the infraction or breach. The
period is extended to six years when a tax return
has not been filed, or in cases of fraud.
Taxpayer set-offs for other related-party transactions
There is no formal provision in this regard.
Interest and penalties
Additional assessment payment deadline
The general rules for administrative assessments apply. Interest is applicable from the
date the tax would have been payable.
Penalty on transfer pricing assessment
If a taxpayer cannot prove that transactions with
related parties were carried out at arms length, the
Chilean IRS will redetermine the prices to calculate
the tax due. The difference between the two prices
will be subject to additional tax, and a fine equal to 5
percent of the omitted amount will also be imposed.
30
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
A request may be submitted after the proposed adjustment is communicated to the taxpayer in writing.
31
China
Whats new
Chinas State Administration of Taxation signed
the OECDs Multilateral Convention on Mutual
Administrative Assistance in Tax Matters, with the
goal of leveraging the international tax administrative coordination mechanism to improve tax service
and management for cross-border taxpayers, and to
prevent cross-border double nontaxation.
The SAT also released the 2012 Annual Advance
Pricing Report, which clarified the tax authorities
basic and technical points of view on APAs. The SAT
further strengthened its supervision of intragroup
services, and drafted regulations on the same,
which are expected to be released in 2014. The
SAT has conducted some audits on these transactions, including an approximate RMB 800 million tax
payment case that is the largest case on intragroup
service transactions by far.
General information
Tax authority and law
State Administration of Taxation (SAT); articles 36
and 51 of the Tax Collection and Administration
Law; articles 41 to 48 of the PRCs Enterprise Income
Tax (EIT) Law (Chapter 6, Special Tax Adjustments)
that entered into effect on January 1, 2008.
Regulations, rulings, guidelines
Articles 109 to 115 and articles 121 to 123 of the implementation rules for the new EIT Law govern the transfer
pricing regime;
Circular of the State Administration of Taxation on the
Issuance of the Implementation Measures for Special Tax
Adjustments (Trial Implementation) (Guo Shui Fa [2009]
No. 2);
Circular of the State Administration of Taxation on
Printing and Issuing the Annual Report on the Affiliated
Transactions of Enterprises of the People's Republic of
China (Guo Shui Fa [2008] No. 114);
Circular of the Ministry of Finance and the State
Administration of Taxation of Notice on the Tax deductibility of Interest Expense Paid to Related Parties (Cai Shui
[2008] No. 121);
Circular of the State Administration of Taxation on the
Issuance of Requirements of Annual Reporting Forms for
Related-Party Transaction of Enterprises (2008 version)
(Guo Shui Han [2009] No. 72);
Eunice Kuo
+ 86 21 6141 1308
eunicekuo@
deloitte.com.cn
32
Services issues
Are management fees deductible?
According to article 49 of the implementation rules to
the EIT law, management fees are not deductible. Fees
for specific services received may be deductible, but the
tax authorities will likely request extensive documentary
evidence on the services being provided, the reasonableness of the charging basis, and benefits derived by the PRC
entity from such services.
Are management fees subject to withholding?
Management service fees are subject to China
enterprise income tax based on the portion of the
fee attributable to China source and the profit
generated from the China-source revenue.
Effective 1 January 2008, fees for services
rendered both in and outside the PRC are
subject to business tax at a 5 percent rate.
Effective 1 January 2012, China launched a pilot
value added tax (VAT) reform program that initially
applies to transportation and modern service industries in Shanghai. In late 2012, Beijing, Tianjin,
Jiangsu province, Anhui province, Zhejiang province
(including Ningbo), Fujian province (including Xiamen),
Hubei province, and Guangdong province (including
Shenzhen) were included in this pilot program, and
effective 1 August 2013 it was rolled out nationwide.
Fees for services rendered by overseas suppliers
will be subject to the applicable VAT rate (11
percent for transportation services, 17 percent for
leasing of moveable and tangible goods, and 6
percent for certain specified modern services).
Effective 1 January 2014, the pilot program will
be extended to railway transportation and the
postal service with a tax rate of 11 percent.
However, many issues arose during the programs
initial implementation stage that must be further
clarified. Affected taxpayers should follow up on
the development of relevant rules and seek clarification from the relevant tax authorities.
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34
Self-initiated adjustments
In practice, upward adjustments are permitted when filing
the annual income tax return after closing of the accounts.
Statute of limitations on assessment
for transfer pricing adjustments
The EIT law confirms that the statute of limitations on
assessments for transfer pricing adjustments is 10 years.
Taxpayer set-offs for other related-party transactions
When transactions between related parties are
offset, the tax authorities will in principle restore
the transactions and evaluate each related-party
transaction separately when conducting a comparability analysis and making adjustments.
Interest and penalties
Additional assessment payment deadline
Payment is due within the time frame set by the
governing tax bureaus, normally between 15 days and
one month. An extension (for a maximum of three
months) for payment will be subject to approval by
the governing tax bureau at the provincial level.
Penalty on transfer pricing assessment
Penalties apply for failure to file the related-party transaction disclosure forms (RMB 2,000 RMB 10,000); for
refusing to provide contemporaneous documentation
and other information on related-party transactions, or
providing false or incomplete information (RMB 10,000
RMB 50,000). Transfer pricing adjustments are subject
to interest (based on the RMB benchmark lending rate
published by the Peoples Bank of China) plus penalty
interest of 5 percent if the taxpayer has not complied with
the contemporaneous documentation requirements.
Is interest charged on penalties?
According to the EIT law, when the tax authorities
make tax adjustments for enterprises, they will impose
interest charges for the underpaid tax computed on a
daily basis from June 1 following the tax year in which
the tax is attributed, through the date when the additional
tax is paid.
Is interest payable when a refund
is due to the taxpayer?
When a taxpayer has paid excess tax, the taxpayer may
apply to the tax authorities for a refund of the amount
overpaid, and the relevant interest calculated based on the
prevailing bank interest rate, within three years from the
date of tax payment.
2014 Global Transfer Pricing Country Guide
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Colombia
Whats new
The Colombian tax authorities on December 27,
2013, issued regulatory Decree 3030, which substantially modified Colombias transfer pricing regime.
One of the principal changes Decree 3030 introduced
establishes the instances in which taxpayers must file
an informative transfer pricing return and prepare
and file the corresponding supporting documentation. Further, taxpayers are now expected to include
information regarding transactions entered into with
related parties located in free trade zones and tax
havens. The decree generally augments the amount
of information required of taxpayers.
General information
Tax authority and law
Colombia Tax Office (Direccin de Impuestos y Aduanas
Nacionales-DIAN); Book 1, Title I, Chapter XI, Articles
260-1 to 260-11, 319, 20 -2 of the Tax Code.
Regulations, rulings, guidelines
Tax Code Articles 260-1 to 260-11. Decree 3030 of 2013.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Decree 3030 modified the definition of related parties,
which includes entities with direct or indirect ownership
of more than 50 percent. Administrative, economic, or
commercial (sales) control variables also apply. Transactions
with related parties located in Free Trade Zone, and transactions with companies located in tax havens are subject
to the transfer pricing rules.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Decree 3030 establishes that operations carried out by
a Colombian permanent establishment with its related
parties abroad, related parties located in Free Trade Zones,
and companies located in tax havens must comply with
the arms length principle. The permanent establishment
has to prepare an analysis of functions, assets, and risks. In
accordance with Article 20-2 of the Colombian Tax Code,
the branch must keep this document and make it available
in case of request by the tax authorities.
37
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes, but only if the payments meet the general deductibility
requirements: (i) the expenditure must be real; (ii) expenditure causality; (iii) spending needs; and (iv) proportionality
of the expenditure. Article 107 of the Tax Code.
Are cost contribution or cost sharing
payments subject to withholding tax?
Yes, depending on the type of service.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible or amortizable if tax has
been withheld.
Documentation and tax return disclosures
Tax return disclosures
Article 260-9 of the Tax Code requires taxpayers to file
an annual informative transfer pricing return, which must
include transactions entered into with related parties
abroad, related parties located in free trade zones, and
companies located in tax havens. The return is usually
submitted in July, depending on the taxpayers tax ID.
Taxpayers are also required to prepare annually a transfer
pricing study, and submit it to the tax authorities upon
request, if the taxpayers total amount of transactions
entered into with related parties located abroad or located
in free trade zones exceeds 61.000 tax unit values (U.V.T.
from the Spanish acronym), or if the value of all transactions exceeds an amount equivalent to 32,000 U.V.T., equal
to approximately $420,000.
Additionally, taxpayers must report transactions entered
into with companies located in tax havens, if the total
amount of those transactions exceeds 10,000 UVT, equal
to approximately $131,000.
Documentation requirements
Documentation to support transfer prices is required, and
must be provided to the tax authorities in July, depending
on the taxpayers ID.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
Taxpayers subject to the transfer pricing regime must
submit a complete transfer pricing report every year. The
comparable companies used must be in the same fiscal
period as the taxpayer; however previous years of information may be used for the comparables, as long as that use
is justified.
Deadline to prepare documentation
Under Decree N002972, dated December, 2013, Articles
19 and 20, documentation the transfer pricing study
and the informative return must be submitted with the
income tax return.
Deadline to submit documentation
Under Decree N002972, dated December, 2013, Articles
19 and 20, documentation the transfer pricing study
and the informative return must be submitted with the
income tax return.
Acceptable languages for documentation
Documentation must be in Spanish; however, some appendixes could be submitted in English, but the tax authorities
could request a translation.
Transfer pricing adjustments
Must the transfer prices reflected on an
income tax return be the same as those
reflected in financial statements? In other
words, are book/tax differences allowed?
All information used for transfer pricing purposes must
be in accordance with Colombian generally accepted
accounting principles, and could have some differences
from the fiscal/tax information. Differences are accepted
because for fiscal purposes there are deductions or other
concepts that do not apply.
Self-initiated adjustments
There is no formal procedure.
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Competent authority
When may taxpayer submit tax adjustment
to competent authority (CA)?
There is no formal procedure.
May CA develop new settlement positions?
There is no formal procedure.
May taxpayer go to CA before paying tax?
There is no formal procedure.
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Costa Rica
Whats new
On September 2013, the Costa Rican government
issued Executive Decree No. 37898, which established for the first time enforceable legal provisions
dealing with transfer pricing regulations. The new
law is expected to provide certainty to taxpayers and
the tax authorities, given that previously any transfer
pricing issues that arose were settled using the
substance over form principle. To date, the government has not made any additional modifications to
the decree or to the Costa Rican tax laws and regulations, but because 2014 is a presidential election year,
the new government is expected to include fiscal
policy in its agenda.
General information
Tax authority and law
The competent authority that deals with all tax issues is the
General Tax Directorate (Direccin General de Tributacin),
under the supervision of the Ministry of the Treasury.
The transfer pricing law is found in Executive Decree No.
37898-H, issued by the ministry on September 13, 2013.
Regulations, rulings, guidelines
No regulations have been issued under Decree No.
37898-H, issued by the Ministry of the Treasury. The
Income Tax Law, as well as the Costa Rican Tax Code, is
also applicable in the absence of a specific provision.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The definition of control for transfer pricing purposes refers
to the parties that participate directly or indirectly in the
direction, control, or capital of the taxpayer, or when the
same entity/individual participates directly or indirectly in
the direction, control, or capital of both taxpayers, or any
other objective cause that may systematically affect the
decisions and pricing. Transfer pricing rules also apply to
beneficiaries of the Free Trade Zone regime and exclusive
distributors located on Costa Rican territory.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
There is no written regulation that either allows or
prohibits the use of transfer pricing analyses to attribute
profits to a PE or branch.
Rafael Gonzalez
+506 22568192
rafgonzalez@
deloitte.com
Services issues
Are management fees deductible?
In accordance with the Costa Rican Tax Code, any expense
that is useful, pertinent, and necessary for creating taxable
income will be deductible for tax purposes, as long as it is
supported by proper accounting records.
Are management fees subject to withholding?
Yes, but the applicable rate will differ, depending on the
type of service that is rendered, and taking into considering any applicable double income tax treaties.
May stock option costs be included in the cost
base for intercompany services charges?
There are no specific regulations that deal with stock
options, but applying the principles of the Income Tax
Code, it may be concluded that as long as such stock
options may be construed as necessary, pertinent, and
useful for creating the taxable income, they may be
included in the cost base for intercompany services charges.
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Commissionaire arrangements are not forbidden,
therefore, under section 28 of the Constitution of
Costa Rica, they are allowed, but every arrangement
should be analyzed on a case-by-case basis to eliminate
any possible contingency.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
CCAs are not common in Costa Rica, but they are not
forbidden. However, they would require a case-by case
analysis to confirm their validity.
Are cost contribution or cost sharing
payments deductible?
Yes, as long as the payments are useful, pertinent, and
necessary for creating taxable income and proper records
of the payments are kept.
Are cost contribution or cost sharing
payments subject to withholding tax?
Payments should be analyzed on a case-by-case basis,
because depending on the type of service or product that
is being jointly contributed to, withholding tax may or may
not apply, and the applicable tax rate may vary.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Because CCAs and CSAs are not common in Costa Rica,
such payments should be analyzed on a case-by-case basis.
In general terms, payments may be construed as royalty
payments and therefore taxed at a 25 percent rate, unless
a double tax treaty is applicable.
Documentation requirements
Required documentation should be sufficient to demonstrate to the tax authorities that the intercompany transactions comply with the arms length principle.
Self-initiated adjustments
The local regulations do not provide for self-initiated
adjustments, but in general terms, taxpayers are allowed to
amend their tax returns.
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Competent authority
When may taxpayer submit tax adjustment
to competent authority (CA)?
At any moment through the filing of an amendment to the
D-101 (Income Tax) Form.
May CA develop new settlement positions?
No specific provision.
May taxpayer go to CA before paying tax?
Yes.
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Croatia
Whats new
Croatias tax authorities in 2013 established the Office
for Large Taxpayer Audits, which includes a transfer
pricing department focused on performing transfer
pricing audits of large taxpayers.
Priority of methods
There is no hierarchy in the usage of transfer pricing
methods. The taxpayer is allowed to use the most appropriate method for each transaction.
Availability of benchmarking /comparative data
Tax authorities prefer benchmarks that include Croatian
companies and companies from the CEE region. If there
are not enough comparable entities in the CEE region,
pan-European benchmarks may be used.
Usually, the Amadeus Bureau Van Dijks date base is
used. However, if there are other ways to obtain relevant
financial data available for comparable companies, that
information may be used.
Draen Nimcevic
+385 1 2351 917
dnimcevic@
deloittece.com
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45
Competent authority
When may taxpayer submit tax adjustment
to competent authority (CA)?
Taxpayers may submit a tax adjustment to CA when the
related-partys tax authority performs adjustments on the
transaction carried out with the Croatian taxpayer.
May CA develop new settlement positions?
The competent authority may reconsider and develop
a new settlement position if the arms length principle
is not met.
May taxpayer go to CA before paying tax?
Yes, but the established tax obligation remains due.
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Czech Republic
Whats new
Many significant changes to Czech legislation
were enacted pursuant to the Czech private law
recodification effective as of 1 January 2014.
However, these changes affected the transfer pricing
rules only in a minor way (mostly changes in wording)
and the essence of the transfer pricing regime
remains the same. Thus, no significant changes
were made in the transfer pricing area in the Czech
Republic during 2013.
General information
Tax authority and law
Ministry of Finance; Section 23 para. 7 of the Income Taxes
Act (effective January 1, 1993).
Regulations, rulings, guidelines
Decree D-332 on the application of international
standards to the taxation of transactions between related
persons; Decree D-333 on binding ruling over the transfer
pricing policy used in related-party transactions (APAs);
Decree D-334 on the recommended scope of transfer
pricing documentation (in accordance with EU transfer
pricing documentation).
Regarding intercompany services, new Decree D-10 on
Low-Value-Adding Intragroup Services was adopted
effective January 2013. Decree D-10 is based on the
European Commissions communication endorsing the
work of the EU Joint Transfer Pricing Forum on the subject.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The Czech transfer pricing regulations require that all
transactions between related parties must be effectuated
at arms length. According to section 23 para. 7 of the
Income Taxes Act, parties are related if one party has direct
or indirect ownership of more than 25 percent of the
capital or voting rights of another party, or if it participates
in the management or control of the other entity.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The Czech transfer pricing regulations require that all
transactions between related parties must be effectuated
at arms length. According to section 23 para. 7 of the
Income Taxes Act, parties are related if one party has direct
or indirect ownership of more than 25 percent of the
capital or voting rights of another party, or if it participates
in the management or control of the other entity.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit split
method (contribution analysis or residual analysis), and the
transactional net margin method (TNMM).
Priority of methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit split
method (contribution analysis or residual analysis), and the
transactional net margin method (TNMM).
Availability of benchmarking/comparative data
Pan-European database Amadeus is available to the Czech
tax authorities. Companies are entitled to support their
transfer pricing arrangements with benchmark analyses.
Are foreign comparables acceptable to
local tax authorities?
Czech comparables are preferred, but if not
available, relevant foreign comparables may be
considered. Pan-European benchmark searches are
generally accepted by the Czech tax authorities.
Marek Romancov
+420 246 042889
mromancov@
deloitteCE.com
Services issues
Are management fees deductible?
Generally, yes; however, tax deductibility is determined on
a case-by-case basis.
Are management fees subject to withholding?
It depends on the pertinent tax treaty. In most cases,
there is no withholding tax on management fees.
May stock option costs be included in the cost
base for intercompany services charges?
Generally, yes. However, Czech tax legislation does not
provide any guidance on this subject, and the Czech
tax authorities position is unknown due to the lack of
practical experience.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
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Denmark
Whats new
Transfer pricing has been a focus area for the Danish
tax authorities for many years. The tax authorities
have intensified their interest on consistent loss
makers, large groups, insurance branches located in
Denmark, intellectual property rights, tax havens, and
intragroup financing, and they appear set to continue
to focus on these issues during 2014.
Effective for income years starting March 1, 2013,
Denmark has issued a regime requiring an auditors
statement for transfer pricing documentation for
certain taxpayers, but the legislation has not been
applied yet.
General information
Tax authority and law
Ministry of Taxation (Skatteministeriet); Tax Assessment
Act Section 2 and Tax Control Act Section 3B.
Regulations, rulings, guidelines
Regulation no. 42 of January 24, 2006, on Transfer Pricing
Documentation, Danish administrative guidelines 2014-1,
section C.D.11 on Transfer Pricing; Danish guideline of 15
January 2013 on valuation.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing legislation is applicable to transactions
between companies that are under common control, that
is, the same shareholder or group of shareholders, directly
or indirectly, control more than 50 percent of the share
capital or more than 50 percent of the voting power.
Even if the more than 50 percent threshold is not met,
companies are also deemed to be under common control if
the shareholders have agreed to exercise common control
or the companies in question have joint management.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit
split method (contribution analysis or residual analysis),
and the transactional net margin method (TNMM).
Priority of methods
Denmark follows the 2010 OECD transfer pricing
guidelines, whereby the selection of a transfer pricing
method always aims to find the most appropriate
method for a particular case. When more than
one method can be applied in an equally reliable
manner, the traditional transaction-based methods
are preferable to the transactional profit methods.
Availability of benchmarking/comparative data
Statutory financial results of Danish companies are publicly
available, and can be found via Danish databases.
Are foreign comparables acceptable to
local tax authorities?
Yes, but Danish or Nordic comparables are preferred.
Services issues
Are management fees deductible?
Yes, but the payments must satisfy the arms length
principle and have a direct relation to the income
generated; that is, no shareholder costs should be included
in the management fee and the management services
should provide an actual benefit to the recipient of the
management services. Management fees related to an exit
situation are not deductible unless the service provided is
performed to acquire, secure, and maintain the operation
of the company.
Asger M. Kelstrup
+45 30 93 45 96
[email protected]
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Dominican Republic
Whats new
The Dominican Republics most recent changes to
the transfer pricing regime were introduced in 2012,
effective for fiscal year 2013. Those changes included
the application of the transfer pricing rules to local
related-party transactions, the introduction of thin
capitalization rules, the extension of advance pricing
agreement availability to all taxpayers, and the introduction of the concept of unrelated intermediary.
General information
Tax authority and law
Direccin General de Impuestos Internos (DGII).
Regulations, rulings, guidelines
Dominican Tax Code (DTC), Law 11-92 and amendments
introduced by Law 253-12. General Norm 04-2011.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Relationships between two or more entities are defined
by General Norm 04-2011. Transactions between related
parties must be at arms length. New regulations include
domestic related-party transactions.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the resale
price method, the cost plus method, the profit split method
(contribution analysis), and the transactional net margin
method (TNMM).
Priority of methods
The most appropriate method rule applies. Traditional
transaction methods are preferred in practice to transactional profit methods.
Availability of benchmarking/comparative data
Financial information from databases is available,
and interest rates from the Central Bank.
Services issues
Are management fees deductible?
Yes, but applicable withholding taxes must be paid during
the year under review.
