November 2010 - Association of Dutch Businessmen

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know your tax What is it about transfer pricing? Text Barend van Drooge and Gene Kwee of VoskampLawyers One of the main principles of international tax planning for corporations is to relocate profits to low tax jurisdictions and move costs to high tax jurisdictions. Effective structuring based on a sound economic/business model is one thing; however practices as in the below example will be considered abuses of the system. Such practices, in different gradations, have therefore been met with scrutiny from tax authorities worldwide. Recently many Asian tax authorities are increasing their focus on these issues through the concept of transfer pricing. As an example, a manufacturing company of luxury sports cars in Italy sells cars upon having manufactured these to a related Singapore based company, responsible for the worldwide sale of these cars, at an economic value of S$100,000 each. The cars are sold by the Singapore company for S$500,000 each to its customers worldwide. In this regards please note that the corporate tax rate in Singapore is substantially lower than Italy’s (17% opposed to Italy’s basic tax rate of 27.5%). To fully optimize the difference in tax rate, the Italian company may opt to reduce the selling price of the car to a symbolic amount of S$100 to the company in Singapore – so almost all the profits will accrue in a low tax jurisdiction whereas the costs will predominantly remain in the high(er) tax jurisdiction. What is transfer pricing? The objective of transfer pricing is to curb attempts of such relocations of profits/costs by applying the main rule that there should be some sort of an economic basis for related party transactions. Simply put: the pricing of a transaction between two ‘related parties’ should be done at a “market price”, i.e. the price that would have been applied if the transaction was done between independent parties. This price is referred to as the valuation “at arm’s length”. The Organisation for Economic Co-operation and Development (OECD) has, as the international economic forum, issued transfer pricing guidelines for corporations and tax authorities to evaluate if related party transactions were indeed conducted “at arm’s length”. The emphasis lies on the application of the correct method(s) to price the transaction and the required documentation thereof. Most tax authorities worldwide accept the use of the OECD transfer pricing guidelines, albeit under their own interpretations and conditions. What impact has transfer pricing? The relevance for corporations of understanding and applying transfer pricing regulations lies in the risk that tax authorities can challenge the valuation of an (international) transaction. Such a challenge may lead to adjustments, i.e. more income to be taxed in the high tax jurisdiction and may even lead to double taxation in respect of income arising from the disputed transaction. It is therefore imperative to ensure that the transfer pricing valuation and the underlying documentation to support any basis for the pricing is in order. Conclusion Due to the various reasons, such as globalisation and the rise of the Asian economies, the number of cross border transactions has multiplied over the years. Consequently, and especially in jurisdictions where tax authorities may not have had the awareness of such practices in the past, the trend is that Asian tax authorities are looking into the area of transfer pricing in more detail these days. As such, in cross border transactions it is of importance that one considers the implications the specific implications and may even more so consider the transfer pricing regulations and practices in each of the relevant jurisdictions. Please consult your trusted advisor, should you want to know more whether or how the transfer pricing policies may be relevant for you. 18
Not to miss RIVERDANCE 30 November - 12 December Marking the grand opening of Singapore’s gleaming new Sands Theater at the Marina Bay Sands, the original international phenomenon RIVERDANCE returns to Singapore from 30 November to 12 December 2010 for 16 performances only. A thunderous celebration of Irish music, song and dance, RIVERDANCE has tapped its way onto the world stage since its inception in 1994, has thrilled more than 22 million people in over 300 venues worldwide throughout 32 countries across 4 continents, and has grossed over US$1.6 billion worldwide. More Information www.sistic.com.sg Crazy Christmas 2010 2-19 December Dream Academy’s Crazy Christmas returns, with more cheeky renditions of popular tunes and hilarious stand-up comedy packed with local flavour. It’s all things Christmas and more! Join Selena Tan, Pam Oei, Hossan Leong*, Sebastian Tan and others together with vocal ensemble Vocaluptuous – as they unwrap their wildest Christmas fantasies for your entertainment. Fans of Drag Queen Diva, Kumar, are also in for an early Christmas treat! Kumar will make a special appearance in 4 ‘Adults Only, No-Holds-Barred’ shows (2-4 Dec). Let the Queen render you ecstatic with her raunchy tongue-lashing and probing mistletoe! More Information www.sistic.com.sg ZoukOut 2010 - A Dance Music Festival 11 December 10 YEARS ON… CELEBRATING 10 YEARS OF GREAT MUSIC, LOVE & UNFORGETTABLE MEMORIES Come this December, the annual extravaganza promises to be bigger, badder and better, so, rub those hands with glee and say “Hello!” to the region’s most important outdoor dance music festival, ZoukOut 2010! Celebrating its 10 th anniversary, ZoukOut 2010 takes centerstage on Saturday, 11 th December at Siloso Beach, Sentosa Island from 8pm-8am and will mark a trailblazing jaunt of 10 pivotal years in music, dance and art in the great sandy outdoors. More Information www.sistic.com.sg Pedals & Pipes Christmas Rhapsody 17 December Follow one of the organ world’s newest and brightest stars as we head towards Christmas in this joyful celebration of seasonal music. Korean-born Ahreum Han is rapidly creating quite a sensation with what has been described as her “focus, fire, intensity and fun”. There should be quite a bit of dazzle in her varied all- German program, ranging from Bach and Reger. Add to that the joy and magic of Christmas presented by the Singapore Lyric Opera Chorus, and a handful of the most popular Christmas Carols for all to sing, and your Christmas will have got off to a truly glittering start. More Information www.sistic.com.sg 19
Page 1: Association of Dutch Businessmen in
Page 4 and 5: Contents Vol. 20 / No. 9 / Nov 2010
Page 6 and 7: Events shuttle and an overnight tra
Page 8 and 9: Business Innovative addition to Sin
Page 10 and 11: Business Doctrine of Ants and Ostri
Page 12 and 13: ASSOCIATION News Extraordinary Gene
Page 14 and 15: Extra MANDARIN FOR EXPATS IN SINGAP
Page 16 and 17: Interview Interview with Abel Dutil
Page 18 and 19: Bizz News Dutch Caribbean islands g
Page 22: Lifestyle Angkor Wat Half Marathon
Page 25 and 26: Embassy and ADb News Public Holiday
Page 27 and 28: ADB Christmas Dinner and Dance Plea

November 2010 - Association of Dutch Businessmen

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