Worldwide transfer pricing reference guide 2014

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Australia (continued) Relevant regulations and rulings (continued) Taxation Rulings (TR) • TR92/11: Loans • TR94/14: Application of Division 13 • TR97/20: Methodologies • TR98/11: Documentation • TR98/16: Penalties • TR 1999/1: Services • TR2000/16: Relief from Double Taxation • TR2001/11: Permanent Establishments • TR2001/13: Interpretation of Australia’s Double Tax Agreements • TR2002/2: Meaning of Arm’s length for the purposes of §47A(7) Dividend Deeming Provisions • TR2002/5: Definition of Permanent Establishment • TR2003/1: Arm’s length Debt Test • TR 2004/1: Cost Contribution Arrangements • TR2005/11: Branch Funding for Multinational Banks • TR2007/1: Consequential Adjustments • TR2010/7: Interaction of Transfer Pricing and Thin Capitalisation Provisions • TR2011/1: Transfer Pricing Implications of Business Restructures In relation to years starting on or after 1 July 2013, updated guidance is expected to be provided over time. Currently, the first rulings, which will relate to documentation and reconstruction of transactions, are scheduled to be issued in draft in March/April 2014. A further Tax Determination on penalties is expected to follow; however, no date has been set yet for its release or for the release of rulings on any other topics. While it is expected that a substantial part of the historical guidance will be incorporated in the new guidance, taxpayers should take care when relying on the rulings listed above and other guidance listed below for years starting on or after 1 July 2013 as the operation of the legislation has changed and changes in the ATO’s interpretation are likely to occur. Please contact your EY transfer pricing contact to discuss the latest state of play. Tax Determinations (TD) • TD2002/20: Film Production Companies and the Impact of the Tax Offset Scheme • TD2002/28: Foreign Bank Election to not Apply Part IIIB of the Income Tax Assessment Act (1936) • TD2007/1: Market Value of Goodwill of an Entity that becomes a Member of a Consolidated Group Draft Tax Determinations (TD) • TD2014/D7: Market support payments ATO Booklets: • Concepts and Risk Assessment • Marketing Intangibles, Business Restructuring — Discussion Paper • Applying the Arm’s length Principle on application of Australia’s transfer pricing rules • Advance Pricing Arrangements, Documentation and Risk • ATO Discussion Paper on Intra-group finance guarantees and Assessment for Small to Medium Businesses loans — Application of Australia’s transfer pricing and thin capitalization rules • Dependent Agent Permanent Establishments ATO Practice Statements (PS LA): PS LA 2011/1: ATO’s APA Program OECD Guidelines treatment A recent court case, Commissioner of Taxation versus SNF (Australia) Pty Limited [2011] FCAFC 74, decided under Division 13 rejected the OECD Guidelines as relevant when interpreting Division 13 and rejected the use of the TNMM by the Commissioner. In response to this case, Treasury drafted new transfer pricing provisions (Subdivisions 815–A and 815–B, C and D). These provisions refer directly to the OECD Guidelines as relevant guidance for the interpretation of the provisions and as such all methods described in the Guidelines can be used if they are the most appropriate. Worldwide transfer pricing reference guide 24
Australia (continued) Priorities/pricing methods The ATO seeks to adopt the “most appropriate” transfer pricing method. Methods outlined in ATO rulings include traditional transaction methods (CUP, Resale Price and Cost Plus) and traditional profit based methods (Profit Split and TNMM). Assessment and adjustment of transfer prices Under Division 13 and 815–A, the Commissioner is the only person able to make an assessment of the arm’s length consideration of the taxpayer’s transactions. In addition, the Commissioner can only substitute an arm’s length amount of consideration where a taxpayer has received less than an arm’s length amount, or has paid more than an arm’s length amount. Subdivision 815–B, C and D operate on a self-assessment basis. They require public officers to assess whether the taxpayer received a transfer pricing benefit. Broadly, a transfer pricing benefit is received when an entity’s taxable income or withholding tax payable is less than it would have been had the arm’s length conditions operated. A transfer pricing benefit also arises where the entity’s tax loss is greater than it would have been had the arm’s length conditions operated. Where a taxpayer receives a transfer pricing benefit, the arm’s length conditions should be substituted to determine its Australian taxable income. Following the self-assessment, the Commissioner through the ATO, has the ability to raise adjustments where he is of the view that the self-assessed position still contains a transfer pricing benefit. Reconstruction of transactions Subdivision 815–B adopts a substance over form approach towards transactions. It requires the taxpayer to follow the economic substance of a related party arrangement where the economic substance does not match the legal form. In addition, it requires the taxpayer to perform a commerciality test. Under this test, taxpayers must replace the actual commercial or financial relations if independent parties would not have entered into the actual arrangement but instead entered into a different arrangement or would not have entered into an arrangement altogether. Notably, the reconstruction provisions go further than those within the OECD Guidelines (para 1.64–1.66) which only apply if the uncommercial transaction also practically impedes the tax authority from determining the appropriate transfer price. This second leg is not included in Subdivision 815–B and the expectation is that the ATO will interpret the reconstruction provision broadly and could, for instance, seek a reconstruction of the arrangement where the use of a CUP would result in losses. The ATO has also expressed the view that it can change individual elements of the actual arrangement outside the reconstruction provisions in order to improve comparability. For example, the ATO may seek to disregard certain terms of a transaction if these are not observed between independent parties. The ATO considers that this approach is a ‘repricing’ of a transaction rather than a reconstruction. We disagree with this interpretation and would regard any change in the actual transaction a reconstruction. It remains to be seen which view would prevail in a legal challenge. Transfer pricing penalties There are three types of penalties that could potentially apply in the event of an adjustment to transfer prices by the ATO. The first is a penalty for a scheme shortfall. The second is a penalty for the failure to take reasonable care. The third is a penalty for a false and misleading statement made by the taxpayer. Each of these is explained in more detail below. All penalties can apply to the same transaction. Further guidance on the application of penalties under the new legislation is expected to be released by means of a tax determination. Penalties for scheme shortfalls Where the Commissioner has determined that a taxpayer has received a scheme benefit, which includes all transfer pricing adjustments, a penalty can be applied. The level of penalty will vary depending on whether the taxpayer can establish a Reasonably Arguable Position” (RAP). Under Division 13 or Subdivision 815–A, the taxpayer may have a RAP “if it would be concluded in the circumstances, having regard to relevant authorities, that what is argued for is about as likely to be correct as incorrect or is more likely to be correct than incorrect.” As such, the mere existence of transfer pricing documentation does not guarantee that the taxpayer will be able to establish a RAP. The same criteria apply in the context of Subdivision 815–B. However, in addition, transfer pricing documentation needs to be in existence at the time of lodging the tax return and this documentation must meet the prescribed requirements in order to have a RAP. Worldwide transfer pricing reference guide 25