Are management fees subject to withholding?
Yes. The rate is 29 percent under article 305 of the DTC.
May stock option costs be included in the cost base
for intercompany services charges?
No information is available on this subject.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes. Commissionaire arrangements may be
allowed and are subject to analysis.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes. When applicable, tax withholding must be paid.
Richard Troncoso
+1 809 563 5151
ext. 4717
[email protected]
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Self-initiated adjustments
Dominican legislation does not provide specific guidelines
in this regard. Given that taxpayers are not prohibited
from making self-initiated adjustments, they may include
adjustments in their corporate tax returns or amended
returns, depending on when the adjustment is made.
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure.
May CA develop new settlement positions?
There is no formal procedure.
May taxpayer go to CA before paying tax?
There is no formal procedure.
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Ecuador
Whats new
Early in 2013, Ecuador amended its transfer
pricing rules to require taxpayers who engage in
transactions with foreign and domestic related
parties worth over $3 million to file a transfer pricing
appendix to their income tax return. In addition,
the Transfer Pricing Report must be submitted by
taxpayers who have entered into transactions with
foreign and domestic related parties worth in excess
of a cumulative $6 million.
General information
Tax authority and law
Internal Revenue Service (Servicio de Rentas Internas, or
SRI); Executive Decree No. 2430, published in the Official
Gazette No. 494 of 31 December 2004.
Regulations, rulings, guidelines
The transfer pricing regime has been applicable in Ecuador
since fiscal year 2005, following a reform to the Regulation
for Application of the Tax Law on December 31, 2004.
That regulation was in effect from 2005 to 2007. On
December 29, 2007, a reform to the tax law was issued,
introducing the transfer pricing regime that has been in
effect from 2008 to date.
An important change applicable since 2008 requires
taxpayers domiciled in tax havens and jurisdictions with
lower tax rates to be considered related parties.
Through Resolution No. NAC-DGER 2008-0182, the SRI
issued a list of 89 countries considered tax havens and
deemed preferential tax regimes, that is, those countries
in which the income tax rate is 60 percent below the
rate in Ecuador.
Another significant change effective from 2008 is that
the Regulation for Application of the Tax Law establishes
a precedent regarding application of transfer pricing
methods, as well as providing for the possibility of
taxpayers consulting the tax administration on valuations
of operations undertaken with related parties.
On December 23, 2009, Ecuador approved a reform to
the Tax Law (applicable for 2010 and thereafter) whereby
related parties are deemed to include those individuals or
companies with which an entity undertakes 50 percent or
more of its sales or purchases of goods, services, or any
other type of operation.
Jorge Saltos
+593 2 3815100
ext. 2203
[email protected]
Martha Cerda
+593 2 3815100
ext. 2236
[email protected]
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Documentation requirements
On April 25, 2008, the SRI issued Resolution NAC-DGER
2008-0464 establishing the information to be included
in the transfer pricing report. The report must include an
index, be bound and numbered, and must be signed by
the taxpayers legal representative.
On January 16 2013, the SRI issued Resolution NACDGERCGC 13-00011, which modifies Resolution
NAC-DGER No. 2008-0464. The resolution changes the
minimum values and the transactions types for the submission of the appendix and the transfer pricing report (IPT).
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Self-initiated adjustments
Not applicable.
Statute of limitations on assessment
for transfer pricing adjustments
Tax liability prescribes in three years if the income tax
return was filed accurately and on time, and in six years if
the return was incomplete or filed late.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
The procedure and timing will depend on the pertinent
tax treaty.
May CA develop new settlement positions?
No clear guidance on this issue is available.
May taxpayer go to CA before paying tax?
No.
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El Salvador
Whats new
El Salvador did not enact any changes to its
transfer pricing legislation in 2013. However,
the tax administration intensified its oversight of
transfer pricing matters, and filed final supplementary
tax assessments, which has resulted in tax litigations
in this area.
General information
Tax authority and law
The Salvadorian Tax Administration: Treasury Department
(Ministerio de Hacienda) and the Directorate of
Internal Taxes (Direccin General de Impuestos
Internos); Salvadorian Tax Code and guidelines.
Regulations, rulings, guidelines
The Tax Code was amended through Legislative Decree
No. 233, including articles 62-A; 124-A; 135, section.
F; 147, section e; 199-B; 199-C; 199-D; 247, section
l. Subsequently, guidelines on the treatment of operations with related parties and tax havens were issued.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Related parties are defined as follows:
A person or company with direct or indirect participation
in at least 25 percent of the capital stock or voting rights
of another;
Corporations that belong to the same unit of decisionmaking or business group;
Salvadoran entities that have economics ties with
a foreign supplier for exclusive distribution and/or
purchases from the foreign entity that represent
more than 50 percent of the Salvadoran entities total
volume; and
Salvadoran entities that enter into transactions with
entities located in tax havens.
Do the local transfer pricing rules or tax authorities
allow the use of transfer pricing analyses to
calculate profits attributable to a PE or branch?
There are no specific guidelines in the regulations
that allow the use of transfer pricing analyses to
calculate benefits attributable to a permanent
establishment or branch.
Federico Paz
+503 2524 4100
[email protected]
Services issues
Are management fees deductible?
Yes, as long as the taxpayer is able to prove that the
services were actually received, that they were necessary
for the business, and that the amount agreed upon
complies with arms length principle.
Are management fees subject to withholding?
Yes. The withholding rate is 20 percent, except when the
recipient persons/entities are domiciled, established, or
located in countries of low or zero taxation, or tax havens,
in which case the withholding rate is 25 percent.
May stock option costs be included in the cost base
for intercompany services charges?
No information is available on this matter.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Not regulated.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
There is no specific regulation on CSAs.
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Estonia
Whats new
Estonias transfer pricing regime did not experience
any changes in 2013. However, a Tallinn Circuit
Court decision discussed intragroup loans and the
acceptability of the applicable interest rate. The case
concerned an intragroup loan transaction (a prepayment made by a subsidiary to the parent company that
was transformed into a loan). The tax authorities relied
on the Bank of Estonia loan statistics to determine
the arm`s length interest rate on the loan. The court
found that the taxpayer`s application of deposit rates
in the current case was irrelevant, and that only the
loan statistics of the Bank of Estonia were relevant to
determine the arms length interest rate.
General information
Tax authority and law
Estonian Tax and Customs Board (Maksu- ja Tolliamet).
Estonian Income Tax Act (Article 14 sections 7 and 8;
Article 50 sections 4-8); Regulation No. 53 of the Minister
of Finance of 10 November 2006, Methods for determining values of transactions between related persons.
Regulations, rulings, guidelines
The Tax and Customs Board has issued guidelines on its
website on the determination of arms length prices for
related-party transactions, but these guidelines are not
binding on taxpayers.
Regulation No 53 of the Minister of Finance stipulates that
it is recommended that taxpayers follow the OECD transfer
pricing guidelines to the extent the guidelines do not
contradict the Estonian regulation.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply to transactions between related
parties, as defined in Article 8 of the Income Tax Act.
Persons are deemed to be related if they have common
economic interests, or if one person has dominant
influence over the other. The law also includes a list of situations whereby persons are always deemed to be related,
for example, companies belonging to the same group.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Generally, arms length pricing (including transfer pricing
Ivo Vanasaun
+372 6406557
ivanasaun@
deloittece.com
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Self-initiated adjustments
Self-initiated adjustments to transaction
conditions are generally possible as long as the
tax authority has not commenced an audit.
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Finland
Whats new
Finland did not enact any major changes to transfer
pricing legislation in 2013. A limitation on deductible
interest in some cases and circumstances entered
into force on 1 January 2013. The tax office for
large corporations is continuing its transfer pricing
project, which started in 2012. Under this project,
many publicly noted tax audits have been conducted
in Finland, resulting in major tax assessments.
Unfortunately, the appeals process takes time, and
the courts have not yet issued any decisions on
these matters.
General information
Tax authority and law
The Finnish Tax Administration (Verohallinto). Sections 14
a-c and 31 Tax Procedure Act.
Regulations, rulings, guidelines
The Finnish Tax Administration issued a guidance letter on
documentation on 19 October 2007. The English version,
Transfer Pricing Documentation Requirements, was issued
on 16 April 2009.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The control test requires a company to have direct or
indirect ownership of more than 50 percent of the capital
or voting power, the right to appoint more than half the
members of the board of directors, or other means of
control of another company.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes. A transfer pricing analysis may be used to calculate
profits attributable to a permanent establishment or
branch located in Finland. Under the Finnish transfer
pricing rules, the taxable income of the Finnish permanent
establishment is calculated in accordance with the arms
length principle as if the permanent establishment were a
standalone and distinct entity.
Methods and comparables
Acceptable methods
The comparable uncontrolled price method (CUP, the
resale price method, the cost plus method, the profit split
method, and the transactional net margin method (TNMM).
Priority of methods
No priority of methods is established under
domestic law. Finland follows the OECD transfer
pricing guidelines regarding the selection and the
use of transfer pricing methods.
Availability of benchmarking/comparative data
Comparative data is available; Finnish companies
must file their financial statements with the public trade
register annually.
Are foreign comparables acceptable to local tax authorities?
Yes. Pan-European comparables are accepted, but comparability is analyzed on a case-by-case basis, depending on
the location of the tested party, for example.
Services issues
Are management fees deductible?
Yes, provided the services benefit the company and the
pricing of the services meets the arms length pricing
requirements. Proper documentation should be in place to
support the arms length nature of the management fees.
Are management fees subject to withholding?
No.
Jouni Honka-aho
+358 0 20 755 5344
jouni.honka-aho@
deloitte.fi
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France
Whats new
The French legislature in December 2013 enacted a
new transfer pricing documentation requirement. The
purpose of the new provision is to provide the French
tax authorities additional tools to select more efficiently companies to be subject to a dedicated transfer
pricing audit. Taxpayers subject to the new rule now
must file extracts from their full transfer pricing documentation with the French tax authorities within six
months of filing their annual tax return.
The French tax authorities have shown a higher level of
aggressiveness in connection with tax audits, focusing
specifically on transfer pricing matters. Audits regularly
lead to bad faith penalties, and a police search of the
taxpayers premises may be used by the tax authorities
to find material evidence of a permanent establishment. The tax authorities recently issued a transfer
pricing assessment exceeding 1 billion against a
taxpayer, clearly illustrating the current focus on
transfer pricing issues.
General information
Tax authority and law
French Tax Administration; General Tax Code Article 57
(profit transfer), Articles 238 A and 209 B (CFC rules),
Tax Procedure Book : Article L.13 B for specific transfer
pricing questions from the tax authorities, Article L.13AA
for general transfer pricing documentation requirements
and Article L.13AB for additional requirements for transactions with uncooperative havens as defined in Article
238-0-A of the French Tax Code; Article L 80 B 7 (APAs)
and Supreme Tax Court case law on Abnormal Act of
Management, L. 188A (extension of statute of limitations
when FTA makes request from foreign tax authorities).
Regulations, rulings, guidelines
Administrative Doctrine on Article 57 (BOI-BICBASE-80-20), Adopted Procedures L.13AA and L.13AB
(22 December 2009), Administrative Instruction on the
MAP (BOI-INT-DG-20-30), Administrative Instructions on
APAs (BOI-SJ-RES-20), OECD Transfer Pricing Guidelines
(generally accepted in practice).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Direct or indirect dependence link; dependence can be de
jure or de facto.
Gianmarco Monsellato
+33 1 55 61 6346
[email protected]
Services issues
Are management fees deductible?
Yes, provided they meet the arms length standard
(benefits test and mark-up).
Are management fees subject to withholding?
No, except for any portion rejected as not meeting the
arms length standard (deemed dividend).
May stock option costs be included in the cost
base for intercompany services charges?
Administrative costs related to stock option plans could
be recharged in the framework of a Management Fees
Agreement. General rules of deductibility apply for French
tax purposes.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, but such arrangements are heavily targeted
for tax audits.
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Competent authority
When may taxpayer submit tax adjustment
to competent authority (CA)?
In most cases, from six months to three years following
receipt of a notice of tax reassessment (depending on the
relevant tax treaty).
May CA develop new settlement positions?
Yes, unless the taxpayer has entered into a closing
agreement or received a court decision..
May taxpayer go to CA before paying tax?
As of January 2014, a CA procedure will not automatically
defer payment. Therefore, taxpayers are likely to pay tax
while going to CA.
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Germany
Whats new
Germanys Federal Fiscal Court (BFH) in a 2013
decision ruled on the compatibility of Germanys
transfer pricing documentation requirements with EU
law. The BFH examined Germanys transfer pricing
documentation rules, which apply only to cross-border
transactions with related parties, not to domestic
related-party transactions. The court held the rules
violate the fundamental EU principle whereby services
can be provided freely within the EU under the EU
Treaty, but that the different treatment can be justified
by overriding reasons of public interest, namely,
ensuring effective fiscal control. The court also noted
that without documentation, it would not be possible
for the German tax authorities to test the arms length
nature of cross-border transactions, and obtaining
the information through the mutual assistance of tax
authorities in other countries could not be guaranteed.
General information
Tax authority and law
Federal Ministry of Finance; Section 8 para. 1 and 3
Corporate Income Tax Act (KStG); Section 4 para. 1 Income
Tax Act (EStG); Section 1 Foreign Tax Code (AStG); Section
90 para. 3 and section 162 para. 3 and 4 General Tax Code
(AO). Decree-law on the manner, content, and extent of
documentation in the sense of section 90 para. 3 of the
General Tax Code (GAufzV), decree-law on relocation of
business functions (FVerlV).
Regulations, rulings, guidelines
Principles for the Examination of Income Allocation in
the Case of Internationally Related Enterprises of Feb. 23,
1983; Principles for the Examination of Income Allocation
by Cost Sharing Arrangements between Internationally
Related Enterprises of Dec. 30, 1999; Principles for the
Audit of Income Allocation between Internationally
Affiliated Enterprises in Cases of Employee Secondments of
November 9, 2001; Principles for the Audit of the Income
Allocation Between Related Parties with Cross-Border
Business Relations in Respect of the Duty of Determination,
the Duty of Cooperation, Adjustments, Mutual Agreement
Procedures, and EU Arbitration Procedures of April
12, 2005; Principles for the Examination of Income
Allocation between Affiliated Companies in the Case of
International Relocation of Functions, dated October 13,
2010; Principles for the Application of Section 1 Foreign
Tax Code to Cases of Marginal Amortizations and other
Depreciations on Loans Issued to Foreign Related Entities,
dated March 29, 2011.
Jobst Wilmanns
+ 49 0 69 75695 01
jwilmanns@
deloitte.com
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Priority of methods
According to Sec. 1 para. 3 sentence 1 Foreign Tax Code,
the CUP, resale price, and cost plus methods are the
preferred methods if fully comparable arms length prices
can be determined. If fully comparable arms length data
cannot be determined, limited comparable data shall be
used after making appropriate adjustments under the
application of an appropriate transfer pricing method (CUP,
resale price, cost plus, profit split, TNMM). If even limited
comparable arms length data cannot be determined, the
taxpayer must perform a hypothetical arms length test.
plan, whether the costs for the stock options are economically not borne by the service provider but by its shareholders must be examined, for example, if new shares are
issued (Federal Fiscal Court 25.8.2010 - I R 103/09). In the
latter situation, the German tax authorities may partially
deny the tax deductibility of the service costs to the extent
they include such stock option costs.
Commissionaire Arrangements
Are commissionaire arrangements allowed?
Yes.
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Self-initiated adjustments
Year-end adjustments are generally expected to be based
on agreements concluded in advance. However, a recent
decision of Germanys Federal Fiscal Court (BFH), dated
October 11, 2012, should provide more flexibility in
this respect. Upward adjustments are required by law if
German taxable income is too low due to non-arms-length
transfer prices.
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Greece
Whats new
2013 was quite an active year for Greek transfer
pricing legislation, given that the new Greek Income
Tax Code and the Tax Procedures Code include specific
provisions that supplement and amend the previous
Greek transfer pricing legislative framework.
The previous double legislative framework for
transfer pricing documentation (both the Ministry of
Development and the Ministry of Finance had issued
rules) was finally consolidated, and existing legislation
was rationalized and optimized. All transactions carried
out between related entities are now examined under
the scope of transfer pricing provisions. New thresholds concerning the documentation of intercompany
transactions were established, and new deadlines
for compilation of the documentation file and electronic filing of the Summary Information Table were
announced. The new documentation rules do not
apply to fiscal year 2011 and prior years.
APAs were also introduced, effective 1 January
2014, which will enable taxpayers to obtain advance
approval of their transfer pricing practices.
General information
Tax authority and law
Tax authority: Ministry of Finance (MoF).
Applicable laws:
Law 2238/2013, as amended by L.3775/2009,
L.3842/2010 and L.4110/2013;
Law 4172/2013 (new Income Tax Code applicable from
1.1.2014), Law 4174/2013 (Tax Procedures Code, also
applicable from 1.1.2014);
Law 3728/2008 for transactions realized in FYs 2008,
2009 and 2010.
Regulations, rulings, guidelines
Ministerial Circular 1179/2013, Ministerial Circular
1220/2013, Ministerial Circular 1284/2013, L.4170/2013,
and L.4182/2013.
The guidelines, rulings, and regulations contained in this
legislation apply to intercompany transactions that take
place from FY2012 onwards.
Eftichia Piligou
+30 210 6781100
[email protected]
76
Services issues
Are management fees deductible?
Management fees are deductible, subject to general
deductibility conditions:
All expenses must be incurred in the interest of or during
the companys ordinary course of business;
The expenses must correspond to an actual transaction
and the value of the transaction cannot be higher or
lower than the actual value (measured on an indirect
basis); and
The expenses must be reported in the accounting books
for the relevant period in which they were incurred, and
they must be supported by proper documentation. Based
on tax authority requirements and common practice,
the taxpayer should provide a comprehensive analysis of
said charges, including a description of the methodology
used in the calculation of the cost base, the allocation
keys used, as well as documentation of the arms length
nature of any markup applied on the relevant costs.
Documentation requirements
Companies operating in Greece are obligated to prepare a
Transfer Pricing Documentation File for their transactions
both with domestic and foreign affiliated entities.
Transactions between related entities that do not exceed
100,000 annually and in total are exempted from the
documentation obligation, provided the domestic entitys
turnover does not exceed 5,000,000. Conversely, if
the domestic entitys turnover exceeds 5,000.000, the
pertinent threshold is 200,000 annually and in total.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
As stated in Circular 1179/2013, issued on July 18, 2013,
the Transfer Pricing Documentation File must be prepared
on an annual basis (that is, for every fiscal year). The docu2014 Global Transfer Pricing Country Guide
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Guatemala
Whats new
A brand new Income Tax Law became effective in
Guatemala in January 2013, including for the very
first time transfer pricing rules. New Income Tax
Regulations, containing broad transfer pricing norms,
were published in May.
The transfer pricing rules were in force from January
1 to December 20, 2013; on that date, a decree was
published that included a waiver in the application
of the transfer pricing rules, which will reenter into
application on January 1, 2015. In spite of this waiver,
the same decree empowers the Superintendence of
Tax Administration to require taxpayers to file information regarding their transactions with nonresident
related parties and other aspects pertaining to their
transfer pricing, enabling the tax administration to
construct its data bases.
General information
Tax authority and law
Superintendence of Tax Administration SAT. Decree
10-2012, Book I, Income Tax, Chapter VI, Special
Valuation Rules Between Related Parties.
Regulations, rulings, guidelines
Government Agreement 213-2013 Chapter III, Special
Valuation Rules Between Related Parties.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The scope of application of Guatemalas transfer pricing
rules includes any transaction between a taxpayer that
is a resident in Guatemala and a nonresident related
party when it affects the determination of the tax basis
for the period in which the operation is conducted and
subsequent periods.
The following are also considered related parties, and the
transfer pricing rules apply:
A person resident in Guatemala and its permanent establishments abroad; and
A permanent establishment located in Guatemala
and its parent company that is a nonresident, another
permanent establishment of the same entity, or a person
related to it.
Byron Martinez
+ 502 2384-6500
bymartinez@
deloitte.com
Services issues
Are management fees deductible?
To consider management fees deductible, the company
must meet these two transfer pricing conditions: (a)
demonstrate how much an independent party would have
paid for this service; and (b) specify the benefits obtained
by the taxpayer as a result of the service.
In addition, the fees must meet the standard requirements
for deductible expenses.
Are management fees subject to withholding?
Management fees are subject to 15 percent
withholding tax.
May stock option costs be included in the cost
base for intercompany services charges?
There is no reference in the law or the regulations on
this matter; consequently, such costs could be included,
as long as the relevant contract mentions them as costs to
be transferred.
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
These kinds of agreements are not specifically provided for
under local law; thus, they would likely not be accepted by
the tax authorities.
Are cost contribution or cost sharing
payments deductible?
These kinds of agreements are not specifically provided for
under local law; thus, they would likely not be accepted by
the tax authorities.
