TPA Newsletter

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: 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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Transfer Pricing Brief: November 2016

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Malaysia: Penalty for non-compliance of CbC reporting: The fiscal Budget for 2016 has proposed a penalty between MYR 20,000–100,000 or imprisonment of not more than 6 months, or both, for an incorrect return or failure to comply with CbC reporting within the stipulated timeline.
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UK: Rules for Advance Pricing Agreements (APAs): HMRC updated Statement of Practice 2 (2010) (SP2/10) on 8 November 2016 with a view to provide guidance about how HMRC interprets the Advance Pricing Agreement (APA) legislation and applies it in practice.
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Singapore: Reporting of related party transactions: The Inland Revenue Authority of Singapore (IRAS) updated the transfer pricing administration information on the reporting of related-party transactions (RPTs). A company must complete the form for reporting RPTs from the year of assessment 2018 and will submit it together with Form C if the value of the RPTs disclosed in the audited accounts for the financial year exceeds SGD 15 million.
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Croatia: Main corporate tax rate: As per the proposed amendments to the Corporate Income Tax Law, the corporate income tax rate will be reduced to 18% from 20%. Once approved by the parliament, the amendments will apply as of 1 January 2017.
Advance Pricing Agreements (APAs): As per the proposed amendments to the Corporate Income Tax Law, in addition to advance tax rulings, taxpayers may request advance transfer pricing agreements. Once approved by the parliament, the amendments will apply as of 1 January 2017.
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Israel Main corporate tax rate: As per the draft Budget Plan for 2017/2018, the corporate income tax rate will be reduced to 24% in 2017 and 23% in 2018.
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Vietnam: Transfer pricing rule: The draft transfer pricing (TP) decree released on 3 October 2016 by the Ministry of Finance, following Resolution No. 19-2016/NQ-CP dated 28 April 2016 to replace the existing TP regulations, Circular 66/2010/TT-BTC  and to respond to the OECD’s base erosion and profit shifting (BEPS) developments.
Definition of control: As per the draft transfer pricing (TP) decree, two enterprises are considered associated parties if one party directly or indirectly holds at least 25% of the ownership of investment capital of another company or the transactions between two companies are more than 60% of the transaction volume.
Exemptions from documentation requirement: As per the draft transfer pricing (TP) decree  released on 3 October 2016 by the Ministry of Finance, taxpayers with annual total revenue below VND 50 billion (approximately USD 2.2 million) and total related-party transaction values below VND 30 billion (approximately USD 1.3 million) are exempted from preparing TP documentation, subject to certain conditions.
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Mexico: BEPS related compliance 
Master file information: In the case of the consolidated financial statements of the MNE, the proposed regulations regarding the “additional information” that could be requested as part of the new transfer pricing obligations, would not provide flexible deadlines, if the book year closing of the foreign head office differs from the calendar year. As mentioned, the proposed regulations would require very detailed information to be included in the master file.
Local file information: The proposed regulations regarding the “additional information” that could be requested as part of the new transfer pricing obligations, would require more detailed information (than established in Chapter V of the OECD TP Guidelines) for purposes of the local file. For instance, the proposed regulations would require taxpayers to submit copies of all legal agreements concluded between related parties, while the OECD TP Guidelines only call for the “material” agreements.
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Panama: Transfer pricing rule: Decree 390 was published in the Official Gazette on 25 October 2016 to regulates the arm’s length principle established in the Fiscal Code and establishes transfer pricing documentation requirements. The Decree will enter into force on 1 January 2017.
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Colombia: Master file information: Under the proposed draft legislation, 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 Master File as of 2016. The Master File contains relevant global information of the multinational group and a Local File information on the intercompany transactions.
Local file information: Under the proposed draft legislation, 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 intercompany transactions.
CbC reporting requirement: Draft legislation has been proposed and that will introduce CbCR as of 2016.
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South Africa: Documentation requirements: The South African Revenue Service on 28 October 2016 published a final notice regarding additional transfer pricing documentation requirements for companies with cross-border related-party transactions exceeding R100 million. Once the R100 million threshold is met, the additional record keeping requirements apply to all transactions exceeding R5 million. The new requirements apply for years of assessment beginning on or after 1 October 2016.
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Netherlands: BEPS related compliance
General rule for CbC reporting requirement: The deadline for filing the notification for the first CbC report has been extended to 1 September 2017. If the reporting fiscal year ends after 31 August 2017, the general notification rule will apply and the notification should be submitted by the last day of the reporting fiscal year.
