Global Transfer Pricing Conference

Transcription

1 Fit for the future Global Transfer Pricing Conference To agree or not to agree: Working toward agreement with the tax authorities

2 Today s presenters Diane Hay, UK Lyndon James, Australia Ulf Andresen, Germany Greg Barton, USA Carlo Romano, Italy Sanjay Tolia, India Kevin Tsoi, China Slide 2

3 Agenda Current environment Recent country developments Panel discussion Wrap up and takeaways Slide 3

4 Understanding the current state of play Unprecedented level of scrutiny on MNCs not just regulators G20/OECD BEPS program represents a paradigm shift in the international tax landscape BEPS TP actions targeting greater transparency and an increased focus on substance, risk and value creating activities are forcing MNCs to reassess their approach to transfer pricing and their engagement model with tax authorities Today s session will look at developments across a number of countries and assist you in working toward agreement with the tax authorities in those countries. Slide 4

5 Agenda Current environment Recent country developments Panel discussion Wrap up and takeaways Slide 5

6 Australia APA developments The ATO s view on APAs has continued to evolve over the last 12 months Increasingly, the ATO are not accepting as many APA applications. APA renewals are not guaranteed, with recent examples of the ATO challenging previously accepted pricing policies. APA negotiations are taking longer and are being evaluated in the context of BEPS. Slide 6

7 Australia TP Audit developments Unprecedented media coverage- now lead to Senate Enquiry Specialist ATO team set up (ISAPS) to audit/review BEPS type risks Centralised principal structures and intangible transfers are under heightened ATO scrutiny. Transfer pricing audits are no longer limited to questions of arm s length pricing the ATO are increasingly introducing questions of antiavoidance. Since the introduction of BEPS, transfer pricing has increasingly become politicised. As a result, the ATO feels strong political pressure to keep tax dollars at home. Recent headlines Corporate tax avoidance costs Australian business - Sydney Morning Herald September 30, 2014 Government warned that ATO not up to catching tax avoiders - Sydney Morning Herald September 30, 2014 ATO caught short on tax dodgers - The Australian October 1, 2014 Slide 7

8 China Outbound service fees and royalties ( non-trade payments ) under spotlight Article responding to United Nation ( UN ) The six tests : Benefit Test, Need Test, Duplication Test, Value Creation Test, Remuneration Test, Authenticity Test A nation-wide comprehensive tax examination on outbound related nontrade payments China tax authorities views on anti-trust investigation China's anti-trust investigations into foreign companies China tax authorities are reviewing the anti-trust issues from a TP perspective China tax authorities recently listed four common transfer pricing issues with monopolistic features: (1) Price mismatch via products bundling, (2) Price mismatch via goods/services bundling, (3) Offsetting transactions, (4) Concealed under third party transactions Slide 8

9 Germany Central tax office has created a second department for the negotiation of APAs and MAP/arbitration cases with Mrs. Halfter and Mr. Fluechter as heads of the two departments State initiatives to conduct bilateral cross-border tax audits, in particular in Bavaria and North Rhine Westphalia are perceived as a good approach going forward, yet with a limited scope and breadth (primary partner countries are Austria, Italy and the Netherlands) Balancing adjustments within the meaning of Art. 9 (2) and 7 (3) OECD-MTC (should) gain (even) more importance Singular cases of corresponding unilateral efforts to provide relief from double taxation can be detected both in legally binding and non-binding form subject to the size of the respective adjustment though Slide 9

10 India APA Financial Year Before MAP Rollback Slide 10

11 Italy Increasing number of APAs' applications 131 between 2010 and 2013 out of total 183 in APAs also for the existence of Italian PEs Bilateral APAs - implemented in ongoing as of 30 April 2014 (FYs covered by the agreement?) Extended validity period 5 FYs renewable for additional 5 FYs Predominance of transactional profit methods (79% of the cases) instead of traditional transaction methods (21% of the cases) in TP methods agreed Slide 11

12 United Kingdom First tax authority to commit to introduce the CbC template likely to be earliest date. Transfer of profits legislation - unilateral BEPS action by UK to deter arrangements that move profits from the UK through the use of derivatives, but very widely drawn and could potentially affect many structures eg captive reinsurance Changes to APAs ability to revoke APAs if there are changes in UK law or OECD Guidelines Consultation on hybrids may well hit US deferral structures employing US finance branches and other arrangements involving payments for goods, royalties etc Slide 12

13 United States -Notice : Proposed Revisions to Competent Authority Process Additional requirements regarding upfront disclosures for taxpayers seeking MAP relief: Imposes strict mandatory pre-filing conferences in certain situations (e.g., taxpayer-initiated adjustments) and pre-filing memorandum in certain situations (e.g., adjustment of more than $10M for all years combined, IP development arrangement, and global trading arrangement). Mandatory roll forward and increased scope of MAP cases: Encourages and/or mandates roll-forward of MAP resolutions to subsequent years and to additional issues (e.g., ancillary issues such as MAP repatriation, interests and penalties, or foreign tax credit issues). Allows the U.S. Competent Authority to initiate a MAP case without a request by the taxpayer. Slide 13

14 United States - Notice : Proposed Revisions to APA Process Proposed new procedure would: impose additional requirements regarding upfront disclosure during the APA process (including mandatory pre-filing conferences in certain situations), encourage and in some cases mandate rollback of transfer pricing methods (TPMs) to years prior to the APA term, significantly reinforce the IRS s strong preference for bilateral APAs by permitting unilateral APAs only in extremely limited circumstances if a treaty country is involved in the covered transaction. Mandate prefiling conferences in certain more complex cases Require much greater information in APA submissions, including covered issue diagrams which are essentially worldwide functional and supply chain diagrams Slide 14

15 Agenda Current transfer pricing environment Recent country developments Panel discussion Wrap up and takeaways Slide 15

16 Panel Session Question 1 What has been the tax authorities response to BEPS in your country? Are you seeing an increase in tax authority activity as a result of BEPS and what are the key issues being addressed? Slide 16

17 Panel Session Question 2 Has the type of engagement with your tax authority changed as a result of the current environment? Slide 17

18 Panel Session Question 3 Are you seeing a change in the APA process? Slide 18

19 Panel Session Question 4 Given the environment, has your tax authority got the resources to come to agreement with tax payers (cross border and/or domestically)? Slide 19

20 Panel Session Question 5 What should MNCs be doing to ensure their TP engagement strategy is fit for the future? Slide 20

21 Agenda Current transfer pricing environment Recent country developments Panel discussion Wrap up and takeaways Slide 21

22 Today s panel Diane Hay, UK Lyndon James, Australia Greg Barton, USA Kevin Tsoi, China Sanjay Tolia, India Carlo Romano, Italy Ulf Andresen, Germany All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.