Are cost contribution or cost sharing
payments subject to withholding tax?
These kinds of agreements are not specifically provided for
under local law; thus, they would likely not be accepted
by the tax authorities. In any case, any remittance to a
nonresident would be subject to 15 percent withholding
tax (for fees or royalty payments) or 25 percent withholding tax (for all other payments).
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
These kinds of agreements are not specifically provided for
under local law; thus, they would likely not be accepted
by the tax authorities. In any case, any remittance to a
nonresident would be subject to 15 percent withholding
tax (for fees or royalty payments) or 25 percent withholding tax (for all other payments).
Documentation and tax return disclosures
Tax return disclosures
Transfer pricing information may be required by the tax
authorities as an annex to be filed jointly with the annual
income tax return, or separately, at the discretion of the
Superintendence of Tax Administration.
Documentation requirements
The transfer pricing report should have information
regarding the taxpayer and the corporate group the
taxpayer belongs to. This may include:
A general description of the organizational, legal,
and operational structure of the group, as well as any
relevant change in the group, including the identification
of the persons who, within the group, conduct operations that affect the taxpayers operations.
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Hong Kong
Whats new
In 2013, Hong Kongs Inland Revenue Department
continued to focus on expanding Hong Kong's treaty
network. The IRD also began to conduct transfer
pricing training for its staff, and stepped up its
transfer pricing audit efforts, with a number of asset
managers in the city being selected for audits. These
trends are expected to continue in 2014.
General information
Tax authority and law
Inland Revenue Department; Inland Revenue Ordinance.
Regulations, rulings, guidelines
Departmental Interpretation and Practice Notes No. 46 and
No. 48.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Both domestic and cross-border transactions could be
under attack, if they do not comply with the arm's length
principle and result in a tax benefit obtained.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes, but only when it does not contradict the sourcing rule
under the Inland Revenue Ordinance.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit split
method, the transactional net margin method (TNMM),
and other methods if sufficiently supported.
Priority of methods
The most appropriate method is required. Transactionbased methods are preferred over profit-based methods.
Availability of benchmarking/comparative data
Financial data from published accounts of Hong Kong
listed companies is available via numerous databases.
Taxpayers generally will rely on common databases
provided by vendors (such as BVD's Osiris).
Patrick Cheung
+852 28521095
patcheung@
deloitte.com.hk
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Hungary
Whats new
Transfer pricing has been the focus of the Hungarian
tax authorities audits, with special interest on lossmaking companies, or if the profitability of the
Hungarian company decreases significantly. Legislative
changes enacted in 2013 modify the profit margin
(safe harbor) applicable to low value adding services,
which should now be in the range between 3 percent
and 10 percent. For transactions covered by an APA,
transfer pricing documentation need not be prepared
for those calendar years in which the resolution is valid,
including the tax year in which the APA application
was submitted, and the year in which the APA expired.
In practical terms, this change extends the term of an
APA to six years. Finally, controlled-party transactions
valued at less than HUF 50 million are exempt from the
documentation requirements.
General information
Tax authority and law
Hungarian Tax Authority (HTA); Corporate Income Tax Act
Article 18 (transfer pricing rules), Article 4/23 (definition
of related parties) and Article 31/2 (reference to OECD
transfer pricing guidelines); Tax Procedures Act Article 1 (8)
on arms length principle, Article 132/B-C on APAs, Article
176/A on the application of the Arbitration Convention.
The Hungarian Ministry of Finance issued Decree no.
22/2009 on transfer pricing documentation requirements
(modified as of 1 January, 2012, by the Ministry of National
Economy Decree no. 54/2011 and further modified as
of 18 June 2013 by the Ministry of National Economy
Decree no. 20/2013). The Hungarian Ministry of Finance
issued Decree no. 38/2006 on APAs (also modified as of 1
January, 2012, by Ministry of National Economy Decree no.
54/2011); VAT Act Article 67 (determination of tax base if
consideration is not arms length); modification of the Act
on Accounting Article 47, 73, and 78, as of 30 June 2013.
Regulations, rulings, guidelines
Ruling 1999/103 on the possibility of unilateral adjustments performed by the tax authorities; rulings
on several transfer pricing documentation-related
issues, for example, 2004/37, 2005/55, 2007/49,
2007/77, 2007/97, 2007/133, 2007/139, 2008/13,
2008/32, and 2010/21, 2012/2, 2013/3.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
If a company owns directly or indirectly more than 50
Peter Gemesi
+36 1 428 6722
pgemesi@
deloitteCE.com
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India
Whats new
Perhaps no other country had a busier 2013 in terms
of transfer pricing than India. The Central Board of
Direct Taxes released final safe harbor rules, specifying circumstances under which the tax authorities
will accept the taxpayers declared transfer prices.
The rules provide minimum operating profit margins
a taxpayer is expected to earn for certain categories
of international transactions, such as the provision
of software development services, information
technology enabled services, knowledge process
outsourcing services, contract research and development services, and the manufacture and export of
automotive components. The CBDT also issued a
circular providing guidelines for the classification of
research and development centers set up by foreign
companies based on functions, assets, and risk
assumed by the center established in India. Finally,
the Indian courts were also active, handing down
decisions on many aspects of the Indian transfer
pricing regime.
General information
Tax authority and law
Ministry of Finance- CBDT; Income Tax Act 1961, Sections
92 to 92F of Income Tax Act. The CBDT has set up a
separate Transfer Pricing Cell for conducting transfer
pricing audits.
Regulations, rulings, guidelines
Rules 10A to 10TG of the Income Tax Rules 1962; Circular
No.12 of August 23, 2001; Circular No. 14 of December
24, 2001; Circular No. 06/2013 dated June 29, 2013;
Administrative Guidelines of May 20, 2003.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The regulation requires direct or indirect participation in
the management, control, or capital of the other enterprise, or participation of the other enterprise or by the
same person in such enterprise. The regulation provides
an illustrative list of relationships to which transfer pricing
rules apply: equity holding of 26 percent or more; control
of board of directors; loans/guarantees; dependence on
the use of specified intangibles of the other enterprise; and
influence over supply of raw materials/finished products.
If a taxpayer enters into a transaction with a person
located in a notified jurisdictional area (defined as f
Samir Gandhi
+91 22 6185 8460
[email protected]
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Priority of methods
There is no hierarchy of methods. Taxpayers must use the
most appropriate method.
Availability of benchmarking/comparative data
The available databases provide financial statements and
related profitability of external comparables. However, the
databases are not comprehensive.
Are foreign comparables acceptable to
local tax authorities?
There is no specific prohibition against the use of
foreign comparables.
Services issues
Are management fees deductible?
No formal guidelines, but payments for management fees
may be deductible. The tax authorities require satisfaction
of the benefit test.
Are management fees subject to withholding?
Normally yes, subject to reduction pursuant to a tax treaty.
May stock option costs be included in the cost
base for intercompany services charges?
No formal guidelines, but stock options may be included in
the cost base for intercompany service charges.
Commissionaire arrangements
Are commissionaire arrangements allowed?
There is no specific statutory authorization.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
There are no formal guidelines, but payments for shared
research and development costs may be deductible.
Are cost contribution or cost sharing
payments subject to withholding tax?
Arguably, no.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
TThere are no formal guidelines. Payers can consider such
payments as for the acquisition of intangible depreciable
assets, i.e., a capital expenditure.
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Indonesia
Whats new
The Indonesian Directorate General of Taxation
continued to focus on transfer pricing in 2013,
including increased scrutiny, more stringent compliance requirements, and increased audit activities for
taxpayers with related-party transactions.
The DGT provided instructions on how transfer
pricing audits will be conducted, and specified
the forms to be used to collect information from
taxpayers, both designed to standardize the audit
process. The issuance of these implementing guidelines coincides with the DGTs plan to increase
revenue collection from transfer pricing audits, as
announced in a March 2013 circular letter.
One important feature of these new regulations is
the requirement to disclose the profitability of all the
related parties that participate in the supply chain.
The obvious intention of this requirement is to assess
potential profit shifting by the group that could erode
Indonesias revenue base.
General information
Tax authority and law
Directorate General of Taxation. Article 18 (3) of
Income Tax Law No. 36 of 2008 stipulates that the tax
office is authorized to redetermine non-arms-length
related-party transactions using acceptable transfer
pricing methodologies. Article 2 of Value Added Tax
Law No. 42 of 2009 stipulates that market price applies
to related-party transactions.
Regulations, rulings, guidelines
Article 16 (2) and (3) of Government Decree (GR) No.
80/2008 stipulates that supporting documents for relatedparty transactions are required in the event of a tax audit.
Transfer Pricing Guideline is regulated through Directorate
General of Taxation Regulation (DGT) No. PER 43/PJ/2010
(PER-43) and amended through DGT Regulation No.
PER 32/PJ/2011 (PER-32). PER-43 provides the steps to
be performed by taxpayers who have transactions with
related parties to examine the arms length nature of the
transactions. This includes the comparability analysis,
selection of transfer pricing methods, determination of the
arms-length price/profit, and format of transfer pricing
documentation, among others.
Carlo Navarro
+62 21 29923100
[email protected]
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Services issues
Are management fees deductible?
Generally, yes. Articles 6 and 9 of the Income Tax Law.
Are management fees subject to withholding?
It depends on the relevant income tax treaty and the
availability of a certificate of domicile from the tax
authority counterpart.
May stock option costs be included in the cost
base for intercompany services charges?
There is no specific restriction against this.
Commissionaire arrangements
Are commissionaire arrangements allowed?
There is no specific statutory authorization.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
PER-32 briefly touched upon the concept of cost contribution arrangements stating that such arrangements
should be based on the arms length principle. Because
the regulation does not provide much detail, Indonesia will
most likely follow the OECD transfer pricing guidelines and
review on a case-by-case basis. A benefits analysis is likely
to be requested.
Are cost contribution or cost sharing
payments deductible?
Generally, yes. To the extent payments are at arms length,
amounts are deductible if related to taxable income and
not capital.
Are cost contribution or cost sharing
payments subject to withholding tax?
It depends on the type of payment. For example, if
the payment is considered a royalty, withholding tax
would apply.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible or amortizable, depending on
the specific facts. Payments must relate directly to the
taxpayers taxable income.
Documentation and tax return disclosures
Tax return disclosures
For the 2009 tax return and going forward, PER 39/
PJ/2009, which deals with the annual corporate
income tax return, requires more detailed disclosure
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Ireland
Whats new
While there were no formal amendments to Irelands
transfer pricing regime in 2013, initiatives underway
at the OECD level, such as the base erosion and
profit shifting (BEPS) initiative will have an impact on
how companies operating in Ireland will implement
their transfer pricing policies in the future. Irelands
response will form part of a joint international effort
to deal with the issues arising from the BEPS initiative.
The International Tax Strategy document published by
the Irish government as part of Budget 2014 sets out
Irelands commitment to participating in OECD and
EU initiatives to support international tax standards
and deal with aggressive tax planning and fraud.
Because Irelands transfer pricing regime follows the
OECDs transfer pricing guidelines, any changes to
the guidelines arising from the BEPS work will have a
direct impact under domestic law.
General information
Tax authority and law
The Revenue Commissioners. Taxes Consolidation Act
1997 Section 835A-835H. Transfer pricing rules included
in Finance Act 2010 for trading transactions between
associated persons. Effective for chargeable periods
beginning on or after 1 January 2011.
Regulations, rulings, guidelines
The law is to be interpreted in accordance with the OECD
transfer pricing guidelines.
The Revenue Commissioners have issued Guidance Notes
in relation to documentation obligations (see below under
Documentation Requirements).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The associated test is met if there is more than a 50
percent shareholding connection (broadly defined)
between the parties, either directly or indirectly, subject to
the exclusion for certain small and medium-sized entities,
as laid out in the EU Commission Recommendation of 6
May 2003 (2003/361/EC).
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The Irish Revenue accept the calculation of profits in
Paul Reck
+353 1 417 2470
[email protected]
97
98
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure in place. It is recommended
that details of the tax adjustment be submitted as early
as possible to ensure that the applicable time limits under
Irish domestic law, when relevant, are met.
May CA develop new settlement positions?
Yes.
May taxpayer go to CA before paying tax?
There is no formal process in place would need to be
considered on a case-by-case basis.
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Israel
Whats new
The Israeli Tax authority is becoming more aggressive in its auditing, with significant attention paid to
permanent establishment (PE) transactions and headquarters charge-outs. Furthermore, the authorities are
placing growing emphasis on the treatment of PEs,
business restructurings, and transfers of IP. During
2014, the Israeli Tax Authority is likely to address the
base erosion and profit shifting (BEPS) issues, and
may subsequently provide guidance in the form
of a circular.
General information
Tax authority and law
The Israeli Tax Authority. Income Tax Ordinance, Article
85a, which deals with transfer pricing in international
intercompany transactions, was enacted as part of the
2003 Israeli tax reform.
Regulations, rulings, guidelines
Transfer pricing regulations under article 85a, approved 29
November 2006, and effective immediately.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply when a special relationship
exists between parties to a transaction, which includes the
relationship between an individual and his/her relatives,
the control by one party to the transaction over the other,
or control by one individual over the other parties to the
transaction, whether direct or indirect, individually or
together with other individuals.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
Comparable uncontrolled price (CUP) method, cost plus
method, resale price method, the transactional net margin
method (TNMM), the profit split method, the residual
profit split method, and other unspecified methods.
Priority of methods
Transaction-based methods are preferred over profitbased methods.
Jacob Houlie
+972 3 608 5424
[email protected]
Services issues
Are management fees deductible?
Yes, provided the fees are at arms length.
Are management fees subject to withholding?
Generally, no.
May stock option costs be included in the cost
base for intercompany services charges?
There are no formal provisions in this regard.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
There is no specific statutory authority; however, cost
contribution arrangements and cost sharing agreements
are accepted by the tax authorities.
Are cost contribution or cost sharing
payments deductible?
Generally, yes, as long as the payments satisfy the arms
length standard and are not capital in nature.
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101
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Italy
Whats new
Late in 2013, Italy enacted some changes to its
transfer pricing rules. New legislation was approved to
clarify that the regional production tax (IRAP) applies
to transfer pricing adjustments, in addition to the
corporate income tax (IRES). New transfer pricing rules
for companies engaged in online advertising services
provide that the value of intercompany transactions
for Italian-based companies belonging to multinational
groups that operate in the online advertising sector
may not be determined based on cost-plus methods.
Italys Supreme Tax Court issued a decision on whether
transfer pricing regulations may be deemed anti-abuse
rules. The court clarified that the transfer pricing
regulations do not impose an obligation on the tax
authorities to prove that a taxpayer received a tax
benefit because of intercompany transfer pricing. More
specifically, the tax authorities must demonstrate only
that the intercompany prices were not at arms length,
not whether the taxpayer received a tax benefit.
General information
Tax authority and law
Italian Ministry of Economy and Finance; Article 110
(7) of Presidential Decree n. 917/1986 (for corporate
tax purposes IRES); Legislative Decree n. 446/1997
(for regional tax purposes IRAP); article 1, 2-ter of
Legislative Decree n.471/1997.
Regulations, rulings, guidelines
Circular Letter nos. 32/9/2267 (September 22, 1980),
42/12/1587 (December 12, 1981) and 271/E/1059
(October 21, 1997). Circular Letter nos. 141/E/86270 (June
4, 1998), 98/E/107570 (May 17, 2000) and 148/E/139500
(July 26, 2000) for IRAP purposes only; decision of the
Commissioner of Italy Revenue Agency dated September
29, 2010; Circular Letter no. 58/E (December 15, 2010);
Circular no. 21/E (June 5, 2012).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
In addition to the control relationships considered in
article 2359 of the Civil Code, transfer pricing rules apply
to any kind of relationship determining actual or potential
economic influence on business decisions, by means of a
combination of, but not limited to, exclusive agreements,
joint ventures, the presence of common members on the
boards of directors, family relationships, financial rela-
Aldo Castoldi
+39 02 83324111
[email protected]
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Services issues
Are management fees deductible?
Yes, provided the fees are at arms length, are adequately
supported/documented, refer to services inherent to the
taxpayers business activity, and benefits are proved/
documented. Stewardship costs, as well as costs for
duplicated services, are not deductible.
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Self-initiated adjustments
Italy permits adjustments in filing both original and amended
returns after the close of book year-end, as long as the
adjustment does not provide for a decrease in income.
Adjustments may trigger penalties, on an increasing scale,
the later they are made in respect to the deadline for the
filling of the income tax return they refer to.
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
Italy follows the mutual agreement procedure for
the pertinent treaty, or the Arbitration Convention
procedure if the related party is located in an EU
member state (pursuant to EU Arbitration Convention
90/436/CEE). Circular 21/E (June 5, 2012) provides
clarifications to the mutual agreement procedures and Arbitration Convention procedures.
May CA develop new settlement positions?
Yes.
May taxpayer go to CA before paying tax?
Yes. If certain circumstances are met (for instance,
if payment would imply severe and irreparable
damage to the taxpayer), the tax authorities, at
the taxpayers request, may temporarily suspend
recovery of tax and interest assessed if a mutual
agreement/arbitration procedure is started.
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Japan
Whats new
Two primary developments related to transfer pricing
occurred in Japan in 2013. Updated rules related
to Japanese corporate tax and transfer pricing
audits took effect on January 1, 2013. As part of
the updated rules, transfer pricing issues are to be
audited together with corporate tax issues unless, at
the commencement of the audit, either the taxpayer
or the tax authorities propose to have transfer pricing
issues evaluated at a later time in an audit devoted
solely to transfer pricing issues. Upon closing of the
audit, a reexamination of the years covered may only
be made if it is believed that an error has been made
due to information that is newly available.
The introduction of the Berry ratio as an acceptable
profit level indicator, which became effective for
fiscal years beginning after April 1, 2013, represents
another move by the Japanese tax authorities to
bring Japan's transfer pricing regime closer to the
OECD approach.
General information
Tax authority and law
National Tax Agency (NTA); Special Taxation Measures Law
(STML), Article 66-4 and Article 68-88 for companies filing
consolidated tax returns.
Regulations, rulings, guidelines
Enforcement Order 39-12 and 39-112 (for companies
filing consolidated tax returns). Enforcement Ordinance
22-10, and 22-10(2), 22-74, and 22-75. TP commissioners
directive (guideline) issued June 1, 2001, partially amended
several times. Reference Case Studies on Application of
Transfer Pricing Taxation issued on June 25, 2007.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply to transactions between a
Japanese taxpayer corporation and a foreign related party.
Related parties are defined as entities with a special
relationship because of direct or indirect legal control
(through shareholding) or control-in-substance (personnel
dependence, transactional dependence, financial dependence, or similar dependence factors).
Michael Tabart
+81 3 6213 3751
michael.tabart@
tohmatsu.co.jp
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Commissionaire arrangements
Are commissionaire arrangements allowed?
There is no specific statutory authorization.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. Japan follows the rules adopted in TP commissioners directive (guideline) issued March 20, 2006.
Are cost contribution or cost sharing
payments deductible?
Yes, as long as the payments satisfy the arms length standard.
Are cost contribution or cost sharing
payments subject to withholding tax?
There is no specific statutory authorization.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible or amortizable over the useful life.
Documentation and tax return disclosures
Tax return disclosures
Schedule 17(4): Detailed Statement Concerning Foreign
Affiliated Persons and Applied Transfer Pricing Methods.
Documentation requirements
Enforcement Ordinance 22-10 lists 14 items of information/documents that must be presented to the tax authorities during a tax audit without delay.
The 14 requested information items/documents are
divided into two categories: (1) Nine items that show
that controlled transactions were conducted under conditions similar to those of uncontrolled transactions, such
as pricing policies used in business, intercompany agreements, and negotiation processes with affiliated companies
on pricing; and (2) five items such as comparables and
transfer pricing methods used for sanity-check purposes
with respect to the controlled transactions conducted with
the items listed in the first category.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
Japan looks at individual tax years in terms of documentation. Thus, the relevant documentation cited by
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
In practice, following receipt of the formal deficiency
notice; however, there is no specific requirement with
regard to the point at which the taxpayer may submit
a request. More than half of the treaties Japan has
entered into impose limitations as to the deadline
for filing an application.
May CA develop new settlement positions?
Yes. Japan follows the OECD transfer pricing guidelines.
May taxpayer go to CA before paying tax?
Yes. Under the 2007 tax reform, applicable from
April 1, 2007, payment of tax and penalties may be
postponed, and delinquent tax may be exempt during
a CA procedure if the taxpayer applies for this.
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Kazakhstan
Whats new
2013 saw relatively few significant transfer pricing
reforms, legislative changes, or new directions in
tax authority compliance and enforcement action
in Kazakhstan.
Minor legislative amendments were passed, aimed
primarily at clarifying previous ambiguity in drafting,
and discussions took place between the authorities
and various associations of taxpayers and industry
bodies in relation to further potential future reforms
(notably in relation to potential means via which
unrelated companies might be excluded from the
scope of Kazakh transfer pricing legislation/controls).
