| Ukraine: | Controlled transaction: As per the amended Tax Code effective from 1 January 2017, a transaction is considered controlled if the annual income of the taxpayer within the reporting period exceeds UAH 150 million, and the sum of the transactions with each counter party exceeds UAH 10 million. Specific TP compliance: With effect from 1 January 2017, a report on controlled transactions will have to be submitted before 1st October of the tax year. See the story in Regfollower |
| Slovak Republic: | BEPS related compliance General rule for CbC reporting: The Slovak Republic has introduced Country-by-Country Reporting (CbCR) based on the recommendations of the OECD. All multinational corporations with consolidated annual revenues of at least EUR 750 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. The average number of employees in each entity must be reported. The CbC report must be submitted within twelve months after the end of the tax year. The bill is effective from 1 March 2017. Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Slovak Republic that is the parent company of a corporate group. A parent company is a company that is not a subsidiary of any other company in Slovak Republic. Group definition: The country by country reporting requirement applies where the consolidated group revenue in the preceding year is at least €750 million. Profits and tax paid: The report must cover group revenue, distinguishing between related and unrelated parties; accounting results before corporate income tax (or similar taxes); and corporate tax (or similar taxes) paid or accrued, including withholding tax. See the story in Regfollower |
| Australia: | Documentation requirements: The Australian Taxation Office (ATO) released Practical Compliance Guideline PCG 2017/2 (PCG 2017/2) which deals with simplified transfer pricing (TP) record-keeping options. PCG 2017/2 states that taxpayers may self-assess their eligibility for simplified TP record-keeping. If the qualifying conditions are met, taxpayers are required to notify the ATO by making a disclosure in the annual International Dealings Schedule. Main corporate tax rate: The tax rate for small business with a turnover less than $10 million has been reduced to 27.5 percent from 1 July 2016. OECD Guidelines: The Australian Government introduced the Diverted Profits Tax Bill on 9 February 2017 implementing some recommendations of the OECD Base Erosion and Profit Shifting (BEPS) Actions 8 to 10. Penalty in case of adjustment: The Diverted Profits Tax Law will allow the Australian Taxation Office (ATO) to impose a penalty tax rate of 40% on diverted profits. This applies in respect of income years commencing on or after 1 July 2017 to significant global entities with global revenue of AU$1 billion or more. Penalty for documentation failure: The Diverted Profits Tax Law will allow increased penalties for non-compliance with tax document requirements by Significant Global Entities (SGEs) and which can be as high as AU$525,000. SGEs can include small Australian operations of global groups and companies with purely domestic Australian operations. See the story in Regfollower |
| Canada: | General rule for CbC reporting: The Canada Revenue Agency (CRA) published a form (RC 4649) and instructions for completing the country-by-country (CbC) report for reporting fiscal years that begin after 2015. See the story in Regfollower |
| South Africa: | OECD guidelines: In South Africa’s 2017 budget, there are proposals to update and align South Africa’s current transfer pricing guidance with the OECD Transfer Pricing Guidelines. Hard to value intangibles: South Africa has considered including the provisions of BEPS action 8 in the 2017 Annual Budget. The Budget is to include new guidance on the arms-length principle and an agreed approach to ensure appropriate pricing on intangibles that are difficult to value. Special rules for hybrid instruments or entities: Recommendations on transparent entities are being incorporated into the multilateral instrument in 2017 Annual Budget of South Africa. Restriction on interest deduction: The South Africa Government has included the recommendations from Action 4 of BEPS to strengthen its efforts to curb excessive debt financing, which erodes the tax base, and will consider the current interest limitation in the light of OECD recommendations. See the story in Regfollower |
| Japan: | General rule for CbC reporting: Japan has introduced notification requirements related to Country-by-Country Reporting (CbCR) in line with Action 13 of the OECD BEPS project. These requirements will cover basic information including details of the ultimate parent entity, surrogate parent entity, and entities in Japan. The deadline for submitting the notification electronically via E-tax will be the last day of the reporting fiscal year (RFY) of the multinational group. See the story in Regfollower |
| Oman: | Main corporate tax rate: As per the Royal Decree 9/2017 passed by the Government, the standard corporate tax rate has increased from 12% to 15%. See the story in Regfollower |
