Sweden Restriction on interest deduction: On 14 June 2018, the Parliament passed a bill regarding a general provision limiting the deductibility of net interest expense to 30% of earnings before interest, tax, depreciation and amortization (EBITDA). The draft bill was submitted to the parliament on 3 May 2018. The new law will come into effect 1 January 2019 and will apply for the first time to fiscal years beginning after 31 December 2018.
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Australia Specific TP compliance: On 12 June 2018, the Australian Taxation Office (ATO) has published the update “International Dealings Schedule (IDS)” for 2018, which focuses on the identification of current transfer pricing risks, including cross-border R&D cost plus agreements, offshore hubs and hybrid mismatch arrangements.
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Special rules for hybrid instruments or entities: On 21 June 2018, the Australian Taxation Office (ATO) issued the draft Practical Compliance Guideline Part IVA of the Income Tax Assessment Act of 1936 and restructured hybrid mismatch agreements (PCG 2018/D4). PCG 2018/D4 provides guidance on how the ATO can apply Australia’s general anti-circumvention provisions in Part IVA of the Income Tax Assessment Act of 1936 (Part IVA) to these restructurings.
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Uruguay Treaty Application: On 4 June 2018, the Uruguayan parliament passed the Bill for the ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Uruguay signed the MLI on 7 June 2017.
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Luxembourg Treaty Application: On 15 June 2018, the Luxembourg Cabinet approved a bill ratifying the Multilateral Agreement on the Implementation of Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which Luxembourg signed on 7 June 2017. Upon completion of the ratification process, Luxembourg must deposit its instrument of ratification in order to put the MLI into force for its covered agreements (tax treaties).
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India Comparable uncontrolled price method (“CUP”): On 14 May 2018, the Delhi Bench of the Income-tax Appellate Tribunal ruled its decision on the transfer pricing (TP) case of BMW India Pvt. V. ACIT (ITA No 6160 / Del. / 2014) in favor of the taxpayer. The decision concludes that expenses that are specifically for the Indian taxpayer’s market and that benefit only the Indian taxpayer cannot be attributed to the foreign affiliate. The tribunal agreed with the taxpayer’s determination under the Comparable Uncontrolled Price (CUP) method.
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Dispute resolution-Appeals: Recently, the Mumbai Bench of the Income-tax Appellate Tribunal (the Tribunal) ruled its decision on the transfer pricing (TP) case of Colgate Palmolive (India) Ltd. v. ACIT (ITA No. 6073/Mum/2014 and ITA No. 2778/Mum/2011) in favor of the taxpayer. The decision concludes that in the absence of an arrangement or agreement with the Associated Enterprise (AE), the taxpayer is not required to undertake any brand building for its AE and there is no “tangible evidence” to substantiate that advertising, marketing, and promotion expenses incurred by the taxpayer led to brand building or to the creation of marketing intangible that benefited the taxpayer group.
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Secondary adjustment: On 20 June 2018, the Indian Tax Administration issued Draft Rules pertaining to the application of “secondary adjustment” provisions in the case of an APA or MAP. Public comments, in this regard, can be sent electronically by 9 July 2018 at the mail address.
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Thailand Documentation-Requirement: On 5 June 2018, the Government submitted the draft of law amending the Revenue Code on transfer pricing to the National Legislative Assembly for approval. The law will be in force for the accounting periods beginning on or after 1 January 2019. The first filing date of the transfer pricing disclosure form which will need to be filed with an annual tax return will be on 30 May 2020 for the fiscal year ended 31 December 2019 and 28 August 2020 for the fiscal year ended 31 March 2020.
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Egypt Requirements-Control: On 22 May 2018, the Egyptian Government published Ministerial Decree No. 221 of 2018 amending certain provisions of the Income Tax Law Executive Regulations under Ministerial Decree No. 991 of 2005 relating to transfer pricing rules. The definition of related party transactions is amended in accordance with Article (38).
Application: On 22 May 2018, the Egyptian Government published Ministerial Decree No. 221 of 2018 amending certain provisions of the Income Tax Law Executive Regulations under Ministerial Decree No. 991 of 2005 relating to transfer pricing rules. The amendments added the Transactional Net Margin Method and the Profit Split method for determining the arm’s length price under Article (39).
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Chile CbC reporting requirement-Timing: On 22 June 2018, the Chilean tax authority issued a notice reminding taxpayers the deadline for filing CbC 1907. For 2018, the deadline for filing Form 1907 is on 29 June 2018 for transactions taking place during the preceding calendar year (2017).
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Nigeria CbC reporting requirement-General: On June 19, 2018, the Federal Inland Revenue Service (FIRS) formally released income tax (Country-by-Country reporting) regulations 2018 which was published in an Official Gazette of January 8, 2018. Each ultimate parent entity (UPE) of a multinational corporation with a consolidated group turnover of N 160 billion or more is required to submit a country-by-country report starting from or after 1 January 2018 in a specific format to the FIRS each year, provided that such entity is resident in Nigeria for tax purposes.
CbC reporting requirement-Timing: The CbC report should be submitted no later than 12 months after the last day of the reporting year of the MNE Group.
CbC reporting requirement-Penalty for non-compliance: The penalty for failure to file the CbC report to the FIRS by the filing deadline is NGN10 million in the first instance and NGN1 million for every month the failure persists. In addition, there is a penalty of NGN10 million where a reporting entity files an incorrect or false report while failure to provide notification attracts a penalty of NGN5 million in the first instance and NGN10,000 for every day in which the default continues.
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Peru Treaty Application: On 21 June 2018, the President of Peru authorized the Minister of Economy and Finance to sign the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. On 7 December 2016, Peru became a member of the Inclusive Framework on BEPS package and hosted the fifth plenary meeting of the Inclusive Framework held on 25-28 June 2018 in Lima.
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Bangladesh Main corporate income tax rate: On 28 June 2018, the Parliament passed the national budget for fiscal year 2018-2019. The corporate tax rate has been reduced to 40% from 42.50% for non-publicly traded banks, insurance and financial institutions. The rate has been also reduced for publicly-traded banks, insurance companies and financial institutions from 40% to 37.50%. The corporate tax rates for the other sectors have been kept unchanged by Finance Minister.
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