General information
Tax authority and law
The Tax Committee and the Customs Committee of the
Ministry of Finance. The Law on Transfer Pricing, dated 5
July 2008; and the Code of the Republic of Kazakhstan On
Taxes and Other Obligatory Payments to the Budget (the
tax code).
Regulations, rulings, guidelines
Resolution of the Government (dated 12 March 2009)
#292 On approval of the list of officially recognized
sources of information on market prices;
Resolution of the Government (dated 12 March
2009) #293 On approval of the list of goods (works,
services) international transactions that are subject
to monitoring;
Resolution of the Government (dated 24 October 2011)
# 1197 On approval of the rules for concluding an
agreement on application of transfer prices;
List of exchange goods adopted by government regulation (dated 6 May 2009) #638;
List of countries with concessional tax regimes
adopted by government regulation (dated 31
December 2008) #1318;
Resolution of the Government (dated 11 November
2011) #1324 On approval of the reporting forms for
monitoring of transactions and rules for conducting
monitoring of transactions;
Order of the Minister of Finance (dated 26 March 2009)
#129 On approval of the regulation on the procedure
of interaction of the authorized bodies during transfer
pricing control;
Law of the Republic of Kazakhstan (dated 6 January
2011) #377-IV On State Control and Supervision in the
Republic of Kazakhstan;
Anthony Mahon
+7 727 2581340
ext. 2756
[email protected]
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Priority of methods
The CUP has first priority. If it is impossible to apply the
CUP, other methods may be used, following this hierarchy:
(1) cost plus method; (2) resale price method; (3) profit
split method; and (4) net profit method.
Commissionaire arrangements
Are commissionaire arrangements allowed?
There are no specific provisions.
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Documentation requirements
Transaction parties (when transactions are within the scope
of the transfer pricing regime) are obligated to maintain
suitable documentation to justify the reasonableness of
transaction prices used.
Kazakhstans transfer pricing regulations also introduced
annual reporting requirements in the form of monitoring
of international transactions for a specified list of goods
and services approved by the government of Kazakhstan.
Reporting includes:
Documentation confirming the justification of
prices used;
The method used to determine the market price and the
source of information used;
A description of the goods (work, services), contractual
terms, business strategy, and information on the trade
brokers margin; and
Other documents and data proving the consistency of
the prices applied with market prices.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
Yes, documentation must be submitted to the tax authorities in the form of a report on monitoring of transactions
(submitted electronically online) on an annual basis.
The report contains information about all cross-border
transactions during the reporting year, including:
Type of commodity;
Date, place, and terms of shipment; transaction price;
Market price;
Differentials (i.e. an adjustment amount that applies to
adjust transaction prices (or prices from sources of information) to those that would be equivalent to goods and
services available in comparable economic conditions;
including costs of shipment, insurance, customs, and
other costs incurred); and
Other information.
The report on monitoring of transactions must be
submitted only by large taxpayers. The list of companies
classified as large taxpayers is approved and issued
annually by the government.
There are no specific requirements regarding new searches
or refreshment of comparables.
Deadline to prepare documentation
Documentation must be prepared by 15 May of the year
following the reporting year for transactions in goods
(works, services) subject to monitoring.
Additional supporting documents for purposes of monitoring may be requested and must be submitted within 30
calendar days after receipt of the request.
Otherwise, in general cases, supporting information and
documents must be prepared and submitted within 90
days upon request by the authorities.
Deadline to submit documentation
By 15 May of the year following the reporting year for
transactions of goods (works, services) that are subject to
monitoring.
Additional supporting documents for purposes of monitoring may be requested and must be submitted within 30
calendar days after receipt of the request.
Otherwise, in general cases, supporting information
and documents must be submitted within 90 days upon
request from the authorities.
Deadline to file income tax return
The corporate income tax return must be filed by 31 March
of the year following the reporting tax year
Acceptable languages for documentation
Documentation in Russian and Kazakh is generally acceptable. However, the reporting forms for transfer pricing
monitoring must be in Russian.
Transfer pricing adjustments
Must the transfer prices reflected on an
income tax return be the same as those
reflected in financial statements? In other
words, are book/tax differences allowed?
For tax purposes, prices may be adjusted in accordance
with transfer pricing legislation, and therefore could
be different from income and expenses recognized for
accounting purposes.
Self-initiated adjustments
Self-initiated adjustments are allowed. The
procedure for such adjustments is regulated
under general tax legislation (the tax code).
2014 Global Transfer Pricing Country Guide
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The taxpayers failure to provide the tax authorities with reporting to monitor transactions is
subject to a fine up to 70 MCI (1 MCI=USD 12).
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There are no specific provisions.
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Kenya
Whats new
Kenyas transfer pricing legislation did not change
in 2013. The Kenya Revenue Authority (KRA)
continues to be aggressive in carrying out transfer
pricing audits. Experience with transfer pricing audits
indicates that the KRA will nearly always challenge
transfer pricing arrangements for taxpayers that
report losses for a number of years and entities that
enter into related-party transactions with group
companies located in tax havens.
General information
Tax authority and law
Kenya Revenue Authority; Section 18(3) of the Income
Tax Act deals with transfer pricing legislation. This antiavoidance section grants the tax authority power to restate
transactions between a resident entity and a nonresident
affiliate that are not at arms length.
Regulations, rulings, guidelines
The Income Tax (Transfer Pricing) Rules, 2006, issued by
the Minister for Finance on 15 June 2006.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The rules define related parties as one or more
enterprises whereby:
One of the enterprises participates directly or indirectly in
the management, control, or capital of the other;
Third person participates directly or indirectly in the
management, control, or capital of both; or
An individual who participates in the management,
control, or capital of the business of one entity is associated by marriage, consanguinity, or affinity to an individual who participates in the management, control, or
capital of the business of the other.
The minimum threshold for control in the case of a body
corporate is 25 percent shareholding or voting power,
unless specifically provided for by the companys constitution. Note, however, that even in the absence of control,
entities may still be deemed related, because control is not
the only criterion.
Do the local transfer pricing rules or the tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The rules apply to permanent establishments, which are
Fredrick Omondi
+254 0 719 039318
[email protected]
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there is no requirement to file transfer pricing documentation with the tax return.
Acceptable languages for documentation
Documentation must be in English.
Transfer pricing adjustments
Must the transfer prices reflected on an
income tax return be the same as those
reflected in financial statements? In other
words, are book/tax differences allowed?
There are no guidelines on this issue. However, in
practice a transfer pricing adjustment could be passed
through the financial statements, or through the income
tax computation.
Self-initiated adjustments
The revenue authority requires that the taxpayer file
an application under section 90 of the Income Tax Act
for amendment of self-assessment returns. This usually
triggers a tax audit.
Statute of limitations on assessment
for transfer pricing adjustments
As with other income tax assessments, the Revenue
Authority has the power to make assessments for up to
seven years back. However, when there is evidence of
fraud, there is no time limit for making assessments.
Taxpayer set-offs for other related-party transactions
No formal provision.
Interest and penalties
Additional assessment payment deadline
The due date is that which applies to the balance of
tax for the year to which the self-assessment relates.
Therefore, the additional assessment will attract interest
from the date on which the tax for the year in question
should have been paid (four months after the year-end).
Penalty on transfer pricing assessment
Penalties will apply for transfer pricing purposes under the
ordinary penalty sections of the Kenyan Income Tax Act.
Is interest charged on penalties?
Effective June 2010, interest is not charged on penalties.
Is interest payable when a refund
is due to the taxpayer?
Interest is currently not payable on tax refunds.
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure.
May CA develop new settlement positions?
There is no formal procedure.
May taxpayer go to CA before paying tax?
No guidelines provided.
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Korea
Whats new
The most important change in Koreas transfer pricing
regime during 2013 was the introduction of transfer
pricing methods for pricing guarantee fees provided
by Korean parent companies to foreign affiliates.
Cross-border related-party guarantee transactions
were subject to transfer pricing regulation in Korea,
but the law was silent on the computation method to
determine an arms length fee. Under revised Korean
regulations, the arms length price of guarantee
fees should be calculated using one of three stipulated methods: the cost-based approach, based on
the guarantors expected risk and cost; the benefit
approach, based on the guarantees expected benefit
to the recipient; or the cost-benefit approach, a
hybrid method based on the guarantors expected
risk and cost and the guarantees expected benefit.
Guarantee fees have been a contentious issue in
Korea for some time, and will likely continue to be an
area of controversy. The debate is an indication that
the Korean transfer pricing environment, which traditionally focused on aggressive assessment of inbound
taxpayers, is turning toward outbound taxpayers, in
line with the growth of many Korean multinationals.
General information
Tax authority and law
National Tax Service (NTS); Law for the Coordination of
International Tax Affairs (LCITA) (effective January 1, 1996).
Regulations, rulings, guidelines
Presidential Enforcement Decree, Ministerial Enforcement
Decree, Basic rulings for LCITA. Basic rulings were
released in June 2004 to provide clear-cut guidelines.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
A special relationship exists if one party (i) owns directly or
indirectly 50 percent or more of the total shares of another
party; or (ii) has substantial control, and common interests
exist between both parties.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Tae-Hyung Kim
+82 2 6676 2410
taehyungkim@
deloitte.com
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes.
Are cost contribution or cost sharing
payments subject to withholding tax?
No, subject to certain exceptions.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible or amortizable over the useful life
of the intangible.
Documentation and tax return disclosures
Tax return disclosures
Taxpayers are required to submit (1) Report of Transfer
Pricing Method; (2) Summary of Overseas Related-Party
Transactions; and (3) Summary of Income Statement for
Overseas Related Parties.
Documentation requirements
Korea does not impose a documentation requirement.
However, a 10 percent underreported tax penalty in case
of a transfer pricing income adjustment as a result of a
tax audit may be waived by preparing contemporaneous
documentation by the tax return filing due date.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
Korea does not impose an annual documentation requirement. To qualify for the penalty waiver granted for
the preparation of contemporaneous documentation,
taxpayers should include the following information:
An overview of the business, including an analysis of the
facts affecting the price of assets and/or services;
Information on the organizational structure that explains
the relationship between the taxpayer and related parties
engaged in cross-border related-party transactions;
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documents for tax appeal or Competent Authority procedures if the documents were not submitted within 60 days
(or 120 days) upon request from the NTS without justifiable reason. Underreported tax penalty is 10 percent of
additional corporate income tax amount.
Is interest charged on penalties?
No.
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Latvia
Whats new
New, more detailed transfer pricing documentation
requirements where introduced in Latvian tax legislation effective 1 January 2013. After the introduction
of these requirements, the Latvian tax authorities
have significantly increased the number of transfer
pricing audits and the attention to prices in relatedparty transactions.
General information
Tax authority and law
State Revenue Service (SRS); Taxes and Duties Act, articles
15.2, 16.1 (from 1 January 2013); Taxes and Duties Act,
articles 23.2; Income Tax Act, article 12.
Regulations, rulings, guidelines
Cabinet of Ministers Regulations No. 556, articles 83.-94;
Cabinet of Ministers Regulations No. 981.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply to transactions with:
Foreign entities with at least a 20 percent relationship;
Local entities with at least a 90 percent relationship;
Local entities benefiting from corporate income tax
relief or other types of tax relief provided in Latvian
legislation; and
Entities established in black-listed territories.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes. Transfer pricing rules apply to all Latvian corporate
taxpayers residents and permanent establishments.
Methods and comparables
Acceptable methods
Latvian transfer pricing legislation is generally in line with
the OECD transfer pricing guidelines. The comparable
uncontrolled price (CUP) method, the resale price method,
the cost plus method, the profit split method, and the
transactional net margin method (TNMM) are acceptable.
Priority of methods
Subject to the availability of reliable comparables data,
traditional transaction methods are preferred to transactional profit methods.
Janina Landisa
+371 67 074 193
jlandisa@
deloittece.com
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Lithuania
Whats new
Lithuania did not introduce any changes to its
transfer pricing legislation in 2013. However, the
Supreme Administrative Court of Lithuania ruled
on the first transfer pricing case in the countrys
history. The court ruled in favor of the tax authorities, concluding that the interquartile range should
be used when not all the values of the determined
comparables could be treated as representative from
a transfer pricing perspective.
General information
Tax authority and law
State Tax Inspectorate under the Ministry of Finance.
Regulations, rulings, guidelines
Order No. 1K-123 of the Minister of Finance (transfer
pricing rules), dated 9 April 2004;
Law on corporate income tax (No. IX-675), dated
20 December 2001;
Law on Tax Administration (No. IX-2112), dated
13 April 2004;
Order No. VA-27 of the head of STI regarding submission
of the report on transactions and operations with associated parties, dated 22 March 2005;
Order No. VA-105 of the head of STI regarding APAs,
dated 19 October 2011;
Order No. VA-49 of the head of STI regarding the
recovery of tax overpayments by taxpayer, dated
30 June 2009;
Order No. VA-25 of the head of STI regarding the
method of imposing penalties and the calculation of late
payment interest, dated 28 March 2007.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The transfer pricing rules apply to associated parties as
established in Article 2 of the Law on Corporate Income
Tax. Specifically, the rules apply to:
Related parties (as established in the same article);
Entities that may have influence over each other resulting
in the conditions of their mutual or economic operations being other than those where maximum economic
benefit is sought by each of said persons.
Tatjana Vaiciuliene
+370 5 2553004
tvaiciuliene@
deloittece.com
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Documentation requirements
A requirement to prepare and maintain transfer pricing
documentation exists for the following entities:
Lithuanian entities and the permanent establishments of
foreign entities, if their revenue for the tax period during
which the controlled transaction was rendered exceeds
LTL 10 million;
Financial and credit institutions that perform activities
regulated under the Law on Financial Institutions; and
Insurance companies whose activities are regulated by
the Law on Insurance.
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Luxembourg
Whats new
Luxembourg did not enact new transfer pricing
legislation in 2013, but the Luxembourg tax authorities continue to expand their knowledge on transfer
pricing. 2014 may bring new legislation on transfer
pricing to complement the existing group financing
Circular 164/2. As part of the governments fiscal
plans to attract the headquarters of multinational
groups, new transfer pricing legislation in line with
international principles may be introduced.
General information
Tax authority and law
Luxembourg Tax Administration. Article 56 of the
Income Tax Law and Art. 164 para. 3 ITL.
Regulations, rulings, guidelines
Circular ITL NS No.164/1 dated 9 June 1993; Circular ITL
No.164/1 dated 23 March 1998.
Circular L.I.R. 164/2 dated 28 January 2010 and Circular
164/2 bis LITL issued on April 8, 2011.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Luxembourg legislation does not provide a definition of
related parties. However, under article 164, paragraph 3,
it suffices for the tax administration to demonstrate that a
shareholder, a stockholder, or an interested party received
an advantage from a company solely in its capacity as
a shareholder, stockholder, or interested party, whether
directly or indirectly.
Circular 164/2 states: Two enterprises are associated
enterprises when one enterprise participates directly
or indirectly in the management, control, or capital of
the other or if the same persons participate directly or
indirectly in the management, control, or capital of
both enterprises.
Stephan Tilquin
+352 45145 2592
[email protected]
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. Luxembourg follows Chapter VIII of the OECD transfer
pricing guidelines.
Are cost contribution or cost sharing
payments deductible?
Yes, as long as the payments satisfy the arms
length standard.
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Malaysia
Whats new
Malaysias Inland Revenue Board (IRB) issued a
transfer pricing audit framework, effective 1 April
2013, that serves as a guidepost for the tax authorities on the conduct of transfer pricing audits. The
framework is applicable to taxpayers cross-border
and domestic transactions with related entities. The
framework provides a concessionary rate of penalty
when taxpayers make a voluntary disclosure in
writing to the tax authorities. Even with a voluntary
disclosure, taxpayers are still required to prepare
transfer pricing documentation.
In other transfer pricing news, the Special
Commissioner of Income Tax issued a decision on
the first-ever transfer pricing case in Malaysia. The
disputed issues predominantly related to commission rates, intercompany charges, and the resultant
penalties for the 1998 to 2005 years of assessment.
The Special Commissioners ruled that the IRBs
transfer pricing were invalid, and opined that transfer
pricing was not an exact science, and that the taxpayer's transfer pricing reports and expert evidence were
reliable in establishing that the taxpayer's pricing
method was acceptable.
General information
Tax authority and law
The Inland Revenue Board; specific provisions relating to
transfer pricing and thin capitalization have been enacted
under section 140A of the Income Tax Act. These provisions are effective 1 January 2009. Prior years are covered
under general anti-avoidance legislation (section 140) and
record-keeping provisions (section 82).
The Tax Analysis Division of the Ministry of Finance,
through a letter dated 11 December 2012, has deferred
the implementation of the thin capitalization provisions
until 31 December 2015.
Regulations, rulings, guidelines
Malaysian transfer pricing guidelines were issued on 2 July
2003, basically following the OECD transfer pricing guidelines. The Malaysian transfer pricing guidelines, 2012, read
in conjunction with the Income Tax (Transfer Pricing) Rules,
2012, issued in 2012, replace the transfer pricing guidelines of 2003.
Theresa Goh
+6 03 7712 5135
[email protected]
Any taxpayer that falls below the aforementioned thresholds may opt to voluntarily comply with the guidelines in
full, or alternatively may opt to comply with the contemporaneous documentation provisions under the transfer
pricing guidelines.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The Malaysian transfer pricing guidelines issued in 2012
extend the applicability of the guidelines to transactions
between a permanent establishment and its head office
or other branches. For purposes of the guidelines, the
permanent establishment will be treated as a (hypothetically) distinct and separate enterprise from its head office
or other related branches.
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, but such arrangements give rise to significant
risk of creating a permanent establishment.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
The 2012 Malaysian transfer pricing guidelines provide
a short framework for the acceptance of cost contribution arrangements. When a taxpayer enters into a cost
contribution arrangement with an associated enterprise,
the arrangement should be reflective of an arms length
arrangement.
Are cost contribution or cost sharing
payments deductible?
The Malaysian transfer pricing guidelines provide that a
CCA should be entered into with prudent and practical
business judgment, and with a reasonable expectation of
receiving a benefit. The guidelines also infer that an independent party would not enter into a CCA when the value
of the contribution exceeds the expected benefit. Hence,
to the extent a CCA arrangement is reflective of arms
length pricing, the payments would be deductible.
Are cost contribution or cost sharing
payments subject to withholding tax?
Payments may be subject to withholding tax, depending
on the context of the payments, the nature of the
payments (capital or revenue), and the location where the
services are provided.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
There is no substantial guidance regarding the tax treatments of payments to a contributor of preexisting intangibles to a CCA or CSA.
Documentation and tax return disclosures
Tax return disclosures
All related-party transactions, including gross margin
and profit before tax, must be disclosed in the annual
tax return.
The main disclosures required to be set out in a tax
return are:
Intragroup sales;
Intragroup purchases;
All related-party transactions;
Loans received from or provided to related parties; and
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There are no formal procedures. Malaysia generally follows
MAP procedures for the pertinent treaty provisions.
The taxpayer can submit a tax adjustment to CA after
accepting the tax adjustment and paying the additional
tax due.
May CA develop new settlement positions?
Yes.
May taxpayer go to CA before paying tax?
No. The taxpayer can approach CA after accepting the tax
adjustment and paying the additional tax due.
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Mexico
Whats new
Mexico enacted a new Income Tax Law in 2013 that
entered into effect in 2014. As a result, the provisions
regarding transfer pricing issues have changed, and
important modifications to some articles have been
introduced. Among the most important changes
are amendments to the transfer pricing compliance
and permanent establishment rules for companies
operating under the maquila regime, the limitations
of deductions related to payments to entities in a
preferential tax regime and payments to transparent
entities, or when the foreign entity does not consider
the payment to be taxable income.
Transfer pricing documentation has been subject to
increased scrutiny by the tax authorities regarding
services, restructurings, and commissionaires.
General information
Tax authority and law
Servicio de Administracin Tributaria (SAT); Mexican
Income Tax Law Articles 2 (Sec VI and last two paragraphs), 4, 5, 11, 15, 21, 27 (Sec I, V, XIII, XVIII), 28 (Sec
XI, XIV, XVII, XIX, XXIII, XXIV, XXVII, XXIX, XXXI), 42, 70
(Sec VI), 76 (Sec IX, X, XII), 82, 90, 94 (Sec VII), 101, 110
(Sec IX, X, XI), 111, 140, 147 (Sec X), 148 (Sec XIV), 149,
151, (Sec III), 156, 159, 161, 176, 177, 179, 180, 181,
182, 183, 184, 187 (Sec V). Mexican Income Tax Law transitional dispositions 9 (applicable rules Sec XVI). Mexican
Income Tax Law Regulations Article 260, 276. Mexican
Federal Fiscal Code Articles 21, 26 (Sec XV), 34-A, 81
(Sec XVII), 82 (Sec XVII), 84 (Sec XIII), 146-B (Sec I).
