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 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
Brazil issues Draft Legislation on implementation of the Arm's Length Principle

Brazil issues Draft Legislation on implementation of the Arm’s Length Principle

28 December 2022 Brazil published draft legislation on implementation of the arm’s length principle as described in the OECD Transfer Pricing Guidelines. The new provisions came into effect on the date of publication and must be converted into law by the National Congress. The new transfer pricing regime will be optional for taxpayers for 2023 and mandatory as of 2024. Unofficial English Translation MEDIDA PROVISÓRIA Nº 1.152, DE 28 DE DEZEMBRO DE 2022 - BRAZIL - MEDIDA PROVISÓRIA Nº 1.152, DE 28 DE DEZEMBRO DE 2022 - DOU - Imprensa Nacional ... Continue to full case
US Supreme Court denies Whirlpool's request for judicial review of the 2021 judgement from the Court of Appeal.

US Supreme Court denies Whirlpool’s request for judicial review of the 2021 judgement from the Court of Appeal.

21 November 2022 the US Supreme Court denied Whirlpool its request for judicial review of the December 2021 judgement of the Court of Appeal (Sixth Circuit). 10 August 2022 Whirlpool filed a “petition for writ” with the Supreme Court of the United States. “Petitioners Whirlpool Financial Corporation & Consolidated Subsidiaries and Whirlpool International Holdings S.à.r.l. & Consolidated Subsidiaries collectively, “Whirlpool”) respectfully petition this Court for a writ of certiorari to review the judgment of the United States Court of Appeals for the Sixth Circuit in this case.” The case revolves around a tax arrangement setup by the Whirlpool group, where a subsidiary in Luxembourg with one part-time employee (and subject to US CFC provisions) owned a Mexican manufacturing entity. The Mexican entity manufactured products for the Luxembourg subsidiary under a manufacturing services arrangement. According to the contractual setup, the subsidiary in Luxembourg owned all the ... Continue to full case
TELE2 announces SEK 1,8 billion victory in Swedish Courts

TELE2 announces SEK 1,8 billion victory in Swedish Courts

In a press release dated November 7, 2022, TELE2 announced a SEK 1,8 billion win related to tax deductions for foreign exchange losses on intra-group loans, that had previously been disallowed by the Swedish tax authorities in an assessment issued back in 2019. According to the tax authorities the company would not – at arms length – have agreed to a currency conversion of certain intra-group loans which resulted in the loss. Tele2 appealed the decision to the Administrative Court where, during the proceedings, the authorities acknowledged deductions in part of the currency loss – SEK 745 millions. Hence, at issue before the Court was disallowed deductions of the remaining amount of SEK 1 billion. In January 2021 the administrative court dismissed TELE2’s appeal in regards of the remaining amount of SEK 1 billion. Tele2 then filed an appeal with the Court of Appeal. The ... Continue to full case
Caterpillar announces $740 million settlement with the IRS

Caterpillar announces $740 million settlement with the IRS

In a press release dated October 27, 2022, Caterpillar announced that a $740 million settlement had been reached with the IRS related to tax issues for FY 2007 through 2016. In the third quarter of 2022, the company reached a settlement with the U.S. Internal Revenue Service (IRS) that resolves all issues for tax years 2007 through 2016, without any penalties. The company’s settlement includes, among other issues, the resolution of disputed tax treatment of profits earned by Caterpillar SARL (CSARL) from certain parts transactions. The company vigorously contested the IRS’s application of the “substance-over-form” or “assignment-of-income” judicial doctrines and its proposed increases to tax and imposition of accuracy related penalties. The settlement does not include any increases to tax in the United States based on those judicial doctrines and does not include any penalties. The final tax assessed by the IRS for all issues ... Continue to full case
Credit Suisse enters EUR 238 million settlement agreement in France

