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August 24, 2016

Josh Finfrock, Director in the Memphis Office, recently contributed to an article covering updates on 2016 Second Quarter Transfer Pricing Developments.

The article discusses the recently released guidance from the Australian Tax Office (ATO), the recent court ruling in favor of Medtronic, and new guidance from the OECD on the implementation of Country-by-Country reporting.

The Medtronic case is worth noting due to the tax the company would have paid had there been an alternate conclusion. Medtronic recently received a favorable ruling from the U.S. Tax Court in its transfer pricing dispute with the IRS. Had they received an unfavorable ruling, Medtronic would have owed nearly $1.4 billion. The issue arose because the IRS argued that Medtronic U.S. should have received higher royalty rates from its Puerto Rico based subsidiary, MPROC. Medtronic argued that the IRS did not adequately consider the importance of product quality in the medical device industry, and that MPROC provided more than just product assembly.

For questions on how these transfer pricing updates may have an impact on your company, please contact Josh Finfrock at jfinfrock@cbiz.com or 901.685.5575. To view the full article on CBIZ's Insights & Resources page, click here.




March 4, 2016

Over the next six months, the Memphis office is focusing on different specialties and services by featuring a Q & A with one of our local experts each month.

Josh Finfrock serves as a Director and leads the transfer pricing practice for CBIZ & MHM Memphis.  Josh has significant experience providing guidance on the development of internal transfer pricing policies and on the development of planning and documentation strategies for multinational clients operating in various countries worldwide.

Not only does this series allow you to get to know Josh on a more personal level, but he also answers important questions like “What should be in consideration as you're doing business internationally?”  The conversation continues with Josh discussing the common issues he finds, consequences of companies not in compliance, and why it’s important for transfer pricing to be controlled and monitored.

More resources featured on Josh’s Conversation page include previously featured articles, a BizTip Transfer Pricing video, and information on the latest CBIZ MHM Executive Roundtable Series.

Read the full conversation by clicking here.




February 26, 2016

Josh Finfrock, Director in the CBIZ MHM Memphis office, recently spoke at the U.S. Intermediate Transfer Pricing Update Bloomberg BNA conference on February 22nd & 23rd.

The two-day conference included instruction on common transfer pricing methodologies and concepts for accountants, attorneys, and other tax practitioners.  The program was designed as a training session to introduce tax practitioners to the key reporting and compliance issues in establishing an arm’s length price under Sec. 482 and the OECD guidelines.

Finfrock leads the Transfer Pricing practice at CBIZ and performs work for companies all across the world.  At the conference, Josh presented 'Analyzing the Intercompany Transfers of Tangible Property.'  In this session, he discussed… available methodologies, types of manufacturers, types of distributors, and examples of common intercompany transactions as it all relates to sales of tangible property.

Transfer pricing in the United States continues to be a topic of major concern to tax executives at U.S. outbound and inbound multinationals. Transfer pricing requires financial statement results to properly reflect profits between business units for tax and earnings forecasts. As a result, corporate tax and financial executives must establish effective internal controls and defend their pricing policies before their auditors and the IRS.

For questions regarding transfer pricing and its impact on your international operations, please contact Josh Finfrock at jfinfrock@cbiz.com or 901.685.5575.




January 27, 2016

Josh Finfrock, Director in the Memphis Office, recently authored an article covering the 2015 Fourth Quarter Update on Transfer Pricing.

Referencing his previous post, Josh begins by providing an update on the final BEPS project recommendations.  He then provided a United States transfer pricing update regarding proposed regulations released by the IRS and Treasury Department.

Josh’s article also gives detailed transfer pricing updates in foreign markets.  The recently issued updates concerning transfer pricing documentation and CbC reporting involved Australia, India, and Denmark.

For questions on how these transfer pricing updates may have an impact on your company, please contact Josh Finfrock at jfinfrock@cbiz.com or 901-685-5575.  To view the full article on CBIZ’s Insights & Resources page, click the button below.





November 10, 2015

Josh Finfrock, Director of the Memphis Office recently authored an article covering the Base Erosion and Profit Sharing (BEPS) recommendations.