| Hong Kong: | General rule for CbC reporting requirement: The Government of Hong Kong has proposed to implement transfer pricing documentation based on the three-tier country-by-country (CbC) reporting approach (including a Master file and a Local file). The Financial Secretary on 22 February 2017 delivered the budget speech to the Legislative Council including this proposal. See the story in Regfollower |
| India: | Priority of methods: The Delhi Bench of the Income-tax Appellate Tribunal held in the case Swarovski India Private Ltd. v. ACIT (ITA No. 5621/Del/2014 that the “resale price method” is the most appropriate method to benchmark an international transaction for the taxpayer’s trading activity involving purchases of goods from foreign related parties and then reselling the same goods without adding any value to them. Comparable data: The Delhi Bench of the Income-tax Appellate Tribunal held in the case Swarovski India Private Ltd. v. ACIT (ITA No. 5621/Del/2014 that the comparables must be limited to comparable companies for which the gross profit margin can be computed without allocations/ truncation. See the story in Regfollower Transfer pricing rule: As per the 2017 budget presented by the Finance Minister on 1 February 2017, from fiscal year 2016-2017 onward transactions between related parties that are “tax neutral” would not be subject to the transfer pricing rules. |
| Russia: | Multilateral information exchange: Representatives of the Federal Tax Service of Russia signed the Multilateral Competent Authority Agreement on 26 January 2017, for Country-by-Country Reporting (MCAA CbCR). See the story in Regfollower |
| Colombia: | BEPS related compliance Master file information: Article 260-5 of the Tax Code, as amended by the tax reform, provides that taxpayers with either a gross equity of at least 100,000 Taxable Units (TU); or gross revenues of at least 61,000 TU that have transactions with related parties must prepare and submit a Master File as of 2016. The Master File must contain relevant global information of the multinational group and the Local File should contain information on intragroup transactions involving the taxpayer. Local file information: As per the Article 260-5 of the Tax Code, taxpayers with either a gross equity of at least 100,000 Taxable Units (TU; one TU is approximately US $10) or gross revenues of at least 61,000 TU that have transactions with related parties must prepare and submit a Local File as of 2017. A Local File will contain information on the inter-company transactions. General rule for CbC reporting requirement: Colombia has incorporated Country-by-Country (CbC) reporting requirement for Colombian-controlled entities of multinational groups that hold subsidiaries, branches or permanent establishments (PEs) located abroad, and which are not subsidiaries of a non-resident company, whose consolidated income realized in the previous tax year (based on the consolidated financial statements) exceeds 81,000,000 UVTs. Colombian or foreign entities with a PE in Colombia that have been appointed by their controlling entity as responsible for providing the country-by-country report; and one or more Colombian entities or PEs from the same multinational group where the parent company is located abroad are also responsible for submitting CbC report, provided that their income exceeds 20% of the total income of the multinational group. Penalty for non-compliance: The penalty for failure to comply with the report of information will be applicable as per Article 260-5 of the Tax Code if the taxpayer fails to comply with the submission of the country-by-country report. Priority of methods: As per the Article 260-3 of the Tax Code (TC), as amended by the tax reform, the comparable uncontrolled price (CUP) method must be applied in the case of transactions with related parties dealing with commodities except in special cases. Penalty in case of documentation failure: A new penalty is introduced in the case of taxpayers who fail to comply with the submission of the supporting documentation. In that case, the applicable penalty corresponds to 4% of the total amount of the transactions that must be reported in the supporting documentation, without exceeding 25,000 UVTs. APA rules: Article 260-10 of the Tax Code, as amended by the tax reform, introduces changes in the procedure applicable to Advance Pricing Arrangements (APAs). See the story in Regfollower |
| Ecuador: | Transfer pricing rule: Resolution No. NAC DGERCGC16-00000531 issued by the Internal Revenue Service on 30 December 2016 introduces transfer pricing regulations applicable specifically to exports of oil, petrol, bananas, gold, silver, copper or other minerals (metals). See the story in Regfollower |
| Malta: | Multilateral information exchange: Malta joined the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of Country-by-Country reports (CbC MCAA), which is based on article 6 of the Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol. See the story in Regfollower |
| Lithuania: | Multilateral information exchange: Lithuania has joined the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of Country-by-Country reports (CbC MCAA), which is based on article 6 of the Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol. See the story in Regfollower |
Transfer Pricing Brief: February 2017
05 March, 2017
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