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 ... Read more

The Australian Taxation Office has agreed on a settlement with BHP Mining Group to resolve a transfer pricing dispute relating to transfer pricing treatment of commodities sold to a Singapore marketing hub. BHP had originally been assessed with over AUD 1 billion in additional taxes. According to the settlement BHP will pay additional tax of AUD 529 million to resolve the dispute, covering the years 2003–18. According to the settlement BHP Group will also increase its ownership of BHP Billiton Marketing AG, the company conducting BHP’s Singapore marketing business, from 58 percent to 100 percent. The change in ownership will result in all profits made in Singapore in relation to the Australian assets owned by BHP Group being fully subject to Australian tax. BHP’s Singapore marketing arrangements will continue to be located in Singapore and will also be within the ‘low risk’ segment for offshore marketing hubs ... Read more

The Australian Taxation Office has issued new guidance for multinational groups using offshore marketing- and procurment hubs for tax avoidance purposes. The guidance adresses tax schemes where MNEs uses offshore hubs to shift profits and thereby avoid Australian taxes. Offshore hub arrangements are catagorised by the ATO as white, green, blue, yellow, amber, or red – based on the risk assesment for tax purposes of the transfer pricing setup. The new guidance is a result of recent Australian investigations and hearings into tax avoidance schemes used by Multinational Groups. Tax avoidance in Australia Australian Senate Hearings into Tax Avoidance The overall framework for Australian risk assessment for tax purposes of MNE’s offshore marketing- and procurement hubs is shown below: ... Read more

Most Sub Saharan African jurisdictions see the area of mineral transfers/sales as the main transfer pricing risk, but only few have systems in place to check if prices applied to minerals transferred to related parties comply with the arm’s length principle. Studies highlights a strong need for capacity strengthening in the area of transfer pricing throughout the African continent and for enhancing the knowledge of mining industry within tax authorities. South Africa has, for many years, been the leader in transfer pricing audits among the African countries. But emerging countries such as Nigeria, Ghana, Kenya, Tanzania, Mozambique, are now making a concerted effort to develop transfer pricing capability. In Tanzania, for example, the Acasia Mining Plc. was recently  issued a USD 190 billion tax bill. The assessment demonstrates a strong political will in Africa to address transfer pricing non-compliance. A paper commissioned by the World Bank highlights transfer pricing issues within the African Mining industry. Not surprisingly, it seems that most of the transfer pricing problems relates ... Read more

A transfer pricing dispute between South African Revenue Service and Sishen Iron Ore, a subsidiary of Kumba Iron Ore, has now been resolved in a settlement of ZAR 2.5bn. The case concerned disallowance of sales commissions paid to offshore sales and marketing subsidiaries in Amsterdam, Luxembourg and Hong Kong. Since 2012, Kumba Iron Ore’s international marketing has been integrated with the larger Anglo American group’s Singapore-based marketing hub. The settlement follows a similar investigations into the transfer pricing activities of Evraz Highveld Steel, which resulted in a R685 million tax claim against the now-bankrupt company related to apparent tax evasion using an Austrian shell company between 2007 and 2009 ... Read more

The Handbook on Effective Tax Risk Assessment explores how information contained in CbC reports can be used for risk assessment and which types of tax risk indicators that may be identified using the information contained in CbC Reports. In chapter 4 some of the main tax risk indicators that may be identified using CbC Reports are described: The footprint of a group in a particular jurisdiction A group’s activities in a jurisdiction are limited to those that pose less risk There is a high value or high proportion of related party revenues in a particular jurisdiction The results in a jurisdiction deviate from potential comparable The results in a jurisdiction do not reflect market trends There are jurisdictions with significant profits but little substantial activity There are jurisdictions with significant profits but low levels of tax accrued There are jurisdictions with significant activities but low levels of profit (or losses) A group has activities in jurisdictions which pose a BEPS ... Read more

Canadian mining company, Cameco Corp, has settled a tax dispute and will pay the IRS $122,000 for income years 2009-2012. Cameco’s dispute with tax authorities relates to its offshore marketing structure and transfer pricing. Cameco sells uranium to its marketing subsidiary in Switzerland, which re-sells it to buyers, incurring less tax than the company would through its Canadian office. Cameco says it has a marketing subsidiary in Switzerland because most customers are located outside Canada ... Read more

The taxpayer is registered and incorporated in the Republic of South Africa and carries on business in the petrochemical industry. It has some of its subsidiaries in foreign jurisdictions. Business activities include the importation and refinement of crude oil. This matter concerns the analysis of supply agreements entered into between the XYZ Corp and some of its foreign subsidiaries. It thus brings to fore, inter alia the application of the South African developing fiscal legal principles, namely, residence based taxation, section 9D of the Income Tax Act 58 of 1962 and other established principles of tax law, such as anti-tax avoidance provisions and substance over form. Tax avoidance is the use of legal methods to modify taxpayer’s financial situation to reduce the amount of tax that is payable SARS’s ground of assessment is that the XYZ Group structure constituted a transaction, operation or scheme as contemplated in section 103(1) of the Act. The structure had the effect of avoiding liability ... Read more

Singapore marketing hubs are being used by large multinational companies — and billions of dollars in related-party transactions that are being funnelled through the hubs each year. The Australian Tax Office has issued claims of substantial unpaid taxes to mining giants Rio Tinto and BHP Billiton. BHP Billiton and Rio Tinto have revealed through the Senate inquiry they have been issued amended assessments for tax, interest and penalties of $522 million and $107 million respectively. These claims will be challenged in court. The cases centres on the use of commodity trading/marketing hubs established in Singapore colloquially known as the Singapore Sling. The Australian taxation commissioner alleges Rio Tinto and BHP Billiton is using subsidiaries in Singapore to reduce the taxes in Australia. It has been revealed that from 2006 to 2014, BHP Billiton sold $US210 billion worth of resources to its Singapore subsidiary. That was then on-sold to customers for $US235 billion — a $US25 billion mark-up over eight years ... Read more

The Practical Compliance Guideline (Guideline) sets out the Australian Taxation Office’s (ATO’s) compliance approach to transfer pricing issues related to the location and relocation of certain business activities and operating risks into a centralised operating model. The type of activities commonly centralised include marketing, sales and distribution functions although centralised operating models are not necessarily limited to these functions. For the purposes of this Guideline, these centralised operating models are referred to as ‘hubs’. The ATO understands that the overall structure of hubs, the transactions that flow in and out and the diversity and sophistication of a hub’s dealings contribute to increased complexity and higher costs for tax compliance. The Guideline is designed to help manage the compliance risk and therefore the compliance costs associated with your hub. The framework set out in the Guideline can be used to: (a) assess the compliance risk of the transfer pricing outcomes of hubs in accordance with the ATO’s risk framework (b) understand ... Read more

The intercompany transactions at issue involved fees paid to the company’s wholly-owned Barbados based subsidiary during taxation years 2000 and 2001 for sales, marketing and support services. The Tax Court of Canada had determined that it was appropriate to apply the CUP method rather than the TNMM, which was advocated by the company’s expert. Canada’s Federal Court of Appeal upheld the decision by the Tax Court of Canada, which in 2014 ruled that the Canada Revenue Agency had largely been correct in reassessing the taxable income of Marzen Artistic Aluminum Ltd. Canada vs Marzen-v-the-Queen ... Read more