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Slovak Republic: BEPS related compliance
General rule for CbC reporting requirement: Slovak Republic introduced Bill on Country-by-Country Reporting (CbCR) based on the recommendations of the OECD. As per the proposed bill, all multinationals 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. If adopted, the bill will become effective on 1 March 2017.
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France: Documentation threshold: The threshold as codified at Article 223 quinquies B of the French general tax code is reduced from €400 million to €50 million of turnover or gross assets, effective for accounting periods closing on or after 31 December 2016 as per the New law in France, enacted on 8 November 2016.
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Transfer Pricing Brief: October 2016

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Malaysia: Main Corporate tax rate: The Budget for 2017 proposed to reduce the corporate tax rate for the year of assessment 2017 and 2018. As per the proposal, the reduce tax rate will be between 1 and 4 percentage points for companies with significant increase in taxable income for the 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.
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OECD: Dispute resolution: OECD released key documents on 20 October 2016, approved by the Inclusive Framework on BEPS. This will form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14.
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Malawi: Advance Pricing Agreements (APAs): As per the Taxation (Amendment) Act. 2016, taxpayers are permitted to enter into APAs with the Commissioner General (the Commissioner) with respect to income derived from mining projects, provided that the duration of the APAs does not exceed a period of 5 years.
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China: Advance Pricing Agreements (APAs): As per the Notice SAT Gong Gao [2016] No. 64 which made amendments to the Notice GuoShuiFa [2009] No. 2, an enterprise for which the total annual amount of related transactions exceeds CNY 40 million in the preceding 3 years, prior to the tax year when the Notice of Tax Items concerning the acceptance of negotiation intentions by the competent tax authority is delivered, may reach an APA with its competent tax authority concerning the pricing policies and calculation methods for its related transactions in future years.
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Poland: Main corporate tax rate: As per the draft Budget Law for 2017 submitted to the parliament, a lower rate of corporate income tax of 15% will be applied to small taxpayers.
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Mexico: Documentation requirement for individuals professional: Rule No. 3.9.5 of Resolution on Amendments to the Omnibus Tax Bill for 2016 as published by the Mexico’s Tax Administration Service (SAT) represents an amendment to the exception for taxpayers that allows them not to obtain or maintain transfer pricing supporting documentation if the taxpayer’s taxable revenues in the previous fiscal year are equal to or below MXN 13 million or MXN 3 million in the case of individuals providing independent professional services.
Advance Pricing Agreement (APA) rules: Rule 2.12.8 published on July 14, 2016 states that if the Mexican Tax Authorities consider the information provided by the taxpayer to be insufficient, they may perform a site visit to obtain and verify information regarding assets, functions, and risks of the Mexican taxpayer requesting an APA in order to validate the selection of method as well as the comparable companies.
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Norway: BEPS related compliance:
General rule for CbC reporting requirement: The Norwegian Government published its proposal for the 2017 Fiscal Budget on the domestic Country-by-Country (CbC) reporting rules to the Norwegian tax authorities. As per the proposal, all multinational groups with annual consolidated group revenue equal to or exceeding NOK6.5 billion (approximately US$730 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.
Main corporate tax rate: The Budget for 2017 proposes to reduce corporate income tax rate to 24% in 2017 and to 23% in 2018.
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Bulgaria: BEPS related compliance:
General rule for CbC reporting requirement: As per the draft bill published by the Ministry of Finance, multinational enterprise groups (MNE groups) headquartered outside Bulgaria must file CbC reports in Bulgaria if their consolidated group revenue exceeds EUR 750 million (i.e. in line with the threshold under Directive 2016/881). A reduced reporting threshold of BGN 100 million (approximately EUR 51 million) is proposed for MNE groups, whose ultimate parent company is a Bulgarian tax resident.
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France: Main Corporate Tax rate:As per the draft Finance Bill for 2017, the French corporate income tax (CIT) rate would decrease from 33.1/3% to 28%.
BEPS related compliance:
General rule for CbC reporting requirement: The French government published an administrative decree defining the filing procedures and the contents of the country-by-country (CbC) report. The decree is aligned with the recommendations of the OECD’s final report on BEPS Action 13.