On October 5, 2015, the Organisation for Economic Co-operation and Development (OECD) presented final recommendations relating to the BEPS project to the G20 Finance Ministers. The recommendations represent a multi-year focus on international tax policy aimed at curbing tax avoidance by multinational enterprises (MNEs) and include more than 1,600 pages covering 15 action points.

Josh’s article gives detailed insight into each of the 15 action points and summarizes key topics and recommendations presented by the OECD.

For questions on how these recommendations may have an impact on your company, please contact Josh Finfrock at jfinfrock@cbiz.com or 901-685-5575.  To view the full article on CBIZ’s Insights & Resources, click the button below.




October 6, 2015

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
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
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
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.

Canada
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.

China
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.

Poland
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
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.

Taiwan
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 jfinfrock@cbiz.com.




September 22, 2015

Although transfer pricing services are not as commonly known in the accounting industry, the work has an international reach that can have a major economic impact on companies big and small.

Josh Finfrock, Director in the Memphis Office is leading this niche, an essential division that focuses on international taxation.  Recently featured in an article published by The Daily News, Josh gives insight on his work, industry details, and personal experience.

“We’re helping companies on one end just starting to figure out how to expand internationally or maybe they are just coming to the U.S.,” he said. “They are trying to get their arms around what they have to do. But then we’re working with really established companies. They have a big international footprint with a significant amount of changes happening or compliance issues to make sure they are doing things right.”

For questions on transfer pricing’s impact on your company, please contact Josh Finfrock at jfinfrock@cbiz.com or 901-685-5575.  To view the full Memphis Daily News article, click the button below.




March 12, 2015

The Australian Taxation Office (“ATO”) recently published Practice Statement Law Administration (“PS LA”), online guidance for safe harbors regarding the simplification of transfer pricing record keeping. The PS LA explains the Australian Commissioner will not review a taxpayer’s transfer pricing records beyond confirming the taxpayer’s eligibility if certain safe harbor requirements are met.

The guidance provides safe harbors to the following:

Safe harbor conditions for Small (non-distribution) taxpayers:

  • Consolidated turnover is not greater than AUD 25 million; 
  • Has not incurred 3 or more consecutive years of losses;
  • Has no intercompany transactions with entities in “specified countries” (countries considered “high risk”);
  • Has not restructured in the year;
  • Has no intercompany transactions involving royalties, research and development, and license fees and arrangements;
  • Not classified as a distributor; and
  • No more than 15% of total turnover is comprised of “specified intercompany services” (services considered “high risk”).
  • Safe harbor conditions for Small-to-medium sized distributors:
  • Turnover for the distributor is no greater than AUD 50 million and has an operating margin of at least 3% on a 3-year basis;
  • Has no intercompany transactions with entities in “specified countries;”
  • Has not restructured in the year; and
  • Has no intercompany transactions involving royalties, research and development, and license fees and arrangements.

Safe harbor conditions for Low-risk intragroup services:

  • The markup on low-risk service revenue is at least 7.5% or the markup on low-risk service expense is no more than 7.5%; and
  • One of the following conditions is met: (1) No more than AUD 1 million of absolute intercompany services or (2) Greater than AUD 1 million of absolute intercompany services, with service expense comprising of no more than 15% of total expense and the service revenue comprising of no more than 15% of total revenue;
  • Has not incurred 3 or more consecutive years of losses;
  • Has no intercompany transactions with entities in “specified countries”;
  • Has not restructured in the year; and
  • No more than 15% of total turnover is comprised of “specified intercompany services.”

Safe harbor conditions for Low-level intragroup loans:

  • Australian group has a combined borrowed and loan amount of AUD 50 million or less;
  • The interest rate paid on the amounts borrowed is not more than the variable Reserve Bank of Australia indicator lending rate for “small business; variable; residential-secured; term loans”;
  • Has not incurred 3 or more consecutive years of losses;
  • Has no intercompany transactions with entities in “specified countries” (countries considered “high risk”); and
  • Has not restructured in the year.

