Transfer Pricing Brief: October 2016

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Malaysia: Main Corporate tax rate: The Budget for 2017 proposed to reduce the corporate tax rate for the year of assessment 2017 and 2018. As per the proposal, the reduce tax rate will be between 1 and 4 percentage points for companies with significant increase in taxable income for the year of assessment 2017 and 2018. Reduce tax rate from 19% to 18% will be applicable for SMEs with taxable income up to first RM500,000.
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OECD: Dispute resolution: OECD released key documents on 20 October 2016, approved by the Inclusive Framework on BEPS. This will form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14.
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Malawi: Advance Pricing Agreements (APAs): As per the Taxation (Amendment) Act. 2016, taxpayers are permitted to enter into APAs with the Commissioner General (the Commissioner) with respect to income derived from mining projects, provided that the duration of the APAs does not exceed a period of 5 years.
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China: Advance Pricing Agreements (APAs): As per the Notice SAT Gong Gao [2016] No. 64 which made amendments to the Notice GuoShuiFa [2009] No. 2, an enterprise for which the total annual amount of related transactions exceeds CNY 40 million in the preceding 3 years, prior to the tax year when the Notice of Tax Items concerning the acceptance of negotiation intentions by the competent tax authority is delivered, may reach an APA with its competent tax authority concerning the pricing policies and calculation methods for its related transactions in future years.
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Poland: Main corporate tax rate: As per the draft Budget Law for 2017 submitted to the parliament, a lower rate of corporate income tax of 15% will be applied to small taxpayers.
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Mexico: Documentation requirement for individuals professional: Rule No. 3.9.5 of Resolution on Amendments to the Omnibus Tax Bill for 2016 as published by the Mexico’s Tax Administration Service (SAT) represents an amendment to the exception for taxpayers that allows them not to obtain or maintain transfer pricing supporting documentation if the taxpayer’s taxable revenues in the previous fiscal year are equal to or below MXN 13 million or MXN 3 million in the case of individuals providing independent professional services.
Advance Pricing Agreement (APA) rules: Rule 2.12.8 published on July 14, 2016 states that if the Mexican Tax Authorities consider the information provided by the taxpayer to be insufficient, they may perform a site visit to obtain and verify information regarding assets, functions, and risks of the Mexican taxpayer requesting an APA in order to validate the selection of method as well as the comparable companies.
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Norway: BEPS related compliance:
General rule for CbC reporting requirement: The Norwegian Government published its proposal for the 2017 Fiscal Budget on the domestic Country-by-Country (CbC) reporting rules to the Norwegian tax authorities. As per the proposal, all multinational groups with annual consolidated group revenue equal to or exceeding NOK6.5 billion (approximately US$730 million) will be obliged to file a CbC report. The CbC report shall be submitted in the jurisdiction where the group’s ultimate parent company is tax resident and shall be exchanged with the jurisdictions where the group operates.
Main corporate tax rate: The Budget for 2017 proposes to reduce corporate income tax rate to 24% in 2017 and to 23% in 2018.
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Bulgaria: BEPS related compliance:
General rule for CbC reporting requirement: As per the draft bill published by the Ministry of Finance, multinational enterprise groups (MNE groups) headquartered outside Bulgaria must file CbC reports in Bulgaria if their consolidated group revenue exceeds EUR 750 million (i.e. in line with the threshold under Directive 2016/881). A reduced reporting threshold of BGN 100 million (approximately EUR 51 million) is proposed for MNE groups, whose ultimate parent company is a Bulgarian tax resident.
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France: Main Corporate Tax rate:As per the draft Finance Bill for 2017, the French corporate income tax (CIT) rate would decrease from 33.1/3% to 28%.
BEPS related compliance:
General rule for CbC reporting requirement: The French government published an administrative decree defining the filing procedures and the contents of the country-by-country (CbC) report. The decree is aligned with the recommendations of the OECD’s final report on BEPS Action 13.
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Slovak Republic: Main Corporate Tax rate: As per the proposed amendments to tax law, the corporate income tax rate will be reduced from 22% to 21% and was proposed to be effective from 1 January, 2017.
Advance Pricing Agreements (APAs): As per the proposed amendments to the tax law, the fee for applying for a unilateral APA is to be set at EUR 10,000. The fee for bilateral and multilateral APAs will be set at EUR 30,000.
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Iceland: Financial services: Restrictions on interest deductions: Bill No. 787 adopted by the parliament proposes a fixed ratio rule, limiting corporate tax deductions for net interest expense to 30% of a group’s EBITDA with some exceptions.
BEPS related compliance:
General rule for CbC reporting requirement: Bill No. 787 adopted by the parliament proposes implementation of country-by-country (CbC) reporting. The Bill does not include a description of what the CbC report should contain. This will be put forward in a regulation by the Minister of Finance and Economic Affairs following the implementation of the Bill into domestic legislation.
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Luxembourg: Transfer pricing rule: A new article 56bis will be included in the Income Tax Act (ITA) to codify the arm’s length principle. As per the article 56bis, companies have to determine an arm’s length price for all transactions. It is specified that if a transaction is generally not concluded by unrelated parties, as such, it does not automatically mean that the transaction is not at arm’s length.
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Singapore: BEPS related compliance:
General rule for CbC reporting requirement: The Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide on Country-by-Country (CbC) Reporting. The ultimate parent entity of the Singapore MNE group will be required to file a CbC Report for all entities in the group if the entity of the MNE group is a tax resident in Singapore with subsidiaries or operations in at least one foreign country and the consolidated group revenue for the MNE group in the financial year is at least S$1,125 million.
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Slovenia: Main corporate tax rate: The Slovenian parliament adopted a tax reform and according to which the corporate income tax rate will increase from 17% to 19% and will enter into force on 1 January 2017.
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Ethiopia: Transfer pricing Rule: Ethiopia has introduced Transfer Pricing rules. Transfer Pricing rules are applicable for all Ethiopian taxpayers with cross-border Intercompany Transactions exceeding 500,000 Ethiopian birr/USD 22,380 and for Ethiopian taxpayers with domestic Intercompany Transactions provided they have annual revenues exceeding 500,000 Ethiopian birr/USD 22,380. Taxpayers involved in cross-border Intercompany Transactions with an aggregated value of exceeding 500,000 Ethiopian birr (USD 22,380) are required to prepare a Transfer Pricing declaration form.
Transfer pricing documentation: Transfer pricing rules require a taxpayer to have Transfer Pricing Documentation in place at the filing date of its statutory tax return. Transfer Pricing Documentation needs to be submitted upon request within 45 days. Transfer Pricing Documentation needs to be prepared in either Amharic or English.
Availability of Advance Pricing Agreements (APAs): The new TP rules provide that a taxpayer may request to enter into an advance pricing arrangement (APA) with the ETA to determine the arm’s length conditions for its future transactions over a fixed period of time.
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