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Slovak Republic: Main Corporate Tax rate: As per the proposed amendments to tax law, the corporate income tax rate will be reduced from 22% to 21% and was proposed to be effective from 1 January, 2017.
Advance Pricing Agreements (APAs): As per the proposed amendments to the tax law, the fee for applying for a unilateral APA is to be set at EUR 10,000. The fee for bilateral and multilateral APAs will be set at EUR 30,000.
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Iceland: Financial services: Restrictions on interest deductions: Bill No. 787 adopted by the parliament proposes a fixed ratio rule, limiting corporate tax deductions for net interest expense to 30% of a group’s EBITDA with some exceptions.
BEPS related compliance:
General rule for CbC reporting requirement: Bill No. 787 adopted by the parliament proposes implementation of country-by-country (CbC) reporting. The Bill does not include a description of what the CbC report should contain. This will be put forward in a regulation by the Minister of Finance and Economic Affairs following the implementation of the Bill into domestic legislation.
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Luxembourg: Transfer pricing rule: A new article 56bis will be included in the Income Tax Act (ITA) to codify the arm’s length principle. As per the article 56bis, companies 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.
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Singapore: BEPS related compliance:
General rule for CbC reporting requirement: The Inland Revenue Authority of Singapore (IRAS) issued an e-Tax Guide on Country-by-Country (CbC) Reporting. The ultimate parent entity of the Singapore MNE group will be required to file a CbC Report for all entities in the group if the entity of the MNE group is a tax resident in Singapore with subsidiaries or operations in at least one foreign country and the consolidated group revenue for the MNE group in the financial year is at least S$1,125 million.
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Slovenia: Main corporate tax rate: The Slovenian parliament adopted a tax reform and according to which the corporate income tax rate will increase from 17% to 19% and will enter into force on 1 January 2017.
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Ethiopia: Transfer pricing Rule: Ethiopia has introduced Transfer Pricing rules. Transfer Pricing rules are applicable for all Ethiopian taxpayers with cross-border Intercompany Transactions exceeding 500,000 Ethiopian birr/USD 22,380 and for Ethiopian taxpayers with domestic Intercompany Transactions provided they have annual revenues exceeding 500,000 Ethiopian birr/USD 22,380. Taxpayers involved in cross-border Intercompany Transactions with an aggregated value of exceeding 500,000 Ethiopian birr (USD 22,380) are required to prepare a Transfer Pricing declaration form.
Transfer pricing documentation: Transfer pricing rules require a taxpayer to have Transfer Pricing Documentation in place at the filing date of its statutory tax return. Transfer Pricing Documentation needs to be submitted upon request within 45 days. Transfer Pricing Documentation needs to be prepared in either Amharic or English.
Availability of Advance Pricing Agreements (APAs): The new TP rules provide that a taxpayer may request to enter into an advance pricing arrangement (APA) with the ETA to determine the arm’s length conditions for its future transactions over a fixed period of time.
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Transfer Pricing Brief: September 2016

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Costa Rica:  Filing of annual transfer pricing return: Costa Rica has published a resolution in the official gazette to finalize the rules concerning the filing of an annual transfer pricing return for taxpayers qualifying as “large taxpayers” or as “national large companies” or operating under a free trade zone regime and having inter-company transactions in Costa Rica. As per the resolution, the due date for filing transfer pricing return is the last business day of June in the year following the tax year. The first transfer pricing return for 2015 and the transfer pricing return for 2016 will both be due on the last business day of June 2017.
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Russia:  BEPS related compliance:
Master file information: As per the new version of the draft law published on 6 September 2016, Master file is obligatory only for Russian parented groups. A master file should include a full list and key terms of all intercompany agreements relative to the controlled transactions and a full functional analysis, whereby the OECD recommendation is to require disclosure of only service agreements and a brief functional analysis.
Local file information: As per the new version of the draft law published on 6 September 2016, Russian group members will be required to submit a local file which will be needed only for transactions with foreign group members qualifying as ”related parties” under Russian transfer pricing law.
General rule for CbC reporting requirement: The Russian Ministry of Finance issued a new version of the draft law on 6 September 2016 regarding the introduction of country-by-country (CbC) 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 for 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: As per the draft law issued on 6 September 2016, failure to submit notifications or to submit inaccurate information may be subject to a penalty of RUB50,000. Failure to submit a CbC report, a master file or a local file 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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France:  Main corporate tax rate: The government of France announced that the current corporate income tax rate of 33.33% will be reduced in the 2017 fiscal Budget.  Starting from 2017, a lower rate of 28% will be applicable to small and medium-sized enterprises (SMEs) for profits up to EUR 75,000 and by 2020, all businesses will be benefited from this lower rate.
