TPA Briefs

Transfer Pricing Brief: July 2017

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Poland: Financial services-Restriction on interest deduction: According to draft bill revising on corporate income tax act published on 12 July 2017, thin capitalization rules limiting the deduction of financing costs to 30% of an adjusted tax basis.
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Iceland: Restriction on interest deduction: On 1 June 2017, the Icelandic Parliament passed legislation amending the interest limitation rules.
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Panama: APAs-Availability of APA: The Tax Authorities (Direccin General de Ingresos, DGI) recently given for consultation a bill amending article 762-L of the tax code to introduce advanced pricing agreements (APAs) to the transfer pricing regime.
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Greece: BEPS related compliance-CbC reporting requirement: According to the draft law 20 July 2017, containing modifications to the Greek Corporate Income Tax L.4170/2013 and 4474/2017, the Country-by-Country (CbC) reporting requirements will be applicable for fiscal years starting on or after 1 January 2016.
BEPS related compliance-Timing: The report is required to be provided to the tax authorities within 15 months after the last day of the tax year it refers to.
BEPS related compliance-Penalty for non-compliance: According to the draft law 20 July 2017, the proposed penalty for non-submission of the CbC report is €10,000. With respect to the late submission or submission of inaccurate information, the penalty is €5,000.
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Belgium: Information exchange-Multilateral: The federal government submitted a draft bill, providing implementing rules of DIRECTIVE 2015/2376/EU of 8 December 2015 amending the Mutual Assistance Directive [on administrative cooperation in the field of taxation] (2011/16).
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Netherlands: Restriction on interest deduction: On 10 July 2017, a public (internet) consultation was launched by the Dutch Ministry of Finance on the implementation of the European Anti-Tax Avoidance Directive 2016/1164 (ATAD). The consultation document covers the EBITDA based interest deduction limitation rule.
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Czech Republic: CbC reporting requirement-General rule: According to amending proposals passed by the chamber of deputies on 12 July 2017, the CbC report will be mandatory for multinational groups with an annual consolidated turnover exceeding €750 million.
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Cyprus: Intra-group services-General rule: The Circular of 30 June 2017 defines intra-group financing transactions as all activities of granting loans or advances to related entities remunerated by interest (or should be remunerated by interest) and funding them through public debt issuance, private loans, advances, or bank loans, among others.
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Italy: Adjustments-Corresponding adjustment: According to article 59 of Law Decree no. 50/2017, a corresponding downward adjustment resulting in lower taxable income will no longer be conditional on a mutual agreement procedure (MAP).
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Thailand: Public comments regarding Draft Transfer Pricing Rules: The Revenue Department of Thailand is requesting public comments with respect to the Draft Transfer Pricing Rules which were approved by the Thai Cabinet on May 2015. The comments are to be provided by 7 July 2017.
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Germany: Requirements: Accordin to CbC reporting requirements guidance issued on 11 July 2017, CbC reporting is effective for tax years starting after 31 December 2015.
Language: The country report can be submitted in English. The information or explanations contained in Table 3 of the BMF letter must be submitted in English, in accordance with Article 2b of Implementing Regulation (EU) 2015/2378.
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Vietnam: Audit Process: According to the new Law No. 07/2017/QH14 effective from 1 July 2018, the tax authorities will exclude the costs of the technology transfer from deductible expenses if the technology transfer contract is not registered.
Audit Rules: According to Law No. 07/2017/QH14, the tax authorities may request the enterprises receiving the technology to provide the audited technology transfer dossiers and dossiers on how market prices were determined for the transferred technologies in order to determine the expenses deductible for corporate income tax calculation purposes.
Audit Process-Areas of scrutiny: Law No. 07/2017/QH14 stipulates that the technology transfer price must be audited and implemented in accordance with the tax and price law.
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Comparable Data: According to Circular 41/2017, for benchmarking purposes, Vietnamese data should be prioritized but if not available, regional data can also be used if appropriate adjustments are made for factors such as location and cost differentials.
Comparability analysis: According to Circular 41/2017, if the taxpayer is outside the range, an adjustment will be made to the median.
CbC reporting requirement-General rule: Circular 41/2017 confirms that ultimate parent company in Vietnam should prepare CbCR if the consolidated revenue is VND 18 trillion or more.
Safe Harbour-Exemption from documentation requirements: Decree 20/2017 provides relief for small businesses and lists various exemptions that are available which includes taxpayers engaging in ‘simple’ functions with revenue less than VND 200 billion and achieving at least the following ratios of EBIT to sales on its respective business
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Malaysia: Update the guidelines for transfer pricing: The Inland Revenue Board of Malaysia (IRBM) had recently announced new updates and changes to the Transfer Pricing Guidelines 2012 (“TPG 2012”).
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US: Specific TP compliance: The Internal Revenue Service has recently released final versions of the form and instructions for filing country-by-country (CbC) reports. Form 8975 and its schedules can be filed in the modernized e-file (MeF) XML schema format. Parent entities not permitted to file returns electronically must file Form 8975 with their paper income tax return.
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Slovenia: CbC reporting requirement-General Rule: On 16 June 2017, the ordinance on country-by-county (CbC) reporting was published in Official Gazette No. 30/2017. The CbC reporting form is expected to be available in July 2017. In principle, the CbC reports must be submitted within 3 months after the end of the tax year as additional documents on the ordinary corporation tax return.
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Singapore: Requirement-Rule: According to the draft Income Tax (Amendment) Bill 2017 (Draft Bill) of 19 June 2017, Section 34D of the Singapore Income Tax Act (SITA) would be expanded to provide clarification on the meaning of arm’s-length conditions.
Documentation-Thresholds: According to the draft Income Tax (Amendment) Bill 2017 (Draft Bill) of 19 June 2017, the requirement to prepare TPD will only apply to businesses with turnover exceeding S$10 million. This S$10 million turnover serves as an additional safe harbour to the existing thresholds.
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Information exchange-Multilateral: On 22 June 2017, Singapore signed the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of Country-by-Country (CbC) reports. The signing took place at a ceremony held during the third meeting of the inclusive framework on BEPS on 21–22 June 2017.
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Romania: CbC reporting requirement-General rule: According to the new provisions passed on June 9 2017, a Romanian tax resident entity that is ultimate parent entity of an MNE Group with annual consolidated group revenue of €750 million and above will need to comply with the CbC requirements for fiscal years starting on or after 1 January 2016.
Penalty for non-compliance: For failing to file a CbC report, the penalty ranges from RON 70,000 to RON 100,000. For late filing of a CbC report or for incomplete/incorrect filing of the CbC report, the penalty ranges from RON 30,000 to RON 50,000.
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France: Reduction of corporate tax rate: On 4 July 2017, the Prime Minister of France confirmed in his opening speech to the National Assembly that the Government would cut the corporate tax from 33 percent to 25 percent by 2022 with the hope of attracting Businesses.
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Pakistan: Information Exchange-Multilateral: On 22 June 2017, Pakistan signed the Multilateral Competent Authority Agreement (MCAA) on the automatic exchange of Country-by-Country (CbC) reports. The signing took place at a ceremony held during the third meeting of the inclusive framework on BEPS on 21–22 June 2017.
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Sri Lanka: Penalty for documentation failure: Sri Lankan companies that violate transfer pricing rules can be fined up to two percent of the total value of transactions between related parties in case of non-disclosure of any required information under the new tax law. The new law also contains the provision to impose a penalty of up to 1% of the total amount of transactions with related parties when they fail to comply with discloser requirements.
