Transfer Pricing Newsletter

Australia

Corporate Income Tax rate- 30% for periods to 2013/14. The budget for 2014 proposes to reduce the corporate tax rate to 28.5%.

Capital gains tax rate–Taxed at the same rate as business income.

China

Main Corporate Income Tax– A lower 15% incentive corporation tax rate applies to specified industries in certain areas including the Qianhai modern service industry cooperation zone, subject to certain conditions. The incentive applies for the years from 2014 to 2020 inclusive.

Estonia

Main Corporate Income Tax rate–The government has announced its intention to reduce the corporate tax rate to 20% in 2015.

Greece

Transfer Pricing Requirements– POL 1097 of 9 April 2014 set out revised transfer pricing guidelines, including clarification of documentation requirements.

Control–The transfer pricing rules also apply to foundations, cooperatives and consortia.

Documentation Format–A Greek subsidiary of a foreign-owned company must prepare a Greek documentation file, including a chapter outlining the market conditions experienced during the period.

India

Audits Time Limits– A proposal is currently under consideration to replace the threshold with a risk assessment approach relying on the presence of certain high risk factors to select taxpayers for a transfer pricing audit.

Japan

Main Corporate Income Tax rate –The government’s Tax Commission is looking at further corporate tax reductions for future years.

Malaysia

Compliance Form for Transfer Pricing –From 2014 the tax return form (Form C) contains a new check box (Box R4) where corporate taxpayers declare that their transfer pricing documentation has been prepared and submit the Form, via electronic medium or by way of electronic transmission to Lembaga Hasil Dalam Negeri Malaysia.

Norway

Financial Services–Under regulations issued in April 2014 certain securities transactions are exempt from the interest restriction rules, including where an external loan is obtained by a parent company and guaranteed by a 50% subsidiary.

Main Corporate Income Tax rate –The main corporate tax rate is 27% from 1 January 2014 (previously 28%).

Poland

Advance Pricing Agreement (APA)– Draft legislation approved by the Council of Ministers in April 2014 aims to expand the scope of APAs to more transactions including cost contribution arrangements and to permit more than one type of transaction to be included in a single APA. APAs withdrawal proposed legislation approved by the Council of Ministers in April 2014 provides for more detail of situations where the tax authorities may withdraw from APA negotiations because of obstacles to the process.Validity of APAs measures proposed in 2013 and approved by the Council of Ministers in April 2014 would provide for retrospective application of an APA.

Russia

Transfer Pricing  Requirements–Documentation is required for transactions with Russian entities located in a special economic zone where the total of all transactions exceeds RUB 60 million in a year.

Financial Services–Letter 03-01-RZ/20100 of 29 April 2014 confirmed that the transfer pricing provisions apply to insurance and reinsurance transactions.

Thresholds for Transfer Pricing Documentation – From 2014 documentation are required for all controlled transactions.

Tanzania

Transfer Pricing Requirements–Controlled transactions are defined as transactions between associates, where one party has direct or indirect control of 50% of the voting power of the other

Intangible Property–The Transfer Pricing Regulations require the use of the comparable uncontrolled price method (before considering other methods) for transactions involving the sale or licensing or intangible property. Where the transaction involves high value or unique property the residual profit split method must be considered first. The Transfer Pricing Regulations indicate that marketing activities and marketing costs incurred by a party that does not own the trademark should be compensated at arm’s length.

Intra-Group Services-Intra-group services are covered by the transfer pricing rules. Services that provide incidental benefits or passive association benefits are disregarded.

Financial Services- Intra-group financing provided directly or indirectly with or without consideration must be compensated with an arm’s length interest rate.

Transfer Pricing Methods– Comparable Uncontrolled Price method (“CUP”), Resale Price Method, Cost-Plus method, Transactional Net Margin method and Profit Split method, are permitted under the Income Tax (Transfer Pricing) Regulations 2014.

Transfer Pricing Documentation Requirement–The Transfer Pricing Regulations 2014, set out the records and documents that should be included in the transfer pricing documentation. The transfer pricing documentation should include details of the organizational structure, nature of the business, the controlled transactions, price setting strategy and assumptions, comparability, risk and functional analysis, selection and application of transfer pricing methods, documents supporting the transfer pricing analysis and other documents relevant to the taxpayer’s transfer pricing.Documentation should be sent to the tax authorities within 30 days of a request. The transfer pricing documentation should be in place by the time of filing the tax return.

Penalty in cases of Adjustments–In the case of a transfer pricing adjustment the penalty is 100% of the amount underpaid.

Advance Pricing Agreement-The taxpayer may request an APA in respect of certain future controlled transactions for a specified period of time, as per the Income Tax (Transfer Pricing) Regulations 2014. Unilateral, bilateral and multilateral APA would be possible under double tax treaties. Multilateral APA would be possible under double tax treaties. Validity of APAs would be for a period of up to five years.

Ukraine

Transfer Pricing Documentation-Under proposed legislation large taxpayers must submit a report on related party operations and documentation by 1 May following the year end but for 2014 the deadline is postponed to 1 October.

Penalty for Documentation Failure–For failure to notify controlled transactions or failure to file primary documentation the penalty is a fine of 100 times the minimum wage (previously 5% of the amount of the controlled transaction). For failure to file transfer pricing documentation the penalty is ten times the minimum wage (previously one hundred times the minimum wage).