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New Zealand Financial services: The government of New Zealand released a consultative discussion document on 6 September 2016 containing proposals for addressing hybrid mismatch arrangements. The document proposes that New Zealand adopts the 2015 OECD recommendations on hybrid mismatch arrangements.
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Brazil Resale price method: Private Ruling 63/2016 published in the Official Gazette of 31 August 2016, clarified that under the transfer pricing resale price method, the fixed profit margins apply according to the economic sector of the legal entity. In the case of resident companies importing, for resale, chemical products listed in chapter 38 of the tax on industrialized products table, the applicable fixed profit margin is 30%.
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China: Transfer pricing requirement: SAT Bulletin No. 42 published on July 13, 2016 has replaced the existing transfer pricing documentation regulations in Circular Guoshuifa [2009] No. 2, known as Circular 2.
Definition of related party: As per Bulletin 42, two parties will be considered related if they have “other substantial common interests.” The regulation recognizes that related-party relationships may change, and relationships should be recognized during the periods when they exist.
Intangibles property: The definition of “intangibles” extends to include commercial secrets, client lists, sales channels, government licenses and other similar items in SAT Bulletin No. 42 published on July 13, 2016.
Intra-group services: SAT Bulletin No. 42 published on July 13, 2016 by China’s State Administration of Taxation (SAT) has introduced an entirely new requirement for the preparation of a Special File wherever a taxpayer engages in intra-group service transactions. The Special File would contain copies of the relevant inter-company agreements, documentation of service cost identification and allocation keys. SAT Bulletin No. 42 also encompasses the provision of services and the recipient, the specific content of services, features, operation method, pricing principles, forms of payment, as well as to benefit the parties after the occurrence of labor and so on.
Documentation requirement for cost contribution arrangements: Cost contribution arrangements: SAT Bulletin No. 42 published on July 13, 2016 has included some special items in documentation requirement for CSA’s.
Special report on debt to equity ratio: A Special Report is required demonstrating that the taxpayer’s related party debt levels are consistent with the arm’s length principle if its debt to equity ratio exceeds specified ratios.
Main corporate tax rate: Circular Cai Shui [2014] no 59 has extended the 15% tax rate to Technologically Advanced Service Enterprises (TASEs) in 21 trial cities until 31 December 2018. These must provide qualifying services and 50% of employees must have an associate degree or above.
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Denmark: General rule for CbC reporting requirement: A Danish executive order No. 1133 dated 27 August 2016 was issued to provide detailed rules on notice requirements and on how the CbC report must be completed. The executive order was effective from 1 September 2016.
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Switzerland: Main corporate tax rate: The Swiss Corporate Tax Reform III (CTR III) foresees gradual reduction of corporate tax rate over a period of five years from the current maximum rate of 20.7% to approximately 14% (including federal tax).
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Netherlands: Definition of related party: As per the tax budget proposal for fiscal year 2017 issued by the Dutch Ministry of Finance, A party is considered a ”related party” – among others – if an entity has at least one third interest in the Dutch party or is (in)directly owned at least one third by an entity that (in)directly owns at least one third interest in the Dutch party.
Tax treatment of interest on related party loans: As per the tax budget proposal for fiscal year 2017 issued by the Dutch Ministry of Finance, the deduction of interest, including related costs and currency exchange results, by a Dutch company on a related-party loan is to be disallowed to the extent that the loan is used to finance capital transactions with related parties, e.g., acquisition of shares, dividend distributions and capital contributions (tainted transactions). The interest deduction related to tainted transactions might however still be allowed if it can be argued that there are predominantly business reasons for the transaction and the debt financing.
Main corporate tax rate: As per the tax budget proposal for fiscal year 2017, it is suggested to expand application of the 20% rate to profits up to €250,000 as of 1 January 2018, to €300,000 as of 1 January 2020 and to €350,000 as of 1 January 2021.
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UK: General rule for CbC reporting requirement: The UK Government has accepted a cross-party backbench amendment to Finance Bill 2016 which gives HM Treasury powers to introduce public country-by-country reporting (CBCR).