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Transfer Pricing Brief: June 2017

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Greece: Main corporate tax rate: According to Law 4472/2017 published in the official Gazette on 19th May 2017, the corporate income tax (CIT) rate will be reduced from 29% to 26% from 1 January 2019 subject to certain conditions.
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Netherlands: Information exchange-Multilateral: On June 2, 2017, a Bill to implement EU directive 2016/881 was published in official Gazette No. 215. The Bill takes effect from 5 June 2017, with retroactive effect to 1 January 2016. In addition, on June 7, 2017, Netherlands signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS).
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Pakistan: Main corporate income tax rate: According to Federal Budget and Finance Bill for fiscal year 2017-2018, the corporate income tax rate will be reduced from 31% to 30% for tax year 2018.
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Audit Rules-Rules: Pakistan’s Finance Minister presented to Parliament on 26 May 2017 the federal budget for 2017-18. The related finance bill includes provisions establishing an office responsible for conducting transfer pricing audits (Directorate-General of Transfer Pricing) and proposes penalty provisions with respect to certain taxpayer failures such as the failure to maintain or produce transfer pricing documentation and the failure to furnish a timely country-by-country report.
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Lithuania: CbC reporting requirement-General rule: On 23 May 2017, the Lithuanian Parliament passed amendments to the Tax Administration Law to implement the CbC reporting requirements that will take effect from 5 June 2017. According to law, all Lithuanian tax resident entities that are part of an MNE Group with annual consolidated group revenue of €750 million and above will need to comply with the CbC requirements for fiscal years starting on or after 1 January 2016.
CbC reporting requirement-Timing: The CbC report must be submitted within 12 months after the end of MNE’s financial year. There is no information yet regarding the CbC reporting notification deadlines, secondary filling procedures or penalties specific to non-compliance with the CbC requirements.
Penalty for non-compliance: Penalties ranging between €150 and €300 will apply for noncompliance.
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Portugal: CbC reporting requirement-Timing: The CbC report must be submitted within twelve months after the end of the tax year. As per published Decree no. 170/2017-XXI dated May 30, 2017, the deadline to submit the mandatory CbC reporting notification, with respect to the fiscal year 2016, has been extended to 31 October 2017.
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Romania: CbC reporting requirement-General rule: On 24 May 2017, the Romanian Ministry of Finance published a draft law to implement CbC reporting. According to the draft law, all Romanian tax resident entities that are the ultimate parent entity of an MNE Group with annual consolidated group revenue of €750 million and above will need to comply with the CbC requirements for fiscal years starting on or after 1 January 2016.
CbC reporting requirement-Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Romania that is the parent company of a corporate group.
CbC reporting requirement-Timing: The CbC report must be submitted within 12 months after the end of MNE’s financial year.
Penalty for non-compliance: According to a draft law published on 24 May 2017,  monetary penalties (of up to RON 50,000 – 100,000) could be triggered when a Romanian entity fails to report the required information within the time stipulated or fails to report the information in a complete and accurate manner.
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Costa Rica: Specific TP compliance-Form: Resolution DGT-R-28-2017 of 5 June 2017 modifies Article 4 of Resolution DGT-R-044-2016 and temporarily suspends the due date for filing the transfer pricing information return.
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India: Adjustments-Secondary adjustment: India’s Finance Act, 2017 (FA 2017) introduced “secondary transfer pricing adjustment” provisions in the Indian Tax Law (ITL) to ensure that profit allocation between the associated enterprises (AEs) is consistent with the primary transfer pricing adjustment.
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Safe Harbour-Rule: On 7 June 2017, the Indian Central Board of Direct Taxes revised the existing Safe Harbour Rules (SHRs) which were issued in September 2013. The revised SHRs are available for transactions up to INR 200 crore (approximately USD 31m). The revised SHRs are aimed at reducing Transfer Pricing disputes and providing better certainty to taxpayers.
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Comparability analysis: The Ahmedabad Bench of the Income-tax Appellate Tribunal held in the case Inductotherm (India) Pvt. Ltd v. DCIT that the “internal cost plus method” could not be applied to benchmark exports of finished goods to a related party when there are differences in the geographical location of the market and in the value chain and utility of the product.
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Sweden: Financial services-Restriction on interest deduction: On 20 June 2017, the Swedish Government announced a memorandum proposing new interest deduction limitation rules. Under the rules, the deductibility of the net interest expense would be limited to 35% of taxable EBIT under the main proposal, while a limitation to 25% of taxable EBITDA is presented as an alternative, recognizing that there are advantages and disadvantages to both alternatives.
Main corporate income tax rate: On 20 June 2017, the Swedish Government announced a memorandum proposing corporate tax reduction rate from 22% to 20%.
Safe Harbour-Simplified interest rates: According to a proposed memorandum announced by the government on 20 June 2017, each company in a group may elect to apply a safe-harbor rule allowing a deduction of net interest expense of SEK 100,000 (approx. €10,000).
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Transfer Pricing Brief: May 2017

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Italy: Requirement-Rule: According to Decree No.50 published on 24 April 2017, the definition of normal value with the concept of arm’s length will be modified to be more aligned with Organisation for Economic Co-operation and Development (OECD) principles.
Adjustments-Corresponding adjustment: According to Decree No.50 published on 24 April 2017, corresponding adjustments are now allowed the conclusion of tax audits performed under international cooperation procedures, where the results are agreed by the tax authorities involved.
Special Areas-Intangible property: The Italian patent box regime allows taxpayers to elect to exclude a percentage of the income derived from the use and/or the transfer of ownership of relevant intangibles from the tax base declared for both corporate income tax (IRES) and regional tax (IRAP) purposes.
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Croatia: CbC reporting requirement-General rule: The country by country reporting requirement applies to MNEs headquartered in Croatia with annual consolidated group revenue equal to or exceeding €750 million in the previous year. CbCR applies for fiscal years beginning on or after 1 January 2016.
CbC reporting requirement-Parent company: The CbCR is filed by the ultimate parent of those multinational groups (“MNG”) that have total consolidated revenues of EUR 750 million or more in the last financial year.
CbC reporting requirement-Definition of group: The country by country reporting requirement applies where the consolidated group revenue in the preceding year is at least EUR 750 million.
CbC reporting requirement-Timing: The first CbC report for the fiscal year started on or after 1 January 2016 must be by an ultimate parent entity of the MNE group or its surrogate parent entity that is resident in Croatia within 12 months from the last day of that tax year. Thus, for the fiscal year that ended on December 31 2016, the deadline is December 31 2017.
CbC reporting requirement-Penalty for documentation failure: Penalties ranging between HRK 2,000 to HRK 200,000 will apply for noncompliance.
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Availability of APA: The Guidance on Advance Pricing Agreements (APAs) has been published in Official Gazette No. 47/15 on 3 May 2017. Accordingly, APAs could be concluded in respect of the transfer pricing treatment of intercompany transactions and would be binding on the TA.
Authority: Tax Administration.
Rules: APAs could be concluded in respect of the transfer pricing treatment of intercompany transactions and would be binding on the TA. Before submitting an official request, the taxpayer may also initiate a non-binding consultation procedure with the TA discussing the transfer pricing treatment of the intercompany transaction for which the APA request will be filed.
Withdrawal: APAs can be canceled if factual circumstances change; legislation has been amended or annulled; and facts have not been truthfully presented to the TA.
Validity: 5 years.