Regulations, rulings, guidelines
Annual Miscellaneous Tax Provisions for Maquiladora
companies, APA filing, Informative Return for ExportOriented Manufacturing Companies (IMMEX), Informative
Transfer Pricing Return, and Statutory Tax Report Filing
System (SIPRED), Tax Report Filing System (SIPIAD), Transfer
Pricing Questionnaire. Articles 276 and 260 of the Income
Tax Law Regulations, and I.3.8.3 of Miscellaneous Tax Rules.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Direct or indirect participation in management, supervision,
control, or capital/ownership. The parent company of a
permanent establishment and all other permanent establishments of said company are also considered related parties.
Simn Somohano
+52 664 622 7872
ssomohano@
deloittemx.com
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, although they may be subject to increased scrutiny
from the tax authorities.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Domestic law prohibits the deduction of costs charged by
a nonresident on an allocation basis. For treaty countries
there may be possible relief under a nondiscrimination
basis, and every case must be presented to the competent
authorities under the mutual agreement procedure.
Are cost contribution or cost sharing
payments deductible?
No.
Are cost contribution or cost sharing
payments subject to withholding tax?
These decisions would be made on a case-by-case basis.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
These decisions would be made on a case-by-case basis.
Documentation and tax return disclosures
Tax return disclosures
The following items are required: annual tax return;
Informative Transfer Pricing Return; Informative
Return for Export-Oriented Manufacturing Companies
(IMMEX); Tax Certificate or Statutory Filing System
(SIPRED); Tax Report Filing System (SIPIAD); and
questionnaires in the SIPRED and SIPIAD.
A transfer-pricing-specific information return must be filed
annually disclosing related parties and their corresponding
transactions, including the method applied for analysis,
if the entity has a transfer pricing study and it is applying
any regulation or treaty. Additionally, two annual questionnaires must be completed regarding intercompany
transactions and documentation. Finally, an appendix
with details of the intercompany transactions should be
presented, including the conclusion of the intercompany
transactions, whether the transactions comply with the
arms length principle, and the amount of any adjustment.
Documentation requirements
Contemporaneous documentation must show that prices
with each domestic and foreign related party set on a
transaction-by-transaction basis are at arms length. The
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Netherlands
Whats new
The Dutch government on 26 November 2013
published a new transfer pricing decree that combines,
updates, and clarifies prior transfer pricing guidance.
In the decree, the government endorses the direct
application of the OECD transfer pricing guidelines
as an appropriate explanation and clarification of
the arms principle as codified in Article 8b of the
Corporate Income Tax Act 1969. The new decree also
focuses on areas in which the OECD guidelines leave
space for individual interpretation, or where there is
potential uncertainty from a Dutch perspective.
General information
Tax authority and law
Netherlands Revenue. Corporate Income Tax Act Article
8b and 8c.
Regulations, rulings, guidelines
Transfer Pricing Decree, November 26, 2013, IFZ
2013/184M;
Decree on APAs, ATRs, Financial Service Entities, August
11, 2004, DGB 2004/1338;
Decree on TP Coordination Group, August 11, 2004,
DGB 2004/1339;
APA Decree, August 11, 2004, IFZ 2004/124;
ATR Decree, August 11, 2004, IFZ 2004/125;
Decree on Financial service companies, August 11, 2004,
IFZ 2004/126; and
Q&A Decree re financial service companies, August 11,
2004, IFZ 2004/127.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The definition of associated enterprises in article 8b
Corporate Income Tax Act follows the wording of article
9 of the OECD Model Tax Convention. Companies are
considered to be associated if one company has an
equity participation in, or management control over
another enterprise, which provides the company sufficient
control to influence relationships that may give rise to
non-arms-length arrangements. A ruling from the Dutch
tax authorities can provide certainty on this topic.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes, the Dutch transfer pricing regulations follow the
Thijs Heijenrath
+31 6558 53691
[email protected]
Services issues
Are management fees deductible?
Yes. Specific guidance on management fees is
included in the Decree of November 26, 2013, nr.
IFZ 2013/184, the new transfer pricing decree.
Are management fees subject to withholding?
No.
May stock option costs be included in the cost
base for intercompany services charges?
Certain stock option costs might be included in
the cost base for intercompany services. The Dutch
Corporate Income Tax Act, under some circumstances,
excludes stock option costs from the tax base, making
them nondeductible.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. Netherlands follows Chapter VIII of the OECD Transfer
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Pricing Guidelines. Specific guidance on the relative contribution of CCA participants and their respective share in the
benefit is included in the Decree of November 16, 2013, nr
IFZ 2013/184, the new transfer pricing decree.
Are cost contribution or cost sharing
payments deductible?
Yes, unless an asset is capitalized. The company
may choose to deduct or to capitalize the
development costs of an intangible asset that is
expected to generate benefits in other years.
Are cost contribution or cost sharing payments subject
to withholding tax?
No.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Generally, capitalization of payments and amortization
over the economic life of the intangible. The maximum
amortization for goodwill is 10 percent of the value
per year.
Documentation and tax return disclosures
Tax return disclosures
There is an obligation to identify intragroup transactions.
Documentation requirements
There are statutory requirements for entities subject to the
Corporate Income Tax Act. Documentation should be part
of the taxpayers general books and records.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
No. In practice, an update is expected every few
years to account for normal business and market
developments, or when there is a significant change
in facts and circumstances.
Deadline to prepare documentation
For entities subject to the Corporate Income Tax
Act, documentation should be in place at the time
the intercompany transaction takes place.
Deadline to submit documentation
Upon request. If the documentation cannot be presented
upon request, a reasonable time (one to three months) will
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
An application for mutual agreement procedure may
be filed after notification of the tax assessment, and must
be filed within three years of notification, unless modified
by a treaty.
May CA develop new settlement positions?
Yes, unless the taxpayer has entered into a closing
agreement or received a court decision.
May taxpayer go to CA before paying tax?
Yes. The taxpayer may go to CA after receiving a final tax
assessment; accelerated CA is available upon request.
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New Zealand
Whats new
Transfer pricing continues to be a significant focal
point for the New Zealand Inland Revenue (IR). IR
is heavily scrutinizing all transfer pricing arrangements, particularly in relation to significant business
restructurings, transactions involving intangibles, and
financing arrangements. Businesses must be prepared
for questioning on their global structures and intercompany transactions, and ensure that transfer
pricing documentation that supports the arms length
nature of the taxpayers transactions with foreign
affiliates is on file.
IR has also made significant changes to the risk
review process, which has resulted in a more visible
and coordinated approach to the risk assessment
process for a greater population of taxpayers. IR
requests a Basic Compliance Package (BCP) from
selected taxpayers which consists of the taxpayers
group structure information, financial statements,
and tax reconciliations. A comprehensive Transfer
Pricing Questionnaire (TPQ) is typically requested as
part of the IRs review of the BCP.
General information
Tax authority and law
Inland Revenue (IR); Sections YD 5, GB 2, and
GC 6 14 of the Income Tax Act 2007.
Regulations, rulings, guidelines
The IR fully endorses and follows the OECD transfer
pricing guidelines in administering New Zealands
transfer pricing rules. The IR published transfer
pricing guidelines in 2000; however, these were
intended only to supplement the OECD guidelines,
and are unlikely to be updated in the future.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Any two companies are associated persons when there
is a group of persons that have a 50 percent or greater
voting, market value, or income interest in the two
companies, or control of the two companies by any
other means (section YB 2(1)). There are also definitions
of associated persons for persons, partnerships, and
trusts. An anti-avoidance provision (section GB 2) requires
compliance with the transfer pricing rules in case of an
arrangement that has a purpose or effect of defeating
the intent and application of the transfer pricing rules.
Diana Maitland
+ 64 4 470 3630
dmaitland@
deloitte.co.nz
Priority of methods
Taxpayers must use the most reliable method. Transactionbased methods are preferred over profit-based methods.
Availability of benchmarking/comparative data
Limited public New Zealand comparable data is available
regarding companies and certain transaction types.
Are foreign comparables acceptable to
local tax authorities?
The use of foreign comparable companies is permitted in
cases in which there are no sufficiently comparable New
Zealand companies and the foreign comparable companies
are resident in markets similar to that of New Zealand.
Services issues
Are management fees deductible?
Yes, to the extent the fees are incurred by the taxpayer
and are consistent with the arms length principle.
Are management fees subject to withholding?
Withholding tax obligations arise to the extent the fees
constitute royalties in accordance with Income Tax Act
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Documentation requirements
There is no specific statutory requirement in New Zealand
that taxpayers prepare transfer pricing documentation. However, the legislation does require taxpayers to
determine their transfer prices in accordance with the
arms length principle, and the IR has stated that transfer
pricing documentation is central to the process of justifying
and explaining pricing of cross-border transactions. New
Zealand is unique in that the burden of proof (that prices
are not arms length) initially rests with the IR. Accordingly,
while there is no explicit requirement to prepare transfer
pricing documentation, taxpayers who prepare and
maintain transfer pricing documentation are more likely
to ensure that the burden of proof remains with the IR,
thus mitigating their transfer pricing risk in New Zealand.
Lack of documentation may also result in the application
of shortfall penalties to any transfer pricing adjustment
proposed by the IR.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
There is no specific statutory requirement in New Zealand
requiring the completion of transfer pricing documentation. However, as stated, the completion of transfer
pricing documentation is now considered by IR as essential
to showing compliance with the arms length principle
as contained in the tax legislation. The IR will look to
the OECD transfer pricing guidelines when considering
matters such as frequency of updates for transfer pricing
documentation.
Deadline to prepare documentation
There is no statutory deadline for preparation of documentation.
Deadline to submit documentation
Documentation must be submitted upon request, typically
within a 30-day response period.
Deadline to file income tax return
The due date for filing an income tax return depends on
the balance date (year-end) of the taxpayer. Additionally,
if a tax agent completes the tax return, there may be an
extension of time for filing the return.
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communicated in writing. There are also specific notification deadlines included in a number of New Zealands
income tax treaties.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There are no specific provisions in place. It is generally
expected that a taxpayer can request competent authority
assistance once the proposed adjustment has been
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Norway
Whats new
The transfer pricing landscape in Norway remained
relatively stable throughout 2013. The Norwegian
tax authorities are continuing an APA pilot study, and
a formal APA program is expected to be introduced
upon its completion.
Norways approved budget for 2014 included a
limitation on the interest deduction for related-party
debt. The proposed interest limitation rules apply to
entities with net related-party interest expenses in
a year of NOK 3 million or more. The rules broadly
limit a Norwegian entitys annual tax relief on interest
expenses to a maximum of 30 percent of an adjusted
EBITDA. Excess interest deductions can be carried
forward and may be tax deductible for 10 years. The
new rules are an additional factor to consider when
evaluating debt for thin capitalization and transfer
pricing purposes. Significantly, third-party debt that
is subject to a guarantee from a related party is
considered related-party debt and hence is potentially
subject to the limitation.
General information
Tax authority and law
Tax Directorate (Skattedirektoratet). The General Tax Act
section 13-1.
Regulations, rulings, guidelines
The arms length principle is incorporated in
the General Tax Act section 13-1. Generally, the
OECD transfer pricing guidelines apply.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply when there is community of
interest between parties. Filing and documentation rules
apply if there is at least 50 percent direct or indirect joint
ownership. The tax authorities will most likely continue
to focus on transactions when there is direct or indirect
ownership of more than 50 percent.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes, the Norwegian tax authorities broadly follow the
OECD transfer pricing guidelines and the Report on the
Attribution of Profits to Permanent Establishments.
Hans-Martin Jrgensen
+47 23 27 96 35
[email protected]
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OECD
Whats new
The OECD on 12 February 2013 released its first
report on base erosion and profit shifting (BEPS), with
the goal of making the case for action by showing
the extent of the problem. The report concluded
that BEPS is a significant problem for OECD member
and non-member states. The key areas of concern
include, among others, transfer pricing, in particular
the shifting of risks and intangibles, the artificial
splitting of assets between different legal owners
and transactions within a group that would rarely
take place with third parties, and the tax treatment
of related-party debt, insurance and other intragroup
financial arrangements.
As part of the BEPS project, the OECD on 30 July
2013 issued a revised Discussion Draft on Transfer
Pricing Aspects of Intangibles for public consultation,
and on 13 January 2014 released a Discussion Draft
on Transfer Pricing Documentation and Countryby-Country Reporting that seeks to establish what
information should be reported by MNEs when
filing tax returns in every country where they have a
taxable presence.
General information
Tax authority and law
Council of Organization for Economic Cooperation
and Development (OECD); Articles 9 and 25
of the OECD Model Tax Convention.
Regulations, rulings, guidelines
Transfer Pricing Guidelines for Multinational Enterprises
and Tax Administrations (as amended). The OECD
transfer pricing guidelines do not always have a legally
binding effect in domestic law, but carry considerable
weight and govern the application of Article 9 of the
OECD Model Tax Convention in international law.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Two enterprises are associated if one participates
directly or indirectly in the management, control, or
capital of the other, or if both are under common
control. However, domestic transfer pricing rules must
operate to bring a taxpayer into a charging situation.
For instance, the OECD transfer pricing guidelines do
not specify a control relationship and are thus very
widely drawn: domestic rules may mean that enter-
Edward Morris
+44 20 7007 6568
[email protected]
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Documentation requirements
Depends on local law. The OECD transfer pricing guidelines
do not provide relief from documentation requirements
imposed under local laws. It is reasonable for tax authorities to expect taxpayers to prepare and maintain such
material. As part of the BEPS project, the OECD is establishing preferred documentation requirements that OECD
member states will be encouraged to incorporate into
domestic law.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Determined under local law. Chapter IX of the OECD
transfer pricing guidelines analyzes business restructuring situations in which commissionaire structures
are frequently seen. Commissionaire structures are
being looked at as part of the BEPS project.
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Self-initiated adjustments
Depends on local law. Self-initiated adjustments are not
accepted by many OECD member countries without
considerable scrutiny. There is an acknowledgment
that self-initiated adjustments may lead to some
countries denying the availability of a Mutual
Agreement Procedure to resolve any double taxation,
though the OECD does not recommend this.
Statute of limitations on assessment
for transfer pricing adjustments
Determined under local law.
Taxpayer set-offs for other related-party transactions
Depends on local law. Intentional set-offs should be
assessed in accordance with the arms length principle to
quantify the values claimed as set-offs. Tax administrators
have discretion to grant or deny a taxpayers request for
reduction in an adjustment based on unintentional overreporting of taxable income. Documentation should establish
that the set-offs were intentional and would have affected
the pricing between the parties at arms length.
Interest and penalties
Additional assessment payment deadline
Depends on local law.
Penalty on transfer pricing assessment
Depends on local law. However, the OECD transfer
pricing guidelines recognize that promoting compliance
should be the primary objective of civil tax penalties.
Is interest charged on penalties?
Depends on local law. The OECD is silent on this matter.
Is interest payable when a refund
is due to the taxpayer?
The OECD transfer pricing guidelines make no recommendation in this regard, but there is an acknowledged
international consensus that, just as late payment of tax
attracts an interest charge, then any refund of tax should
also carry interest.
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Peru
Whats new
Perus tax authority (SUNAT) was more active in
transfer pricing issues in 2013 than it had been previously, increasing the number of information requests
related to transfer pricing technical studies from prior
years. In May the tax authorities published guidance
that made the presentation of a transfer pricing study
annually with the transfer pricing return mandatory.
The tax authorities also introduced a new version
of the software used to submit the transfer pricing
return, and set the dates for filing. Finally, a resolution
issued in December introduced rules for the preparation and filing of APA applications.
General information
Tax authority and law
National Superintendence of Tax Administration (SUNAT).
Articles 32 and 32-A of the Income Tax Law. Effective for
transactions from January 1, 2001.
Regulations, rulings, guidelines
Articles 24 and 108-118 of the Income Tax Regulations
(Supreme Decree 122-94-EF, modified by Supreme Decree
190-2005-EF and Supreme Decree No 258-2012-EF) and
Resolution 167-2006-EF. Supreme Decree 258-2012-EF,
published December 18, 2012, amends the income tax
regulations, including the transfer pricing provisions.
Resolution 175-2013-EF, published May 30, 2013, sets
forth guidance on the obligation to submit a transfer
pricing technical study. Resolution 377-2013-EF provides
guidance on advance pricing agreements.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Related parties are those that share (1) partners or
common stockholders representing over 30 percent of
the capital, directly or indirectly; (2) common directors,
managers, or other executives with decision-making power
in financial and commercial agreements; (3) consolidation of financial statements;( 4) sales of assets and/or
services equal to, or higher than, 80 percent of the total
annual income in favor of one unrelated company or of
companies related between themselves and a 30 percent
of total annual cost for the buying party (both requirements must be met to be economically related); (5) joint
venture contracts with independent accounting, in transactions with their contracting parties; (6) permanent establishments in Peru in respect to the corresponding company
abroad; and (7) natural persons are included among
subjects under analysis, if applicable.
Gloria Guevara
+51 1 211 8585
GlGuevara@
deloitte.com
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes, if the cost portion corresponding to the Peruvian
taxpayer relates to actual services rendered in connection
with the generation of taxable income in Peru and the
amount is reasonable in relation to such income.
Are cost contribution or cost sharing
payments subject to withholding tax?
Yes, depending on the nature of the payment. For
instance, royalties for the use of, or license to use,
trademarks, patents, and know-how are subject to
income tax withholding.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Any payment abroad for the use or the right to use intangibles is subject to income tax withholding, but is deductible as an expense if it relates to the generation of taxable
income in Peru, and the amount is reasonable.
Documentation and tax return disclosures
Tax return disclosures
Taxpayers must file a transfer pricing tax return in June of
every year that includes a transfer pricing study and information regarding the transactions subject to the transfer
pricing regime.
Documentation requirements
Taxpayers must have a technical study that supports their
transfer pricing calculations, and that also indicates the
transfer pricing method applied. Detailed documentation
and information for each transaction and the technical
study must be made available to SUNAT during the established period. In 2013 the filing of the transfer pricing
technical study with the transfer pricing return became
mandatory; thus, from fiscal year 2012 onward, the
technical study must be submitted annually.
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Philippines
Whats new
The Philippines Secretary of Finance, upon the
recommendation of the Commissioner of Internal
Revenue, in January 2013 issued regulations that
provide guidelines on the arms length principle for
transfer pricing, which apply to both cross-border
and domestic transactions between associated
enterprises. The guidelines are largely based on the
arms length methods set out under the Organization
for Economic Cooperation and Developments
transfer pricing guidelines and adopt the use of arms
length principle as the most appropriate standard to
determine transfer prices of related parties.
General information
Tax authority and law
Bureau of Internal Revenue. The Philippines tax authorities
recently issued Revenue Regulations No. 2-2013, which
prescribe transfer pricing guidelines in the Philippines.
Regulations, rulings, guidelines
Revenue Regulations No. 2-2013 provide guidelines on
the arms length principle for transfer pricing, which apply
to both cross-border and domestic transactions between
associated enterprises. The guidelines are largely based on
the arms length methods set out under the OECD transfer
pricing guidelines.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
A controlled taxpayer is covered by the transfer pricing
rules. Any two or more organizations or trades, or
businesses owned or controlled directly or indirectly
by the same interests are covered.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes. The Philippines transfer pricing regulations apply to:
Cross-border transactions between associated enterprises; and
Domestic transactions between associated enterprises.
Methods and comparables
Acceptable methods
The transfer pricing regulations adhere to the methods
provided under the OECD transfer pricing guidelines, such
as the comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit split
method, and the transactional net margin method.
Priority of methods
The Bureau of Internal Revenue does not have a specific
preference for any method. Instead, the transfer pricing
method that produces the most reliable results, taking into
account the quality of available data and the degree of
accuracy of adjustments, should be utilized.
Availability of benchmarking/comparative data
There is no readily available data. Benchmarking and
selection of comparative data for local comparables may
be done manually by accessing the Philippine Securities
and Exchange Commission portal.
Are foreign comparables acceptable to
local tax authorities?
The Philippine transfer pricing regulations are silent
in this regard. The tax authorities prefer local sets of
comparables, but in the absence of good quality local
comparables, foreign comparables are acceptable.
Fredieric B. Landicho
+63 2 581 9043
[email protected]
Services issues
Are management fees deductible?
Yes.
Are management fees subject to withholding?
Normally, yes.
Myra V. Torres
+63 2 857 1559
[email protected]
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Documentation requirements
Adequate documentation must be maintained to enable
the taxpayer to defend its transfer pricing analysis, prevent
transfer pricing adjustments arising from tax examinations,
and support an application for MAP relief. While transfer
pricing documentation is not required to be submitted
upon filing of the income tax return, it should be retained
for the period provided under the Tax Code and submitted
to the BIR upon request.