Credit Suisse enters EUR 238 million settlement agreement in France

A settlement agreement between the French Financial Public Prosecutor and Credit Suisse was announced in the Paris Court of Appeal 24 October 2022. The “CJIP” agreement brings an end to investigations in France over whether the Swiss bank facilitated and aided clients in tax avoidance. (English translation of the press release from the French Public Prosecutor) On 24 October 2022, the President of the Paris Judicial Court validated the judicial public interest agreement (CJIP) concluded on 21 October 2022 between the Financial Public Prosecutor (PRF) and CREDIT SUISSE AG pursuant to Article 41-1-2 of the Criminal Procedure Code. Under the terms of the CJIP, CREDIT SUISSE AG undertakes to pay the Treasury a public interest fine totaling EUR 123,000,000. In addition, CREDIT SUISSE AG undertakes to pay to the Treasury the sum of €115,000,000 in damages owed to the State. As a result, the public ... Continue to full case
OECD Publishes Updated Guidance on CbC Reporting

OECD Publishes Updated Guidance on CbC Reporting

On 14 October 2022 OECD published updated guidance on CbC reporting. The guidance contains definitions of items in the CbC reporting template – revenue, related parties, tax accrued and paid, fair value accounting, positive and negative figures etc. Issued related to particular reporting entities is also addressed (investment funds, major shareholding, deemed listing provisions and permanent establishment information. Guidance is provided on common issues such as currency fluctuations, definition of consolidated revenue, long and short accounting periods, mergers – demergers and acquisitions, and errors made by MNE groups in preparing CbC reports. And finally the updated guidance addresses issues related to the mechanism for sharing CbCR between tax authorities. OECD-guidance-on-the-implementation-of-country-by-country-reporting-beps-action-13 ... Continue to full case
OECD Publishes Manual on Bilateral Advance Pricing Arrangement

OECD Publishes Manual on Bilateral Advance Pricing Arrangement

On 28 September 2022 OECD published a new manual for entering bilateral advance pricing arrangement (APA’s) which has been approved by the Inclusive Framework on BEPS, as well as all members of the FTA, on 6 July 2022. The Bilateral Advance Pricing Arrangement Manual (“BAPAM” or “Manual”) is intended as a guide to tax administrations and taxpayers for streamlining the bilateral APA process. In addition to detailing several Best Practices for engaging in bilateral APAs, it also includes practical resources for tax administrations and taxpayers, such as templates and examples. It provides tax administrations and taxpayers with basic information on the operation of bilateral APAs (“BAPAs”) and identifies best practices for BAPAs without imposing a set of binding rules upon jurisdictions. The best practices identified in the Manual aim to streamline the BAPA process through: Mitigating delays created by differences in the BAPA processes in each ... Continue to full case
Banca Generali announces EUR 45 Million Settlement with Italian Revenue Agency

Banca Generali announces EUR 45 Million Settlement with Italian Revenue Agency

Italian financial institute, Banca Generali, has signed a agreement with the Italian Revenue Agency, whereby the parties agreed upon the terms and conditions for the settlement of tax claims in relation to transfer pricing for FY 2014 to 2018. Under the agreement, Banca Generali will incur an additional tax charge of €45.99 million for FY 2014-2018. The tax dispute relates to remuneration for a transfer in 2008 of fund management activities in Italian to a newly established Luxembourg company, BG Fund Management Luxembourg S.A. According to the announcement, no penalties will be applied due to the penalty protection regime. Italy BG_Tax+Agreement_2022 ... Continue to full case
Uber-files - Tax Avoidance promoted by the Netherlands

Uber-files – Tax Avoidance promoted by the Netherlands

Uber files – confidential documents, leaked to The Guardian newspaper shows that Uber in 2015 sought to deflect attention from its Dutch conduits and Caribbean tax shelters by helping tax authorities collect taxes from its drivers. At that time, Uber’s Dutch subsidiary received payments from customers hiring cars in cities around the world (except US and China), and after paying the drivers, profits were routed on as royalty fees to Bermuda, thus avoiding corporate income tax. In 2019, Uber took the first steps to close its Caribbean tax shelters. To that end, a Dutch subsidiary purchased the IP that was previously held by the Bermudan subsidiary, using a $16 billion loan it had received from Uber’s Singapore holding company. The new setup was also tax driven. Tax depreciations on the IP acquired from Bermuda and interest on the loan from Singapore will significantly reduce Uber’s ... Continue to full case

Australian Treasury issues Consultation Paper on Multinational Tax Integrity and Tax Transparency

