CbC reporting requirement: UK has published draft Regulations in relation to Country by Country (CbC) reporting, along the lines of the recommendations made in the OECD action plan on base erosion and profit shifting (BEPS). The Regulations also provide for another member of the group resident in the UK to voluntarily file a report if the parent company is non-resident. The reports will be required for accounting periods beginning on or after 1 January 2016 and should be filed within twelve months after the end of each accounting period.

Penalty for non-compliance: As per the draft Regulations, penalties are to apply for failure to provide the country by country report on time without reasonable excuse or for an incorrect report.

See the Story in Regfollower

Application of other transfer pricing method: The consultation draft issued on 17 September 2015 describes two types of “other methods” that can be applied like the value contribution allocation method (VCM) and asset valuation method.

Financial services: The consultation draft requires a special report demonstrating that the taxpayer’s related party debt levels are consistent with the arm’s length principle if it’s debt to equity ratio exceeds specified ratios.

Documentation requirement: As per the new consultation draft issued on 17 September 2015, single function entities that have incurred losses are required to prepare a Master File and Local File without regard to transactional thresholds. This is an extension of the pre-existing documentation requirement for loss companies.

See the Story in Regfollower

Advance Pricing Agreement (APA): Inland Revenue recently updated its guidance on the Advance Pricing Agreement (APA) application process and published a list of steps aiming to standardize the process. Agreements can be sought from Inland Revenue alone (unilateral) or between Inland Revenue and another tax authority or authorities.

See the Story in Regfollower

Statute of limitations: Under the new Corporate Income Tax (CIT) law which came into force on 12 October 2015, the statute of limitations period of CIT years in which an entity has generated losses and tax credits has been extended to 10 years.

Audit time limit: As per the new Corporate Income Tax (CIT) law which came into force on 12 October 2015, the current general 12-month limit for the duration of a tax audit is extended to 18 months and to 27 months for taxpayers who are obliged to audit their financial statements or form part of a tax consolidated group.

Mutual Agreement Procedure (MAP): As per the Official Gazette published Law 34/2015 of 21 September 2015, domestic economic or judicial procedures will be suspended if a tax treaty’s mutual agreement procedure has been initiated until such procedure has been resolved.

See the Story in Regfollower

CbC reporting requirement: The Danish Minister of Taxation published a draft bill on 18 September 2015 introducing Country-by-Country (CbC) Reporting based on the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13. It is proposed in the draft law that all Danish multinational groups with a consolidated turnover of at least DKK 5.6 billion (approximately €750m) would be required to file a CbC report.

See the Story in Regfollower

Master file information: Information: The Australian Treasurer introduced a Bill on 16 September 2015 that requires taxpayers to maintain a master file, which provides a high-level description of the multinational group’s business operations. This new requirements will be applicable to income years commencing on or after 1 January 2016.

Local file information: The Bill requires taxpayers to maintain a local file, which describes the Australian entity’s operations and cross border related party dealings. This new requirements will be applicable to income years commencing on or after 1 January 2016.

CbC reporting requirement: The Australian Treasurer introduced a Bill on 16 September 2015 to implement additional transfer pricing documentation requirements and CbC reporting into Australian domestic law, with application to income years commencing on or after 1 January 2016.

See the Story in Regfollower

Main corporate tax rate: The Norwegian fiscal budget for 2016 proposed to reduce the corporate income tax rate to 25% from 27% with effect from 1 January 2016 and will further reduce to 22% from 2018.

See the Story in Regfollower

Master file & Local file information: The Mexican government has proposed in the 2016 federal budget to introduce and maintain a Master file and Local file as per the BEPS action plan 13.

CbC reporting requirement: The Mexican government has proposed to introduce Country by Country (CbC) reporting requirement in the 2016 federal budget which was presented to the parliament on 8 September 2015.

See the Story in Regfollower

Intangible property: The National Tax Authority (DIAN) pronounced on sale transactions of intangibles subject to the transfer pricing regime in a recently published ruling (Ruling 23855 of 2015).

See the Story in Regfollower

Transfer pricing rule: As per the published Legislative decree no. 147, expenses relating to the transactions with “black list” jurisdictions are allowed up to an “arm’s length” value.  Amounts above that value may be allowed if the taxpayer can establish the genuine business reason for the transaction and the manner in which it was conducted.

Advance ruling threshold: As per the Legislative decree no. 147 published in the official gazette on 22 September 2015, the advance ruling procedure applies for investments not less than €30 million.

APA validity: The Legislative decree no. 147 published in the official gazette on 22 September 2015 allows for five years binding agreements with the tax authorities.

See the Story in Regfollower

Documentation requirement: As per the proposed finance bill of 2016, large companies are required to provide full contemporaneous transfer pricing documentation to the French tax authorities as of the first day of a tax audit. In addition to this contemporaneous transfer pricing documentation requirement, such companies also must submit simplified transfer pricing documentation within six months of filing the tax return for the relevant assessment year.

