Australia: Documentation requirement: The Australian Treasury has released exposure draft law on 6 August 2015 to implement the new OECD standards on transfer pricing documentation like master file which will include an overview of the multinational group’s business operations, transfer pricing practices, organizational structure, its intangibles and intercompany financial activities, its financial and tax positions, and a description of the group’s businesses.
Local file information: The exposure draft law requires transfer pricing documentation like local file which will be based on specific relevant related party transactions.
CbC reporting requirement: The exposure draft law also requires transfer pricing documentation like Country-by-Country (CbC) reporting requirement. The new documentation standards will be implemented from 1 January 2016.
Penalty for non-compliance: The draft released on 6 August 2015 will increase penalties for tax avoidance and transfer pricing and the maximum penalty provision is 120% of the avoided tax amount.
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Bangladesh: Main corporate income tax rate: In the Finance Act. 2015, the publicly traded company tax rate has been reduced to 25% from previous rate of 27.5%.
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Colombia: Transfer pricing rule: The National Tax Authority of Colombia pronounced in a published Ruling 20776 of 2015 that transactions carried out with tax haven jurisdictions in tax year 2014 are subject to the transfer pricing regime.
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Chile: Burden of proof in tax audit: Chile enacted anti-avoidance rules which acknowledge the fact that the burden of proof with regard to tax avoidance is on the Chilean tax authority like IRS.
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China: Cost contribution arrangements: China’s State Administration of Taxation (SAT) promulgated SAT Bulletin No. 45 of 2015 on Standardizing the Administration of Cost Sharing Agreements which now require Chinese taxpayers that enter into a cost sharing agreements (CSA) to register the agreement with the local tax authorities within 30 days of entering into the agreement. Enterprises must submit a CSA to the SAT level by level for recording within 30 days of concluding the CSA. Audit investigations and special tax adjustments will be carried out against CSAs that do not comply with the arm’s length principle, or if the CSA’s costs are not commensurate with the benefits accrued.
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Costa Rica: Transfer pricing rule: The Bill No. 19,679 dated 12 August 2015 was submitted to the Legislative Assembly to introduce the arm’s length principle to further develop the transfer pricing rules via regulations.
Financial services: The Bill also includes a provision to introduce thin capitalization rules in Costa Rica.
Standard compliance calendar: The Bill was submitted to the Legislative Assembly to modify the tax period as “Calendar Year”.
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Ecuador: Number of years to be compared: Resolution No. NACDGERCGC1500000455 dated 27 May 2015 prohibits the use of multiple year data and requires using information of concerned year only.
Documentation requirement: This Resolution imposes new transfer pricing documentation requirements with revised threshold limit.
Documentation format: As per the resolution no. NACDGERCGC1500000455; transfer pricing annexes need to be filed using software provided by the Tax Administration. Transfer pricing report and working papers should be saved in a PDF format on a non-rewritable CD with a letter confirming necessary signing by the accountants in the report and working papers.
Documentation thresholds: As per the resolution; if the total value of transactions with related parties both foreign and domestic exceeds US$3m, a transfer pricing annex must be supplied to the tax authority. Where the total value of transactions with related parties both foreign and domestic exceeds US$15m, a detailed transfer pricing report must also be provided with the annex.
Documentation deadline: The new resolution of 27 May 2015 allows taxpayers to submit transfer pricing report and annexes for transactions in 2014 within 10 to 28 September 2015 depending on their Tax ID.
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Ukraine: Availability of APA and rules: Decree No. 504 of 17 July 2015 provides the procedure for obtaining advance pricing agreements (APAs). It allows large tax payers unit to obtain unilateral, bilateral & multilateral advance pricing agreements (APAs). Decree No. 504 of 17 July 2015 also provides rules for obtaining advance pricing agreements (APAs). The term of the APA cannot exceed three years.
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Penalty for failure to submit transfer pricing documentation: As per the clarification Letter of the State Fiscal Service (SFS) in Letter No. 24525/7/99-99-22-01-02-17 dated 7 July 2015, failure to submit transfer pricing documentation will result in penalties of 3% of the value of the controlled transactions, but not exceeding 200 times the minimum wage (i.e. UAH 243,600 in 2015).
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Penalty for failure to include required information: The penalty for failing to include in a transfer pricing report the required information on controlled transactions reduced to 1%, but not exceeding 300 minimum salaries. The parliament adopted the tax code amendments on 15 July 2015 with this revised penalty provision.
Definition of control: Transactions will be recognized as controlled for transfer pricing purposes if the annual turnover of a taxpayer (considered on a stand-alone basis) exceeds UAH 50 million and the annual transaction volume between two parties exceeds UAH 5 million as per the amended rules adopted by the parliament on 15 July 2015.