Fees: Ranges from HRK 15,000 to HRK 50,000 depending on the taxpayer’s turnover as stated in the most recent tax return.
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Pakistan: Dispute resolution-Alternative dispute resolution: The Federal Board of Revenue (FBR) has released a guide on the mechanism of ADR in April 2017. Based on the guide, taxpayers can seek to resolve tax disputes via ADR instead of the conventional method of appealing through the appellate authorities, tribunals and courts of law. The aim of the ADR is to reduce the costs of appeal to taxpayers and to expedite the resolution of tax disputes.
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Norway: Financial services-Restriction on interest deduction: On 4 May 2017, a discussion paper that proposes changes to the earnings stripping rules has been issued by the Norwegian Ministry of Finance which further extends the limitation to also include interest costs on unrelated party debt.  The new proposed rules provide for one exception according to which the taxpayers are able to document that the equity ratio of the company is not lower than the equity ratio reported in the consolidated financial statements, full interest costs on unrelated party debt will continue to be deductible. If passed, the amendment would be effective from 1 January 2018.
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Iceland: CbC reporting requirement-General rule: According to Regulation no.245/2017, Country-by-Country Reporting shall include the applicable information on an aggregate basis for all entities within each country. In the previous regulation no. 1166/2016, this information was requested for each entity instead of collectively for each country.
BEPS related compliance-Timing: According to Regulation no.245/2017, Country-by-Country reporting must be filed with the Directorate of Internal Revenue before the end of each calendar year or by the end of financial year. In the previous regulation no. 1166/2016, CbCR was to be filed no later than 12 months after the close of the group’s financial year.
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Korea: BEPS related compliance-Master file: A Master file must be submitted for fiscal years beginning on or after 1 January 2016, by all domestic corporations and foreign corporations with Korea-source income with Sales revenue exceeds KRW 100 billion (approximately U.S. $89 million) and the volume of cross-border related-party transactions exceeds KRW 50 billion (approximately U.S. $44.4 million)
BEPS related compliance-Local file: A Local file must be submitted for fiscal years beginning on or after 1 January 2016, by all domestic corporations and foreign corporations with Korea-source income with Sales revenue exceeds KRW 100 billion (approximately U.S. $89 million) and the volume of cross-border related-party transactions exceeds KRW 50 billion (approximately U.S. $44.4 million).
BEPS related compliance-CbC reporting requirement: The CbC report is required to be submitted by ultimate parent company when the earlier year’s consolidated sales revenue exceeds KRW 1 trillion.
Financial services-general rule: The tax authority updated the rules on the arm’s length interest rate applicable for loan transactions between a resident and a foreign related-party. The new rules set forth the arm’s length interest rate for lending and borrowing involving a Korean resident taxpayer to a foreign related party.
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India: BEPS related compliance-CbC reporting requirement: India has introduced a country-by-country (CbC) reporting requirement in section 286 of the Indian Income-tax Act-1961, with effect from financial year 2016-2017. The first round of CbC reports, when applicable, will have to be filed with the Indian tax authorities by 30 November 2017.
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Information exchange-Bilateral: On May 17, 2017, Indian Union Cabinet has given its approval for signing of a multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS).
Information exchange-Multilateral: The Union Cabinet has given its approval for India’s signing of a multilateral convention(MLI) to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS) which is scheduled to take place in Paris on 7 June 2017.
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Australia: Risk Assessment: Draft Practical Compliance Guideline PCG 2017/D4 of 16 May 2017, sets out a self-assessment risk framework which will allow taxpayers to self-assess the tax risk of their related party financing arrangement and realize the compliance approach the Commissioner is likely to implement based on the risk profile. The provisions of the draft guidance will apply to both inbound and outbound financing arrangements that are entered into with a non- resident related party.
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Main corporate income tax rate: In the 2016–17 Budget, the Government announced that it intended to progressively reduce the corporate tax rate from 30 per cent to 25 per cent over the next ten years. The corporate tax rate is reduced from 28.5% to 27.5% for the 2016–17 income year for small business entities.
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Hungary: CbC reporting requirement-General rule: Hungary released a draft law on country-by-country (CbC) reporting on 10 March 2017. According to law, all Hungarian tax resident entities that are part of a multinational group that derives annual consolidated income of at least EUR 750 million will need to comply with the CbC reporting requirements.
Parent company: A Hungarian resident ultimate parent entity must file a country-by-country report with the Hungarian tax authority within 12 months of the last day of its reporting fiscal year. If the ultimate parent is tax not resident in Hungary, Hungarian resident constituent entities may become reporting entities and may be appointed by their groups to file the CbC report.
Definition of group: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
Profits and tax paid: The CBCR must include information on the main data of the MNE per each tax jurisdiction involved with its operation i.e. revenue, pre-tax profit / loss, paid corporate income tax, capital etc.
Employees: The average number of employees in each entity must be reported.
Assets: CbC reports must contain tangible assets other than cash or cash equivalents and main business activity.
Timing: The first CbC reports and notifications must be filed for the fiscal year commencing on or after 1 January 2016, within 12 months of the last day of that fiscal year. In future fiscal years notifications must be made no later than the last day of the reporting fiscal year. Any change must be reported within 30 days of such change occurring.
Penalty for non-compliance: Failing to submit reports or notifications, late submission, or providing incorrect, false or incomplete information may be subject to a default penalty of up to HUF 20 million.
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Czech Republic: Information exchange-Multilateral: The government of the Czech Republic has given its approval of signing of the multilateral convention (MLI) to implement tax treaty-related measures to prevent base erosion and profit shifting (BEPS) which is scheduled to take place in Paris on 7 June 2017.
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Singapore: Cost-plus method: Recently, the Inland Revenue of Singapore has clarified its practice that allows services companies which provide “routine support services” to adopt the cost-plus mark-up method.
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France: CbC reporting requirement-Parent company: If the parent company established in France and files the CbC report that entity must “check a box” indicating this information on its tax return. If a legal entity established in France is the subsidiary of an ultimate parent company located in a jurisdiction and files the CbC report that entity is not required to mention any CbC reporting information on its tax return. Other than the above circumstances entity must indicate the legal name and address of the entity filing the CbC report on its income tax return.
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Colombia: Local file: Local files must be filed for tax year 2016 between 11 July and 25 July, depending on the last number of the taxpayer’s ID, as established in Decree 1625 of 2016.
Master file: Must be filed for tax year 2017 in 2018 in accordance with dates to be determined by the Government; tax year 2016 is not subject to the master file requirement.
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Germany: Information exchange-Multilateral: On 21 December 2016, the Federal Government approved the signing of the Multilateral Convention on the implementation of tax-related measures to prevent the shortening of profits and the shift of profit. The signing ceremony is scheduled to take place in Paris on 7 June 2017.
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Russia: Information exchange-Multilateral: The Russian government approved the signing of the, Multilateral Convention (2016) (MLI). The signing ceremony is scheduled to take place in Paris on 7 June 2017.
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Ukraine: APAs-Rules: According to the adopted amendments to the Regulation No. 504 of 17 July 2015, an APA will become effective on the date agreed by the State Fiscal Service and a taxpayer (depending on the terms and conditions of the controlled transactions) or on 1 January of the year following that in which the APA was signed.
APAs-Validity: According to adopted amendments to the Regulation No. 504 of 17 July 2015, the validity of an APA is extended from 3 to 5 years.
