Austria
The Austrian Independent Fiscal Senate (UFS) in decision UFSW, GZ RV 2515-W/09 suggested that the use of an interquartile or a full range depends on the quantity and quality of results of the benchmarking study. A small sample of six results for example did not meet statistical requirements for use of the interquartile range and a full range would need to be used.
Australia
Australia adopts the arm’s length principle. A new Subdivision 815-A ITAA 1997 has been passed in 2012 in respect of treaty equivalent cross-border transfer pricing rules. An exposure draft of new subdivisions 815-B to 815-E ITAA 1997 was issued on 22 November 2012. Subdivision 815-B aims to ensure that the profits taxed in Australia from cross border conditions between entities are a reflection of the contribution made to the profits by operations in Australia. Subdivision 815-B requires examination of the substance of the transactions and is to be interpreted consistently with the OECD Guidelines. The ATO would be permitted to reconstruct transactions to conform to the economic substance. Subdivision 815-C confirms the single-entity approach to a permanent establishment and subdivision 815-D is concerned with documentation requirements and penalties.
Canada
The OECD guidelines are followed in respect of transactions in intangibles and for application of the arm’s length principle to business restructurings. As regards to the priority of methods transaction based preferred over profit-based when the methods can be applied in an equally reliable manner.
Penalty in cases of adjustments may apply where an adjustment to profits exceeds the lesser of:
i) 10% of taxpayer’s gross revenues for the year; or
ii) C$5 million. The penalty is assessed at 10% of the amount of the reduced transfer pricing income and capital adjustments (i.e. a 10% penalty applies to the amount of the adjustment).
Two major exceptions are for:
(i) adjustments that relate to qualifying cost contribution arrangements; and
(ii) those where the taxpayer satisfies the reasonable effort standard.
Where a taxpayer objects to the CRA’s penalty referral report this objection is referred with that report to the Transfer Pricing Review Committee (TPRC) for consideration.
Czech Rep.
In the cases of low value-adding services such as administrative, financial or commercial support services simplified documentation requirements apply provided that an arm’s length mark-up of 3% to 7% of cost is used. The services must not exceed 10% of the provider’s turnover or 20% of the recipient’s operating costs and must not exceed CZK 50 million.
Croatia
Statute of limitation is three years and it commences after the end of the year in which any tax liabilities should have been assessed or in which tax evasion has been determined.
Hungary
As regards to the priority of methods, the comparable uncontrolled price (CUP) method has priority over other methods if conditions exist for its reliable adoption. Where the CUP method is not used the taxpayer must therefore provide an explanation as to why it was rejected. Comparable Data-Range-If the price or margin for the controlled transaction is outside the interquartile range, a transfer pricing inspection is likely. A reasonable explanation must be provided to avoid a transfer pricing adjustment. The comparables search data must be updated each year to avoid default penalties.
Ireland
Guidelines issued on 26 November 2012 for the Transfer Pricing Compliance Review (TPCR) program indicate that taxpayers selected for TPCR will be given three months to self-assess their transfer pricing procedures by preparing a report covering a number of issues in relation to arm’s length pricing. the TPCR process is effective from the 2011 tax year.
Luxembourg
Main corporate income tax rate-From 1 January 2013 a 7% surcharge for the employment fund (previously 5%) is levied on the tax due, giving a combined rate of 22.47%. Also from 1 January 2013 a minimum corporate tax ranging from EUR 500 to EUR 10,000 applies to companies with a balance sheet total below EUR 10 million.
Mexico
Up to 2012 documentation threshold only applies to cross-border transactions but Miscellaneous Rule I.3.8.3, of November 2012 has extended this documentation threshold to apply also to domestic transactions.
Malaysia
Financial services-Malaysia has been planning to introduce thin capitalization rules but the introduction of these rules has been deferred until 31 December 2015.
New Zealand
An issues paper published for discussion in January 2013 proposes the extension of thin capitalization rules to apply to unrelated parties that are acting together to control more than 50% of another company. The paper also proposes to exclude related party debt in the computation of the worldwide debt to equity ratio. The current thin capitalization rules apply to restrict the tax deduction for interest in certain circumstances. The current safe harbor debt to asset ratio for New Zealand companies which is 60% for inbound and 75% for outbound investment would remain in place.
Sweden
Previously Interest was not deductible only if it relates to a loan from a related party for the intragroup acquisition of shares or share-based instruments. In certain special circumstances this restriction may also apply to loans from third parties. From 1st January 2013 this restriction is extended generally to interest on loans for this purpose from any source. Corporate Tax Rate-From 1st January 2013 the corporate income tax rate has become 22% which was 26.3% previously.
Ukraine
A number of changes have been brought by the new transfer pricing regulation of Ukraine regarding control, safe harbor rules, applicable methods, range of comparable data, documentation requirement, documentation format, documentation thresholds, and penalty for documentation failure, audit time limits and audit process.
Vietnam
Under proposed changes to the tax law new thin capitalization provisions would be introduced from 1 January 2014. The tax deduction for interest would be restricted where the debt to equity ratio exceeds 4:1 (or 10:1 for credit institutions).Corporate Tax Rate-Under proposed amendments to the tax law the corporate income tax rate is to be reduced to 23% from 1 January 2014.
