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.

Mining Group Rio Tinto in new $86 million Dispute with ATO over pricing of Aluminium

In March 2020 the Australian Taxation Office issued an tax assessment regarding transfer pricing to Rio Tinto’s aluminium division according to which additional taxes in an amount of $86.1 million must be paid for fiscal years 2010 – 2016. According to the assessment Rio’s Australian subsidiaries did not charge an arm’s length price for the aluminium they sold to Rio’s Singapore marketing hub. This new aluminum case is separate to Rio’s long-running $447 million dispute with the ATO over the transfer pricing of Australian iron ore. Rio intents to object to the ATO’s aluminium claim and states that the pricing of iron ore and aluminium has been determined in accordance with the OECD guidelines and Australian and Singapore domestic tax laws ... Continue to full case
Fiat Chrysler reaches a EUR 2.5 billion settlement with the Italien tax authorities

Fiat Chrysler reaches a EUR 2.5 billion settlement with the Italien tax authorities

Fiat Chrysler has reached a settlement with the Italian tax agency over taxable gains related to a transfer of the U.S. Chrysler business from Fiat SpA Italy to Fiat Chrysler Automobiles NV (Netherlands). The Italian tax agency claimed that the value of the U.S. Chrysler business had been underestimated and issued a preliminary assessment with an additional taxable gain of 5.1 billion euros. The agency had valued Chrysler at 12.5 billion euros, while Fiat SpA had declared it to be worth less than 7.5 billion. Under the terms of the latter settlement the additional taxable gain has agreed at 2.5 billion euros ... Continue to full case

Altera asking the US Supreme Court for a judicial review of the 2019 Decision from the U.S. Court of Appeals concerning the validity of IRS regs. on CCAs

Altera has asked the US Supreme Court for a judicial review of the Decision from the U.S. Court of Appeals for the Ninth Circuit over the validity of Internal Revenue Service regulations  that requires related companies to share the cost of stock-based employee compensation when shifting their intangible assets abroad applying US Cost Sharing regulations. In the decision a divided panel in the Court of Appeal upheld the regulation as “permissible” and therefore entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). In the Petition Altera presents three questions: 1. Whether the Treasury Department’s regulation is arbitrary and capricious and thus invalid under the Administrative Procedure Act, 5 U.S.C. 551 et seq. 2. Whether, under SEC v. Chenery Corp., 332 U.S. 194 (1947), the regulation may be upheld on a rationale the agency never advanced during rulemaking ... Continue to full case
2020: ATO Alert on arrangements and schemes connected with DEMPE of intangibles

2020: ATO Alert on arrangements and schemes connected with DEMPE of intangibles

The ATO is currently reviewing international arrangements that mischaracterise Australian activities connected with the development, enhancement, maintenance, protection and exploitation (DEMPE) of intangible assets. Such arrangements may be non-arm’s length or structured to avoid tax obligations, resulting in inappropriate outcomes for Australian tax purposes. One of the issues is whether functions performed, assets used and risks assumed by Australian entities in connection with the DEMPE of intangible assets are properly recognised and remunerated in accordance with the arm’s length requirements of the transfer pricing provisions in the taxation law. These arrangements are particularly in focus where intangible assets and/or associated rights are migrated to international related parties as part of non-arm’s length arrangements and/or in a manner intended to avoid Australian tax. In circumstances where these arrangements lack evidence of commercial rationale and/or substance, the ATO will apply of the exceptions in the transfer pricing provisions ... Continue to full case
New TPG Chapter X on Financial Transactions (and additions to TPG Chapter I) released by OECD

New TPG Chapter X on Financial Transactions (and additions to TPG Chapter I) released by OECD