Page 1 and 2: Worldwide Transfer Pricing Referenc
Page 3 and 4: Worldwide transfer pricing referenc
Page 5 and 6: Nigeria 215 Norway 217 Oman 220 Pak
Page 7 and 8: The content is current as of 28 Feb
Page 9 and 10: CUP (comparable uncontrolled price)
Page 11 and 12: Albania (continued) Priorities/pric
Page 13 and 14: Algeria Taxing authority and tax la
Page 15 and 16: Algeria (continued) Return disclosu
Page 17 and 18: Angola (continued) Transfer pricing
Page 19 and 20: Argentina Taxing authority and tax
Page 21 and 22: Argentina (continued) Transfer pric
Page 23: Australia Taxing authority and tax
Page 27 and 28: Australia (continued) Documentation
Page 29 and 30: Australia (continued) Frequency of
Page 31 and 32: Austria (continued) Documentation r
Page 33 and 34: Bahrain Taxing authority and tax la
Page 35 and 36: Bangladesh (continued) Penalty reli
Page 37 and 38: Belgium Taxing authority and tax la
Page 39 and 40: Belgium (continued) Statute of limi
Page 41 and 42: Bolivia Taxing authority and tax la
Page 43 and 44: Botswana Taxing authority and tax l
Page 45 and 46: Brazil (continued) Relevant regulat
Page 47 and 48: Brazil (continued) Priorities/prici
Page 49 and 50: Brunei Taxing authority and tax law
Page 51 and 52: Bulgaria (continued) Transfer prici
Page 53 and 54: Bulgaria (continued) Return disclos
Page 55 and 56: Cameroon Taxing authority and tax l
Page 57 and 58: Canada Taxing authority and tax law
Page 59 and 60: Canada (continued) Documentation re
Page 61 and 62: Chile Taxing authority and tax law
Page 63 and 64: Chile (continued) Return disclosure
Page 65 and 66: China (continued) Documentation req
Page 67 and 68: Colombia Taxing authority and tax l
Page 69 and 70: Colombia (continued) Penalty relief
Page 71 and 72: Republic of Congo Taxing authority
Page 73 and 74: Costa Rica Taxing authority and tax
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Croatia Taxing authority and tax la
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Croatia (continued) Frequency of ta
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Czech Republic Taxing authority and
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Denmark Taxing authority and tax la
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Denmark (continued) Documentation d
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Dominican Republic Taxing authority
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Dominican Republic (continued) Expe
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Ecuador (continued) Priorities/pric
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Ecuador (continued) Return disclosu
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Egypt Taxing authority and tax law
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Egypt (continued) Frequency of tax
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El Salvador (continued) Transfer pr
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Estonia Taxing authority and tax la
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Fiji Taxing authority and tax law T
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Fiji (continued) Frequency of tax a
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Finland (continued) Documentation r
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France (continued) Transfer pricing
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France (continued) Documentation re
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France (continued) Expected reactio
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Gabon (continued) Transfer pricing-
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Georgia (continued) Documentation r
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Germany Taxing authority and tax la
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Germany (continued) For late filing
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Ghana Taxing authority and tax law
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Ghana (continued) APA opportunity T
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Greece (continued) Transfer pricing
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Guatemala Taxing authority and tax
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Honduras Taxing authority and tax l
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Hong Kong (SAR) Taxing authority an
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Hong Kong (SAR) (continued) APA opp
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Hungary (continued) Priorities/pric
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Hungary (continued) Documentation r
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Iceland Taxing authority and tax la
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India Taxing authority and tax law
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India (continued) Documentation req
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Indonesia Taxing authority and tax
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Indonesia (continued) Frequency of
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Ireland Taxing authority and tax la
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Ireland (continued) Frequency of ta
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Israel (continued) Priorities/prici
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Italy Taxing authority and tax law
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Italy (continued) Transfer pricing
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Italy (continued) Frequency of tax
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Japan (continued) Transfer pricing
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Japan (continued) APA opportunity U
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Kazakhstan Taxing authority and tax
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Kazakhstan (continued) Frequency of
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Kenya (continued) Documentation req
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Kosovo (continued) Documentation re
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Kuwait (continued) Documentation re
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Latvia Taxing authority and tax law
