TPA Newsletter

Australia

Intangible property-Arrangements for the license or transfer of intangibles must conform to the arm’s length principle. The ATO is increasing the amount of resources devoted to examining business restructurings and marketing hubs.

Financial services-A consultation on the thin capitalization rules was announced in the 2013 budget. The government proposes to reduce the permitted debt to equity ratio from 3:1 to 1.5:1 for non-banking entities, and from 20:1 to 15:1 for banks.

Brazil

Main corporate income tax rate-The main rate is 34%. Taxation based on presumed profits is available to companies whose turnover is below BRL 48 million (rising to BRL 78 million from 1 January 2014). Companies opting for the presumed profit method are taxed at a statutory rate on their gross revenue.

China

Documentation-Requirement-SAT officials have emphasized that the documentation should record and support the decision-making process in determining transfer prices. Documentation should include details of the decision makers, procedures performed in setting prices, the competitive environment in the taxpayer’s industry, the supply chain, organizational structure, business overview, related party transactions, functions performed and risks borne by the parties.

Denmark

Main corporate income tax rate-The rate would be 25.5% in 2014, 23.5% in 2015 and 22% from 2016.

Egypt

Main corporate income tax rate-From 19 May 2013 a 25% tax rate applies to all profits. Before that date a 20% rate applied to profits up to EGP 10 million and a 25% rate applied to profits exceeding that amount.

Spain

Audits Process-In April 2013 Spain established the National Office for International Taxation, whose responsibilities include the planning and coordination of tax audits relating to international taxation with particular emphasis on transfer pricing and non-resident taxation and support for tax audit teams in these areas.

Finland

Intangible property-In a decision of 4 March 2013 the Supreme Administrative Court confirmed the relevance of the OECD Guidelines including the chapter on business restructuring to transfer pricing issues concerning intangibles.

Hungary

Safe Harbour-Simplified methods-The accepted mark-up for low value-adding services is between 3% and 7%. Under proposed legislation introduced to parliament in March 2013 this range would be extended to mark-ups between 3% and 10%.

Comparable Data-Range-Under proposed legislation introduced into parliament in March 2013 the use of the interquartile range would be required where the number of comparable transactions is at least 25.

Documentation-Requirement-Draft legislation introduced into parliament in March 2013 would specify in detail the process of selection of comparable transactions for the economic analysis. If passed the draft legislation would also remove the need for documentation where an APA application has been submitted and confirmed, from the tax year of submission until the end of the last tax year for which the APA is in effect.

Israel

Main corporate income tax rate -The corporate tax rate is 26% for 2013/14. A lower rate of 15% applies to companies eligible under the Law for the Encouragement of Capital Investment.

Norway

Main corporate income tax rate –The tax plan for 2014 includes provision for a reduction of the corporate tax rate to 27%.

New Zealand

Financial services-An updated issues paper issued in June 2013 includes in the definition of “acting together” a situation where 50% of the shares are held by non-residents who are effectively coordinated by another person or group of people (such as for example private equity managers or firms).

Peru

Safe Harbour-Rule-Under the new resolution a safe harbour rule would apply in relation to transfer pricing documentation.Resolution 175-2013-SUNAT limits the circumstances where a company would need to submit a transfer pricing informative return or a transfer pricing technical study would need to be submitted. Under Resolution 175-2013-SUNAT taxpayers must file a transfer pricing informative return only when the amount of transactions entered into with related parties and parties in tax havens in the fiscal year exceeds PEN 200,000. Taxpayers would need to submit a technical transfer pricing study only when their accrued income exceeds PEN 6 million and the amount of transactions with related parties and parties in tax havens exceeds PEN 1 million.

Documentation-Format-Under the new resolution taxpayers would be required to submit the transfer pricing study to the SUNAT each year with the Transfer Pricing Informative Return Form.

Documentation-Thresholds –Under the new rules, it is now mandatory for taxpayer to submit a transfer pricing informative return or a transfer pricing technical study. Under the new resolution taxpayers must file a transfer pricing informative return only when the amount of transactions entered into with related parties and parties in tax havens in the fiscal year exceeds PEN 200,000. Taxpayers would need to submit a technical transfer pricing study only when their accrued income exceeds PEN 6 million and the amount of transactions with related parties and parties in tax havens exceeds PEN 1 million.

Slovenia

Financial services- Deductible in principle provided that the transaction is at arm’s length. Thin capitalization provisions apply to restrict deductible interest where the related party debt exceeds the prescribed debt to equity ratio.

Main corporate income tax rate-The corporate tax rate is 17% from 1 January 2013.

Capital gains tax rate- 17%.

Ukraine

APAs-Forms- Large taxpayers must file a related party information form with their application for an APA.

South Africa

Safe Harbour-Simplified interest rates- Safe harbour interest rate on loans. Under a draft interpretation note that, when finalized, will apply retrospectively from 1 April 2012, safe harbor rules in respect of a 3:1 debt to equity ratio will no longer be available. A proposal published on 29 April 2013 if implemented would provide that the thin capitalization rules do not apply where interest on the related party debt does not exceed 30% of taxable income before adjustment for interest received paid or accrued. If denominated in a foreign currency the interest rate may not exceed the foreign equivalent of the South African prime rate; and where denominated in Rand (ZAR) the interest rate may not exceed the prime rate.

Documentation-Requirement-From May 2013 the income tax return form for companies (Form ITR 14) requires detailed disclosure of information for transfer pricing and thin capitalization purposes.

Compliance-Form-Disclosure required on ITR14.