Today, the OECD has released the report Transfer Pricing Guidance on Financial Transactions. The guidance in the report describes the transfer pricing aspects of financial transactions and includes a number of examples to illustrate the principles discussed in the report. Section B provides guidance on the application of the principles contained in Section D.1 of Chapter I of the OECD Transfer Pricing Guidelines to financial transactions. In particular, Section B.1 of this report elaborates on how the accurate delineation analysis under Chapter I applies to the capital structure of an MNE within an MNE group. It also clarifies that the guidance included in that section does not prevent countries from implementing approaches to address capital structure and interest deductibility under their domestic legislation. Section B.2 outlines the economically relevant characteristics that inform the analysis of the terms and conditions of financial transactions. Sections C, D ... Continue to full case
Google - Taxes and Transfer Pricing

Google – Taxes and Transfer Pricing

Google’s tax affairs are back in the spotlight after filings in the Netherlands have showed that billions of dollars were moved to Bermuda in 2016 using the “double Irish Dutch sandwich”. According to the Washington Post, Google’s cash transfers to Bermuda reached $27b in 2016. Google uses the double Irish Dutch sandwich structure to shield the majority of it’s international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda-mailbox owned by another company registered in Ireland. US According to US filings, Google’s global effective tax rate in 2016 was 19.3%. New US tax law will give companies such as Google an incentive to repatriate much of that cash by offering them a “one-time”, 15.5% tax rate on offshore funds. After that, foreign earnings will be taxed at 10.5%, with ... Continue to full case
Malaysian Energy Group - TENAGA Nasional Bhd - has been issued a RM 4.000.000.000 tax bill by the Revenue Board of Malaysia

Malaysian Energy Group – TENAGA Nasional Bhd – has been issued a RM 4.000.000.000 tax bill by the Revenue Board of Malaysia

Malaysian Energy Group – TENAGA Nasional Bhd – has begun legal proceedings against the Inland Revenue Board of Malaysia. In November 2019, the Inland Revenue Board issued a tax assessment  according to which taxes of RM3.98 bil (or USD 1 billion) is owed for years 2015-2017. After reciving the assessment, TENAGA responded “Based on the legal advice obtained from our tax solicitors, TNB has a good basis to contend that there is no legal and factual basis for IRB to issue the said notices”  “Accordingly, TNB will be appealing against the said notices.” The High Court has now granted an interim stay of all further proceedings including the enforcement of the notices until the hearing of the leave application on April 2, 2020. In a prior case back from 2015 TENAGA received notices for the years of assessment 2013 and 2014 amounting to RM2.07 bil. Back then, ... Continue to full case
Unilateral Measures related to taxation of the Digital Economy

Unilateral Measures related to taxation of the Digital Economy

Imposed and proposed unilateral measures to adress taxation of the Digital Economy CountryMeasurePercentageDecriptionEffective data Czech Republic DST (Law on selected digital services tax)The Czech Ministry of Finance submitted a finalized proposal to the Czech Government on Sept. 5, 2019, which is now pending the Czech Parliament’s approval. Effective date: to be determined, but likely sometime in 2020. January 18 - The Czech government approved a 7% digital tax proposal on Monday aimed at boosting state coffers by taxing advertising by global internet giants like Google and Facebook, the Finance Ministry said. The proposed tax, which still must make it past lawmakers in parliament, covers revenue gained from targeted advertising, providing digital market places, and user data sales.? 2020 FranceDST (Tax on certain services provided by the enterprises of the digital sector)Enacted on July 11, 2019, and entered into force on July 26, 2019. Retroactive from ... Continue to full case
Microsoft - Taxes and Transfer Pricing

Microsoft – Taxes and Transfer Pricing

Microsoft’s tax affairs have been in the spotlight of tax authorities all over the World during the last decade. Why? The setup used by Microsoft involves shifting profits from sales in the US, Europe and Asia to regional operating centers placed in low tax jurisdictions (Bermuda, Luxembourg, Ireland, Singapore and Puerto Rico). The following text has been provided by Microsoft in a US filing concerning effective tax and global allocation of income: “Our effective tax rate for the three months ended September 30, 2017 and 2016 was 18% and 17%, respectively. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto Rico.“ “In fiscal year 2017, our U.S. income before income taxes was $6.8 ... Continue to full case
US response to OECDs Unified Approach

