Category: Transfer Pricing News

Transfer pricing news have recent information on disputes and settelments, hearings and investigations, and developments in guidelines and approaches to transfer pricing issues.

OECD releases the report on Amount B

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. Pillar One - Amount ... Continue to full case

FTA Article on Swiss Transfer Pricing Legislation and Practices as of 1 January 2024

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 official Article is only available in French and German, but an unofficial English version is provided below. Swiss b-verrechnungspreise Eng-trans ... Continue to full case

Malta issues Transfer Pricing Guidance

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. Malta Guidelines - Transfer Pricing Rules ... Continue to full case

Australia finalises compliance guideline on intangibles migration arrangements – PCG 2024/1

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
Coca-Cola in $174 million tax dispute with the ATO

Coca-Cola in $174 million tax dispute with the ATO

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
United Arab Emirates issues comprehensive Transfer Pricing Guide

United Arab Emirates issues comprehensive Transfer Pricing Guide

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. Transfer Pricing Guide - EN - 23 10 2023 ... Continue to full case
IRS says Microsoft owes $28.9 billion in back taxes

IRS says Microsoft owes $28.9 billion in back taxes

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. IRS v Microsoft ... Continue to full case

Brazil publishes comprehensive normative instructions for its new transfer pricing rules

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
EU Commission proposes to simplify tax rules - and harmonise transfer pricing rules across the EU

EU Commission proposes to simplify tax rules – and harmonise transfer pricing rules across the EU

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

138 countries agree historic milestone to implement OECD’s Two‐Pillar Solution

12 July 2023 138 members of the OECD/G20 Inclusive Framework agreed an Outcome Statement recognising the significant progress made and allowing countries and jurisdictions to move forward with historic, major reform of the international tax system. The Two‐Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy will ensure a fairer distribution of profits and taxing rights among countries and jurisdictions with respect to the world’s largest Multinational Enterprises (MNEs). The Outcome Statement agreed at the 15th Meeting of the Inclusive Framework follows 20 months of intense technical negotiations by delegates to continue the work to implement the Two Pillar Solution. It reflects collaboration and compromise among all jurisdictions – small and large, developing and developed – during negotiations by Inclusive Framework members since October 2021. The Outcome Statement summarises the package of deliverables developed by the Inclusive Framework to address ... Continue to full case

Brazil publishes new updated 2023 transfer pricing legislation – aligned with OECD guidelines

14 June 2023 Brazil issued it’s new updated transfer pricing legislation, which is now aligned with OECD transfer pricing guidelines. Click here for unofficial English translation Brazil LEI Nº 14.596, DE 14 DE JUNHO DE 2023 ORG ... Continue to full case

New German Administrative Principles on Transfer Pricing (BMF-AO-2023)

6 June 2023 Germany published it’s new updated administrative principles on transfer pricing. The new publication includes expanded guidance on transfers of functions (and valuation – see English translation) and financial transactions. With regard to the latter, reference is made to two recent decisions of the Federal Fiscal Court (BFH) on intra-group loans (BFH of 18 May 2021, I R 4/17, and of 13 January 2022, I R 15/21). With the exception of the new content on transfer of functions, the new principles can be applied retroactively by the tax authorities. Click here for an unofficial English translation of the German 2023 Administrative Principles on Transfer Pricing BMF AO 2023-vom-06062023 ORG ... Continue to full case

Malaysia issues new Transfer Pricing Rules for 2023

On 29 May 2002, Malaysia updated its existing TP rules. The new rules are largely in line with the OECD Transfer Pricing Guidelines, but there are minor differences. For example, the new rules state that the arm’s length range is defined as the range between the 37.5th and 62.5th percentiles of a data set. Furthermore, according to the new rules, the tax authorities may make adjustments to the median or any point above the median, even if a taxpayer’s price is already within the arm’s length range where there is a lower degree of comparability or comparability defects in the dataset. “13. Adjustment by Director General (1) Notwithstanding any other provision under these Rules, where the Director General has reason to believe that any price including the rate of interest imposed or would have been imposed in a controlled transaction is not at arm’s length, ... Continue to full case
Poland issues Tax clarifications on transfer pricing - No. 5: Resale Price Method

Poland issues Tax clarifications on transfer pricing – No. 5: Resale Price Method

24 March 2023 the Polish Ministry of Finance issued Tax clarifications on transfer pricing No. 5: Resale Price Method The resale price method (RPM) is one of the traditional transaction methods and probably most useful where it is applied to distribution operations.. Application of the RPM for determining the price of a controlled transaction begins with the price at which a product that has been purchased from an associated enterprise is resold to an independent enterprise. This price (the resale price) is then reduced by an appropriate gross margin on this price (the “resale price margin”) representing the amount out of which the reseller would seek to cover its selling and other operating expenses and, in the light of the functions performed (taking into account assets used and risks assumed), make an appropriate profit. What is left after subtracting the gross margin can be regarded, ... Continue to full case

Germany issues draft law for implementation of the global minimum tax – OECD Pillar II

