Transfer Pricing Newsletter

Australia

Financial services-With effect from 1 July 2014 the permitted debt to equity ratio has been reduced from 3:1 to 1.5:1 (from 75% to 60% of adjusted Australian assets) for non-banking entities and from 20:1 to 15:1 for banks.

Chile

Main corporate income tax rate-Under the provisions of a modified tax bill published by the government the corporate income tax rate will depend on whether the taxpayer elects for a system of attributed profits or for a partially integrated system. For taxpayers electing the attributed profit system the tax rate would rise by stages to 25% by 2017. For taxpayers electing the partially integrated system the tax rate would rise to 27% by 2018.

Financial services- Under the provisions of a draft tax bill thin capitalization rules are to be introduced, based on a maximum permitted debt to equity ratio of 3 to 1. Also, interest expense deductions would be restricted in the case of acquisitions of shares and other securities.

Colombia

Main corporate income tax rate-The corporate income tax rate is 25%. Small enterprises may benefit from lower tax rates under Law 1429/2010 if the conditions are fulfilled.

Czech Rep.

Transfer documentation requirement-With effect from 1 January 2014 Czech taxpayers must send in a separate disclosure form entitled Overview of Transactions with Related Parties at the time of filing the corporate tax return. This applies to taxpayers with foreign related party transactions in the period and turnover above CZK 80 million; assets above CZK 40 million and more than 50 employees in the relevant period. if the taxpayer only had transactions with Czech related parties in the period the reporting requirement still applies if the company is showing losses for the period or if it is in receipt of tax incentives. A separate disclosure form is required for each related party.

Spain

Transfer pricing requirement– In addition to these documentation requirements information on related party transactions is also required on an annual basis for submission with the tax return.

Specific transfer pricing compliance-Information on related party transactions must be declared on the corporate income tax return Form 200. For each related party involved in transactions the taxpayer must list the name of the taxpayer or entity; the type of relationship; the country in which the related party is located; the type and characteristics of the transactions; the transfer pricing method used and the amount of the transactions. Intercompany transactions exceeding EUR 100,000 with each related party must be reported on the tax return.

 France

Transfer pricing documentation requirement-As the final version of this Transfer Pricing Statement has not yet been released the filing deadline for the Statement for 2014 and it has been postponed until 20 November 2014 for all companies that would have been required to file the Statement between June and November 2014.

Greece

Transfer pricing documentation requirement- Under Ministerial Decision POL 1097 of 9 April 2014, taxpayers may use the existing documentation file to cover the documentation requirement for the following year, provided that the file is updated adequately and the taxpayer discloses which sections of the file have been updated since the previous year. The updating procedure must be completed within four months of the end of the fiscal year.

Japan

Main corporate income tax rate- A lower corporate tax rate of 15% applies to the first JPY 8 million of corporations with equity of JPY 100 million or below. The Tax Commission has however recommended that this rate should be reviewed.

Netherlands

Financial services-Financial service companies must conform to detailed requirements with regard to economic substance if they are applying for tax relief under a treaty or applying for an APA. Where they do not confirm their compliance with substance requirements in the tax return the tax authorities may exchange information on the taxpayer with the tax authority of the other State.

Rules applicable for an advance pricing agreement –Financial service companies must meet detailed substance requirements when applying for an APA.

Romania

Penalty in cases of adjustments-Under draft proposals currently under discussion the penalty for an under declaration of profits would be 10% of the additional amount assessed, but would be 25% of the amount assessed if the additional amount is more than 25% of the taxable profits originally declared by the taxpayer.

Reduction of penalties for an audit-Under the draft proposals the penalties would be reduced by 75% in the event of punctual payment of the additional tax due.

Interest-Under draft proposals currently under discussion the daily interest charge would be reduced from 0.03% to 0.02%.

Unilateral and bilateral advance pricing agreement – Under proposed amendments to the law there would be more specific regulation of advance pricing agreements.

Uruguay

Financial services-Ruling 5,795 of 18 June 2014 confirms that the transfer pricing rules do not apply to financial dealings between a permanent establishment in Uruguay and non-resident parts of the same legal entity.

United States

Audits process-International Business Compliance (IBO) and Transfer Pricing Operations (TPO) work together on transfer pricing issues and share responsibility for the selection, identification and resolution of transfer pricing issues.

OECD

Transfer pricing requirements- –The action plan aims to provide guidance to ensure that transfer pricing outcomes with respect to risk and capital, and high risk transactions, are in line with value creation.

Documentation requirement for transfer pricing – The OECD paper proposes a two tiered approach to transfer pricing documentation. It sets out in detail the proposed contents of a transfer pricing master file and of a local file. The master file would contain details of the organization, business operations and assets of the multinational group of which the local taxpayer is a member, while the local file would contain details of the local entity and its controlled transactions.