The Australian Taxation Office’s draft Practical Compliance Guideline PCG 2025/D2 explains how the ATO assesses the tax risk of inbound cross-border related-party financing arrangements and the factors it takes into account. It also sets out the compliance framework the ATO follows when determining the appropriate interest rate or other pricing for such arrangements. Because the document is still in draft form, it has no effect until it is finalised. When issued, it will apply exclusively to inbound cross-border related-party financing arrangements ... Continue to full case

On 23 May 2025, the OECD issued guidance on common errors made by multinational enterprise (MNE) groups when preparing their country-by-country (CbC) reports. These reports contain valuable information on the global allocation of income, taxes paid, and the location of economic activity among the tax jurisdictions in which an MNE group operates. This information can be used for a high-level transfer pricing risk assessment, the assessment of other BEPS-related risks, and economic and statistical analysis, if appropriate. However, this information can only be used effectively for these purposes if the data in CbC reports is robust and accurate. Tax administrations have encountered a number of errors in the data contained in CbC reports filed to date, and the new guidance describes the most common of these ... Continue to full case

Germany has issued guidance on a recent addition to German taxpayers’ transfer pricing documentation obligations. The transaction matrix now required under Section 90 (3) sentence 2 no. 1 AO is a structured, tabular overview of relevant information on the taxpayer’s transactions and business relationships with related parties and permanent establishments, which is intended to support risk-oriented case and audit field selection. Click here for an unofficial English Translation ... Continue to full case

12 December 2024, the German Federal Ministry of Finance published updated administrative principles on transfer pricing 2024 (VWG VP 2024). The updates mainly concern the chapter on financial transactions, where paragraphs 3d and 3e have recently been added to the AStG. Paragraph 3d concerns the determination of arm’s length interest rates, group or stand-alone rating and whether capital should be treated as a loan or equity, and paragraph 3e concerns the treatment of financing arrangements, i.e. cash pools, hedging, etc. New guidance is also provided on the application of OECD Pillar 1 – Amount B. Click here for an unofficial English Translation ... Continue to full case

1 October 2024, the New Zealand Inland Revenue published a new 2024 edition of its Multinational Enterprises Compliance Focus. According to the publication (page 23), the provision of risk indicators will assist MNE’s in self-assessing their compliance with anti-BEPS measures and identifying potential deficiencies. A self-assessment can be conducted using the flowchart below. According to the publication (page 24), the top ten base erosion and profit shifting risks in New Zealand are According to the publication (page 27), the Inland Revenue has conducted targeted BEPS campaigns focusing on specific sectors and issues, using a range of information from questionnaires and follow-up activities. The top ten key findings from these campains to be incorporated into risk assessment models and future interventions are Bundled intangible property (i.e. a single payment for several types of rights) is the highest risk category of intangible, as it is difficult to ... Continue to full case

9 September 2024, the Peruvian tax authority – SUNAT – issued guidance on the qualification of services, transfer pricing methods for services and the application of the “benefit test”. Click here for English translation ... Continue to full case

30 August 2024 the Inland Revenue of New Zealand issued Commissioner’s Statement CS 24/02. The Statement that sets out the Commissioner’s position in relation to the withholding tax obligations that may arise from transactions that constitute a transfer pricing arrangement ... Continue to full case

The Australian Tax Office (ATO) has applied for special leave to appeal to the High Court of Australia against the Full Federal Court’s decision in PepsiCo, Inc. v Commissioner of Taxation [2024] FCAFC 86. At issue was the ‘royalty-free’ use of intangible assets under an agreement whereby PepsiCo Singapore sold concentrate to Schweppes Australia. According to the ATO, part of the payments made by Schweppes Australia to PepsiCo Singapore were in fact royalties for the use of trademarks and trade names, which were subject to Australian withholding taxes. See also ATO’s draft ruling TR 2024/D1. In June 2024, the Full Federal Court found that PepsiCo was not liable for royalty withholding tax and that the diverted profits tax (DPT) did not apply, overturning the previous decision of the Federal Court which, in a judgment dated 30 November 2023, had ruled in favour of the ATO and ... Continue to full case

In 2013, Airbnb entered into a technology and licensing agreement with its Irish subsidiary, which included a cost-sharing arrangement for the use and development of its proprietary intellectual property. As part of this arrangement, the Irish affiliate made a lump-sum platform contribution transaction (PCT) payment of $35 million in exchange for rights to Airbnb’s IP. To determine the PCT amount, Airbnb applied the income method, using discount rates ranging from 25% to 35% and estimating the useful lives of the licensed intangibles. The U.S. Internal Revenue Service (IRS) challenged this valuation, asserting that an arm’s length payment should have been approximately $4.2 billion. Based on this position, the IRS issued an assessment for additional taxable income and associated penalties. The IRS employed a comparable uncontrolled transaction (CUT) method, referencing Airbnb’s Series D financing round, which took place on April 16, 2014—roughly three months after the ... Continue to full case

On 17 June 2024, additional guidance and lists of qualifying and coverred jurisdictions under Amount B was released by the OECD. The additional guidance includes: The definitions of qualifying jurisdictions within the meaning of section 5.2 and 5.3 of the Amount B guidance. These definitions will facilitate adjustments to the return calculated under the simplified and streamlined approach for tested parties located in those qualifying jurisdictions. The respective definitions are now incorporated into the Amount B guidance in the annex to Chapter IV of the OECD Transfer Pricing Guidelines. The definition of covered jurisdictions within scope of the political commitment on Amount B. That political commitment recognises that subject to their domestic legislation and administrative practices, members of the Inclusive Framework commit to respect the outcome determined under the simplified and streamlined approach to in-scope transactions where such an approach is applied by a covered jurisdiction and ... Continue to full case