Transfer pricing documentation should include, but is not
limited to:
Organizational structure
Nature of the business/industry and market conditions
Controlled transactions
Assumptions, strategies, policies
Cost contribution arrangements
Comparability, functional, and risk analyses
Selection of the transfer pricing method
Application of the transfer pricing method
Background documents
Index to documents
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
A fresh benchmarking every year is not required under
the Philippine transfer pricing guidelines, although it is
generally advisable. At a minimum, the transfer pricing
study and benchmarking should be updated every
three years.
Deadline to prepare documentation
An agreement must be prepared prior to the transaction. The Bureau of Internal Revenue does not require
documentation to be submitted when the tax returns are
filed. Documentation should be kept by taxpayers, and is
only required to be submitted upon request by the BIR.
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Poland
Whats new
In the single most important legislative amendment
enacted in Poland during the last 10 years, the
transfer pricing regulations were significantly
amended in July 2013. The changes reflect the
update of the OECD transfer pricing guidelines, and
implement conclusions developed by the EU Joint
Transfer Pricing Forum in the area of low value-added
services. As a result of the amendment, the issue
of business restructuring has become particularly
important, and is expected to become a subject of
deeper consideration by the tax authorities.
An increasing number of transfer pricing audits have
been initiated. The tax authorities are frequently
investigating not only a taxpayers transfer pricing
documentation, but also the actual conditions of
transactions between related parties (including
calculations of prices and the profitability of related
parties). Benchmarking studies are also being
requested more frequently.
General information
Tax authority and law
Inland Revenue; articles 9a, 11, 19, and 27 of Corporate
Income Tax Act; articles 25, 25a, and 45 of Personal
Income Tax Act; section IIa of Tax Ordinance of 29
August 1997 (APAs), Convention on the Elimination of
Double Taxation in Connection with the Adjustment of
Profits of Associated Enterprises (23 August 2007).
Regulations, rulings, guidelines
Transfer Pricing Decree of 10 September 2009 (with
further amendments), Decree on Tax Havens of 23
June 2013, Ordinance on APA Realization of 31 May
2006. Also, amendment to the Accounting Act of 18
March 2008, which requires entities to disclose in their
financial statements information on significant transactions with related entities that are not at arms length.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Five percent direct or indirect share in capital. Other types
of relationship (such as effective control, family relationships, and relationships resulting from employment or
property) are also taken into account. The rules apply to
both Polish and foreign parties, and to both domestic and
cross-border transactions. The transfer pricing restrictions
apply also to foreign entrepreneurs operating through
Iwona Georgijew
+48 22 511 08 24
igeorgijew@
deloitteCE.com
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The method and manner of calculating profits and specification of the price of the object of transaction used does
not mean that benchmarking analysis is required to receive
penalty protection related to documentation.
Recent court cases have provided new interpretations of
the documentation requirements. A few transfer pricing
court verdicts indicated that transfer pricing documentation must demonstrate the arms length character of the
intercompany dealings. This means that the importance
of comparable benchmarks verifying the level of transfer
prices is increasing, and they are more frequently required
by tax auditors.
Any additional assessed income is taxed at the appropriate tax rate (19 percent or 50 percent) and latepayment interest on the additional tax due applies.
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Portugal
Whats new
The Portuguese government on 15 October 2013
presented to Parliament a draft law to reform the
corporate tax code that was approved and will
be applicable to tax periods starting on or after 1
January 2014. The main changes to the transfer
pricing rules include a change of the shareholding
threshold criteria from 10 to 20 percent of participation in the share capital or voting rights of another
entity for two entities to be deemed related parties,
the extension of the scope of the transfer pricing
rules to dealings between foreign branches of a
Portuguese head office, and the introduction of
unilateral advance pricing agreements that involve
entities resident in countries that have concluded tax
treaties with Portugal.
General information
Tax authority and law
Tax and Customs Authority (Autoridade Tributria e
Aduaneira) (A.T.); Article 63 and Article 138 of the Corporate
Income Tax Code, applicable for tax years beginning after
December 31, 2001.
Regulations, rulings, guidelines
General guidance on transfer pricing Ministerial Order
(Portaria) #1446-C/2001; advance pricing agreements
Ministerial Order (Portaria) #620-A/2008.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Under the provisions in the Portuguese Corporate Income
Tax, effective for tax year 2013 (2014), any of the
following conditions would define the relationship as one
between related parties:
(i) one entity participates directly or indirectly in at least
20 percent of the share capital or voting rights of another
entity; (ii) both entities are at least 20 percent owned,
directly or indirectly, by the same legal entity; (iii) an
entity and the members of its corporate bodies, or any
administration, direction, management, or supervising
boards; (iv) entities in which the majority of the Board of
Directors are constituted by the same persons; (v) entities
related under a subordination agreement or any other
agreement of a similar nature; (vi) holding companies as
stated in applicable document for the obligation to obtain
consolidated accounts (holding company as stated in the
Portuguese Commercial Companies Code); (vii) economic,
Rosa Soares
+351 21 042 75 18
[email protected]
Patrcia Matos
+351 21 042 75 34
[email protected]
Priority of methods
There is a hierarchy of methods. Transaction-based
methods are preferred over profit-based methods,
so that the use of an indirect profit-based method
must include a justification demonstrating the impossibility of using a transaction-based method.
Availability of benchmarking/comparative data
Tax authorities show a preference for local comparables, and despite the fact that Portugal has a relatively
small economy, local comparable data for independent
companies is usually available through the SABI database
covering Portuguese companies. However, in the absence
of adequate data, Spanish companies may be used.
Are foreign comparables acceptable to
local tax authorities?
Local comparables are preferred, but others
may be permitted if it can be demonstrated
that Iberian comparables are not available.
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Services issues
Are management fees deductible?
Yes. However, the management fees must reflect
the economic benefit and the arms length principle.
Specific rules apply to intragroup services, as defined
in the applicable transfer pricing ministerial order.
Are management fees subject to withholding?
Yes. However, if a double taxation agreement is available,
the management fees will not be subject to withholding
tax, provided procedures are followed.
May stock option costs be included in the cost
base for intercompany services charges?
Yes, provided the company receives an economic benefit.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. Specific documentation requirements are set out for
cost contribution arrangements.
Are cost contribution or cost sharing
payments deductible?
Portugal has no formal guidelines on this issue. Payments
will be deemed deductible provided they comply with the
domestic general deduction provision.
Are cost contribution or cost sharing
payments subject to withholding tax?
Yes. However, if payments are structured as services, there
is no withholding tax under income tax treaties, if certain
procedures are followed.
Documentation requirements
Taxpayers with net sales and other operating income
exceeding EUR 3 million in the previous year must maintain
a wide range of contemporaneous documentation. The
Portuguese transfer pricing regime determines two types of
requirements, namely (i) a declarative requirement of filing
an Annual Tax and Accounting Statement and (ii) a documentation requirement (preparation of the annual transfer
pricing documentation file).
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
The transfer pricing documentation file should be prepared
annually, and should consist of a complete report encompassing all relevant information. ,However, if there are no
major changes in the taxpayers business functions and
risks compared with the preceding year, it is acceptable
(within a three-year period) to limit the economic study to
updating the comparables, in line with the OECD transfer
pricing guidelines approach.
Deadline to prepare documentation
Documentation must be prepared by the 15th day
of the seventh month following the tax year-end.
Deadline to submit documentation
Documentation must be submitted upon request.
Deadline to file income tax return
The Annual Tax and Accounting Statement must be
filed by the 15th day of the seventh month following
the tax year-end.
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Self-initiated adjustments
Adjustments in both original and amended returns after
year-end are permitted as long as the transaction takes
place with a foreign related party and there is no decrease
in taxable income. Adjustments to decrease taxable
income are allowed only after an administrative appeal.
Statute of limitations on assessment
for transfer pricing adjustments
General tax law provisions apply. Tax assessments may
be issued only within a four-year period following the
last day of the tax year concerned, but an exception is
made for undeclared income obtained from countries
or territories with clearly more favorable tax regimes,
in which case the statute of limitations is 12 years.
Taxpayer set-offs for other related-party transactions
There is no formal provision on this issue.
Interest and penalties
Additional assessment payment deadline
Taxes are payable within 30 days from the date of assessment, on the combined amount of the defaulted tax and
the appropriate compensatory interest.
Penalty on transfer pricing assessment
Specific transfer pricing penalties (from 500 up to
10,000) apply for failure to present transfer pricing
documentation within the time frame determined by the
tax authorities. Should the taxpayer be subject to a transfer
pricing adjustment, no further specific penalties apply.
In addition, depending on the circumstances, general
tax penalties of up to 150,000 apply for refusal to
provide information, or for providing incorrect or
incomplete information.
Is interest charged on penalties?
No.
Is interest payable when a refund
is due to the taxpayer?
Yes, compensatory interest applies if a refund
is due to the taxpayer and the legal deadline
for payment of the refund is not met.
Reduction in transfer pricing penalties
Penalties may be reduced, depending on
the circumstances.
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Romania
Whats new
The Romanian business environment faces two major
trends: an increase in the number of intercompany
dealings by corporations trying to optimize their operations and an intensification of tax audits focused
on identifying new sources of income for the state
budget. These two conflicting goals have led to more
frequent transfer pricing disputes between taxpayers
and tax authorities. Following the international trend,
the Romanian tax authorities have intensified their
transfer pricing audits.
In terms of legislative news, a change was enacted
in February 2013 to the VAT legislation to allow the
tax authorities to adjust at market value the taxable
base of intercompany transactions involving a party
with limited VAT deductibility rights. In light of these
changes, it is expected that the number of VAT
adjustments derived from transfer pricing adjustments will increase for some categories of taxpayers,
including those operating in the financial and healthcare sectors.
General information
Tax authority and law
National Agency for Fiscal Administration and Ministry of
Public Finance, Romanian Fiscal Code.
Regulations, rulings, guidelines
The OECD transfer pricing guidelines, methodological
norms of the Romanian Fiscal Code, Order 222/2008
regarding the content of the transfer pricing file issued by
the National Agency for Fiscal Administration, Government
Decision no. 529/2007 regarding the approval of APAs and
advance fiscal solutions.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
According to Romanian transfer pricing legislation, two
legal entities are related parties if:
One entity holds directly or indirectly (through the shareholding of related entities) a minimum of 25 percent of
the number/value of shares or voting rights in the other
entity, or it effectively controls the other entity; or
One entity holds directly or indirectly (through the
shareholding of related entities) a minimum of 25
percent of the number/value of shares or voting
rights in the two entities.
Dan Bdin
+40 21 2075 392
[email protected]
Priority of methods
The method that yields the most accurate results has
priority. However, transaction-based methods are preferred
over profit- based methods.
Availability of benchmarking/comparative data
Usually, the Amadeus Bureau van Dijk database is used.
However, if there are other ways to obtain relevant
financial data available for comparable companies, such
information may be used.
Are foreign comparables acceptable
to local tax authorities?
Yes. When a benchmark study is performed, it is recommended that Romanian comparables be used. However,
if there is not enough information within the Romanian
market, comparable companies from the European Union
or the international level are accepted.
Services issues
Are management fees deductible?
Yes, if certain conditions are met (the management
services were actually rendered, there is evidence regarding
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Russia
Whats new
The deadline for Russias first reporting period
regarding 2012 controlled transactions was
November 20, 2013. In response, approximately
4,500 taxpayers uploaded notifications on their
controlled transactions to a federal database.
During 2013 the Russian tax authorities were also
involved in the processing of advance pricing agreements since 2012 they have received more than
40 APA requests, and less than 10 were concluded
in 2013.
General information
Tax authority and law
Russian Tax Office (Federal Tax Service); Tax Code of the
Russian Federation Part 1: Articles 105.1 105.25,
129.3, 129.4, 154, 161, 187, 208, 211, 220, 230,
250, 274, 301, 304, 307, 308, 333.33, 340, 346.6.
Regulations, rulings, guidelines
Among the main guidelines issued by the FTS
regarding the new transfer rules are:
Clarifications on preparation and submission of transfer
pricing documentation for control purposes (Letter N
OA-4-13/14433@ 31.08.2012);
The notification form for controlled transactions (Precept
#MMB-7-13/524@ 27 July 2012); and
Clarifications on APA procedure (Letter No-OA-4-13/85@
12 January 2012).
In 2013, the Russian Federal Tax Service issued additional
clarifications and regulations on the application of the new
transfer pricing law:
Amendments to the Russian Tax Code regarding the
application of transfer pricing rules to financial transactions (effective 1 January 2014):
Clarifications on submission, admission, and processing
of the notification for controlled transactions (Letter
No-OA-4-13/6612@ 10 April 2013).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The following transactions are subject to transfer pricing
control in Russia: all cross-border related-party transactions, cross-border transactions of goods traded on
commodity markets (if the transaction amount exceeds
RUB 60 million), cross-border transactions with offshore
residents (if the transaction amount exceeds RUB 60
Dmitry Kulakov
+7 495 787 0600
[email protected]
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Documentation requirements
According to the Russian Tax Code, companies must keep
specific transfer pricing documentation if the total income
from all controlled transactions received by the taxpayer
from the same counterparty exceeds RUB 80 million in
2013 (no cap in 2014). The transfer pricing documentation must contain the following information: structure
and terms of the transaction, parties involved and their
functions, pricing method, a description of the transfer
pricing methods, sources of information used and rationale
for the choice of transfer pricing method, information on
other factors that might influence the price (for example,
marketing strategy), and information on adjustments to
the tax base.
Are the documentation requirements annual
requirements? If so, what do they involve each
year (for example, a complete report, a memo
identifying any changes and the updated
transaction values?) Must comparables be
refreshed or a new search performed?
There is no requirement to keep contemporaneous documentation. However, documentation should be submitted
within 30 days upon request. Failure to submit transfer
pricing documentation could lead to additional penalties
(up to 40 percent). The documentation content requirements generally are in line with the OECD format. A new
benchmark study should be performed every year.
Deadline to prepare documentation
In accordance with the Russian Tax Code, taxpayers will be
required to submit information on controlled transactions
(i.e., notifications) in a calendar year to the tax authorities
no later than May 20, and the tax authorities may request
documentation after June 1 of the subsequent year.
Deadline to submit documentation
The tax authorities are allowed to request transfer pricing
documentation from taxpayers no later than 1 June of the
year following the calendar year in which the controlled
transactions were performed. Taxpayers are required to
file documentation with the tax authorities within 30 days
after receiving a request.
Deadline to file income tax return
In general, income tax returns must be filed no later
than 28 March following the end of the tax year.
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Singapore
Whats new
Singapore did not see any major changes to its
existing transfer pricing laws and guidelines. But
in late 2013, the IRAS commenced the process of
reviewing the existing guidelines, with a view to
update or rewrite the guidelines in light of substantial
changes to the OECD transfer pricing guidelines, as
well as to provide guidance on local requirements in
relation to transfer pricing. The IRAS will undertake
a consultation on this issue in 2014, and changes
to the guidelines are expected to be issued
soon thereafter.
General information
Tax authority and law
Inland Revenue Authority of Singapore (IRAS); Section 34D,
included in Singapore Income Tax Act in 2010, establishes
the legal requirement for related-party transactions to be
carried out at arms length. Section 34D provides IRAS with
the legal authority to enforce the arms length principle
and make adjustments if related-party transactions are not
carried out on an arms length basis.
Regulations, rulings, guidelines
IRAS Transfer Pricing Guidelines were officially issued
on 23 February 2006. They endorse the arms length
principle, as defined by the OECD. IRAS issued
supplementary guidelines on APAs on 20 October
2008. Additional guidelines on related-party loans
and services were issued on 23 February 2009.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Singapores tax authority expects related-party transactions
to be carried out at arms length. Persons are considered
related parties when one person, directly or indirectly, has
the ability to control the other, or when both of them,
directly or indirectly, are under the control of a common
person. Related parties include associated enterprises
and separately taxable entities of an enterprise, such as
permanent establishments of the enterprise.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes, the use of transfer pricing analyses to
compute profits attributable to a permanent
establishment or branch is permissible.
Services issues
Are management fees deductible?
Yes, if they are incurred wholly and exclusively in the
production of assessable income of the payer, are not
referable to a stewardship function, and the quantum
satisfies the arms length standard. For reimbursement/cost
allocation, the expense must not be specifically prohibited
under the Singapore Income Tax Act.
Are management fees subject to withholding?
Following the enactment of the Income Tax (Amendment)
Act 2009, withholding tax will no longer apply to management fees for services rendered by nonresidents entirely
outside of Singapore, subject to certain conditions.
May stock option costs be included in the cost
base for intercompany services charges?
If this cost is considered part of the fully absorbed cost
required to provide the service, it should be included
in the determination of the arms length service fee.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, but these arrangements give rise to significant risk of
creating a permanent establishment.
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Are the documentation requirements annual requirements? If so, what do they involve each year (for
example, a complete report, a memo identifying any
changes and the updated transaction values?) Must
comparables be refreshed or a new search performed?
Documentation is expected to be kept updated. In cases
when there is no major change to the business and its
related-party arrangements, a new study (including a new
benchmarking study/search) is typically expected every two
to three years. In the intervening years, the financial results
of the comparables should be updated.
Deadline to prepare documentation
There is no statutory deadline for the preparation
of transfer pricing documentation in Singapore.
Deadline to submit documentation
Documentation must be submitted in a timely manner
when requested. From experience, this is typically no more
than a month from the time of the request.
Deadline to file income tax return
November 30 of each calendar year.
Acceptable languages for documentation
Documentation must be in English.
Transfer pricing adjustments
Must the transfer prices reflected on an
income tax return be the same as those
reflected in financial statements? In other
words, are book/tax differences allowed?
The transfer prices reflected on an income tax return and
financial statements should be the same.
Self-initiated adjustments
Not permitted.
Statute of limitations on assessment
for transfer pricing adjustments
Six years from the year of assessment to which the income/
expense is related. Effective from year of assessment 2008,
this period is reduced to four years. In cases of tax evasion,
the period is unlimited.
Taxpayer set-offs for other related-party transactions
Generally not permitted.
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Slovakia
Whats new
The National Council of the Slovak Republic
amended several transfer pricing rules related to
the selection of the transfer pricing method, the
submission of transfer pricing documentation, and
decisions on the approval of the pricing method.
Under the new rules, transfer pricing methods based
on comparison of prices are no longer preferred over
other transfer pricing methods, and transfer pricing
documentation may be requested even if no tax audit
is being performed.
General information
Tax authority and law
Slovak tax authorities; Section 2(n), Section 17(5), and
Section 18 of ITA.
Regulations, rulings, guidelines
ITA, MF/8288/2009-72, OECD transfer pricing guidelines.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The definition of related parties for transfer pricing
purposes is found in Section 2 (n), (o), (p), and (r) of the
ITA. The nature/extent of a transaction is decisive, as a
substance-over-form rule applies in the Slovak Republic.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes. The local transfer pricing rules follow the principles
and standards laid down by the OECD Report on the
Attribution of Profits to Permanent Establishments.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method,
the resale price method, the cost plus method, the
profit split method, and the transactional net margin
method (TNMM).
Priority of methods
Effective 1 January 2014, transfer pricing methods based
on a comparison of prices will no longer be preferred over
other transfer pricing methods.
Marek Romancov
+420 246 042 889
mromancov@
deloitteCE.com
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Generally, yes; however, tax deductibility is determined on
a case-by-case basis.
Are cost contribution or cost sharing
payments deductible?
Generally, yes; however, tax deductibility is determined on
a case-by-case basis.
Are cost contribution or cost sharing
payments subject to withholding tax?
Generally, no.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Payments are deductible or amortizable.
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Slovenia
Whats new
Transfer pricing in Slovenia is a developing issue,
and it has increasingly become the focus of tax
audit procedures in recent years. The Slovenian tax
authorities have organized a transfer pricing team
specializing in transfer pricing inspections, which has
been accompanied by a growing number of transfer
pricing adjustments imposed on audited taxpayers.
General information
Tax authority and law
Tax Administration of the Republic of Slovenia. Corporate
Income Tax Act (Official Gazette of the Republic of
Slovenia, no.117/06 to 81/13), articles 16-19, 32,72; Tax
Procedure Act (Official Gazette of the Republic of Slovenia,
no. 13/11 to 111/13) article 382.
Regulations, rulings, guidelines
Rules on transfer prices (Official Gazette of the Republic of
Slovenia, no. 141/06 to 4/12).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply to transactions between
entities that are connected either through direct or
indirect ownership, control, or voting rights equal to
at least 25 percent, or when transaction are not
conducted at arms length.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
The comparable uncontrolled price method (CUP), the resale
price method, the cost plus method, the profit split method,
and the transactional net margin method (TNMM).
Priority of methods
The most appropriate method considering the circumstances should be used. If the comparable market price
can be determined with equal reliability using transactionbased methods or profit-based methods, the use of
traditional transaction-based methods is preferred. The
comparable uncontrolled price method is preferred over
other methods.
Andreja kofi
Klanjek
+386 1 307 2841
[email protected]
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Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
A request may be submitted after the proposed adjustment is communicated to the taxpayer in writing when a
tax audit is finished.