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Iceland: Definition of related entities: Iceland Parliament passed a bill on 15 June 2015 amending article 57 of the Income Tax Act No. 90/2003 which narrowed the definition of “related entities” by removing the legal entities owned, directly or indirectly, or governed by individuals who are tied financially through joint business or investment from the definition clause of the related entities.
Exemption from documentation requirements: Entities exceeding turnover or total assets of ISK1 billion need not to document local controlled transactions as per the bill passed by the parliament on 15 June 2015.
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Poland: BEPS related compliance: The Council of Ministers adopted an amending bill on 21 July 2015, which requires a taxpayer that is part of a multinational corporate group with annual income or expenses of at least €20 million to prepare and deliver a master file report containing standardized information relevant to all group members and a local file specifically related to transactions carried out by the taxpayer. It is expected that the provisions on transfer pricing reporting obligations will come into effect on 1 January 2017.
CbC reporting requirement: The amending bill also requires a resident entity that is part of a multinational corporate group with annual consolidated income of at least €750 million to prepare a comprehensive report reflecting the activities and taxes paid in each country in which the group operates, i.e., the country-by-country reports (CbCR). It is expected that the provisions on transfer pricing reporting obligations will come into effect on 1 January 2017.
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US: Mutual Agreement Procedure (MAP): The new revenue procedure Rev. Proc. 2015-40 provides guidance on the process of requesting and obtaining assistance under US tax treaties from the US Competent Authority. It includes pre-filing procedures in MAP case and a requirement for a pre-filing Memorandum on the nature of the issues or the adjustment required.
Guidance on obtaining advance pricing agreements (APAs): The revenue procedure Rev. Proc. 2015-41 provides guidance on the process of requesting and obtaining advance pricing agreements from the Advance Pricing and Mutual Agreement program (APMA). There will also be coordination between IRS offices with a view to rolling back an APA to earlier years even where the taxpayer has not requested this.
Provisions for pre-filing meeting and memorandum in APA: The revenue procedure Rev. Proc. 2015-41 includes provisions for pre-filing meetings and a pre-filing Memorandum. The procedure also lists specifications for APA requests with the provision of rolling back an APA to earlier years even where the taxpayer has not requested this.
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Korea (Rep): BEPS related compliance: The tax law amendments proposal announced on 6 August 2015 and subsequently released a draft legislation by the South Korean Ministry of Strategy and Finance will require taxpayers to submit a “Comprehensive Report of Taxpayer’s International Transactions” as “master file” and “local file” at the time of filing the corporate tax return of the fiscal year commencing on or after 1 January 2016.
CbC reporting requirement: In the tax law amendments proposal announced on 6 August 2015, the Ministry of Strategy and Finance has shown their intention to introduce the country-by-country reporting gradually but not including this in the current draft legislation.
Penalty for non-compliance: As per the released draft legislation by the South Korean Ministry of Strategy and Finance, failure to comply with the reporting requirement will result in a noncompliance penalty not exceeding KRW 10million (US$8,500) and will be effective for fiscal years beginning on or after 1 January 2016.
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India: Transfer pricing rule: The Bombay High Court (HC) issued its decision on 23 June 2015 in the case of CIT v. Garware Polyster Ltd (ITA 1434 of 2013) that where the scope of work undertaken by the associated enterprise (AE) agent is wider than that of a comparable third party, arm’s length price (ALP) for the agency commission at a higher rate is justified.
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Number of years to be compared: In the case of ChrysCapital Investment Advisors (India) Pvt. Ltd v. DCIT (ITA No. 417 of 2014), Indian High Court passed a decision that while determining the comparability of transactions the multiple year data can only be included in the manner provided in Rule 10B(4) of The Income Tax Rules.
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Slovenia: Availability of APA: As per the proposed changes to the Tax Procedure Act., Advance Pricing Agreement will be introduced from 1 July 2017 onwards. Under the proposed regime of the Advance Pricing Agreement taxpayers will be able to apply for a unilateral, bilateral or multilateral agreement.
APA authority: The introduction of the institute of Advance Pricing Agreement (APA) is one of the proposed changes to the Tax Procedure Act.
APA rules: Taxpayers will have to file a written application with the tax authority; such petition will also need to specify all the necessary criteria that influence the determination of transfer prices.
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United Kingdom: Main corporate income tax rate: UK summer budget 2015 announced that the headline rate of corporation tax would be further reduced from the current rate of 20% to 19%, effective from 1 April 2017, and to 18% effective from 1 April 2020.
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