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Brazil: BEPS related compliance-CbC reporting requirement-General rule: According to Normative Instruction 1,709/2017 published on May 25 2017, the Brazilian entity may amend its corporate income tax return within 60 days and file the CbC report on behalf of the entire group for calendar year 2016 if a competent authority agreement (CAA) is not concluded between Brazil and the reporting entity’s jurisdiction by 31 December 2017.
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Belgium: Master file: Belgium’s Federal Public Service (FPS) Finance recently updated its transfer pricing documentation forms in relation to master file based on BEPS Action 13.
CbC reporting requirement-Timing: On December 22, 2016, the Federal Public Service (FPS) announced the extension of CbC reporting notifications to September 30, 2017 for fiscal year 2016.
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Bulgaria: Information exchange-Multilateral: The Bulgarian government approved the signing of the, Multilateral Convention (2016) (MLI) on 17 May 2017. The signing ceremony is scheduled to take place in Paris on 7 June 2017.
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Israel: Information exchange-Multilateral: On 22 May 2017, the tax authority in Israel announced the signing of a multilateral agreement for the automatic exchange of country-by-country (CbC) reports and of common reporting standard (CRS) information.
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Spain: Specific TP compliance: Spain’s Tax Agency has published a draft order approving Form 232 for reporting related-party transactions and transactions and situations that involve countries and territories considered to be tax havens. The deadline for filing Form 232 has been set generally in May.
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Transfer Pricing Brief: April 2017

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China: Adjustments-MAP: Bulletin 6 governs MAP in relation to bilateral/multilateral APAs and special tax adjustments in one jurisdiction which would result in corresponding adjustment in another jurisdiction. According to Bulletin 6, the SAT may initiate a MAP upon the request of an enterprise or the competent authority of the other contracting state. Taxpayers with ongoing special tax investigations or those who have not paid taxes assessed in an investigation may be denied access to MAP.
Special Areas-Intangible property- Hard to value intangibles: China contains the five functions in SAT Bulletin 6 including development, enhancement, maintenance, protection and exploitation (DEMPE functions) under OECD guidelines that are relevant in determining the allocation of profits from use of intangible property. In addition, Bulletin 6 added promotion as a sixth function to signify the importance China places on value created through marketing activities undertaken by Chinese companies.
General for Intra-group services: SAT Bulletin 6 encompasses the provision of empowerment of tax authorities to refuse a deduction for service fees paid to a related party that does not have particular effect. The Bulletin maintains internationally accepted and OECD sanctioned benefit test.
Location specific advantages for business restructurings: Bulletin 6 incorporates comparability analysis in requiring LSA adjustments. Multinational entity may face an increasing number of cases where the tax authorities make transfer pricing adjustments based on LSAs.
Priority of Methods: SAT Bulletin 6 highlights the TNMM method which is generally not appropriate in transactions where the tested party has significant intangible assets. Bulletin 6 provides that a high and new technology enterprise should apply the profit split method so that a higher portion of profit will be allocated to the high and new technology enterprise.
Other methods: Bulletin 6 introduces additional asset valuation and catchall method that must be applied consistently with the arm’s length principle.
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UK: General rule for CbC reporting requirement: The Statutory Instrument No. 497 of 30 March 2017, amends SI 2016 No. 237, which gives effect in the G20/OECD’s minimum standard for country-by-country (CbC) information needed to be provided to the tax authorities. Additionally, the regulations ensure compliance with the amended EU Council Directive on Administrative Cooperation 2011/15/EU (DAC4). Furthermore, country-by-country reporting obligation now applies to MNE groups whose ultimate parent entities are governed under UK law, including limited liability partnerships.
Timing for CbC reporting requirement: Statutory Instrument 2017 (No. 497), published on 30 March 2017 governs new annual notification requirements for UK entities, with the first notifications due on 1 September 2017 and then by the end of the CbC reporting period thereafter.
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Poland: General rule for CbC reporting requirement: On 20 March 2017, the new legislation regarding the exchange of tax information with other countries entered into force.  The Law provides information on obligations of financial institutions (FIs) and the automatic exchange of country-by-country (CbC) reports. Entities belonging to groups whose have registered office or permanent establishment (PE) in Poland shall provide the group information for the reporting year.
Information exchange-Multilateral: On 20 March 2017, the new legislation regarding the exchange of tax information with other countries entered into force.  The new legislation provides rules concerning the exchange of information including revenue, realized gain (loss) before tax, income tax paid and payable, capital, ROE, number of employees and tangible assets other than cash and cash equivalents.
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Germany: General rule for CbC reporting requirement: The German Federal Ministry of Finance recently published a draft discussion paper on transfer pricing documentation. The proposed draft TP documentation decree correspond mainly the OECD Guidance defining the relevant information to be included in the Master File and the Local File.
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New Zealand: BEPS related compliance: On 3 March 2017, the Revenue and Finance Minister released three BEPS related consultation papers which address the issue of Base Erosion and Profit Shifting (BEPS). The consultation papers proposed new measures to strengthen New Zealand’s rules for taxing large multinationals. Submissions on the consultation document on implementing the international convention are open until 7 April. Submissions on the other two are open until 18 April. Ministers will consider final proposals arising from the documents later in the year.
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Ukraine: Documentation-Requirement: Effective from 1 January 2017, in addition to the previous requirements transfer pricing documentation is expanded including copies of the agreements specifying terms and conditions of the controlled transactions; information about the payments made in the transaction; information about the taxpayers involved in the business; information about the cost allocation algorithm used in calculating the profit level indicator; and description and calculation of comparability adjustments of terms and financial results of the controlled and uncontrolled transaction.
Documentation-Thresholds: Starting from 1 January 2017, criteria for tracing controlled transactions is increased with annual income of at least USD 5.4m (1.8 million in 2016) and with transactions with a single counterparty of more than USD 357000 thousand (179,000 in 2016).
Documentation-Deadline: The deadline for submitting the report of controlled transactions has been changed from previous date of 1 May to 1 October of the year following the reporting year.
Comparability-Range: Effective form 1 January 2017, taxpayers will be able to adjust their taxable profit for Transfer Pricing purposes to maximum or minimum values of the range of prices instead of the median.
Comparability analysis: Effective from 1 January 2017, it is possible to determine a profitability margin and perform a benchmarking study if no direct comparable data is available and in such cases, the benchmarking study can be done based on financial information  of comparable legal entities.
Penalty for documentation failure: Starting from January 2017, penalties are based on the living wage for persons capable of work as of January 1 of the reporting year (previously penalties were based on the minimum wage). In case of non-submission of report on controlled transaction 300 living wages is imposed. For late submission of report on controlled transactions, 1 living wage for each calendar day of the delay but not more than 300 living wages. Failure to declare a controlled transaction in report on controlled transactions, 1 % of undeclared amount but not more than 300 living wages. For late declaration of controlled transactions, 1 living wage for each calendar day of the delay but not more than 300 living wages. Failure to submit TP documentation, 3% of the amount that document was not submitted but not more than 200 living wages. For delayed submission of TP documentation, 2 living wage for each calendar day of the delay but not more than 200 living wages. Failure to submit the report on controlled transactions or transfer pricing documentation within 30 calendar days following the last day of the payment of the penalty, 5 living wages for each calendar day of non-submission after expiration of 30 calendar days.
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Cyprus: Information exchange-Multilateral: On 5 April 2017, the Council of Ministers approved the signing of the OECD Multilateral Instrument (MLI) Convention of 2016. The signing formality is scheduled to take place on 7 June 2017.
