Belgium

There are no specific provisions in relation to financial services, but fees must conform to the arm’s length principle. Thin capitalization rules apply to restrict the tax deduction for interest on loans between related companies or loans involving companies located in a tax haven. The restriction applies where the debt to equity ratio exceeds 5:1.  Entities are considered to be located in a tax haven if they are not subject to tax on their income or are subject to tax rules that are considerably more favourable than the Belgian tax regime.

Chile

Proposed amendments to the transfer pricing legislation would if passed require taxpayers to prepare adequate transfer pricing documentation showing how prices are calculated and how those prices conform to the arm’s length principle. Taxpayers would be required to file a transfer pricing return with a sworn statement that the information is complete and accurate.

China

Under Circulars 13 and 16 “Internal Working Procedure (Trial) of Special Taxation Adjustment” and “Joint Assessment Procedure (Trial) for Key Cases of Special Taxation Adjustment” issued on 1 March 2012 the tax administration is required to set up joint review panels in certain cases that involve profit adjustments. These panels are being set up in cases involving enterprises with registered capital above 100 million RMB and turnover above 1 billion RMB in the relevant period; cases involving national industry or group investigations; or other cases designated by the SAT.

Germany

The draft legislation also clarifies that the arm’s length principle applies to transactions between partnerships and other types of entity. The draft law refers to an economic transaction rather than a business relation to ensure that all types of transaction are potentially within the scope of the transfer pricing rules.

Denmark

Bill L173 passed by parliament on 13 June 2012 includes a requirement for an auditor’s statement on the transfer pricing documentation. This requirement is to apply from 1 January 2013, but the SKAT will have the power to request auditors’ statements from previous periods. Penalties also apply if the taxpayer does not provide sufficient information for the tax authorities to determine if the transfer pricing documentation requirements apply. A profit adjustment need not be made for the penalty to apply; however, the penalty is increased by 10% of the profit adjustment if an adjustment is issued, with a minimum penalty of DKR 250,000 applying from 1 January 2013. Also from 1 January 2013, where there is systematic non-compliance, the level of the penalty may be raised by a further 50%.

Greece

The penalty under Art. 39A of L.2338/1994 of the ITC is 20% (previously 10%) of the price difference between the arm’s length price and the price the affiliated companies have declared to the GTA. On 31 January 2012 the Greek Parliament approved modifications to the penalties imposed for the late filing of the list of the intercompany transactions. Under these newly enacted rules, taxpayers will be subject to a one-off penalty equal to EUR 10,000, increased by EUR 1,000 for each day of delay. The total amount of the penalty for late filing cannot exceed more than EUR 100,000.

Italy

The mutual agreement procedure (MAP) is possible under the terms of a double tax treaty or the EU Arbitration Convention. Circular letter No. 21/E refers to the provisions of the OECD Manual on Effective Mutual Agreement Procedures (MEMAP) and the EU Code of Conduct for application of the Arbitration Convention as best practice in this area.

Lithuania

Valid for the current year and for five years from the date of the administrator’s decision. On expiry of this period an extension may be agreed if circumstances have not changed.

Malaysia

The minimum term for an APA is three years and the maximum term is five years. A roll-back to previous years may be possible in some circumstances.

United States

Final regulations on transfer pricing for cost sharing arrangements were issued on 16 December 2011. The final regulations provide guidance on economic contributions by participants in a cost sharing arrangement and on arm’s length compensation. The regulations include supplemental guidance on the application of the best method analysis and the income method. The final regulations provide clarification of the acquisition price and market capitalization methods and of the profit split method.   Director of the Advance Pricing and Mutual Agreement (APMA) Program.