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Transfer Pricing Brief: August 2016

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Greece: Documentation requirement: As per the bill approved by the Ministry of Finance on 27 July 2016, the General Secretary of Public Revenue may exempt very small enterprises from the submission of transfer pricing documentation.
Documentation deadline: As per the approved bill, the documentation has to be submitted at the deadline set for filing the income tax returns. The new deadline applies to documentation pertaining to transactions executed after 1 January 2015.
Advance Prcing Agreement (APA) rules: The bill enacted on 27 July 2016 amends the deadline for the issuance of the APA decision that cannot exceed the 18 months instead of the 120 days from the submission of the respective APA application . Furthermore, the period may be further extended to 36 months upon a decision of the General Secretary.
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Canada: BEPS related compliance
General rule for Country-by-Country (CbC) reporting: Canada’s Department of Finance released draft legislative proposals to implement CbC reporting requirement that were originally announced in the 2016 federal budget. The draft 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 of €750 million or more in a fiscal year.
Filing deadline: As per the draft legislative proposals, 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”.
Penalty for non-compliance: Penalties are set out in the draft 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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India: Priority of method: The Delhi Bench of the Income-tax Appellate Tribunal upheld the decision in the case of Liugong India Private Ltd. v. ACIT (ITA No. 1482/Del/2015) and concluded that when comparables are available, the CUP method is the best method to use in computing the arm’s length price.
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Luxembourg: BEPS Related Compliance
General rule for Country-by-Country (CbC) reporting: The Luxembourg Government submitted draft law n°7031 on 2 August 2016 regarding Country-by-Country (CbC) reporting to the Luxembourg Parliament. The draft 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. If adopted, all Luxembourg tax resident entities that are part of a multinational group with a consolidated annual group turnover of at least €750 million will need to comply with the CbC reporting requirements for financial years starting on or after 1 January 2016.
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Sweden: Transfer pricing rules: The tax authorities issued an updated version of the Swedish Transfer Pricing guidance on July 2, 2016. The guidance has been updated with the final report on aligning Transfer Pricing outcomes with value creation (Actions 8-10) of the Action Plan on Base Erosion and Profit Shifting.
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Slovak Republic: Documentation requirement: The Ministry of Finance published Guidelines no. MF/014283/2016-724 regarding transfer pricing documentation and replaces the guidelines published in 2015. The requirements for transfer pricing documentation and its content for taxpayers do not change in principle. However, the Guidelines clarify obligations for public administration units. They also provide special rules for transactions performed in the public interest and for cases where prices are regulated by special legislation.
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Mexico: Advance Prcing Agreement (APA) rules: Rule 2.12.8 published on July 14, 2016 states that if the Mexican Tax Authorities consider the information provided by the taxpayer to be insufficient, they may perform a site visit to obtain and verify information regarding assets, functions, and risks of the Mexican taxpayer requesting an APA in order to validate the selection of method as well as the comparable companies.
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Uruguay:

Bilateral Advance Pricing Agreement (APA): The proposed draft law would allow tax payers to apply for bilateral APAs.
Multilateral Advance Pricing Agreement (APA): The proposed draft law would allow tax payers to apply for multilateral APAs.

BEPS Related Compliance
General rule for Country by Country (CbC) reporting: The Uruguay Government has submitted to Congress a tax bill including adoption of the OECD’s recommendations for Country-by-Country (CbC) reporting following the scope of information to be provided under the Base Erosion and Profit Shifting (BEPS) Action 13 final report. It is expected that this tax bill will be passed before the end of the current legislative period (December 15) and will apply to accounting years starting on or after January 1, 2017.
Master file information: The Uruguay Government has submitted to Congress a tax bill including adoption of the OECD’s recommendations for the Master File for transfer pricing documentation. The master file should provide information of the group regarding organizational structure, activities performed, functions developed, assets used, and risk assumed by the entities of the multinational group, intangible assets ,intercompany financing and financial and tax information.
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Ireland: Availability of Advance Pricing Agreement (APA): The Irish Revenue published bilateral advance pricing agreement guidelines on June 23 relating to the operation of Ireland’s APA program, which is effective for applications received on or after July 1, 2016. The guidance outlines the framework of the APA program, as well as the requirements to apply for an APA, and the roles and responsibilities of taxpayers and Irish Revenue.