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Czech Republic: General rule for CbC reporting requirement: According to proposed amending legislation to become effective on 5 June 2017, the CbC report will be mandatory for multinational groups with an annual consolidated turnover exceeding €750 million. Czech companies will be obliged to prepare a CbC report on behalf of the entire multinational group if they are the ultimate parent company of the group or if they have been regulated for the purposes of CbC reporting as representing companies. If the Czech company prepares the CbC report itself, all the member companies of the group will need to be informed of the fact and it will be necessary to further communicate with them so that all the details that are necessary for preparing the CbC report may be obtained.
Timing for CbC reporting requirement: The first reporting periods in which CbC reports should be prepared are periods beginning on or after 1 January 2016. Thus, The first due date for CbC report filling is 31 December 2017. For the reporting period ending prior to 30 September 2017, the due date for first notification shall be 30 September 2017. For reporting periods ending after 30 September 2017, the due date for the notification shall be the end of the first reporting period.
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Costa Rica: BEPS related compliance:
Master file: Costa Rica’s tax authority (Dirección General de Tributación—DGT) issued Resolution DGT-R-16-2017 on 21 April 2017. According to Resolution, taxpayers having transactions with related parties are required to keep supporting document relating to corporate and company local information. The corporate information required by the DGT is the equivalent to the “Master file” that summarizes qualitative and quantitative data from the group at the international level, as proposed by the OECD in the base erosion and profit shifting (BEPS) project.
Local file: According to Resolution DGT-R-16-2017 issued on 21 April 2017, taxpayers having transactions with related parties are required to retain supporting documentation of company local information. The company local information which is equivalent to the Local File as proposed by OECD BEPS Action 13 requires the taxpayer to provide the organization structure, chain value, financial information etc.
Penalty for non-compliance: A penalty of USD 90,000 applies for failure to comply BEPS related compliance as per the requirements of Resolution DGT-R-16-2017 issued on 21 April 2017.
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Australia: Documentation requirement-Master file: According to ATO’s guideline, for preparing and lodging the Master file XML schema is required to be developed in in house, licensed or outsourced. While the master file XML schema contains questions in relation to taxpayer’s lodgment of the Country-by-Country (CbC) report, the CbC report itself must be lodged separately in accordance with the OECD XML. CbC statements including master file and local file must be lodged via one of the channel provided by Australian Taxation Office (ATO).
Documentation requirement-Local file: According to ATO’s guideline, for preparing and lodging the Local file XML schema is required to be developed in in house, licensed or outsourced. CbC statements including master file and local file must be lodged via one of the channel provided by Australian Taxation Office (ATO).
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Mexico: Documentation requirement-Master file: On 3 April 2017, the Mexican Tax Ombudsman published the final regulations on transfer pricing providing guidance on the master file. The final regulations allow a foreign related party to prepare the master files and Mexican taxpayers to file the master file in English or Spanish as long as it is consistent with OECD BEPS Action 13. If the Mexican taxpayer prepares the master file locally, the information provided must align with the new definitions and specific requirements included in the final regulations. The final regulations are not effective until published by the SAT in the Official Gazette.
Documentation requirement-Local file: On 3 April 2017, the Mexican Tax Ombudsman published the final regulations on transfer pricing providing guidance on local file. The local file must be filed in Spanish, except for the business description of comparable companies and agreements, which may be provided in English or Spanish. Taxpayers with an Advance Pricing Agreement (APA) or subject to the maquiladora rules will have the option to not file the local file.
General rule for CbC reporting requirement: On 3 April 2017, the Mexican Tax Ombudsman published the final regulations on transfer pricing providing guidance on CbC report. The final regulations include some clarifications and definitions for the CbC report. In addition, the final regulations allow Mexican taxpayers to file just one transfer pricing information return jointly with the entities of the multinational group.
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Netherlands:  General rule for CbC reporting requirement: On April 18, 2017, the Dutch lower house of Parliament adopted the Bill No.34651 to implement country-by-country (CbC) reporting. The bill allowed a group entity to serve as the reporting entity and a designated Dutch group entity to file an incomplete CbC report with all the information at its disposal.
Penalty for non-compliance in CbC reporting requirement: The Dutch Lower House on 18 April 2017 passed proposed Amendment No.9 which increased the penalty for noncompliance to €820,000.
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Transfer Pricing Brief: March 2017

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Canada: General rule for CbC reporting requirement: The Canada Revenue Agency (CRA) updated RC4651 Guidance on Country-By-Country (CbC) Reporting on 2 March 2017 to provide information on the interpretation of Canadian CbC reporting legislation in details.
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Australia: Local file information: As per the guidance published by the ATO, the taxpayer is required to provide copies of International Related-Party Agreements (IRPA) in Part B of the local file for all transactions shown in Part A of the file, unless the transaction is covered by one of the eight categories on the Exclusions List.
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Sweden: BEPS related compliance
Master file information: Sweden has introduced a requirement for a master file in line with the OECD’s base erosion and profit shifting (BEPS) Action 13 final report where information regarding the multinational group is to be provided. The Master file must be prepared by the time when the tax return of the parent company is due.
Local file information: Sweden has introduced a requirement for a local file in line with the OECD’s base erosion and profit shifting (BEPS) Action 13 final report. The local file reporting obligations will be applicable to MNEs that have more than 250 employees and minimum consolidated revenue of SEK 450 million or having a minimum consolidated balance sheet total of SEK 400 million in FY 2017. The content of the local file is consistent with OECD BEPS Action 13 recommendations and is effective from 1 April 2017.
General rule for CbC reporting requirement: The Swedish Parliament adopted new Transfer Pricing documentation requirements as encouraged by BEPS Action 13 on transfer pricing documentation and CbC reporting. Multinational Enterprises (MNEs) with a minimum consolidated revenue of SEK 7 billion (equivalent to EUR 750 million) in FY 2016 will be required to submit a CbC report with the Swedish Tax Agency within one year from the end of the fiscal year. CbC reporting would concern fiscal years starting on or after 1 January 2016 (i.e., retroactively for 2016) and is effective from 1 April 2017. The Country-by-Country (CbC) report must be submitted by a company resident in Sweden 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 Sweden. 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. The average number of employees in each entity must be reported.
Timing: The CbC report must be submitted within twelve months after the end of the tax year.
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Russia: BEPS related compliance
Master file information: The Russian Finance Ministry presented for public discussion a new version of the draft law on 6 March 2017. As per the new version of the draft law, any taxpayer may be required to present the Master file, whether it belongs to a Russian-based or foreign-based MNE group. A master file should include a description of the group’s business, including key value drivers, a description of the five main products/services, including supply chains for those products/services and geographical markets for those products/services in which the group operates, a description of the main intra-group transactions involving the provision of services, a brief functional analysis of the group and a description of key business restructuring events which occurred during the period reviewed.
Local file information: The new version of the Draft eliminates uncertainty over whether members of an MNE group will be required to prepare a Local file in addition to or in place of the existing transfer pricing documentation requirements. Now a Local file is regarded as the only type of documentation in addition to the CbC report and Master file that members of an MNE group would be required to submit in relation to cross-border controlled transactions. The local file will contain material related-party transactions, the amounts involved and the company’s analysis of the transfer pricing determinations made on those transactions.
General rule for CbC reporting requirement: The Russian Ministry of Finance issued a new version of the draft law on 6 March 2017 regarding the introduction of country-by-country reporting in Russia. The new reporting requirements is in line with the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 13 Final Report. It will be applicable for the 2017 financial year to international groups whose revenue totals RUB50 billion (approx. US$777 million) or more. Voluntary reporting is possible for financial years prior to 2017.