US response to OECDs Unified Approach

Letter from the US treasury to the OECD concerning the proposed Unified Approach on taxation of the Digital Economy, and the reply to the letter from the OECD. treasury-letter-oecd-digital-services-tax Letter-from-OECD-Secretary-General-Angel-Gurria-for-the-attention-of-The-Honorable-Steven-T-Mnuchin-Secretary-of-the-Treasury-United-States ... Continue to full case
Netflix under investigation for alleged tax evasion in Italy

Netflix under investigation for alleged tax evasion in Italy

Public prosecutors in Italy have opened a preliminary probe into the taxation of Netflix on the basis that servers and cables constitute a digital infrastructure that makes revenues taxable under Italian law. Italian media, Corriere della Sera, says that the prosecutors are working with Italy’s fiscal police to determine whether revenues from Netflix’s estimated 1.4 million Italian subscribers are subject to Italian taxation, even though Netflix operates out of the Netherlands. Italian prosecutors have recently also probed into the taxation of other U.S. tech giants such as Apple, Amazon and Facebook and collected a reported €5 billion-plus in back taxes. “Netflix does not pay taxes” the investigation in Milan starts. However, unlike the previous cases, Netflix have no companies, offices or employees in Italy. But still, Netflix earns millions selling streaming services to Italian customers. According to the prosecutor cables, fiber optics, computers, servers and ... Continue to full case
British American Tobacco hit by £902 million tax assessments in the Netherlands

British American Tobacco hit by £902 million tax assessments in the Netherlands

According to the 2018 financial statement, British American Tobacco group has been hit by a £902 million tax assessments in the Netherlands. “The Dutch tax authority has issued a number of assessments on various issues across the years 2003-2016 in relation to various intra-group transactions. The assessments amount to an  aggregate net liability across these periods of £902 million covering tax, interest and penalties. The Group has appealed against the assessments in full. The Group believes that its companies have meritorious defences in law and fact in each of the above matters and intends to pursue each dispute through the judicial system as necessary. The Group does not consider it appropriate to make provision for these amounts nor for any potential further amounts which may be assessed in relation to these matters in subsequent years. While the amounts that may be payable or receivable in relation to tax disputes ... Continue to full case
The L'Oréal group announced additional payment of 320 million euros in corporate tax to the French tax authorities to "settle a dispute"

The L’Oréal group announced additional payment of 320 million euros in corporate tax to the French tax authorities to “settle a dispute”

The French cosmetic group L’Oréal announced in September 2019 that it would pay 320 million euros to the French tax authorities to “settle a dispute” related to the payment of corporate tax for three of its subsidiaries for fiscal years 2014 and 2018. In detail, the charge was 47 million euros for Lancôme Parfums et Beauté, 115 million euros for Active International Cosmetics and 158 million euros for Prestige and Collections International ... Continue to full case
2019: ATO draft on compliance approach to the arm’s length debt test

2019: ATO draft on compliance approach to the arm’s length debt test

The draft Guideline provides guidance to entities in applying the arm’s length debt test in Division 820 of the Income Tax Assessment Act 19972 and should be read in conjunction with draft Taxation Ruling TR 2019/D2 Income tax: thin capitalisation – the arm’s length debt test. This Guideline also provides a risk assessment framework that outlines our compliance approach to an application of the arm’s length debt test in certain circumstances that are identified as low risk. The arm’s length debt test is one of the tests available to establish an entity’s maximum allowable debt for thin capitalisation purposes. The test focuses on identifying an amount of debt a notional stand-alone Australian business would reasonably be expected to borrow, and what independent commercial lenders would reasonably be expected to lend on arm’s length terms and conditions. An entity’s debt deductions are reduced to the extent ... Continue to full case
France, Public Statement related to deduction of interest payments to a Belgian group company, BOI-RES-000041-20190904

France, Public Statement related to deduction of interest payments to a Belgian group company, BOI-RES-000041-20190904

