Transfer Pricing Newsletter

Australia

Transfer Pricing Rule-The reconstruction provisions are contained in section 815-130 ITAA 1997. TR 2014/6 gives guidance on identifying situations where the form of commercial or financial relations differs from the substance and confirms the ATO’s power to disregard and reconstruct transactions that lack economic substance. The examples given in TR 2014/6 where reconstruction could arise include marketing hubs, transfers of intangibles and loss-making companies.

Intangible Property-Taxation Ruling TR 2014/6 clarifies the situations where the tax authorities could reconstruct transactions whose form is not in line with their commercial substance and includes transfers of intangible assets as an example of one situation where this could occur.

Spain

Corporate Income Tax Rate –With effect from 1 January 2015 the tax rate is reduced to 28% (previously 30%) and will decrease to 25% from 1 January 2016. The tax rate for SMEs is 25% in 2014. A 20% rate applies to micro-enterprises (with turnover under EUR 5 million) for the years 2011 to 2013. A rate of 15% will apply for two years to companies newly formed in 2014 and 2015.  Surcharge from 0.01% – 0.75% may apply.

France

Transfer Pricing Documentation Requirement- The official form for annual submission of abridged transfer pricing documentation is a four-page table requiring a description of the company; a list of intangibles used and the country of residence of the owner of the intangibles; transfer pricing policies of the group; intragroup transaction flows involving the French company; the nature of the transactions; aggregate amounts per type of transaction if above EUR 100,000; a list of countries involved in the transactions; transfer pricing methods used; and any major changes in transfer pricing policy in the year. In addition to this, full transfer pricing documentation should be available at the time of a tax audit.

As per Article 223 quinquies B of the Tax Code for fiscal year 2013 the deadline for submitting this form is extended to 20 November 2014

Hungary

Arm’s Length Principle- The proposed changes for 2015 would include in the definition of related parties an additional provision relating to entities where there is joint management that exercises decisive influence on business and financial policies.

Iceland

Transfer Pricing Rule-A draft regulation outlining detailed transfer pricing rules was released on 13 October 2014 and when finalized this will apply from 1 January 2015. The draft regulation clarifies that the transfer pricing rules apply to both domestic and foreign related party transactions.

Transfer Pricing Method- For priority of methods the draft transfer pricing regulations indicates that taxpayers should take into account the provisions of the OECD Guidelines when selecting the transfer pricing method.

Transfer Pricing Documentation Requirement-The draft transfer pricing regulations contain a description of the required content of the transfer pricing documentation.

 Slovak Republic

Arm’s Length Principle-From 1 January 2015 the transfer pricing rules apply to transactions between two domestic related parties as well as transactions with a foreign related party.

Financial Services-From 1 January 2015 tax deductible interest on loans from domestic and foreign related parties is limited to 25% of earnings before interest, tax, depreciation and amortization (EBITDA). Disallowed interest cannot be carried forward. These rules do not apply to financial institutions, leasing companies or entities administering collective investment schemes.

 OECD

Transfer Pricing Rule- In November 2014 the OECD published a strategy for the involvement and input of developing countries in the action plan on BEPS.

Intra-group services-A discussion draft for a revised chapter to the OECD Guidelines on services was issued in November 2014 to include a section on the definition and treatment of low value-adding services which could be treated in a simplified manner for transfer pricing purposes. Comments are invited by 15 January 2015 and will be followed by a public consultation in March 2015.

Exemption from Documentation Requirements for Safe Harbour Rules- –The discussion draft on low value-adding services released in November 2014 contains provisions for simplified treatment and documentation of these services.