The TP Range - February 2019
The TP Range - February 2019
A Note from BDO’s Transfer Pricing Practice
The TP Range covers important changes around the world in today’s transfer pricing climate. The name TP Range is a nod to the U.S. and OECD transfer pricing guidelines, which call for a taxpayer's transfer prices to fall within an arm's-length range of results for most method applications.
Last month, digital taxation remained top-of-mind as the OECD unveiled four proposals on the table to address challenges arising from the digitalization of the economy; Belgium became the latest European country to introduce digital tax proposals to its government; and the European Commission confirmed plans to propose a temporary digital transaction tax. Meanwhile India introduced amendments to its country-by-country regulations, and the UK has unveiled a new program to assist in DPT corrections. We also cover safe harbor rules in Poland for related party debt, effective January 1.
Sincerely,
BDO USA’s Transfer Pricing Team
OECD/Global News
During the webcast, it was confirmed that aggregated CbCR statistics will be made available with the second edition of Corporate Tax Statistics in early 2020, though some information from the report may be available as early as June 2019 when the G20 report is issued.
You can watch the January 29 OECD Tax Talk here, or read the OECD’s announcement here.
Though the commission concedes certain progress made under the BEPS program, it calls for changes that fundamentally re-think the global taxation system. The ICRICT wants governments, the UN Tax Committee, and multilateral institutions to consider alternatives to transfer pricing, such as unitary taxation for multinationals with an effective minimum tax rate between 20 and 25 percent.
You can read the ICRICT report here.
Though the commission concedes certain progress made under the BEPS program, it calls for changes that fundamentally re-think the global taxation system. The ICRICT wants governments, the UN Tax Committee, and multilateral institutions to consider alternatives to transfer pricing, such as unitary taxation for multinationals with an effective minimum tax rate between 20 and 25 percent.
Country-by-Country News
Under the amended regulations, Indian multinationals will be required to furnish CbCR requirements within 12 months from the end of the reporting fiscal year. Constituent entities that reside in India but have non-resident parents are required to file a CbCR in cases where the non-resident parent is not required to file a CbCR in its jurisdiction of residence, although timing to furnish the CbCR in these cases has not yet been specified. Indian multinationals that consitute an Alternative Reporting Entity and have a non-resident parent entity may furnish the CbCR by the due date specified by the parent entity’s jurisdiction of residence.
The guidelines also amend the definition of an agreement, and define a reporting year as the accounting year in which the financial and operational results are required to be reflected in the report. The amended regulations are set to take effect retroactively from April 1, 2017, and will apply going forward from the assessment year 2017-2018.
You can read more about the guidelines here.
The second draft bill would extend the definition of a domestic permanent establishment under Belgian law to a “significant digital presence.” Significance, as defined by the bill, applies to cases in which a company’s digital services revenue exceeds EUR 7 million, in which the users of a company’s digital services exceed 100,000, or in which there are more than 3,000 business contracts for a company’s digital services, all within a given tax jurisdiction. In both cases, the IP address of the user’s device and its use in Belgium will be used to establish nexus with Belgium.
With the current political climate and the upcoming federal elections in May, it is unlikely that these proposals will be approved in the near-term.
This summary was provided by Olivier Michiels, Senior Manager, BDO Belgium
You can read more about the European Commission’s plans here and here.
Another safe habor rate is applicable to low-value intragroup services transactions, assuming that the following conditions are met: (i) the markup has been applied on the basis of a cost plus method and is not more or less than 5 percent of costs in the case of receipt or provision of services, respectively, (ii) the service provider is not located in a tax haven, and (iii) the service recipient owns the calculation presenting the type and level of costs included in calculating the value of the transaction, as well as the methodology and justification related to the applied allocation keys. Along with the safe harbor rate, Poland’s Ministry of Finance introduced other transfer pricing rules related to country-by-country reporting, selection of a transfer pricing method, and the use of discounted cashflow models for valuation of intangibles, also effective January 1.
This summary was provided by Rafal Kowalski, Partner and Magdalena Moczarska, Senior Consultant, BDO Poland
You can read more about the policy, its requirements, deadlines, and other such information here.
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