May CA develop new settlement positions?
There are no special provisions in the legislation.
May taxpayer go to CA before paying tax?
There is no formal procedure in the legislation; however
the general practice is that taxes must be paid in accordance with the tax authorities decision based on the
findings of the tax audit. After all taxes due are settled,
mutual agreement procedures can start.
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South Africa
Whats new
South Africa has well established transfer pricing
rules based on the OECD transfer pricing guidelines.
The legislation was enacted in 1995 and a detailed
Transfer Pricing Practice Note was issued by the South
African Revenue Service (SARS) in 1999. The (SARS)
has an experienced specialist team dealing with
transfer pricing, and this is seen as an ongoing area
of opportunity for revenue collection.
Taxpayers who receive transfer pricing queries from
SARS are strongly advised to act on them and to try
to resolve them with SARS before they escalate to the
point where an assessment is issued. In our experience, once a matter reaches this stage, it is resolved
only with great difficulty.
Recent changes to South Africas tax law have placed
a greater compliance burden on taxpayers. The
consequences of adjustments are more serious, and
transfer pricing is more than ever an area requiring
careful planning in the South African environment.
General information
Tax authority and law
South African Revenue Service (SARS); section 31 of
the Income Tax Act No 58 of 1962 (effective July 19,
1995). Section 9D also requires the consideration of
transactions between a controlled foreign entity (CFE)
and a connected person to reflect an arms length
price consistent with the provisions of Section 31.
An amended version of section 31 became effective
for years commencing after April 1, 2012. The changes
have affected the consequences of adjustments, as
discussed below. In addition, the amended section
has changed the emphasis from arms length pricing
to the arms length nature of the entire relationship
between the parties. Therefore, SARS will consider not
merely the pricing of a transaction but also any artificial (non-arms-length) aspects of the entire relationship. SARS is expected to issue a new practice note
during 2013 to take these changes into account.
Regulations, rulings, guidelines
Practice Note 7, issued August 6, 1999; Practice Note 2
(thin capitalization), issued May 14, 1996, and amended
May 17, 2002, as well as the OECD Guidelines.
Billy Joubert
+27 11 806 5352
[email protected]
Priority of methods
There is no priority of methods; however, the most
reliable method should be selected and the choice
should be documented.
Availability of benchmarking/comparative data
Comparables data regarding South African companies is
not publicly available.
Are foreign comparables acceptable to
local tax authorities?
Yes. Pan-European comparables are preferred, although
comparables from other regions may be acceptable if the
reasons for the use of those comparables are explained in
the policy document.
Services issues
Are management fees deductible?
Generally, yes. When an indirect method of allocation has
been used, it is necessary to apply to the South African
Reserve Bank to remit the management fees. This application must be made on an annual basis.
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Are the documentation requirements annual requirements? If so, what do they involve each year (for
example, a complete report, a memo identifying any
changes and the updated transaction values?) Must
comparables be refreshed or a new search performed?
Documentation is not compulsory. However, taxpayers are
strongly advised to have documentation if they are parties
to significant cross-border intragroup transactions. The
South African documentation requirements are very similar
to those found in the OECD transfer pricing guidelines.
One such requirement is that the documentation must be
contemporaneous. This means that documentation should
evolve so that it continues to reflect the taxpayers transactions and circumstances. However, there is no specific form
of update prescribed. In practice, annual updates may take
the form of a memorandum that supplements the information in a previous document, or fresh documentation. As
a general rule of thumb, it is considered that comparables
should be updated every three years.
Deadline to prepare documentation
There is no formal deadline for preparing documentation.
However, there are questions in the income tax return
regarding whether or not a transfer pricing policy has
been prepared.
The requirements of the tax return have also varied from
year to year. In some years taxpayers who record that
they have documentation have been required to submit it.
Therefore, taxpayers should carefully consider the submission requirements each year. It is considered a best practice
for taxpayers to submit their documentation even in years
when it is not required by SARS.
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Spain
Whats new
The most important event in Spains transfer pricing
practice in 2013 was the Constitutional Courts
judgment dismissing the charge of unconstitutionality raised by the Supreme Court regarding the
Spanish transfer pricing penalty regime. The Supreme
Court challenged the penalty regime because it
considered that it might be against the principles of
legal certainty and proportionality recognized in the
Spanish Constitution.
The Constitutional Court determined that the penalty
regime established in Royal Decree 1793/2008 does not
fail to comply with the Spanish Constitution, because
Law 36/2006 contains the basic definition of prohibited behaviors, and therefore the law complies with
the principle of legal certainty. Regarding the proportionality of the penalties, the Constitutional Court
concluded that Spains ordinary courts are responsible
for determining whether there is proportionality
between the illicit actions and the respective penalties.
General information
Tax authority and law
Tax Administration; Corporate Income Tax Act (Royal
Legislative Degree 4/2004) and Nonresidents Tax Act
(Royal Legislative Decree 5/2004). Article 16 of CITA (Royal
Legislative Degree 4/2004) governing transfer pricing rules
was changed significantly by the Tax Fraud Prevention Act
published on Nov. 30, 2006 (Law 36/2006). Royal Decree
1793/2008 modifies the Corporate Income Tax Regulation.
New regulations were approved in 2010 Royal Decree
6/2010 on the simplification of the documentation requirements for small and medium-sized enterprises, and Royal
Decree 897/2010, which deals with the simplification of
taxpayer documentation in general.
Regulations, rulings, guidelines
Effective February 19, 2009, Royal Decree 1793/2008
provides detailed rules regarding documentation, penalty
procedures, tax audit transfer pricing process, secondary
adjustments, and an APA-specific procedure. Royal Decree
1794/2008, governing the Mutual Agreement Procedure
and EU Arbitration Convention (EU/90/436) from a Spanish
domestic perspective.
It is important to mention that effective January 1, 2012,
Royal Decree 12/2012 provides that interest deductions
will be capped at 30 percent of EBITDA (earnings before
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Sweden
Whats new
The Swedish government introduced changes
to existing legislation on interest deductions on
intragroup debt. The rules, proposed to come into
effect on 1 January 2013, apply to interest expense
accruing after 31 December 2012. Under the amendments, the scope of the interest deduction restriction
would be broadened to include all intragroup debt,
regardless of the purpose or origin of the loan. The
definition of a group will be broadened to include
substantial influence between entities.
The exceptions to the interest deduction were
amended to include deductions made if the intragroup debt is based on sound commercial reasons.
The burden would be on the taxpayer to demonstrate
the business reasons underlying the debt arrangement. In essence, the rules governing intragroup debt
have become more stringent.
General information
Tax authority and law
Swedish Tax Administration (Skatteverket); Chapter
14 19-20 of the Swedish Income Tax Act.
Regulations, rulings, guidelines
Arms length principle (SFS 1999:1229; 14:19-20);
documentation requirements (SFS 2001:1227; 19:2a-2b);
APAs (SFS 2009:1289); case law (R 1991 ref. 107).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Direct or indirect management, supervision, ownership,
or control in another company is required. In determining whether control exists, a shareholder should
take into account share capital and voting power of
other shareholders, if an agreement regarding the
exercise of common control has been made between the
shareholders. Accordingly, if three unrelated taxpayers
each own one-third of a company and a shareholder
agreement regarding the exercise of common control
has been concluded, transactions between the company
and the shareholders will qualify as controlled transactions. Moreover, companies may be affiliated based on
either de jure or de facto control. The term covers legal
persons in which the same group of shareholders may
exercise control or that share the same management,
even if the shareholders are not the same. Accordingly,
if three unrelated taxpayers each own one-third of two
Elvira Allvin
+46 75 246 43 70
[email protected]
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Switzerland
Whats new
During 2013 the cantonal tax administrations in
Switzerland, at the Federal Tax Administrations
request, have tightened their audit activities
regarding transfer prices for cross-border transactions. Although the tax code has not changed,
taxpayers have been systematically asked to provide
evidence documentation regarding the arms
length nature of their intragroup transactions.
General information
Tax authority and law
In Switzerland, a distinction must be made between
cantonal and federal tax authorities. The country does
not have explicit transfer pricing legislation, although the
tax authorities may adjust unjustified expenses based
on Art. 58 of the Federal Taxes Act and Art. 24 of the
Harmonization of the Cantonal Tax Laws Act to adjust
the net profits of a taxpayer that does not meet the arms
length standard. As an OECD founding member state,
Switzerland adheres to the principles of the OECD transfer
pricing guidelines. Transfer prices between related parties
are increasingly verified and questioned as part of tax audits.
Regulations, rulings, guidelines
The Swiss tax authorities generally follow the OECD
transfer pricing guidelines. Specific regulations have
been issued on services (SFTA Circular 2004), debt/
equity ratio (SFTA Circular 1997), and interest
on intercompany loans (annual SFTA circulars).
Under the prevailing laws, a taxpayer must be in a
position to demonstrate, upon request, the arms
length nature of a related-party transaction.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
There are no specific rules regarding the definition of
related companies. The Swiss tax authorities generally
follow the OECDs definition of associated enterprises.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Because Switzerland adheres to the principles of the OECD
transfer pricing guidelines, the position published by the
OECD regarding the attribution of profits to permanent
establishments is binding on the Swiss tax authorities.
Hans Rudolf
Habermacher
+41 58 279 6327
hhabermacher@
deloitte.ch
Services issues
Are management fees deductible?
Yes, if the services are rendered and meet the arms length
standard, management services fees are tax deductible.
Are management fees subject to withholding?
No.
May stock option costs be included in the cost
base for intercompany services charges?
Employee stock option costs are not automatically tax
deductible, because certain cantonal tax authorities
challenge the notion that stock options may have been
issued without a cost to the company. These costs should
be analyzed based on the specific facts and circumstances
of each case to meet specific rules in Swiss tax law relating
to employee stock option costs.
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, but the tax authorities may consider such an
arrangement a permanent establishment of the
foreign principal company in Switzerland.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes.
Are cost contribution or cost sharing
payments deductible?
Yes, as long as the payments satisfy the arms
length standard.
Are cost contribution or cost sharing
payments subject to withholding tax?
No, as long as the price is at arms length. If it is not at
arms length, any deviation may be considered a deemed
dividend and therefore subject to withholding tax.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Buy-in payments are deductible or amortizable over the
useful life of the intangible (decided on a case-by-case
basis, depending on the facts and accounting treatment).
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Self-initiated adjustments
There is no formal procedure in this regard.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure. For MAP cases, the Swiss
authorities expect the taxpayer (or a consultant on its
behalf) to provide supporting material to strengthen the
negotiation position to eliminate double taxation.
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Taiwan
Whats new
The Taiwanese tax authorities in 2013 continued their
practice of insisting that related-party transactions
should be analyzed on an individual transaction basis.
Moreover, the tax authorities have been focusing
increasingly on transactions involving intangibles and
technical service fee.
General information
Tax authority and law
Ministry of Finance; Article 43-1 of Taiwan Income Tax Law.
Regulations, rulings, guidelines
Regulations Governing Assessment of Profit-Seeking
Enterprise Income Tax on Non-Arm's-Length
Transfer Pricing (the transfer pricing guidelines).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
A party that has equity ownership, common management, or effective control over the finance, personnel, or
operations of another party, or enters into a joint venture
agreement with another party will be treated as related to
that party. Detailed definitions of related party are included
in the transfer pricing guidelines.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
A branch of a foreign company is a taxable business
entity. Generally, a foreign company could engage in
business transactions (such as trade of intangible goods)
with its Taiwan branch, and the foreign companys profits
from those transactions would not be taxable in Taiwan.
However, when a foreign company itself has revenue from
Taiwan sales, the foreign company may apply to the tax
authorities for approval to prorate that business revenue
and count related Taiwan-source income based on value
added in Taiwan. Transfer pricing analysis may be one of
the tools for the attribution allocation.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the comparable
profit method, the profit split method, and other arm's
length methods approved by the Ministry of Finance.
Priority of methods
The best method rule applies.
Availability of benchmarking/comparative data
Public international and domestic business databases
are available.
Are foreign comparables acceptable to
local tax authorities?
Taiwan comparables are preferred. However, the tax
authorities will accept foreign comparables if the number
of Taiwan comparables is insufficient.
Services issues
Are management fees deductible?
Yes.
Are management fees subject to withholding?
Management fees will be exempt from withholding tax
only in the following cases: (1) the fees are allocated
from a head office or regional headquarters to a Taiwan
branch; or (2) the management services are rendered
offshore and evidence could be provided to adopt the
Rules to Recognize Taiwan-Source Income. Advance
application would be required in the latter situation.
May stock option costs be included in the cost
base for intercompany services charges?
Yes, stock option costs could be included in the
service expenses charged to Taiwan affiliates. The
Taiwan entity could take the deduction on its income
tax return, but the employees who are granted
the stock option must recognize income on their
individual income tax returns accordingly.
Mike Chang
+886 2 2545 9988
ext. 3353
mikechang@
deloitte.com.tw
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
The Rules to Recognize Taiwan-Source Income,
released by the MOF on September 3, 2009, accepted
cost sharing agreements for R&D expenses, with the
following conditions:
The cost sharing agreement is a joint research and development project between all participants;
All participants will jointly own the intellectual property
and enjoy its benefits according to the cost and effort
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Self-initiated adjustments
Based on an MOF ruling, self-initiated upward adjustments
to the median of the interquartile range are allowed under
the comparable profits method.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure.
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Thailand
Whats new
The Thai corporate tax rate fell from 30 percent for
fiscal year 2011 to 23 percent for fiscal year 2012,
and 20 percent for fiscal years 2013 and 2014,
without any accompanying increase in indirect tax
rates. This reduction in the revenue base has resulted
in a heightened focus on enforcement, including
transfer pricing audits.
General information
Tax authority and law
Revenue Department; Section 65 bis(4), Section 70 ter,
Section 65 bis (7), Section 65 (13), (14) and (15) of the
Thai Revenue Code.
Regulations, rulings, guidelines
Departmental Instruction No. Paw. 113/2545 (issued
May 16, 2002 Calculation of corporate income
tax in the case of establishing transfer pricing).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Departmental Instruction No. Paw. 113/2545 applies
the definition of Associated Enterprise from the OECD
transfer pricing guidelines.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The transfer pricing rules do not address the determination
of profits attributable to a permanent establishment or
branch. The Thai Revenue Department has typically used
a formulaic approach for determining profits attributable
to a permanent establishment, but they have accepted
transfer pricing analyses in some cases.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, and other
methods that are acceptable by international standards
and that appropriately apply to the actual transactions.
Priority of methods
Transaction-based methods are preferred over profit-based
methods.
Stuart Simons
+66 2 676 5700
ext. 5021
[email protected]
Commissionaire Arrangements
Are commissionaire arrangements allowed?
Yes, but such arrangements give rise to significant risk of
creating a permanent establishment.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
There is no specific statutory authority. Thailands tax
authority is likely to follow the OECD transfer pricing
guidelines.
Are cost contribution or cost sharing
payments deductible?
Yes, provided the taxpayer can substantiate that the cost
relates specifically to the taxpayers business.
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Self-initiated adjustments
Adjustments are permitted, whether increasing or
decreasing profit. In the case of a profit increase, a
taxpayer will be subject only to a surcharge of 1.5 percent
per month. In either case, there must be adequate documentation to substantiate the adjustment in the current
period.
Statute of limitations on assessment
for transfer pricing adjustments
A summons for tax examinations must be issued within
two years of the filing date, or five years when tax evasion
is suspected. A tax assessment must be issued within 10
years.
Taxpayer set-offs for other related-party transactions
There is no formal provision.
Interest & Penalties
Additional assessment payment deadline
Generally, 30 days from the date of receipt of the assessment notice. An extension may be requested.
Penalty on transfer pricing assessment
There are no specific transfer pricing penalties; the general
corporate tax penalty regime applies. A penalty of up to
100 percent of the additional corporate tax and interest
surcharges of 1.5 percent per month may apply on
outstanding tax.
Is interest charged on penalties?
No interest charged on penalties.
2014 Global Transfer Pricing Country Guide
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Turkey
Whats new
With the recent establishment of specialist transfer
pricing audit teams, 2013 was marked by increased
transfer pricing audit activity in Turkey. In more and
more audits, transfer pricing documentation for
multiple years has been requested upfront, with little or
no leeway provided to taxpayers in terms of preparation time.
General information
Tax authority and law
Ministry of Finance Revenue Administration; New
Turkish Corporate Tax Code (Law No. 5520) Article 13
(effective 1 January 2007), Article 41/5 of Income Tax Law,
Transfer Pricing Decree No. 2007/12888 (announced 6
December 2007), Transfer Pricing General Communiqu
No. 1 and 2 (announced 18 November 2007 and 22
April 2008, respectively), Transfer Pricing Decree No.
2008/13490 (announced 13 April 2008).
Regulations, rulings, guidelines
Article 13 of the Turkish Corporate Tax Code provides
the general principles. Transfer pricing applications are
explained through examples included in Communiqus No.
1 and 2, as well as Transfer Pricing Decree No. 2007/12888
and Decree No. 2008/13490. A guideline announced in
November 2010 includes detailed explanations regarding
annual documentation requirements and a sample report
format.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Article 13 of The Turkish Corporate Tax Code defines
related parties as: (1) companies own shareholders and
corporations and individuals related to those shareholders; (2) corporations and individuals that directly or
indirectly control or are controlled by a corporation or its
shareholders through management, supervision, or share
capital; and (3) spouses of the shareholders, siblings,
and parents of the shareholders and up to third degree
(inclusive) natural and in-law relatives of the shareholders.
Transactions with parties resident in countries deemed to
cause harmful tax competition (to be determined by the
Council of Ministers) are also considered related-party
transactions. Further details are provided in section 3 of
Transfer Pricing General Communiqu No. 1. Transfer
Pricing General Communiqu No. 2 expands the relatedparty definition by treating the purchase of goods by
a local Turkish distributor from a foreign company as a
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Self-initiated adjustments
Based on general provisions, self-initiated adjustments can
be made through regret filing procedures as long as the
adjustment does not result in a decrease in income.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
The taxpayer may go to competent authority after the
amount of the proposed adjustment is officially notified in
writing.
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Ukraine
Whats new
2013 was a breakthrough year for transfer pricing in
Ukraine, as new detailed regulations were introduced
on 1 September 2013. The new regulations are
largely in line with the OECD transfer pricing guidelines, but with several important differences. The
new regulations require submission of transfer pricing
documentation by taxpayers.
The first period to which the new rules apply is
1 September through 31 December 2013. This
nonstandard period creates several additional difficulties for taxpayers as they try to comply with the new
regulations. Starting from 2014 the reporting period
will be a calendar year, more in line with international
practice.
General information
Tax authority and law
Ministry of Revenues and Duties of Ukraine.
Tax Code of Ukraine, Article 39.
Regulations, rulings, guidelines
Tax Ruling on Transfer Pricing, approved by Decree of the
Ministry of Revenues and Duties #699 dated 22 November
2013.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply to the following transactions:
Transactions with resident related parties that:
Have declared income tax losses for the previous
reporting year;
Enjoyed a special tax regime at the beginning of the
current reporting year;
Applied a nonstandard income tax or VAT rate at the
beginning of the current reporting year; or
Were not corporate income tax or VAT payers at the
beginning of the current reporting year.
Transactions with a nonresident entity registered in
a country with an income tax rate at least 5 percent
lower than the rate applicable in Ukraine, or that pays
corporate income tax at a rate at least 5 percent lower
than the rate applicable in Ukraine (the corporate income
tax rate in Ukraine is 18 percent for 2014).
Alexander Cherinko
+380 44 490 9000
acherinko@
deloitte.com.ua
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Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes. But a series of tax implications (transfer pricing,
permanent establishment, VAT) would have to be considered before implementing such an arrangement.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Generally no. Recharges made to Ukrainian entities under
a CCA or a CSA would not be deductible for tax purposes
in Ukraine. Moreover, currency control regulations would
likely make it impossible to make payments outside
Ukraine under a CCA or a CSA.
Alternative approaches to calculation of recharged
amounts must be considered when implementing such
structures in Ukraine.
Are cost contribution or cost sharing
payments deductible?
No.
Are cost contribution or cost sharing
payments subject to withholding tax?
No.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
No specific guidance available.
Documentation and tax return disclosures
Tax return disclosures
Taxpayers must complete a special appendix to the
corporate income tax return to disclose any transfer pricing
adjustments they make.
Documentation requirements
Two types of documentation are required:
Report on controlled transactions, due 1 May of the year
following the reporting one.
Transfer pricing documentation, due one month after a
request from the tax authorities (two months for large
taxpayers). The request may be issued by the authorities no earlier than on 1 May of the year following the
reporting one.
A calendar year is a reporting period for transfer pricing
purposes.