Penalty for non-compliance of CbC reporting: Failure to submit a CbC report or to submit inaccurate information may be subject to a penalty of RUB100,000 for each of the three types of the reporting. For violations identified in 2017 through 2019, there would be a grace period during which fines should not be imposed.
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Italy:

General rule for CbC reporting requirement: The Italian Ministry of Finance issued a Decree on 8 March 2017 providing detailed information regarding the application of CbC reporting rules. The Decree is in accordance with an EU Directive of 25 May 2016 requiring all EU Member States to implement a CbC reporting obligation in their national legislation in accordance with the recommendations of the OECD BEPS Action 13. According to the Decree, all Italian tax resident entities that are Ultimate Parent Entities (UPEs) of an MNE group with annual consolidated group revenue equal to or exceeding €750 million will need to prepare a CbC report. Alternatively, if the UPE is not resident in Italy, and not obligated to file a CbC report in its country of residence, or although obligated to file CbC report there is no exchange of information instrument in place with Italy or there is a systemic failure of the jurisdiction of tax residence of the UPE, any other entity of the group that is resident in Italy would have to prepare the CbC report.
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UK: Main corporate tax rate: The corporate income tax rate in the UK has been reduced to 19% compared to the current 20% rate starting from 1st April 2017.
Restriction on interest deduction: The government introduced the new hybrid mismatch regime legislation in Finance Bill 2017 as per BEPS action 2 and will be effective from January 1, 2017.
Special rules for hybrid instruments or entities: The government introduced rules in Finance Bill 2017 to implement the OECD’s Action 4 Final Report that limit the tax deductions up to £2m of net interest expense per annum that companies can claim for their interest expenses. This was effective from 1st April 2017.
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Transfer Pricing Brief: February 2017

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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.
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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.
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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.
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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.
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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.
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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.
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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%.
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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.
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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.
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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.
Secondary adjustment: As per the 2017 budget the concept of a “secondary adjustment” following transfer pricing adjustments would be introduced, so that a taxpayer would be required to make a secondary adjustment when the primary adjustment to the transfer price is made in certain situations.
Financial services: The Budget for 2017 proposes that a restriction on interest deduction will be imposed in line with recommendations from the OECD’s base erosion and profit shifting (BEPS) project. No deduction would be allowed when an Indian company (or permanent establishment in India of a foreign company) pays interest exceeding INR one crore in respect of debt issued or guaranteed by a non-resident related party and that is determined to be “excess interest.
Assessment: As per the 2017 budget presented by the Finance Minister on 1 February 2017, the time for completing assessments would be reduced from 21 months to 18 months starting with AY 2018-19, and beginning for AY 2019-20, the time limit would be 12 months from the end of the year of assessment in which the income was first assessable.
Main corporate tax rate: As per the 2017 budget presented by the Finance Minister on 1 February 2017, the corporate tax rate will been reduced to 25% for enterprises with annual turnover up to INR 500 million.
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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).
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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).
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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).
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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.
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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.
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Transfer Pricing Brief: January 2017

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Azerbaijan: Transfer pricing rules: Law No. 454-VQD of 16 December 2016 establishes new transfer pricing (TP) rules for certain transactions. The new TP rules cover transactions whose total value exceeds AZN 500,000 (approximately USD 278,000) in a calendar year. The taxpayer must notify the tax authorities about such transactions before 31 March of each year.
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Peru: Intra-group services: The Legislative Decree N° 1312 introduces an entirely new requirement to deduct intra-group service charges. Specifically, it requires satisfying the “benefit test” to demonstrate that the services were in fact received.
BEPS related compliance
Master file information: Taxpayers that are members of a group whose annual revenue for the fiscal year exceeds 20,000 Tax Units (approximately US$23.82 million) will be required to submit a master file with high-level information of the group’s business operations and TP policies. The Master File should provide information of the group regarding organizational structure and activities performed.
Local file information: The local file documentation requirement applies only to taxpayers whose annual revenue for the fiscal year exceeds 2,300 Tax Units (approximately US$2.74 million). The first local file with information regarding related-party transactions and transactions with tax haven jurisdictions is required for fiscal year 2017.
General rule for CbC reporting requirement: Peru published Legislative Decree N° 1312 (Legislative Decree) amending the Peruvian transfer pricing (TP) reporting requirements as per Action 13 of the OECD’s base erosion and profit shifting (BEPS) project. Tax resident entities that are part of a Multinational Enterprise (MNE) Group with consolidated group revenue of €750 million and above will need to comply with the CbCR requirements. The CbC report is first due in 2018. 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.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Peru 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 Peru.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
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Denmark: Documentation requirement: The Minister of Taxation issued order BEK no. 401 and 402 regarding transfer pricing documentation. The new documentation guidelines BEK no. 402 will replace the previous guidelines of BEK no. 42. The new guidelines include more specific documentation requirements than under the previous documentation guidelines. The new documentation guidelines is applicable from 1 January 2017.
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Malta: Mutual agreement procedure (MAP): The Inland Revenue Department issued guidelines on 15 December 2016 under the provisions of article 96(2) of the Income Tax Act, on the use of the Mutual Agreement Procedure. The procedure allows the Malta Competent Authority or designated representatives of the competent authority to interact with their counterparts in contracting states to a tax treaty or parties to the Arbitration Convention (90/436), in order to resolve international tax disputes.
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Iceland: BEPS related compliance
General rule for CbC reporting requirement: The Ministry of Finance and Economic Affairs of Iceland issued Regulation No. 1166/2016 on the filing of country-by-country reports (CbCR) for the MNEs group in Iceland with consolidated turnover of the group exceeding ISK 100 billion in the preceding financial year.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.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Iceland 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 Iceland.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
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Spain: Model country-by-country reporting (CbCR) form: The tax authorities of Spain recently published a communication announcing the submission of a model country-by-country reporting (CbCR) form 231. The form was approved on 30 December 2016.
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Canada: BEPS related compliance
General rule for CbC reporting requirement: The House of Commons of Canada passed Bill C-29, which provides the final legislation to implement country-by-country (CbC) reporting in Canada. The final legislation formalizes the introduction of section 233.8 to Canada’s Income Tax Act (the Act), which sets out the requirements for CbC reporting. The final legislation sets out country-by-country (CbC) reporting requirements, as developed by the Organization for Economic Cooperation and Development (OECD) and that would apply to a multinational enterprise (MNE) group that has total consolidated group revenue f €750 million or more in a fiscal year. The average number of employees in each entity must be reported. As per the final legislative, the country-by-country report must be filed before the later of 12 months after the ultimate parent’s fiscal year end or within 30 days of a notification by the Minister to an MNE entity of a “systemic failure”.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Canada 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 Canada.
Group definition: The  term  “MNE  Group”  means any  Group  that  (i)  includes  two  or  more enterprises the  tax  residence  for  which  is in  different  jurisdictions, or includes  an enterprise  that  is  resident  for  tax  purposes  in  one  jurisdiction  and  is  subject  to  tax  with respect  to the business  carried  out  through  a  permanent  establishment  in  another jurisdiction, and (ii) is not an Excluded MNE Group.
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.
Penalty for non-compliance: Penalties are set out in the final legislation for failure to comply with the new reporting requirements. The penalties dealing with the failure to furnish foreign-based information will apply to the country-by-country report and that can reach C$12,000 per report, or C$24,000 in situations where a demand has been issued by the Minister to file the report.