See the Story in Regfollower

Requirement rule: The 2015 Final Reports released on October 5, 2015 recommend changes to domestic laws, the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines (TPG).

Intra-group services: The main focus of the revised OECD 2015 final reports released on 5 October 2015 is the new Section D containing additional guidance with respect to an elective, simplified transfer pricing approach for low value-adding intra-group services.

Comparable Uncontrolled Price (CUP) method: The revised OECD guidance released on 5 October 2015 clarifies that the CUP method would generally be the most appropriate transfer pricing method for determining the arm’s length price for controlled commodity transactions, and that, under the CUP method, the arm’s length price for the controlled commodity transaction can be determined, not only by reference to comparable uncontrolled transactions, but also by reference to a quoted price.

Intangible property: The new Guidance released on 5 October 2015 defines an intangible asset for transfer pricing purposes as something “which is not a physical or financial asset, which is capable of being owned or controlled for use in commercial activities, and whose use or transfer would be compensated had it occurred in a transaction between independent parties in comparable circumstances.”

Cost contribution arrangements: The new Guidance released on 5 October 2015 includes a new version of Chapter VIII covering Cost Contribution Arrangements (CCAs). The guidance seeks to ensure that the outcomes of a CCA arrangement and the returns to participants should be similar to any other arrangement that has similar economic characteristics and where the participants make similar contributions.

Profit split method: The guidance provided in the final report 2015 on the application of the transactional profit split method in Chapter II, Part III, Section C of the Transfer Pricing Guidelines indicates that the main strength of the method is that it can provide solutions for highly integrated operations for which a one-sided method would not be appropriate, such as global trading of financial instruments. The current guidance also states that transactional profit split methods may be found to be the most appropriate method in situations where both parties to the transaction make unique and valuable contributions, for example in the form of unique intangibles.

See the Story in Regfollower

Financial services: As per the DER regulations 2015, any borrowing expenses associated with an excess liability over the 4:1 DER will be denied as a taxable deduction. If the debtor’s equity is zero or negative, none of the borrowing expenses will be deductible. As per the regulations, any intercompany borrowing must comply with the arm’s length standard specified in the transfer pricing rules.

 See the Story in Regfollower

CbC reporting requirement: As per the proposed budget announcement of the Irish Minister for Finance, multinational groups headquartered in Ireland with consolidated revenues in excess of €750M will be required to file Country-by-Country (CBC) reporting in line with OECD’s agreed minimum standard under Action 13 of the OECD base erosion and profit shifting (BEPS) project. The deadline for filing the new report will be 12 months after the end of the accounting period.

See the Story in Regfollower

Main corporate tax rate: The Royal Cabinet decided on 13 October 2015 to maintain the corporate income tax rate permanently at 20%, effective from 1 January 2016.

See the Story in Regfollower

Useful database: Circular 1142/2 October 2015 introduced changes to the previously issued guidance regarding the databases allowed to be used for the performance of benchmarking studies for years started or starting from 1 January 2014 forwards. Specifically, under the new guidance, a taxpayer may perform the benchmarking study for a fiscal year based on the available database versions during the period of the two months prior the end of such fiscal year and up to the expiration deadline for filing the Summary Information Table for such fiscal year.

Penalty for documentation failure: As per the Law 4337 dated 17 October 2015, In the case of failure to provide the tax authorities with Transfer Pricing Documentation within 30 days from the official request, a penalty of €5,000 applies, which is increased to €10,000 if TP Documentation is provided after 60 days, and to €20,000 if it is provided after 90 days or it is not provided at all. Penalties for non-filing of the Summary Information Table will be calculated at 0.1% on the value of the transactions subject to documentation requirements with a minimum penalty of €2,500 and a maximum penalty of €10,000.

Penalty in case of adjustment: The Ministry of Finance with the Document DELD1133839EX2015 dated October 02, 2015 provides guidance on the implementation of Article 39 of Law.

See the Story in Regfollower

Priority of transfer pricing method: The final rules include the comparable uncontrolled price (CUP) method as one of the most appropriate methods when determining arm’s length price using the range concept, in addition to transaction net margin method (TNMM), resale price method (RPM) or cost plus method (CPM).

Arm’s length range: Rule 10CA suggest that, the dataset for determining the arm’s length price is to be constructed by placing prices in an ascending order. In respect of the use of a range of prices, Rule 10CA (4) defines the arm’s length range as the 35th percentile to 65th percentile of the dataset organized in an ascending order. However, a minimum of six comparable is required, in the absence of which the arm’s length price will be the arithmetical mean of all the values included in the dataset. The use of the range concept does not apply where the Profit Split Method or Sixth Method is regarded as the most appropriate method for determining the arm’s length price.

Number of years to be compared: Under the amended Rule 10B as per the Notification No. 83/2015 dated 19 October 2015, the data to be used for analyzing the comparability of an uncontrolled transaction with an international transaction will be conducted on the basis of the data relating to the current year; or data relating to the financial year immediately preceding the current year, if the data relating to the current year is not available at the time of furnishing the return of income.

See the Story in Regfollower