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United Kingdom
Whats new
Transfer pricing in the UK is facing an increasing level
of scrutiny, both from a public and a political perspective. This growing interest is reflected in HMRCs
transfer pricing statistics, which show a growth in
yield from settlements, as well as a higher number of
advance pricing agreements and advance thin capitalization agreements. The recent and ongoing increase
in the number of specialist transfer pricing inspectors
within the UK tax authority is another sign of transfer
pricings growing significance.
The UK patent box regime began to be phased
in effective April 2013, with the full reduced rate
applying from 1 April 2017. Companies that elect
into the regime in due course will be taxed at an
effective 10 percent rate of corporation tax on profits
attributable to qualifying patents.
General information
Tax authority and law
HM Revenue and Customs (HMRC); following the
UKs Tax Law Rewrite project, effective 1 April 2010
for accounting periods ending on or after 1 April
2010, the UK transfer pricing legislation is found
in Part 4 of the Taxation (International and Other
Provisions) Act 2010 (TIOPA 2010) (S 146 et seq.).
The mutual agreement procedure is set out in
Part 2 of TIOPA 2010 (ss 124-125). APAs are
in Part 5 of TIOPA 2010 (S 218 et seq.).
Permanent establishment rules are in CTA 2010 (ss 11411144). Rules about attribution of profit to permanent
establishments are in CTA 2009 (Chapter 4, Section 20).
Regulations, rulings, guidelines
UK legislation on transfer pricing incorporates the OECD
model treaty, including the arms length principle as set
out in Article 9 of the OECD Model Tax Convention, and
the OECDs Transfer Pricing Guidelines for Multinational
Enterprises and Tax Administrations. With effect for
accounting periods beginning on or after 1 April 2011,
this is the 2010 version of the transfer pricing guidelines.
In addition to the legislation and reliance on the OECD
model treaty, HMRC publishes guidance on its interpretation of transfer pricing legislation, OECD principles, and UK case law. This guidance is currently
Shaun Austin
+44 121 695 5011
[email protected]
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Priority of methods
The 2010 OECD transfer pricing guidelines, which were
incorporated into UK law for accounting periods beginning
on or after 1 April 2011, do not impose a distinct hierarchy
of methods, because the choice of one method over
another is based on the most appropriate method to the
circumstances of the case. Nevertheless, certain comparisons must be undertaken, in particular with regard to the
availability and reliability of the data. Moreover, the OECD
transfer pricing guidelines state that taxpayers retain the
freedom to apply other unspecified methods, provided the
derived result satisfies the arms length principle.
Availability of benchmarking/comparative data
Detailed financial information on UK registered companies
is available.
Are foreign comparables acceptable to
local tax authorities?
HMRCs general preference is for UK comparables.
However, foreign (in particular European Union) comparables are acceptable in practice if appropriately comparable
UK data cannot be identified, or if foreign data sufficiently
meets comparability criteria.
Services issues
Are management fees deductible?
Yes.
Are management fees subject to withholding?
No.
May stock option costs be included in the cost
base for intercompany services charges?
Historically, UK transfer pricing legislation did not include
specific guidance on the treatment of stock options as
part of a cost plus arrangement. The UK tax authorities
have published guidance that indicate they would like to
see the cost of stock options added to a companys cost
base and recharged with a mark-up. In September 2010,
HMRC released updated guidance in their International
Manual (currently INTM 440210) that confirms HMRC
will accept the spread on vesting or spread on exercise
as pricing methods for share options at the relevant
time. This development provides greater flexibility to
multinational enterprises in deriving arms length share
option charges. However, HMRC have explicitly stated
the importance of applying the chosen method consistently over the full length of the arrangement, and for
all employees to achieve a result that equates to what
might be expected in an arms length situation.
Commissionaire arrangements
Are commissionaire arrangements allowed?
Yes, but such arrangements should be expected to be
subject to HMRC challenge. In the UK, the equivalent of
a commissionaire is an undisclosed agent and the
UKs common law status must be taken into account
in considering the treatment of a UK commissionaire.
Cost sharing agreements
Are Cost Contribution Arrangements (CCA) or
Cost Sharing Agreements (CSA) accepted?
Yes. The UK follows Chapter VIII of the
OECD transfer pricing guidelines.
Are cost contribution or cost sharing
payments deductible?
Yes, although taxpayers may be required to recognize
the underlying character of the costs shared and treat
them accordingly.
Are cost contribution or cost sharing
payments subject to withholding tax?
No.
What is the payers tax treatment of payments to a
contributor of preexisting intangibles to a CCA or CSA?
Tax depreciation may be available on a buy-in payment
for qualifying intangibles. A buy-in may also be structured
as declining royalties. In such a case, the royalties may
be deducted.
Documentation and tax return disclosures
Tax return disclosures
No separate disclosure is required (by signing the tax
return, the taxpayer will be implicitly confirming compliance with the arms length standard).
Documentation requirements
Taxpayers should keep records to support details in the
tax return. However, note the comments in the Deadline
to prepare documentation section. Records should be
retained for the later of (a) six years from the end of the
relevant accounting period; (b) the date when the enquiry
into the return is completed; or (c) the date on which
HMRC are no longer able to open an enquiry
(TIOPA 2010, Part 4).
UK legislation provides for penalties of up to 3,000 per
tax return for failure to compile and retain transfer pricing
documentation (FA 1998, Sch 18, para 23(1)).
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Self-initiated adjustments
The UK imposes a requirement to adjust to arms length
prices only when this increases UK taxable profit or reduces
UK losses; there is no provision for downward profit
or upward loss adjustments. There is an exception for
intra-UK transactions, when an upward profit adjustment
in the return of one party to a transaction can be compensated by a downward adjustment in the other partys tax
return in certain situations on the making of a claim.
Statute of limitations on assessment
for transfer pricing adjustments
Four years from accounting period end. The period for
HMRC to launch an enquiry into a return is extended to
six years only when a company has acted carelessly.
The period may be extended up to 20 years
in case of deliberate misstatement.
Taxpayer set-offs for other related-party transactions
The UK follows the OECD transfer pricing guidelines
on separate consideration of transactions and when
aggregation is permitted.
Interest and penalties
Additional assessment payment deadline
Generally 30 days from the date of receipt of the assessment notice. An extension may be requested.
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
When an action giving rise to, or likely to give rise to,
double taxation not in accordance with an income tax
treaty has occurred, or when equivalent provisions in the
European Union Arbitration Convention are satisfied.
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United States
Whats new
Transfer pricing enforcement remains a high priority
for the United States. Newly proposed rules indicate
that the IRS will allow greater use of Competent
Authority in limited situations when the taxpayer has
made a self-initiated adjustment. Increased focus on
and enforcement of transfer pricing issues continues,
with more resources dedicated to the newly created
Transfer Pricing Operations program within the IRS.
The IRS finalized the 2011 temporary and proposed
1.482-7 cost sharing arrangement regulations on the
use of the differential income stream as an application of the income method and as a consideration in
assessing the best method. No changes were made to
the 2011 temporary and proposed regulations. And
in a noteworthy decision, the U.S. Tax Court ruled in
favor of the IRS in BMC Software Inc. v. Commissioner,
141 T.C. No. 5 (2013), which addressed the effect of
an account created pursuant to Rev. Proc. 99-32 on
the taxpayers one-time dividends received deduction
under section 965. This case raises issues regarding
transfer pricing conforming adjustments under the
U.S. Subpart F international tax rules. The taxpayer has
appealed the decision.
General information
Tax authority and law
Internal Revenue Service (IRS); Internal Revenue Code 482
(latest amendment effective for tax years beginning after
December 31, 1986).
Regulations, rulings, guidelines
Treas. Reg. 1.482, Treas. Reg. 1.6662-6.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The definition of control for transfer pricing purposes
includes any kind of control, direct or indirect, whether
legally enforceable or not. It is the reality of control
that is decisive, not its form or the way it is exercised.
Do the local transfer pricing rules or tax
authority allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
The definition of control for transfer pricing purposes
includes any kind of control, direct or indirect, whether
legally enforceable or not. It is the reality of control
that is decisive, not its form or the way it is exercised.
Todd Wolosoff
+1 212 436 4313
[email protected]
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Commissionaire arrangements
Are commissionaire arrangements allowed?
No.
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Competent Authority
When may taxpayer submit tax adjustment to competent authority (CA)?
A request may be submitted after the
amount of the proposed adjustment is
communicated to the taxpayer in writing.
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Uruguay
Whats new
A new law entered into force in Uruguay in 2013
whereby any failure to comply with transfer pricing
documentation requirements will be penalized on
a graduated basis according to the severity of the
failure. Before the law entered into effect, general
penalties applied, but there was no specific punishment for noncompliance with transfer pricing documentation requirements.
General information
Tax authority and law
Uruguayan Tax Office Direccin General Impositiva
(DGI); Chapter VII Income Tax Act.
Regulations, rulings, guidelines
Decree 56/009 and Decree 392/009. Resolutions issued by
DGI: 2084/009, 2089/009, 818/010, 819/010, 745/011
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
Transfer pricing rules apply when transactions are entered
into with nonresident related parties, including those with
a functional relationship. They also apply to transactions
with companies located in tax havens, and with companies
subject to the Uruguayan free zone regime.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
There is no formal provision in this regard.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit
split method, the transactional net margin method
(TNMM), and a special method for transactions in several
commodities.
Priority of methods
The most appropriate method rule applies, except in the
case of commodities for which a special method applies.
Availability of benchmarking/comparative data
Local comparative data is limited and should be analyzed
on a case-by-case basis.
Alejandra Barrancos
+598 29160756
abarrancos@
deloitte.com
Gonzalo Lucas
+598 29160756
[email protected]
211
Self-initiated adjustments
A company can make a self-initiated adjustment by
including it as a tax adjustment in the income tax return.
Statute of limitations on assessment
for transfer pricing adjustments
General statute of limitation rules apply: generally five
years, but this period might be extended to 10 years in
cases of fraud.
212
Venezuela
Whats new
The Venezuelan tax administration continues to
conduct frequent transfer pricing audits. The country
also has developed jurisprudence in this area, specifically for issues relating to related-party transactions,
for noncompliance with the PDT methodology
established, and the examination of aggregation of
transactions, among others.
General information
Tax authority and law
National Integrated Tax and Customs Service
Administration (SENIAT); Income Tax Law (ITL) Nr. 38.628
Chapter III Title VII (latest amendment effective February
16, 2007).
Regulations, rulings, guidelines
SENIAT Providence NR sNAT-2003-2424, dated February
13, 2004 (effective from date of issuance).
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
A related-party relationship arises in the following
situations:
One companys direct or indirect participation in another
companys management, control, or capital;
Direct or indirect participation of two companies in
another companys management, control, or capital;
Operations with a party located in a foreign tax haven;
and
A third party that operates on behalf of a company in
Venezuela to perform transactions with a related party of
said company in Venezuela.
(Art. 116,117, 118 and 119 ITL).
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the profit
split method, and the transactional net margin method
(TNMM).
Priority of methods
Taxpayers must use the best method, with priority for CUP.
Availability of benchmarking/comparative data
Yes, but the number of local publicly held companies is
limited.
Are foreign comparables acceptable
to local tax authorities?
Yes, there is no legal limitation on using foreign comparable companies.
Services issues
Are management fees deductible?
Yes.
Are management fees subject to withholding?
Yes. The withholding rate depends on the type of contract.
If it is a professional fees contract, the withholding tax
rate is 34 percent of 90 percent of gross income. If it is a
technical assistance contract, the withholding tax rate is 34
percent on a 30 percent basis.
When an income tax treaty is in effect, taxation will occur
in the country from which the service provision has originated. The company not domiciled in Venezuela will be
taxed according to the treaty, not the local legislation. This
applies to both professional fees and technical assistance
contracts.
Alejandro Gomez
+58 212 206 8732
[email protected]
213
214
Competent authority
When may taxpayer submit tax adjustment
to Competent Authority (CA)?
There is no formal procedure.
May CA develop new settlement positions?
Yes.
May taxpayer go to CA before paying tax?
Yes.
215
Vietnam
Whats new
Transfer pricing is an important issue in Vietnam, and
the tax authorities are focusing on it, from increased
requests for transfer pricing documentation to tax
audits. The country also finalized its rules for advance
pricing agreements, effective 5 February 2014. The
final rules closely resemble a draft circular previously
issued, but unlike the draft circular, the final rules
remove the filing fee for an APA application.
General information
Tax authority and law
General Department of Taxation (GDT); Circular 66/2010/
TT-BTC, dated 22 April 2010, and issued by the Ministry
of Finance provides guidelines on the calculation of arms
length prices in business transaction between affiliated
parties. Circular 66 entered into effect on 6 June 2010,
and replaces Circular 117/2005/TT-BTC dated 19 December
2005.
The Ministry of Finance on 20 December 2013 issued
Circular 201/2013/TT-BTC providing guidance on the
application of advance pricing agreements (APAs) in
tax administration. The circular entered into effect on 5
February 2014.
Circular 156/2013/TT-BTC on Tax Administration, dated
6 November 2013, issued by the Ministry of Finance,
provides a new template for the Transfer Pricing
Declaration Form.
Regulations, rulings, guidelines
Some official letters have been issued by the local
Departments of Taxation to guide in the implementation of
Circular 66.
New Form 03-7/TNDN is applicable for tax periods/fiscal
years ending after 1 January 2014. Form 03-7/TNDN will
replace Form 01/QLT, and requires enterprises to self-assess
the arms length nature of their related-party transactions
and declare the difference between accounting records
and reassessed price on the basis of market price.
Nature/extent of relationship between parties to a
transaction required for transfer pricing rules to apply?
The definition of related parties in Circular 66 is more
extensive and clearer than the definition in Circular 117.
There are two additional criteria to determine related
parties: (i) Two enterprises that hold directly or indirectly at
least 20 percent of the investment capital of a third enterprise are considered affiliated; and (ii) an enterprise that
provides a guarantee or grants a loan that constitutes 20
percent or more of the amount of the investment capital
or that is more than 50 percent of the total value of the
long- and medium-term loans of another enterprise will be
regarded as related.
In addition, Circular 66 quantifies the definition of
material difference that would trigger an adjustment
to the comparable price or transaction. Accordingly,
any factor that triggers at least a 1 percent increase or
decrease in the transaction price, or a 0.5 percent increase
or decrease in gross profit ratio or other profitability ratios
would be considered a material difference; consequently,
appropriate adjustments to the comparable price or transaction should be made.
Do the local transfer pricing rules or tax
authorities allow the use of transfer pricing
analyses to calculate profits attributable to
a permanent establishment or branch?
Yes.
Methods and comparables
Acceptable methods
The comparable uncontrolled price (CUP) method, the
resale price method, the cost plus method, the comparable
profits method (CPM), and the profit split method.
Thomas McClelland
+84 8 3910 0751
tmcclelland@
deloitte.com
Priority of methods
Vietnam has not established a priority of methods. The
taxpayer must establish it is using the best method under
the circumstances, including the reliability of supporting
documentation.
Availability of benchmarking/comparative data
Local Vietnamese company comparables are very limited
due to the limited number of public companies and the
quality of information available.
In general, Circular 66 requests that data, vouchers, and
documents used as grounds for comparability analyses
must be from clear sources so that they can be examined
and verified by the tax authorities.
Are foreign comparables acceptable
to local tax authorities?
There are no formal provisions or guidelines on this issue,
but in practice, foreign comparables would be acceptable
as supporting documentation if no or limited domestic
2014 Global Transfer Pricing Country Guide
216
217
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Contacts
Argentina
Horacio Dinice
+54 11 4321 3002
[email protected]
Chile
Alvaro Mecklenburg
+56 2 2729 8314
[email protected]
Ecuador
Jorge Saltos
+593 (2) 3815100 ext. 2203
[email protected]
Hungary
Peter Gemesi
+36 1 428 6722
[email protected]
Australia
Jacques Van Rhyn
+61 8 9365 7122
[email protected]
Alejandro Paredes
+56 2 2729 8216
[email protected]
China
Eunice Kuo
+ 86 21 6141 1308
[email protected]
Martha Cerda
+593 2 3815100 ext. 2236
[email protected]
India
Samir Gandhi
+91 22 6185 8460
[email protected]
Austria
Andrea Lahodny
+43 0 1 537 00 6200
[email protected]
Belgium
Patrick Cauwenbergh
+32 2 600 69 27
[email protected]
Andr Schaffers
+ 32 2 600 67 15
[email protected]
Brazil
Carlos Ayub
+55 11 5186 1227
[email protected]
Bulgaria
Aleksandar Stefanov
+359 2 8023 186
astefanov@
deloittece.com
Georgi Sarakostov
+359 2 8023 118
gsarakostov@
deloittece.com
Canada
Markus Navikenas
+14032671859
[email protected]
Colombia
Jos Erney Guarn
+57 1 426 2315
[email protected]
Costa Rica
Rafael Gonzalez
+506 22568192
[email protected]
Croatia
Draen Nimcevic
+385 1 2351 917
[email protected]
Czech Republic
Marek Romancov
+420 246 042889
[email protected]
Denmark
Asger M. Kelstrup
+45 30 93 45 96
[email protected]
Dominican Republic
Richard Troncoso
+1 809 563 5151, ext. 4717
[email protected]
El Salvador
Federico Paz
+503 2524 4100
[email protected]
Estonia
Ivo Vanasaun
+372 6406557
[email protected]
Finland
Jouni Honka-aho
+358 0 20 755 5344
[email protected]
France
Gianmarco Monsellato
+33 1 55 61 6346
[email protected]
Germany
Jobst Wilmanns
+49 0 69 75695 01
[email protected]
Greece
Eftichia Piligou
+30 210 6781100
[email protected]
Guatemala
Byron Martinez
+502 2384 6500
[email protected]
Hong Kong
Patrick Cheung
+852 28521095
patcheung@
deloitte.com.hk
Indonesia
Carlo Navarro
+62 21 29923100
[email protected]
Ireland
Paul Reck
+353 1 417 2470
[email protected]
Israel
Jacob Houlie
+972 3 608 5424
[email protected]
Italy
Aldo Castoldi
+39 02 83324111
[email protected]
Japan
Michael Tabart
+81 3 6213 3751
[email protected]
Kazakhstan
Anthony Mahon
+7 727 2581340, ext. 2756
[email protected]
Kenya
Fredrick Omondi
+254 0 719 039318
[email protected]
Korea
Tae-Hyung Kim
+82 2 6676 2410
[email protected]
219
Latvia
Janina Landisa
+371 67 074 193
[email protected]
Philippines
Fredieric B. Landicho
+63 2 581 9043
[email protected]
South Africa
Billy Joubert
+27 11 806 5352
[email protected]
United States
Todd Wolosoff
+1 212 436 4313
[email protected]
Lithuania
Tatjana Vaiciuliene
+370 5 2553004
[email protected]
Myra V. Torres
+63 2 857 1559
[email protected]
Spain
Juan Ignacio de Molina
+34 932304848, ext. 5804
[email protected]
Uruguay
Alejandra Barrancos
+59829160756
[email protected]
Sweden
Elvira Allvin
+46 75 24643 70
[email protected]
Gonzalo Lucas
+59829160756
[email protected]
Luxembourg
Stephan Tilquin
+352 45145 2592
[email protected]
Malaysia
Theresa Goh
+6 03 7712 5135
[email protected]
Mexico
Simn Somohano
+52 664 622 7872
[email protected]
Netherlands
Thijs Heijenrath
+31 6558 53691
[email protected]
New Zealand
Diana Maitland
+ 64 4 470 3630
[email protected]
Norway
Hans-Martin Jrgensen
+47 23 27 96 35
[email protected]
OECD
Edward Morris
+44 20 7007 6568
[email protected]
Peru
Gloria Guevara
+51 1 211 8585
[email protected]
Poland
Iwona Georgijew
+48 22 511 08 24
[email protected]
Portugal
Rosa Soares
+351 21 042 75 18
[email protected]
Patrcia Matos
+351 21 042 75 34
[email protected]
Romania
Dan Bdin
+ 40 21 2075 392
[email protected]
Russia
Dmitry Kulakov
+7 495 787 0600
[email protected]
Singapore
Jee Chang See
+65 6216 3181
[email protected]
Slovakia
Marek Romancov
+420 246 042 889
[email protected]
Slovenia
Andreja kofi Klanjek
+386 1 307 2841
[email protected]
Venezuela
Alejandro Gomez
+58 212 206 8732
[email protected]
Switzerland
Hans Rudolf Habermacher
+41 58 279 6327
[email protected]
Taiwan
Mike Chang
+886 2 2545 9988, ext. 3353
[email protected]
Vietnam
Thomas McClelland
+84 8 3910 0751
[email protected]
Thailand
Stuart Simons
+66 2 676 5700, ext. 5021
[email protected]
Turkey
Gler Hlya Ylmaz
+90 212 366 60 72
[email protected]
zgr Toros
+90 212 366 62 30
[email protected]
Ukraine
Alexander Cherinko
+380 44 490 9000
[email protected]
United Kingdom
Shaun Austin
+44 121 695 5011
[email protected]
220
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