transfer pricing documentation

Transcription

1 Mai Nomura Summary Headline on Verdana CbC reporting Bold and transfer pricing documentation Mai Nomura 24 October, 2017

2 New transfer pricing compliance requirements in Hungary: Country-by-Country Reporting and new transfer pricing documentation requirements Topic Why important / Risk to manage In line with BEPS initiatives Country-by-Country Reporting ( CBCR ) obligation has been introduced in Hungary and the transfer pricing documentation requirements will also be harmonized with OECD/BEPS requirements. The companies has to adopt new transfer pricing Masterfile/local file approach with an extended content compared to the current requirements. CBCR is a new requirement for multinational groups. Non-compliance is subject to a default penalty up to HUF 20 million (EUR 64,000) even at the level of the local subsidiaries. How to manage From 2018 new transfer pricing documentation has to be prepared in line with the new rules. CBCR obligation should be investigated to find out the actual obligation for the local entities. PowerPoint Timesaver 2

3 International guidelines BEPS Action 13 OECD Guidelines Chapter V. Level 1 Level 2 Level 3 CbC Report Master file Local file c Main financial information: All group companies Consolidated by countries The activity in the given country MNE group: Description of MNE s business and structure Intangibles Intercompany financing Financial and tax position Group companies: Local entity Controlled transactions Tax rulings, APAs Financial information 2017 Deloitte Hungary 3

4 Transfer pricing documentation Masterfile 2017 Deloitte Magyarország 4

5 Masterfile concept The draft of the respective regulation is already available It is expected to be adopted soon by the Hungarian legislation It will be in line with the Transfer Pricing OECD Guidelines Masterfile will be the obligatory part of the transfer pricing documentation Additional administration is expected due to the increased amount of information needed It contains: Overview of the group, MNE s organizational structure, Description of MNE s business, the MNE s intangibles MNE s intercompany financing activities, MNE s financial and tax positions Identification of any members of the group that provide central financing function Place of effective management Description of business restructuring transactions, acquisitions 2017 Deloitte Magyarország 5

6 Masterfile Main document More structured, more detailed information should be presented compared to the current system Current legislation Information regarding the ownership of intangibles and presentation of the royalty paid and received Example Masterfile New legislation General description of the overall strategy for the development, ownership and exploitation of intangibles Location of principal R&D facilities and location of R&D management List of intangibles or groups of intangibles and which entities legally own them List of agreements related to intangibles Description of the group s transfer pricing policies related to R&D and intangibles Description of any important transfers of interests in intangibles, including the entities, countries, and compensation involved 2017 Deloitte Magyarország 6

7 Content of the Masterfile Intercompany financial activities Description of how the group is financed, important financing arrangements Identification of any members of the group that provide central financing function, and the place of effective management Description of the general transfer pricing policies related to financing arrangements Financial and tax positions Consolidated financial if otherwise prepared for financial reporting, regulatory, internal management, tax or other purposes List and brief description of the existing unilateral APAs and other tax rulings Description of the business: Important drivers of business profit; Description of supply chain for the largest products and/or service offerings List of important service arrangements between group members Description of main geographic markets for the group Functional analysis Description of business restructuring transactions, acquisitions 2017 Deloitte Hungary 7

8 Transfer pricing documentation Local file 2017 Deloitte Magyarország 8

9 Local file More structured, more detailed information should be presented compared to the current system Current legislation New legislation Presentation of the subject of the contract and transaction, date of conclusion and modification of the contract and the duration of the contract Example Local file Description of the material controlled transactions, and the context in which such transactions take place Amount of intra-group payments and receipts Copies of all material intercompany agreements concluded by the local entity. Copy of existing unilateral and bilateral/multilateral APAs and other tax rulings 2017 Deloitte Magyarország 9

10 Local file More structured, more detailed information should be presented compared to the current system Current legislation New legislation Name, seat and tax number of related party Example Local file Description of the management structure and the individuals to whom local management reports Detailed description of the business and business strategy pursued by the local entity Involvement or affect of any business restructurings or intangibles transfers List of key competitors 2017 Deloitte Magyarország 10

11 Local file More structured, more detailed information should be presented compared to the current system Current legislation New legislation Price, margin, profit, other value or range (arm s length price) calculated on the basis of comparable products and services Example Local file Indication of which associated enterprise is selected as the tested party, explanation of the reasons for this selection Summary of the important assumptions made in applying the transfer pricing methodology Explanation of the reasons for performing a multi-year analysis List and description of selected comparable transactions, and information on relevant financial indicators Summary of financial information used in applying the transfer pricing methodology 2017 Deloitte Magyarország 11

12 Local file More structured, more detailed information should be presented compared to the current system Current legislation New legislation No regulation Example Local file Information how the financial data may be tied to the annual financial statements Annual local entity financial accounts for the fiscal year concerned Description of the reasons for concluding that relevant transactions were priced on an arm s length basis based on the application of the selected transfer pricing method 2017 Deloitte Magyarország 12

13 CbC reporting 2017 Deloitte Magyarország 13

14 CbC reporting - Hungarian legislation Who should file the report? Companies exceeding a consolidated group revenue of EUR 750 million Reporting obligation: Vs. Ultimate parent company Other group company Notification and CBC reporting obligation - Electronically, based on a form issued by the Hungarian Tax Authority If no automatic exchange of information relationship with the country of the ultimate parent and Hungary, the reporting obligation may be passed to the Hungarian entity No active exchange relationship between Japan and Hungary CBC reporting obligation for the Hungarian entity? 2017 Deloitte Hungary 14

15 Content of CbC Report 2017 Deloitte Magyarország 15

16 Content of CbC Report 2017 Deloitte Magyarország 16

17 Hungarian legislation Main deadlines CBCR for if the FY started on 1 April, 2016 (FY2016) Notification obligation for FY Notification obligation for FY2017 Submission of CBCR for FY2016 (12 months) Exchange of CBCRs by tax authorities regarding FY2016 (18 months) Submission of CBCR for FY2017 (12 months) Exchange of CBC reports by tax authorities regarding FY2017 (15 months) 31 March September March June Default penalty up to HUF 20 million (approx. EUR 64,500) 2017 Deloitte Hungary 17

18 Deloitte technology solutions CBCR and Transfer Pricing documentation CbC Digital Exchange - CDX Digital DoX Upload and illustrate the Group's relevant financial data in accordance with the requirements of the CbC Report Standardized and harmonized Transfer Pricing Documentation within the Group 2017 Deloitte Hungary 18