Bilateral Advance Pricing Agreement (APA): The Irish Revenue on June 23 published bilateral advance pricing agreement guidelines relating to the operation of Ireland’s APA program. The bilateral APA program was launched in response to action 14 of the OECD’s base erosion and profit shifting (BEPS) project.
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Colombia: Specific transfer pricing compliance: DIAN reminded that the formal obligation to file an informative return will only be complied with if the transfer pricing informative return (Form 120) is digitally signed and submitted and as such mere submission of Form 1125 to DIAN through its online services does not satisfy the obligation to report information for transfer pricing purposes.
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Czech Republic: BEPS Related Compliance
General rule for Country-by-Country (CbC) reporting: The Czech Ministry of Finance announced on August 11, 2016 that it started a public consultation on a bill which would implement country-by-country reporting. As per the bill, tax resident entities that are part of a multinational group in Czech Republic with a consolidated annual group turnover of at least €750 million will need to comply with the CbC reporting requirements.
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Ukraine: Control: As per the Guidance Letter No. 14491/6/99-99-15-02-02-15 issued by the Ukrainian tax authorities, transactions with related non-residents of Ukraine, transactions with residents of low-tax jurisdictions and sales of goods through a non-resident agent are classified as controlled.
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South Africa: Documentation requirements: The South African tax authorities published for public comments a Draft Notice on additional Transfer Pricing record-keeping requirements. Where a person has entered into a potentially affected transaction, the aggregate of the transaction for the year of assessment exceeds higher of 5% of gross income or ZAR 50 million, such a person is required to keep specified records.
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Israel: Documentation requirements: The Israeli approved budget plan contemplates the imposition of transfer pricing documentation and record keeping requirements on any taxpayer that belongs to an MNE group, or that has engaged in a related-party cross-border transaction.

BEPS Related Compliance
General rule for Country-by-Country (CbC) reporting: The Israeli budget plan approved on 12 August 2016 sets out country-by-country (CbC) reporting requirements that generally would be in line with OECD base erosion and profit shifting (BEPS) Action 13 recommendations. These CbC rules would apply to a multinational enterprise (MNE) group that has total group revenue in excess of NIS 3.4 billion (approximately €799 million).
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Turkey: Transfer pricing rules: New law no. 6728 as effective from 9 August 2016, provides new rules related to transfer pricing. The provisions make changes to article 13 of Turkey’s corporate tax law (no. 5520) to align Turkish transfer pricing rules to OECD transfer pricing guidelines.
Control: Article 59 of law no. 6728 adds a new clause to the second paragraph of article 13 of law no. 5520 defining related party with threshold. In order for a case to be deemed as a disguised profit distribution through a direct or indirect shareholder relationship, at least a 10% shareholder relationship, voting or dividend rights must be present. In certain circumstances when there is at least a 10% direct or indirect voting or dividends right present without a shareholding relationship, the parties will also be deemed to be affiliated. With regards to related parties, these percentage ratios will be considered collectively.
Transactional Net Margin Method (TNMM): TNMM methods are based on profits arising from the transactions between related parties in designation of arm’s length price or return. These methods consist of the transactional net margin method and profit split method. The transactional net margin method (TNMM) is based on the examination of an established net profit margin realized by the taxpayer resulting from a controlled transaction on certain relevant and appropriate basis such as costs, sales or assets.
Profit split method: Profit split method refers to the arm’s length split of total operating margin or loss between related parties realized from one or more related-party transactions with regards to the functions performed and risks borne by each party.
Other methods: As per the new law no. 6728, when an arm’s length price or remuneration could not be identified via any of the applicable methods, another method that is consistent with the nature of the related-party transaction and defined by the taxpayer can be used.
Penalty for documentation failure: As per the new law no. 6728, when transfer pricing documentation obligations are fulfilled completely and timely, the loss of tax penalty relating to under-assessed or past-due taxes by reason of a disguised profit distribution will be imposed with a 50% discount.
Advance Pricing Agreement (APA) rules: As per the new law no. 6728, The taxpayer and the Ministry are permitted to implement the designated method for previous tax periods if not barred by statute of limitations by including the method in the agreement scope, given that the practice of repentance and correction precepts of the Tax Procedure Law are applicable and the agreement conditions are valid for the listed periods.
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Slovenia: Main corporate tax rate: The government has submitted the Corporate Income Tax Bill to the parliament to increase the corporate income tax rate from 17% to 19% and which is effective from 1 January, 2017.
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