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South Africa: BEPS related compliance
General rule for CbC reporting requirement: The South African Revenue Services (SARS) and Ministry of Finance issued final regulation via Government Gazette No.R. 1598 of 23 December 2016 to implement the country-by-country (CbC) reporting requirements for the South African MNEs with annual group consolidated turnover exceeding ZAR 10 billion or EUR 750 million. The average number of employees in each entity must be reported. The CbC report must be filed with the SARS no later than 12 months after the last day of the reporting fiscal year of the MNE Group.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in South African 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 South African.
Group definition: The term “Group” means a collection of enterprises related through ownership or control such that it is either required to prepare Consolidated Financial Statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange.
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.
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Luxembourg: Transfer pricing rule: A new article 56bis has been included in the Income Tax Act (ITA) to codify the arm’s length principle. As per the article 56bis, companies principally performing intra-group financing transactions 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.
Intra-group services: The Luxembourg Tax Authorities issued an administrative Circulaire (the Circular) reshaping the transfer pricing framework for companies carrying out intra-group financing activities in Luxembourg. The Circular defines intra-group financing transactions as all activities consisting in granting interest bearing loans or advances to related entities and funding them with, for instance, public debt issuance, private loans, advances, or bank loans. It focuses on the importance of the comparability analysis and provides substantial details on how to conduct it consistent with OECD principles. The Circular states that economic reality should prevail over the contractual terms of the agreement. Under the Circular, a group financing company should have a physical presence in Luxembourg in order to perform risk control functions. The new Circular will replace Circulaires n°164/2 of 28 January 2011 and n°164/2bis of 8 April 2011 and is effective from 1 January 2017.
Mandatory automatic exchange of information: The CbCR Law implementing Directive 2016/881/EU of 25 May 2016 with respect to the mandatory automatic exchange of information in the field of taxation, was published in Luxembourg’s Official Gazette. Based on the Luxembourg CbCR Law, a Luxembourg group entity of a Multinational Enterprise (MNE) group qualifying for the CBCR requirements needs to notify the Luxembourg tax authorities about the identity and tax residence of the entity filing the CBC report by the last day of their reporting fiscal year.
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Korea: BEBS related compliance
General rule for CbC reporting requirement: Under Article 21-2 of the proposed enforcement decree released on 28 December 2016, multinational entities (MNEs) operating in Korea would be required to submit a “reporting entity notification form” in advance, and on that form, the MNEs would need to specify what entity, and in what jurisdiction, the CbC report would be submitted. Under Article 21-2 of the proposed enforcement decree released on 28 December 2016, the reporting entity notification form would be required to be submitted within six months of the fiscal year-end.
Penalty for non-compliance: Under the proposed enforcement decree released on 28 December 2016, penalty provision would be revised so that each report would be subject to a separate penalty of KRW 10 million. As proposed, if a taxpayer is missing a detailed statement of cross-border transactions for one entity, the taxpayer would be subject to a separate penalty of KRW 5 million. In other words, a taxpayer would be separately subject to a penalty in the amount of KRW 5 million per each missing entity. The penalty for both the “combined report of international transactions” and a detailed statement of the cross-border transactions could not be more than KRW 100 million in total.
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Chile: BEPS related compliance
General rule for CbC reporting requirement: The Chilean tax authorities published Resolution No. 126 to introduce an associated country-by-country (CbC) reporting requirement for multinational companies that, in the year prior to the reporting period, have a consolidated revenue of at least €750 million. Resident entities belonging to the multinational companies group (MCG) which have been designated by the parent entity of the MCG as the sole representative for the purpose of filing the “Country By Country Report” affidavit in the name of the parent or controlling entity are also required submit CbC report. The CbC report is submitted using a new Form 1937. In some cases, taxpayers must also file a transfer pricing return (Form 1907) with the CbC report. The average number of employees in each entity must be reported. The deadline for submitting CbC report is the last business day of June each year, for operations carried out during the preceding commercial year.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Chile 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 Chile.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
Penalty for non-compliance: The new resolution applies penalties for non-compliance for both Transfer Pricing Return, ranging from 10 to 50 annual tax units (approximately USD 10,000 to USD 50,000) without exceeding the upper limit between 15% taxpayer’s equity or 5% of the effective capital, whichever is greater.
Specific TP Compliance: The CbC report is submitted using a new Form 1937. In some cases, taxpayers must also file a transfer pricing return (Form 1907) with the CbC report.  Annual Affidavit on Transfer Pricing (Form No.1907) must also be submitted.
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Brazil: BEPS related compliance
General rule for CbC reporting requirement: Tax authorities of Brazil issued Normative Instruction 1.681 of 29 December 2016 that establishes the rules for mandatory annual filing of country-by-country (CbC) reports for Multinational groups where the ultimate parent company is a resident in Brazil. The CbC report filing is required for entities that, as the ultimate parent company of a multinational group, are residents of Brazil for tax purposes, and that have total consolidated group revenue of the fiscal year prior to the year of the CbC reporting of an amount greater than R$ 2.26 billion if the controller is domiciled in Brazil or €750 (or the equivalent in local currency) if the controller is domiciled abroad. The CbC report is to be filed along with the taxpayer’s corporate income tax return (ECF) for the related year. The average number of employees in each entity must be reported. The CbC report and notifications will be embedded in the Brazilian electronic corporate tax return (ECF), which uses the calendar year. The ECF must be filed by the end of July of the subsequent year.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Brazil 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 Brazil.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
Penalty for non-compliance: The Normative Instruction 1.681 imposes potentially heavy penalties for noncompliance with the CbCR rules. Transactions and financial operations that are not fully reported in the CbC report give rise to a penalty of up to 3% of the underlying value of the transactions.
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Malaysia: Main Corporate income tax rate: The enacted Finance Act 2017 reduced the corporate tax for the year of assessment 2017 and 2018. As per the Finance Act 2017, the reduce tax rate will be between 1 and 4 percentage points for companies with significant increase in taxable income for 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.
BEPS related compliance:
General rule for CbC reporting requirement: Malaysia has incorporated CbC reporting requirement for Malaysian-parented multinational corporate groups with total consolidated group revenue of at least Malaysian Ringgit (RM) 3 billion in the financial year preceding the reporting financial year. The CbC rules are align closely with recommendations under the base erosion and profit shifting (BEPS) project’s report on Action 13. 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.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Malaysia 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 Malaysia.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
Penalty for non-compliance: An administrative penalty of between MYR 20,000–100,000 or imprisonment of not more than 6 months, or both, may be imposed for an incorrect return or failure to comply with CbC reporting within the stipulated timeline.
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Japan: Documentation requirement: Japan’s National Tax Agency (NTA) has issued Frequently Asked Questions (FAQs) and answers regarding transfer pricing (TP) documentation requirements in Japan.
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Cyprus: BEPS related compliance
General rule for CbC reporting requirement: All Cypriot tax resident entities that are part of a Multinational Enterprise (MNE) Group with consolidated group revenue of €750 million and above will need to comply with the CbCR requirements for financial years starting on or after 1 January 2016. The law is in accordance with a European Union (EU) Directive of 25 May 2016 requiring all EU Member States to implement a CbC reporting obligation in their national legislation. Alternatively, any other entity of the group that is resident in Cyprus and it is not the ultimate parent entity may be appointed as the surrogate parent entity. In this case, such entity will have to prepare and submit the CbC report if the ultimate parent entity is not resident in Cyprus and it is not obligated to file a CbC report in its country of residence, or although obligated to file the CbC report, there is no exchange of information instrument in place with Cyprus, or the jurisdiction has been notified regarding a systematic failure of exchanging information. One of the requirements that is provided under the Decree is that any Cypriot constituent entity of an MNE Group (either tax resident company or a Cypriot permanent establishment) shall notify the Cyprus tax authorities with the identification of the reporting entity, no later than the last day of the reporting fiscal Year of such MNE Group and first deadline for notification is 20 October 2017. 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.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Cyprus 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 Cyprus.
