Transfer pricing perspectives: Winds of Change - PwC

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As more transactions involve Singapore as alocation for MNC headquarters or trading hubs,Singapore will increasingly be a party to issuesof double taxation that may arise in the region60
As more transactions involve Singapore asa location for MNC headquarters or tradinghubs, Singapore will increasingly be a partyto issues of double taxation that may arisein the region. One strategy to manage thiscould be to use the Mutual AgreementProcedures (MAPs) in the event that the taxauthorities of Singapore’s trading partnersattack such business restructuring. Thismay be a reactive approach to managingdouble taxation which does not provideupfront certainty to MNCs and their taxdirectors. In such cases, APAs could beused as an alternative or complimentarystrategy to apply a proactive approachto seeking certainty and managing thetransfer pricing risks associated withbusiness restructuring. The attractivenessof APAs is also enhanced by the fact thatIRAS has historically shown a willingnessto adhere to the principles outlined in theChapter IX of the OECD Guidelines, onbusiness restructuring.MNCs could take advantage of theopportunity this presents to manage theirtransfer pricing risks and the potential fordouble taxation by opting for bilateral APAswith countries who also have experiencein dealing with bilateral APAs, such asJapan or Australia. In these jurisdictions,the revenue authorities, in principle, bothfollow the guidance outlined in Chapter IXof the OECD Guidelines. MNCs may alsoconsider using the bilateral APA mechanismas an option to resolve related tax issuessuch as exit taxes on conversion of thebusiness models. In adopting this strategy,MNCs should equip themselves with robusttransfer pricing and tax analysis if theyare willing to use the APA mechanism toresolve potential issues.While MNCs can consider applyingfor APAs to deal with a change in thebusiness structure, APAs can also be usedeffectively to gain certainty on existingstructures for future years where businessand transfer pricing models are prone tochallenge by tax authorities. In doing so,there is also a potential to resolve issuesarising in years prior to the APA. Thenew APA programme introduced by theAustralian Taxation Office under PracticeStatement Law Administration ‘PSLA2011/1’ earlier this year for example,indicates that such opportunities may beavailable to taxpayers, where the facts andcircumstances are sufficiently similar, andtherefore methods and outcomes agreedunder an APA may be used to resolveissues arising in years prior to the APA. Infact, the newly released programme hasreignited, with the encouragement of theAustralian Taxation Office, the interest ofAustralian taxpayers in APAs as a potentialsolution to their transfer pricing and relatedtax challenges after a number of years ofreduced confidence in the programme.In spite of this, it is still challenging tonegotiate a bilateral APA successfullywithout proper preparation and carefulmanagement of the discussions with taxauthorities. As is the case for MNCs, taxauthorities also need to commit significantresources to bilateral APA negotiationsand accordingly, a commitment to provideadequate support and cooperation isrequired from the taxpayers.Unfortunately bilateral APAs are notthe answer to all transfer pricingconcerns. Many MNCs who have tried tonegotiate bilateral APAs in China havebeen frustrated by a long pipeline ofAPA applications for consideration bythe Chinese Competent Authority (CA)due to the increased demand for APAsfrom Chinese taxpayers in recent years.The APA programme has long passedthe “infant stage” and all the teethingproblems associated with that, and israpidly growing in popularity. Therefore,the State Administration of Taxation (SAT)has become highly selective in acceptingAPA applications and taxpayers now needa creative and compelling strategy to givetheir case some priority.Similarly, the National Tax Agency (NTA)in Japan also has a large inventory ofbilateral APA cases, and the number ofsubmissions annually continues to increase(partly due to increasing numbers ofAPA renewal applications). In order toaddress this increasing inventory, theNTA has implemented accelerated reviewof APA applications and, additionally, isreaching agreement on bilateral APAswith treaty partners in fewer meetingsthan historically.Transfer Pricing Perspectives. October 201161
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2 Transfer Pricing Perspectives. Oc
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Russia adopts new transfer pricing
Page 9: Starting in 2014, domestic related-
Page 15 and 16: The trend of centralisation in mult
Page 17 and 18: The new frontier - centre-led model
Page 19 and 20: Limited risk entities and true‐up
Page 21 and 22: Is it possible to mount an argument
Page 23 and 24: Value Chain Transformation -beyond
Page 25 and 26: Governments around the globe are fo
Page 27 and 28: ProcessesTransfer pricing managemen
Page 29 and 30: TPi - Data ManagementMost multinati
Page 31 and 32: ConclusionTPi changes the historic
Page 33 and 34: The question of who takes risky dec
Page 35 and 36: Why cost plus might be the wrongpol
Page 37 and 38: It is not easy to deal with risk in
Page 39 and 40: ConclusionIt will not always be the
Page 41 and 42: Perspectives on risk from GermanyIn
Page 43 and 44: Perspectives on risk from IndiaThe
Page 45 and 46: In 2008, we published an article en
Page 47 and 48: The taxpayer will also want to unde
Page 49 and 50: Proactive preparationTransfer prici
Page 51 and 52: Dealing with risk assessmentsMuch o
Page 53 and 54: Once a taxpayer has identified its
Page 55 and 56: ConclusionAlthough it goes without
Page 57 and 58: The Asia Pacific (APAC) region is i
Page 59: As can be observed from the diagram
Page 63 and 64: AuthorsSpencer ChongPartner, PwC Ch
Page 65 and 66: Conceptualising the challengeIntra
Page 67 and 68: During the course of recent transfe
Page 69 and 70: Passive associationIn performing a
Page 71 and 72: ConclusionsTransfer pricing for fin
Page 73 and 74: Let’s talk business realities!Whi
Page 75 and 76: The appropriateness of using a trad
Page 77 and 78: Following the completion of the rev
Page 79 and 80: Finally, another concern raised rel
Page 81 and 82: Transfer Pricing developments in th
Page 83 and 84: Transfer Pricing Perspectives. Octo
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