On 27 March 2024, new paragraphs (3d) and (3e) were added to the German Foreign Tax Act (Außensteuergesetz – AStG) regarding intragroup financing. Paragraph (3d) concerns the determination of arm’s length interest rates, group vs. stand-alone rating and whether capital is treated as a loan or equity. Paragraph (3e) concerns the treatment of financing arrangements, i.e. cash pools, hedging, etc ... Continue to full case

On 19 February 2024, the OECD announced the release of the report on Amount B, which provides a simplified and streamlined approach to the application of the arm’s length principle to baseline marketing and distribution activities. The report, which introduces two options for implementation for jurisdictions that opt into the simplified and streamlined approach from January 2025, describes the circumstances under which a distributor is within scope of Amount B including cases where it also performs certain non-distribution activities, such as manufacturing. It also sets out the activities that may exclude a distributor from the scope of the simplified and streamlined approach, such as the distribution of commodities or digital goods. The inclusion of the Amount B guidance into the OECD Transfer Pricing Guidelines is accompanied by conforming changes to the Commentary on Article 25 of the OECD Model Tax Convention ... Continue to full case

The Swiss Federal Tax Authorities have published an Article on the status of transfer pricing legislation in Switzerland as of 1 January 2024. The Article describes the existing legal basis for the application of the arm’s length principle in Switzerland and reference is made to the OECD Transfer Pricing Guidelines as well as to Swiss administrative practice and case law. The article is available in French, German and English. The English version is provided below ... Continue to full case

On January 19, 2024, the Maltese Commissioner of Taxes and Customs published local guidelines in relation to the transfer pricing rules introduced in Malta in November 2022. The local guidelines refer to the OECD Transfer Pricing Guidelines 2022 in relation to the application of transfer pricing methods, comparability analysis, transfer pricing documentation, etc ... Continue to full case

17 January 2024 the Australian Taxation Office published the final version of its Practical Compliance Guideline PCG 2024/1 Intangibles migration arrangements. The PCG has previously been released in drafts as PCG 2021/D4 and PCG 2023/D2 Intangibles arrangements. The final version sets out ATO’s compliance approach to the tax risks associated with certain cross-border related party intangibles arrangements involving: restructures or changes to arrangements involving intangible assets (referred to as ‘migrations’ in the PCG) the mischaracterisation or non-recognition of Australian activities connected with intangible assets. Changes and additions included in the final version: further clarification of the arrangements in scope exclusion of certain arrangements (‘Excluded Intangibles Arrangement’) from the scope inclusion of a ‘white zone’ for arrangements that have been subject to previous ATO audit or reviews further explaining our compliance approach, including the engagement taxpayers can expect based on the compliance risks associated with an ... Continue to full case

According to various articles in Australian media, Coca-Cola is now defending itself in a case pending before the Federal Court over unpaid withholding tax on royalties received from Coca-Cola Amatil Australia – a local bottler and distributor in which Coca-Cola has a minority shareholding. The case is very similar to that against PepsiCo, where the Federal Court, in a judgment dated 30 November 2023, found PepsiCo liable for additional taxes and penalties. According to the Australian Tax Office, Coca-Cola licensed intangibles (trademarks, branding etc.) to Coca-Cola Amatil Australia, but misclassified payments made under this agreement as being for soft drink-concentrate only in order to avoid paying withholding tax on royalties. Coca-Cola shifted around $435 million in profits overseas and is liable for $174 million in diverted profits tax ... Continue to full case

On 23 October 2023, the United Arab Emirates issued a comprehensive practical Transfer Pricing Guide. The guide is designed to provide general guidance on the Transfer Pricing regime in the UAE with a view to making the provisions of the Transfer Pricing regulations as understandable as possible to readers. UAE’s Transfer Pricing regulations are contained in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, Chapter 10 ... Continue to full case

11 October 2023 Microsoft announced that the IRS has claimed that it owes $28.9 billion in back taxes for the years 2004 to 2013, plus penalties and interest. The claim relates to cost-sharing arrangements used by Microsoft to allocate profits between countries during this period. According to Microsoft, its subsidiaries shared in the costs of developing certain intellectual property and, therefore, the subsidiaries were entitled to the related profits under the IRS cost-sharing regulations ... Continue to full case

29 September 2023 Brazil published normative instructions (IN RFB nº 2.161/23) for its new transfer pricing rules, which will apply from FY 2024 onwards. Brazil’s transfer pricing legislation is now in line with the OECD Transfer Pricing Guidelines. In fact, the new legislation is the result of a joint project between the Brazilian Federal Revenue Service (Receita Federal do Brasil) and the OECD. The normative instructions deal with the general aspects of the new law, which form the basic part of the new system and apply to all transactions falling within its scope. It addresses practical issues in the application of the new regime and provides simplification measures for some transactions as well as for the fulfilment of ancillary obligations. For companies wishing to apply the new rules for FY 2023, the opt-in deadline has been extended to December. These taxpayers will have to fill ... Continue to full case

12 September 2023, the European Commission published a new proposal to simplify tax rules and harmonise transfer pricing rules across the EU. According to the press release, the proposal, called “Business in Europe: Framework for Income Taxation” (BEFIT), will make life easier for both businesses and tax authorities by introducing a new, single set of rules to determine the tax base of groups of companies. This will reduce compliance costs for large businesses who operate in more than one Member State and make it easier for national tax authorities to determine which taxes are rightly due. The new, simpler rules could reduce tax compliance costs for businesses operating in the EU by up to 65%. BEFIT will mean that: Companies that are members of the same group will calculate their tax base in accordance with a common set of rules. The tax bases of all ... Continue to full case