Transfer pricing perspectives: Winds of Change - PwC

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Despite the increasing popularity in somecountries in the region, there are stillcountries in APAC which do not provideformal APA guidelines or have as muchexperience in APA negotiations such asIndia and Indonesia. In these territories, arobust strategy to building the case beforethe tax authorities is imperative. India andIndonesia for example, are well-known tobe aggressive on the audit front for transferpricing matters. To the extent available,the APA mechanism would thereforeprovide an important avenue to taxpayersto manage their transfer pricing risks inthese territories.However, the formal APA regime in Indiais still being designed. The proposed draftDirect Tax Code which will replace theexisting Income Tax Act (and is proposedto be effective from April, 2012), includesprovisions for taxpayers to apply for anAPA. The tax advisory community ofwhich PwC has been at the forefrontof discussions has been pushing thegovernment to incorporate global bestpractices in drafting the APA rules. Whilethe currently proposed draft legislation issilent on the matter, senior governmentofficials have expressed a view that Indiamay include a bilateral APA mechanismwhich would be welcomed by tax directorsof MNCs operating in the region.On the other hand, the IndonesiaDirectorate General of Taxes (DGT)released APA regulations in Indonesia on 31December 2010, providing some guidanceto taxpayers on the application of andprocess for APAs in Indonesia. Based oninteractions with the Indonesia Taxationoffice (ITO) to date, it is clear that the ITOis keen to implement the APA mechanismand anticipates success from the process.Based on this, it can be expected thatgiven the increase in local transfer pricingdisputes involving increasingly complexissues in the region, many MNCs will beconsidering adopting a proactive approachto managing their transfer pricing risk.In this increasingly complex environmentwith an intensified transfer pricingcompliance focus by tax authorities, MNCsare wise to consider a strategic approachto managing their risks. As a key plankto these strategies, tax directors shouldconsider using APAs as a way to seekcertainty and reduce the risk of doubletaxation in the region.Despite the increasing popularity in some countriesin the region, there are still countries in APAC whichdo not provide formal APA guidelines or have asmuch experience in APA negotiations such as Indiaand Indonesia62 Transfer Pricing Perspectives. October 2011
AuthorsSpencer ChongPartner, PwC China+86 21 2323 2580spencer.chong@cn.pwc.comNicole FungPartner, PwC Singapore+65 6236 3618nicole.fung@sg.pwc.comRahul MitraPartner, PwC India+91 124 3306501rahul.k.mitra@in.pwc.comMichael PolashekPartner, PwC Japan+81 03 5251 2517michael.polashek@jp.pwc.comJeremy Capes-BaldwinDirector, PwC Australia+61 2 8266 0047jeremy.capes-baldwin@au.pwc.comFalgun ThakkarSenior Manager, PwC Singapore+65 6236 7254falgun.d.thakkar@sg.pwc.comAy-Tjhing PhanPartner, PwC Indonesia+62 21 5212901ay.tjhing.phan@id.pwc.com
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2 Transfer Pricing Perspectives. Oc
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Russia adopts new transfer pricing
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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 and 60: As can be observed from the diagram
Page 61: As more transactions involve Singap
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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