Group definition: Global group means a group of entities, at least one of which is a foreign entity that are consolidated for accounting purposes as a single group.
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.
Penalty for non-compliance: An administrative penalty of €100 may be imposed for a failure to comply with the CbCR submission requirements if it is not amended subsequently.
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Nigeria: Specific TP compliance: Nigeria’s Federal Inland Revenue Service released a revised transfer pricing declaration form and a revised disclosure form for use by taxpayers beginning from January 2017. All taxable persons with related-party (connected) transactions must file their returns using these new forms.
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Australia: CbC reporting guidance: The Australian Taxation Office (ATO) released a guidance in the form of questions and answers (Q&As) in respect of compliance with country-by-country (CbC) reporting requirements. The guidance reflects the transitional administrative practice of the ATO until the planned review of CbC reporting in 2020.
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Mexico: Transfer pricing adjustment: Mexican tax authorities issued rule 3.9.1of the Miscellaneous Rule on 8 December 2016 regarding Transfer Pricing adjustments. The rule establishes that all transfer pricing adjustments should be reflected in the tax return in which the related party transaction occurred.
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Indonesia: BEPS related compliance
Master file information: Indonesia has introduced a requirement for a master file from 1 January 2017 in line with the OECD Base Erosion and Profit Shifting (BEPS) project. Under PMK-213, Indonesian taxpayers are required to prepare a Master File if the taxpayer Conducts related party transactions (in the covered fiscal year) and has gross revenues in the prior fiscal year of more than IDR50 billion (approximately US$3.7 million) or Conducted related party transactions in the prior fiscal year with a value of more than IDR20 billion (approximately US$1.4 million) of tangible goods transactions, or more than IDR5 billion (approximately US$372,000) for each service, interest payment, utilization of intangible properties or other affiliated transactions. Indonesian taxpayers are also required to prepare a Master File if it Conducts transactions with related parties that are located in countries or jurisdictions with income tax rates lower than the Indonesian corporate income tax rate of 25%.  Master File will contain information regarding description of the group’s capital structure, transfer pricing policy and significant intangible assets utilized.
Local file information: Indonesia has introduced a requirement for a master filefrom 1 January 2017 in line with the OECD Base Erosion and Profit Shifting (BEPS) project. Under PMK-213, Indonesian taxpayers are required to prepare a Local File if the taxpayer Conducts related party transactions (in the covered fiscal year) and has gross revenues in the prior fiscal year of more than IDR50 billion (approximately US$3.7 million) or Conducted related party transactions in the prior fiscal year with a value of more than IDR20 billion (approximately US$1.4 million) of tangible goods transactions, or more than IDR5 billion (approximately US$372,000) for each service, interest payment, utilization of intangible properties or other affiliated transactions. Indonesian taxpayers are also required to prepare a Local file if it Conducts transactions with related parties that are located in countries or jurisdictions with income tax rates lower than the Indonesian corporate income tax rate of 25%.  A Local File will contain specific TP information for each relevant country of operation.
General rule for CbC reporting requirement: Indonesia has introduced Country-by-Country (CbC) reporting requirement for an Indonesian taxpayer who is classified as the parent entity of a business group and who has consolidated gross revenues for that particular fiscal year of at least IDR11 trillion (approximately US$818 million). The Country-by-Country (CbC) reporting requirement also applicable for an Indonesian taxpayer whose parent entity is a foreign taxpayer and domiciled in a country/jurisdiction that does not require the parent entity to submit a CbC Report or that does not have an exchange of information agreement for taxation purposes with Indonesian Government or that has an agreement with Indonesian Government on the exchange of information for taxation purposes, however, the CbC Report information could not be obtained by the Indonesian Government from that country/jurisdiction. The CbC Report must be available no later than 12 months after fiscal year end.
Parent company: The Country-by-Country (CbC) report must be submitted by a company resident in Indonesia 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 Indonesia.
Group definition: The country by country reporting requirement applies where the consolidated gross revenues for that particular fiscal year of at least IDR11 trillion (approximately US$818 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.
Penalty for non-compliance: If taxpayers have not prepared the Master File and Local File prior to the submission of their CITR, then their CITR may be considered as incomplete. Where a CITR is considered to be incomplete, there is the potential for penalties to be levied by the DGT on any unpaid tax of up to 200%, as well as further criminal sanctions.
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Singapore: Transfer pricing rules: The Inland Revenue Authority of Singapore (IRAS) issued the fourth edition of the e-Tax guide on 12 January 2017 regarding the transfer pricing guidelines and included the principle that profits should be taxed where the real economic activities generating the profits are performed and where value is created.
Documentation requirement: The Inland Revenue Authority of Singapore (IRAS) issued the fourth edition of the e-Tax guide with guidance on the TP documentation which is to be organized at Group level and Entity level. TP documentation at group level is to include information of the group’s existing unilateral advance pricing arrangements (APAs) and other tax rulings relating to the allocation of income among countries while the documentation at entity level is to include a copy of the existing unilateral and bilateral/multilateral APAs.
Mutual agreement procedure (MAP): The Inland Revenue Authority of Singapore (IRAS) issued the fourth edition of the e-Tax guide with enhanced guidance on mutual agreement procedure (MAP).
Advance pricing agreement (APA) rules: The Inland Revenue Authority of Singapore (IRAS) issued the fourth edition of the e-Tax guide with enhanced guidance on Advance Pricing Agreement (APA).
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Slovenia: Availability of APA: As per the rules published in the Official Gazette No. 85/2016 of 28 December 2016, Advance Pricing Agreement (APA) will be introduced from 1 July 2017 onwards. The APA application must be addressed to the financial administration and must contain mandatory elements and an indication of the type of APA (i.e. unilateral, bilateral or multilateral). Critical assumptions must be explained in APA and be in accordance with the arm’s length principle.The APA authority is the institute of Advance Pricing Agreement (APA).
APAs: As per the rules published in the Official Gazette No. 85/2016 of 28 December 2016, unilateral, bilateral & multilateral agreement will be available from 1 July 2017.
APA rules: As per the rules published in the Official Gazette No. 85/2016 of 28 December 2016, in order to conclude an Advance Pricing Agreement, the taxpayer will have to file a written application with the tax authority.
APA validity: As per the rules published in the Official Gazette No. 85/2016 of 28 December 2016,APA may be signed for 5 years with the possibility of an extension and a request for an extension must be filed at least 6 months before the validity of the APA has elapsed.
Fees for APA: As per the rules published in the Official Gazette No. 85/2016 of 28 December 2016,the cost of an APA procedure is EUR 15,000.
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Netherlands: Information exchange: The Bill submitted by the State Secretary for Finance proposes the addition of a new article (article 6e) which would provide a legal basis for the automatic exchange of CbC reports with Member States. The CbC report will be exchanged within 15 months of the last day of the period to which the report pertains (18 months for the first reporting period commencing on or after 1 January 2016).
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