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Lebanon Taxing authority and tax la
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Lithuania Taxing authority and tax
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Luxembourg Taxing authority and tax
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Former Yugoslav Republic of Macedon
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Malaysia Taxing authority and tax l
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Malaysia (continued) Frequency of t
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Maldives (continued) Statute of lim
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Malta (continued) Return disclosure
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Mauritius (continued) APA opportuni
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Mexico (continued) Transfer pricing
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Mexico (continued) Return disclosur
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Montenegro (continued) Frequency of
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Morocco (continued) Transfer pricin
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Myanmar Taxing authority and tax la
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Namibia Taxing authority and tax la
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Netherlands Taxing authority and ta
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Netherlands (continued) Statute of
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New Zealand Taxing authority and ta
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New Zealand (continued) Frequency o
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Nigeria Taxing authority and tax la
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Norway Taxing authority and tax law
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Norway (continued) Frequency of tax
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Oman (continued) Frequency of tax a
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Panama Taxing authority and tax law
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Panama (continued) Expected reactio
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Papua New Guinea (continued) Docume
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Peru Taxing authority and tax law T
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Peru (continued) Frequency of tax a
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Philippines (continued) Transfer pr
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Poland Taxing authority and tax law
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Poland (continued) Transfer pricing
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Poland (continued) Return disclosur
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Poland (continued) APA opportunity
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Portugal (continued) Transfer prici
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Portugal (continued) APA opportunit
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Qatar (continued) OECD guidelines t
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Qatar (continued) Return disclosure
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Romania (continued) Documentation r
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Russian Federation Taxing authority
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Russian Federation (continued) Freq
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Saudi Arabia (continued) Transfer p
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Senegal (continued) Documentation r
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Serbia Taxing authority and tax law
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Singapore Taxing authority and tax
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Singapore (continued) Frequency of
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Slovak Republic (continued) Documen
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Slovenia Taxing authority and tax l
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Slovenia (continued) Transfer prici
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South Africa (continued) Penalty re
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South Korea (Republic of Korea) Tax
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South Korea (Republic of Korea) (co
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Spain (continued) Penalty relief So
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Spain (continued) APA opportunity T
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Sri Lanka (continued) Return disclo
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Sweden (continued) Documentation re
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Switzerland Taxing authority and ta
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Taiwan Taxing authority and tax law
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Taiwan (continued) Return disclosur
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Tanzania Taxing authority and tax l
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Thailand Taxing authority and tax l
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Thailand (continued) Frequency of t
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Turkey (continued) Priorities/prici
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Uganda Taxing authority and tax law
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Ukraine Taxing authority and tax la
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Ukraine (continued) Transfer pricin
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United Kingdom Taxing authority and
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United Kingdom (continued) Transfer
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United States (continued) Transfer
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Uruguay Taxing authority and tax la
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Uruguay (continued) APA opportunity
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Venezuela Taxing authority and tax
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Venezuela (continued) Expected reac
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Vietnam (continued) Relevant regula
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Vietnam (continued) Documentation d
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Zimbabwe Taxing authority and tax l
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Zimbabwe (continued) Relevant regul
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Transfer pricing contacts Area cont
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Jurisdiction contacts • El Salvad
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Jurisdiction contacts • Rep. of C
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EY | Assurance | Tax | Transactions
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Worldwide transfer pricing reference guide 2014

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