On 15 November 2019, the Ministry of Finance issued a ruling no.10804629000 providing the guidance when multinational enterprises (MNEs) make a one-time transfer pricing adjustment to achieve an arm’s length result.
For making one-time transfer pricing adjustments, taxpayers should meet the following requirements:
- Before participating in the controlled transaction, the parties have an agreement in place identifying all transaction terms and all factors affecting the pricing;
- The receivables and payables adjusted according to the agreement have been included in the financial accounting; and
- The other participants involved in the controlled transaction are adjusted accordingly.
The Ruling also clarified about the payment of all relevant taxes and levies based on the adjusted transaction price and controlled transactions in cross-border tangible asset transfers. One-time transfer pricing adjustments can be made before the end of the fiscal year and taxpayers should disclose the adjustment with required documents when filing the income tax return. The ruling will be effective from 1 January 2020.