As part of a multinational tax integrity package aimed to address the tax avoidance practices of multinational enterprises (MNEs) and improve transparency through better public reporting of MNEs’ tax information, the Australian Treasury issued a Consultation Paper in August 2022. This paper seeks to consult on the implementation of proposals to: amend Australia’s existing thin capitalisation rules to limit interest deductions for MNEs in line with the Organisation for Economic Cooperation and Development (OECD)’s recommended approach under Action 4 of the Base Erosion and Profit Shifting (BEPS) program (Part 1); introduce a new rule limiting MNEs’ ability to claim tax deductions for payments relating to intangibles and royalties that lead to insufficient tax paid (Part 2); and ensure enhanced tax transparency by MNEs (Part 3), through measures such as public reporting of certain tax information on a country‑by‑country basis; mandatory reporting of material tax risks ... Continue to full case
2022: ATO Taxpayer Alert on Treaty shopping arrangements to obtain reduced withholding tax rates (TA 2022/2)

2022: ATO Taxpayer Alert on Treaty shopping arrangements to obtain reduced withholding tax rates (TA 2022/2)

The ATO is currently reviewing treaty shopping arrangements designed to obtain the benefit of a reduced withholding tax (WHT) rate under a double-tax agreement (DTA) in relation to royalty or dividend payments from Australia. Typically, this benefit is sought via the interposition of one or more related entities between an Australian resident and the ultimate recipient of the royalty or dividend, where the interposed entity is a resident of a treaty partner jurisdiction. The ultimate recipient is generally located in a jurisdiction that either does not have a DTA with Australia or, where it is a treaty partner of Australia, the DTA provides a less favourable treaty benefit. A key purpose of Australia’s treaty network is to eliminate double taxation without creating opportunities for tax avoidance practices, such as treaty shopping arrangements. We are concerned that some taxpayers have entered into, or are considering implementing, arrangements ... Continue to full case
Rio Tinto has agreed to pay AUS$ 1 billion to settle a dispute with Australian Taxation Office over its Singapore Marketing Hub

Rio Tinto has agreed to pay AUS$ 1 billion to settle a dispute with Australian Taxation Office over its Singapore Marketing Hub

On 20 July 2022 Australian mining group Rio Tinto issued a press release announcing that a A$ 1 billion settlement had been reached with the Australian Taxation Office. “The agreement resolves the disagreement relating to interest on an isolated borrowing used to pay an intragroup dividend in 2015. It also separately resolves the pricing of certain transactions between Rio Tinto entities based in Australia and the Group’s commercial centre in Singapore from 2010-2021 and provides certainty for a further five-year period. Rio Tinto has also reached agreement with the Inland Revenue Authority of Singapore (IRAS) in relation to transfer pricing for the same periods. Reaching agreement with both tax authorities ensures Rio Tinto is not subject to double taxation. As part of this agreement, Rio Tinto will pay to the ATO additional tax of A$613m for the twelve historical years (2010 to 2021). This is ... Continue to full case
German draft-legislation on application of the arm's length principle to cross-border relocation of functions

German draft-legislation on application of the arm’s length principle to cross-border relocation of functions

On 5 July 2022, the Federal Ministry of Finance in Germany published draft legislation regarding application of the arm’s length principle to cross-border relocation of functions. According to the general provisions A function is a business activity that consists of a grouping of similar operational tasks performed by specific units or departments of an enterprise. It is an organic part of an enterprise, without the need for a sub-operation in the tax sense. A transfer of functions within the meaning of section 1(3b) of the Foreign Tax Act occurs if a function, including the associated opportunities and risks as well as any assets or other benefits that may have been transferred or left along with it, is transferred or left in whole or in part so that the acquiring company can perform this function or expand an existing function. The function transferred as a whole ... Continue to full case
The Netherlands releases New 2022 Decree on application of the Arm's Length Principle

The Netherlands releases New 2022 Decree on application of the Arm’s Length Principle

