Transfer Pricing Brief: October 2018

Israel	Priority of Methods: According to Circular 11/2018 published on 5 September 2018, in case of sales activity that is performed without significant marketing intangibles, the most appropriate transfer pricing method according to the ITA is the Comparable Profits Method (CPM)/Transactional Net Margin Method (TNMM), with a profit level indicator based on revenue from sales in the local market. CPM/TNMM is most appropriate in marketing and advertising activities. Low value-adding services: According to Circular 12/2018, published on September 5, 2018, the Israeli Taxation Authority (under certain conditions) adopts Chapter 7 of the OECD Guidelines, which establishes a markup of 5% on total operating expenses, including expenses that should be recorded according to Generally Accepted Accounting Principles (GAAP), such as stock options. In terms of marketing support services, the markup is between 10% and 12% of the total cost incurred in providing the service (i.e. markup on total costs). See the story in Regfollower
Ireland	Restriction on interest deduction: As per the “Corporation Tax Roadmap” published on 5 September 2018, Ireland will introduce an ATAD-compliant interest limitation rule no later than 1 January 2024. The earliest date of introduction could be in Finance Bill 2019 and at the latest the end of 2023. See the story in Regfollower
India	Availability of APA: On 31 August 2018, the Central Board of Direct Tax (CBDT) published the second annual report of its advance pricing agreement (APA) programme for the year of 2017-2018, providing a report card of the performance of the programme along with qualitative and statistical analysis. See the story in Regfollower
Brazil	For import transactions: Pursuant to private Ruling 95/2018 of 30 August 2018, the importation of products for internal sale is subject to the transfer pricing rules if the resident importer and the foreign exporter are affiliated persons. It is irrelevant that such products are industrialized in Brazil. See the story in RegfollowerResale price method: On 11 September 2018, the Administrative Council of Tax Appeals issued binding decision 115 confirming that the calculation method of the “Resale Price Method minus profit with sixty percent profit margin (PRL 60)” provided for in Normative Instruction SRF No. 243, of 2002, does not violate the provisions of art. 18, item II, of Law No. 9,430, of 1996, as amended by Law No. 9595 of 2000. See the story in Regfollower
Poland	Specific TP compliance-Form: On 4th September 2018, the interactive forms CIT-TP and PIT-TP, used to present a simplified report on related party transactions, were published on the e-Deklaracje website on the Tax Portal of the Ministry of Finance. The forms must be filed by the end of September 2018. See the story in Regfollower
Peru	Restriction on interest deduction: According to Legislative Decree 1424 adopted on 13 September 2018, the limit on interest deductibility is 3:1 debt/equity to both related and unrelated parties. Starting from 1 January 2021, a new set of thin capitalization rules will come into force where interest that exceeds 30% of EBITDA of the preceding year will be not be deductible. See the story in Regfollower
US	Specific TP compliance-Form: On 18 September 2018, IRS published a release reminding MNE groups on the processes of filing country-by-country reports on Form 8975. See the story in Regfollower Intra-group services: On 21 September 2018, IRS published a document proposing to remove Section 385 from treasury regulation that was finalized in the last of the 2016. The regulations require multinationals that issue related-party debt to provide information to the IRS that establishes that the instrument should be treated as debt for tax purposes, rather than as equity. See the story in Regfollower
Nigeria	CbC reporting requirement-Timing: On 17 September 2018, FIRS issued a public notice concerning the rules for multinational enterprise (MNE) groups that meet the notification requirement under the country-by-country (CbC) reporting regulations to comply with the requirement. See the story in Regfollower
Netherlands	Main corporate income tax rate: On 18 September 2018, the Dutch government published its tax budget proposals for the financial year 2019. The proposals include a gradual reduction of the present statutory Dutch CIT rate from 25% to 24.3% in 2019, to 23.9% in 2020 and to 22.25% as from 2021. See the story in Regfollower
Saudi Arabia	Information exchange-Multilateral: On 18 September 2018, Saudi Arabia signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The Convention provides a framework for cooperation between tax authorities to exchange tax information, including automatic information exchange and simultaneous tax audits, and to assist each other in tax collection. See the story in Regfollower
Kazakhstan	APAs-Rules: On 6 September 2018, Resolution No 528 of 27 August 2018 amending the procedures for the conclusion of advance pricing agreements (APAs) has been published in the Official Journal. Accordingly, the review committee must complete its review within 60 working days of receipt of the application. If the application is approved, the signed contract should be sent to the applicant within five working days. After that, the applicant has 10 working days from the date of signing to reply. See the story in Regfollower
Spain	Specific TP compliance-Form: On 14 September 2018, the Official Gazette published the order HAC/941/2018 of 5 September 2018 that amends the form 231 relating to CbC reporting. Accordingly additional choices in the first part of the form to cover specific cases in which a constituent entity would be required to file, such as no agreement for automatic exchange of information with parent’s jurisdiction, no requirement to file CbC report by foreign ultimate parent and systemic failure for exchange of CbC report. See the story in Regfollower
Sweden	Intangible property-Hard to value intangibles: On 13 September 2018, the Swedish tax authority published an update of transfer prices guidance on intangible assets consistent with OECD’s guidance on hard to value intangible asset transactions (HTVI). The guidance on HTVI is a tool for tax authorities under the arm’s length principle for the valuation of the intangible assets. See the story in Regfollower
Qatar	CbC reporting requirement-General rule: Qatar introduced country-by-country (CbC) reporting requirements through Ministerial Decision No. 21 of 2018 published in the Official Gazette on 9 September 2018. A Qatar tax resident entity is required to submit a CbC report or notification in Qatar if it is a member of a multinational group that had at least QAR3 billion consolidated group revenue in the preceding fiscal year. CbC reporting requirement-Timing: The CbC report should be submitted within 12 months from the end of the reportable financial year. The first filing deadline is 31 December 2018. See the story in Regfollower