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Transfer pricing disputes that lead to litigation can take years to resolve, so it’s always noteworthy when courts rule on transfer pricing matters. The past few months have seen a flurry of significant court decisions on different aspects of transfer pricing, discussed in this issue of BDPO’s Global TP News.
Perhaps the most anticipated case is the PepsiCo win before Australia’s High Court, which found that no royalty withholding tax arose and no diverted profits tax (DPT) applied. But as our article in this issue notes, “This case has passed through three levels of the courts, with a total of 11 judges, six judges finding for the taxpayer and five judges finding for the Commissioner.” Although the taxpayer won the case, the ATO will still be looking closely at arrangements that could be seen as involving embedded royalties.
In other court news, Spain’s Supreme Court issued a ruling siding with the tax authorities that brings much-needed clarity to the transfer pricing treatment of cash pooling arrangements within multinational groups. In Switzerland, the Administrative Court of Zug underscored the importance of the principle of periodicity in transfer pricing practice, concluding that the tested party’s transfer prices must satisfy the arm’s-length standard for each fiscal year. South Africa’s Western Cape Tax Court issued a ruling in a case that “may embolden the South African Revenue Service (SARS) to adopt a more assertive approach to TP assessments and litigation, particularly where complex structures and offshore intellectual property are involved.” Finally, the Court of Justice of the European Union ruled that transfer pricing adjustments may be subject to VAT.
Australian transfer pricing has also been in the news recently because of its public country-by-country reporting (CbCR) rules, which are now being implemented. The regime’s reach goes beyond Australia’s borders, given that it imposes a compliance obligation on some foreign-headquartered multinationals. Our article in this issue tells you everything you need to know.
The transfer pricing world is one of incremental regulation, and in this issue, we report on three recent examples of jurisdictions refining their transfer pricing regimes. Costa Rica officially established a transfer pricing information return reporting obligation. Israel issued a draft circular on the taxation of technology development centres, and the U.S. IRS recently clarified that taxpayers may benefit from the services cost method (SCM) exception to the base erosion and anti-abuse tax (BEAT) even if they don’t apply the SCM for transfer pricing purposes.
Finally, we look back on some recent developments to reflect on what they mean for the transfer pricing world, and look forward to what may unfold in the future. It’s been a year since the UK’s HMRC published its transfer pricing Guidelines for Compliance, and we take the opportunity to review the impact of this transfer pricing initiative. We also include a refresher on Thailand’s CbCR rules, an analysis of Malaysia’s three interlocking instruments that govern transfer pricing, and a look at the evolution of operational transfer pricing in Thailand.
Content
- Australia:
- Recent developments in Australia’s Public Country-by-Country Reporting Regime
- PepsiCo Wins High Court Appeal - No Royalty Withholding Tax or Diverted Profits Tax Payable
- Costa Rica: Transfer Pricing Informative Return Requirement Introduced
- European Union: CJEU rules transfer pricing adjustments may be subject to VAT
- International: Transfer Pricing News in Brief
- Israel: Tax Authority Issues Draft Circular on Taxation of Technology Development Centres
- Malaysia: Positive Developments, Heightened Compliance Obligations, and Unresolved Issues
- South Africa: Transfer Pricing Litigation in South Africa: A New Era of Disputes?
- Spain: Supreme Court Sets Landmark Doctrine on Transfer Pricing for Cash Pooling Arrangements
- Switzerland: Court Decision Reiterates Periodicity Principle in Transfer Pricing Assessments
- Thailand:
- Operational Transfer Pricing: From Compliance to Strategic Execution
- A Country-by-Country Report Refresher
- United Kingdom: Transfer Pricing -- Ensuring Correct and Complete Declarations
- United States: IRS Clarifies Application of Services Cost Method Exception to BEAT
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