On 1 July 2022, the tax authorities in the Netherlands published Decree No. 2022-0000139020 of 14 June 2022 containing local guidance on application of the arm’s length principle. The Decree is based on article 9 of the OECD Model Tax Convention and the OECD Transfer Pricing Guidelines and also contains references to local case laws. In the Decree, particular focus is on areas that have been updated in the most recent releases of the OECD Transfer Pricing Guidelines – Legal ownership, DEMPE functions, Services, HTVI and Valuation Methods, Government policies (COVID-19), Remuneration of Procurement activities, Financial transactions etc. Click here for Unofficial English translation Click here for other translation NL TP decree stcrt-2022-16685 ... Continue to full case
McDonald’s has agreed to pay €1.25bn to settle a dispute with French authorities over excessive royalty payments to Luxembourg

McDonald’s has agreed to pay €1.25bn to settle a dispute with French authorities over excessive royalty payments to Luxembourg

On 16 June 2022 McDonald’s France entered into an settlement agreement according to which it will pay €1.245 billion in back taxes and fines to the French tax authorities. The settlement agreement resulted from investigations carried out by the French tax authorities in regards to abnormally high royalties transferred from McDonald’s France to McDonald’s Luxembourg following an intra group restructuring in 2009. McDonald’s France doubled its royalty payments from 5% to 10% of restaurant turnover, and instead of paying these royalties to McDonald’s HQ in the United States, going forward they paid them to a Swiss PE of a group company in Luxembourg, which was not taxable of the amounts. During the investigations it was discovered that McDonald’s royalty fees could vary substantially from one McDonald’s branch to the next without any justification other than tax savings for the group. This conclusion was further supported ... Continue to full case
AFIP has published a non exhaustive list of Low and No Tax Jurisdictions (LNTJ)

AFIP has published a non exhaustive list of Low and No Tax Jurisdictions (LNTJ)

The Federal Tax Administration of Argentine (AFIP) has published a non exhaustive list of 41 Low and No Tax Jurisdictions (LNTJ). The list related to Law 27,430 from 29 December 2017 which introduced certain adverse tax implications for transactions with LNTJs. For instance, according to the Law transactions with unrelated parties in LNTJs are not deemed arm’s length for transfer pricing purposes. Furthermore such transactions are required to be reported to the tax authorities. LNTJs refers to jurisdictions where the income tax rate is 60% lower than the minimum 25 % CIT rate applicable in Argentina. Hence, LNTJs are jurisdictions that apply an income tax rate lower than 15%. Click here for English Translation JBNT_list_1_14410 ... Continue to full case
Italy releases operational instructions on arm's length range and benchmarking.

Italy releases operational instructions on arm’s length range and benchmarking.

On 24 May 2022, the Italian Tax Agency (Agenzia delle Entrate) released CIRCULAR NO. 16/E containing operational instructions on issues relating to application of the arm’s length range. The circular – which is based on the OECD transfer Pricing Guidelines, guidance on benchmark studies issued by the Joint Transfer Pricing Forum, and relevant Italian case laws – provides operational instructions regarding the correct interpretation of the notion of “arm’s length range”, as also specified in Article 6 of the Decree of 14 May 2018, when applying the provisions set forth in Article 110, paragraph 7, of the Consolidated Income Tax Act or of the provisions contained in the Double Taxation Treaties entered into by Italy in accordance with Article 9 of the OECD Model Convention. The operational instructions concludes as follows the correct application of the most appropriate transfer pricing method may, instead of a ... Continue to full case
Amgen in Billion Dollar Transfer Pricing Dispute with the IRS

Amgen in Billion Dollar Transfer Pricing Dispute with the IRS

Amgen, in its quarterly report for the period ended March 31, 2022, disclosed that, not only has the group been issued a notice of assessments from the IRS for FY 2010-2012 resulting in additional taxes of approximately $3.6 billion plus interest – as previously reported – it has also received a Revenue Agent Reports (RAR) for 2013-2015 resulting in additional taxes of approximately $5.1 billion, plus interest and penalties of approximately $2.0 billion. Furthermore, it is disclosed that Amgen is currently under examination by the IRS for the years 2016, 2017 and 2018 and by a number of state and foreign tax jurisdictions The main dispute relates to the allocation of profits between Amgen group entities in the United States and the U.S. territory of Puerto Rico. Excerpt from Amgen’s quarterly report for the period ended March 31, 2022 4. Income taxes The effective tax ... Continue to full case