However, there are certain limitations to the safe harbors. Any taxpayer paying or receiving royalties or license fees are excluded from the safe harbor. Furthermore, the distribution safe harbor applies to the whole group. Specifically, the whole group’s main activity must be classified as a distributor and the distribution segment cannot be segmented. Finally, safe harbor for interest only applies to inbound interest expenses (there is no safe harbor for outbound interest revenue).

If you have further questions regarding transfer pricing or safe harbors, feel free to contact our Transfer Pricing expert Josh Finfrock at jfinfrock@cbiz.com.




March 20, 2014

Last month, the IRS Transfer Pricing Operations (TPO) team issued a Transfer Pricing Audit Roadmap. The roadmap is intended to assist IRS examination teams with developing and auditing transfer pricing issues.

Audit cycles will depend upon the complexity involved with issues under examination, but the IRS has developed a 24-month timeline to guide the process from fact finding to resolution. Examiners will be utilizing Forms 5471, 5472, 8833, 8858, 8865, 926, UTPs and schedule M-3 to perform initial analysis, issue identification, and risk assessment.

With the pragmatic revenue raising goals involved with transfer pricing audits, the TPO is focused on developing high risk issues around intangibles, hybrid instruments, and other perceived income shifting transactions. Also, taxpayers' worldwide effective tax rates and risk based assessments based on industry profitability ratios will be used to identify and select transfer pricing audit targets.

Transfer pricing is an area of risk quickly escalating beyond just tax and finance departments as executives are increasingly recognizing the significant financial risks, controversy risks, and reputational risks that must be strategically assessed and mitigated. Quality transfer pricing documentation provides the taxpayer the opportunity to tell a “compelling story” to the IRS and may provide protection from penalties if prepared contemporaneously.

Even with transfer pricing documentation in hand, taxpayers should be prepared for examiners to request increasing amounts of background documentation and source information, including:

  • Intercompany agreements
  • Financial and accounting data
  • Employee details
  • Entity structure information

The transfer pricing audit roadmap is one more step in the increasing focus the IRS is placing on transfer pricing, coinciding with mounting foreign country focus on transfer pricing. Countries are increasingly prioritizing transfer pricing enforcement as a necessary tax base defense and probable revenue raiser. Media attention is bringing transfer pricing risk into the forefront for multinational executives, and global initiatives such as the OECD Base Erosion & Profit Shifting (BEPS) project reflect the global appetite for transparency and corporate responsibility.

If you have further questions about the Transfer Pricing Audit Roadmap, contact Josh Finfrock at jfinfrock@cbiz.com or 901.685.5575.    




February 4, 2014

Josh Finfrock, Senior Manager in our Transfer Pricing division, gives insight into the updated transfer pricing documentation rules affecting qualified French taxpayers.

As part of the Finance Bill for 2014 partially enacted by the French Government, updated transfer pricing documentation rules will affect qualified French taxpayers (including French permanent establishments of foreign companies). As noted in Section L13AA of the French Tax Procedure Code, the updated transfer pricing documentation rules affect French taxpayers that satisfy one or more of the following:

  • Turnover or gross assets equal to or exceeding EUR 400 million;
  • Owns, directly or indirectly, at least 50% of a company that meets the EUR 400 million criteria;
  • More than 50% of the entity’s capital or voting rights are owned, directly or indirectly, by French or foreign entities that meet the EUR 400 million criteria; or
  • Part of a consolidated tax group in France and at least one group company meets any of the above criteria.

These updated rules now require French taxpayers to file transfer pricing documentation within 6 months of filing their tax return, whereas the previous transfer pricing documentation rules only required French taxpayers to provide transfer pricing documentation if requested during a tax audit. When documenting, the qualified French taxpayers will now be required to disclose a detailed summary of the entity and the related affiliates. They will also be required to provide a detailed summary of each intra-group transaction valued over EUR 100,000. French taxpayers that fail to file transfer pricing documentation properly (in proper detail, in a timely manner, etc.) may be penalized up to 5% of the reassessment by the French Tax Authorities.  




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