The Organisation for Economic Co-operation and Development (OECD) and the G20 Countries continue to release and finalize the remaining deliverables of their 15-Point Action Plan addressing the Base Erosion and Profit Shifting (BEPS) project. As discussed in one of our earlier insights on the topic, transfer pricing documentation is being re-examined in an effort to enhance transparency, certainty, and predictability for both tax administrators and taxpayers. Adoption of the new guidance is being evaluated by many taxing authorities worldwide in which multi-national enterprises do business.
The following list highlights some of the countries that have recently issued updates and developments from across the globe concerning transfer pricing documentation and regulations:
Mexico presented its Congress with a tax reform package for review on September 8, 2015. The package envisions the adoption of BEPS action item 13 relating to country by country reporting (CBCR), master file, and local file reporting requirements. The requirements would be introduced on a calendar year basis with the first due on December 31, 2017 for the tax year ending December 31, 2016. Multinationals with local revenue of approximately $38 million USD would be subject to master file and local file requirements while Mexican owned multinationals with group revenue of approximately $714 million USD would be subject to CBCR.
Australia has released draft transfer pricing legislation which would require a country-by-country report in addition to the master file and the local file in part of compliance with Action 13 (Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting). Multinationals headquartered in Australia with group revenues of A$ 1 billion or more will be required to file a country-by-country report in Australia. Multinationals headquartered outside of Australia above the same threshold will be required to prepare Master File and Local File documentation.
Spain has released new transfer pricing guidance which now requires a country-by-country report in addition to the master file and the local file in part of compliance with Action 13 (Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting). Spain reacted quickly to implement recommendations stemming from the work of the OECD’s BEPS project. The guidance would be applicable for multinationals with group revenue of greater than €750 million headquartered in Spain with the first report due within 12 months of the first tax year ending after January 1, 2016.
Earlier this spring, the Ministry of Finance published a draft Royal Decree approving the Corporate Income Tax Regulations.
In February, the Canada Revenue Agency (CRA) released guidance following the OECD’s BEPS project guidelines. Guidance issued included policies on internal audits of intra-group services and the use of multiple year data in transfer pricing analyses. Intra-group services will be deductible only if the services confer genuine benefit or economic value to the recipient.
If your company operates within any of these countries or has questions regarding the continued changing transfer pricing environment worldwide, please reach out to your local CBIZ contact to make sure your documentation will be sufficient to manage risk associated with transfer pricing.
Any outbound payments to overseas related parties will be overseen by the Chinese tax authority as documented in Public Notice 16 to ensure authenticity and adherence to the arm’s length standard. This notice is a direct result of China wanting to show their support for the BEPS initiatives.
Specifically, China is targeting services charges considered to be irrelevant for the Chinese taxpayers function and risk profile, services merely protecting shareholder interests, duplicative of services already paid for locally, services that are a result of passive association of the group or do not bring direct benefit, or services that are already remunerated through other intercompany transactions.
Draft amendments of the Personal Income Tax (PIT) and Corporate Income Tax (CIT) acts, which include new transfer pricing documentation requirements for Polish taxpayers, were released by Poland in May. Drafted requirements are similar to the BEPS initiative and will be more extensive than what is currently required. Amongst other updates, the deadline for preparing the documentation will be changed to reflect the current annual tax return deadline.
Bolivia has officially recognized the new transfer pricing guidelines defined by the OECD and will be enforcing said rules for affected taxpayers in the fiscal year 2015.
The Ministry of Finance introduced amendments to transfer pricing assessment rules and concepts reflected in the OECD guidelines in March of this year.
If you have further questions regarding transfer pricing regulations and updates, feel free to contact our local Transfer Pricing expert Josh Finfrock at email@example.com.