In a public statement the French General Directorate of Public Finance clarified that tax treatment of interest deductions taken by a French company on interest payments to a related Belgian company that benefits from the Belgian notional interest rate scheme. According to French Law, interest paid to foreign group companies is only deductible if a minimum rate of tax applies to the relevant income abroad. Click here for translation BOI-RES-000041-20190904 ... Continue to full case
Telenor will have to pay additional taxes of 2.5 billion Norwegian crowns

Telenor will have to pay additional taxes of 2.5 billion Norwegian crowns

Telenor Norway has received a tax assessment according to which the company will have to pay additional taxes in Norway of 2.5 billion Norwegian crowns for tax year 2013. A deduction expenced in 2013 for a loss suffered in 2012 due to settlement of bank guarantees given in respect of external funding in its Indian subsidiary Unitech Wireless has been disallowed for tax purposes by the Norwegian Tax Authorities Telenor decided to enter the market in India in 2008. In 2012, the Supreme Court of India revoked the licenses of the Telenor mobile company and seven other mobile companies. In the fall of 2012, Telenor paid around NOK 4.2 billion to buy back licenses in six of 22 telecommunications regions. Following a dispute with Telenor’s Indian partnership – Unitech – the parties agreed to transfer all the valuables of their joint unit company Mobile Unitech ... Continue to full case
The Australian Taxation Office and Mining Giant BHP have settled yet another Transfer Pricing Dispute

The Australian Taxation Office and Mining Giant BHP have settled yet another Transfer Pricing Dispute

BHP Group has agreed to pay the state of Western Australia A$250 million to end a dispute over royalties paid on iron ore shipments sold through its Singapore marketing hub. The State government found in January that the world’s biggest miner had underpaid royalties on iron ore shipments sold via Singapore stretching back over more than a decade. BHP reached a deal to pay A$529 million in additional taxes to the Australian government late last year to settle a long-running tax dispute over the miner’s Singapore hub on its income from 2003-2018 ... Continue to full case
Poland issues Tax Explanations on Transfer Pricing - No. 1: Comparability Analyses and Transfer Pricing Documentation

Poland issues Tax Explanations on Transfer Pricing – No. 1: Comparability Analyses and Transfer Pricing Documentation

18 June 2019 the Polish Minister of Finance issued the first explanations on transfer pricing concerning – technical aspects of preparing comparability analyses and transfer pricing documentation. With regard to the technical aspects of preparing comparability analyses, the explanations cover such detailed issues as: data comparability vs. locality feasibility of using internal data feasibility of using bid data the appropriateness of using comparables that are not publicly available (so-called secret comparables) reasonableness of discarding from the comparables sample entities with extreme results (including those with loss) minimum sample size for benchmark data analysis selection of an interval point updating the benchmark data analysis. The second key issue addressed by the explanatory notes is the preparation of descriptions of the consistency of the terms of transactions and other events agreed with related parties with the terms that would be agreed among independent parties. Click here for ... Continue to full case
June 2019: IRS Transfer Pricing Examination Process - Risk Assessment

June 2019: IRS Transfer Pricing Examination Process – Risk Assessment

The report on Transfer Pricing Examination Process (TPEP) provides a framework and guide for transfer pricing examinations. The guide will be updated regularly by the IRS based on feedback from examiners, taxpayers, practitioners and others. P5300 ... Continue to full case
Czech Republic Issues new 2019 Local Transfer Pricing Instructions GFR D-34

Czech Republic Issues new 2019 Local Transfer Pricing Instructions GFR D-34

May 2019 the Czech Republic issued new local transfer pricing instructions D-34. These new instruction replaces the 2011 Instruction D-334.  Simultaneously with the new instruction, the Czech translation of the OECD Guidelines on Transfer Pricing for Multinational Enterprises and Tax Administrations, as amended in the 2017 version, was also published in the Financial Bulletin of the Ministry of Finance No. 5/2019. Click here for unofficial English Translation Click here for translation Financni-zpravodaj_2019-c-05 ... Continue to full case