The German Federal Ministry of Finance issues draft law for the implementation of the EU Directive to ensure a global minimum level of taxation for multinational groups of companies and large domestic groups in the Union The aim of the draft law is to implement key elements of the international agreements on Pillar 2 of the so-called two-pillar solution. The post-taxation provisions contained therein are intended to ensure a global effective minimum taxation, to counteract harmful tax competition and aggressive tax structuring and thus to contribute to the promotion of tax justice and a level playing field. Click here for unofficial English translation Germany - draft legislation - Pillar II 170323 ... Continue to full case
AMPOL enters $157 million tax settlement with Australian Tax Office

AMPOL enters $157 million tax settlement with Australian Tax Office

20 February 2023 Ampol Limited announced entering a $157 million tax settlement agreement with the Australian Tax Office in a dispute over pricing of transactions between Ampol Limited and the group’s Singapore procurement hub. Ampol is an Australian based petroleum distributor and retailer, with more than 1,900 Ampol-branded gas stations across the country. Ampol Singapore was established in late 2013 and is the trading and shipping arm of the Group. According to an announcement issued by Ampol, the settlement relates to financial years ended 31 December 2014 to 2022, as well as agreement on the treatment of future earnings. As a result of the settlement: Ampol will pay a further $5.6 million in Australian tax on earnings between 2014 and 2021, and $0.1m in interest. This is in addition to the $104.1m of tax already paid on Ampol Singapore earnings, in relation to these matters, ... Continue to full case

EU list of Non-Cooperative Tax Jurisdictions – Tax Havens

14 February 2023 the Council of the European Union published an updated list of non-cooperative tax jurisdictions. The British Virgin Islands, Costa Rica, the Marshall Islands and Russia have been added to the list, which now comprises 16 jurisdictions: American Samoa Anguilla Bahamas British Virgin Islands Costa Rica Fiji Guam Marshall Islands Palau Panama Russia Samoa Trinidad and Tobago Turks and Caicos Islands US Virgin Islands Vanuatu This revised EU list of non-cooperative tax jurisdictions includes countries that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms. Those reforms should aim to comply with a set of objective tax good governance criteria, which include tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting. For the Marshall Islands, there ... Continue to full case
Interpretation statement from the Inland Revenue of New Zealand on application of the general anti-avoidance provision

Interpretation statement from the Inland Revenue of New Zealand on application of the general anti-avoidance provision

3 February 2023 the Inland Revenue of New Zealand issued an interpretation statement explaining the Commissioner’s view of the law on tax avoidance in New Zealand. It sets out the approach the Commissioner will take to the general anti-avoidance provisions in the Income Tax Act 2007 – ss BG 1 and s GA 1. Where s BG 1 applies, s GA 1 enables the Commissioner to make an adjustment to counteract a tax advantage obtained from or under a tax avoidance arrangement. The Supreme Court in Ben Nevis considered it desirable to settle the approach to the relationship between s BG 1 and the specific provisions in the rest of the Act. This approach is referred to as the Parliamentary contemplation test. The Parliamentary contemplation test was confirmed as the proper and authoritative approach to applying s BG 1 by the Supreme Court in Penny ... Continue to full case
OECD publishes Guidance on the Handling of Multilateral MAPs and APAs

OECD publishes Guidance on the Handling of Multilateral MAPs and APAs

1 February 2023 OECD published guidance on Multilateral MAP and APAs. The Manual is intended as a guide to multilateral MAP and APA processes from both a legal and procedural perspective and provides tax administrations and taxpayers with information on the operation of these procedures and suggests different approaches based on the practices of jurisdictions, without imposing a set of binding rules. The Manual is divided into the following sections: Introduction: This section comprises the outline of the project, the challenges that generally arise in multilateral cases and the overview of experiences of Focus group members based on their responses to the survey. Basis for handling multilateral MAP and APA cases: This section contains guidance on the definition of a multilateral case, the legal basis for handling multilateral cases, the request filed in multilateral cases and the connection between access to multilateral procedures and the ... Continue to full case
The South African Revenue Service (SARS) issues Arm's Length Guidance on Intra-Group Loans

The South African Revenue Service (SARS) issues Arm’s Length Guidance on Intra-Group Loans

17 January 2023 the South African Revenue Service (SARS) released an interpretation note (IN 127) titled “DETERMINATION OF THE TAXABLE INCOME OF CERTAIN PERSONS FROM INTERNATIONAL TRANSACTIONS: INTRA-GROUP LOANS” which provides guidance on how SARS will determine arm’s length pricing for intra-group loans. The Note also provides guidance on the consequences for a taxpayer if the amount of debt, the cost of debt or both are not arm’s length. According to the note an intra-group loan would be incorrectly priced if the amount of debt funding, the cost of the debt or both are excessive compared to what is arm’s length. Legal-IN-127-Determination-of-the-taxable-income-of-certain-persons-from-international-transactions-Intra-group-loans ... Continue to full case