OECD releases new transfer pricing guidance (215.78kb)13 August 2010On 22 July, the OECD published a new Chapter IX of the Transfer Pricing Guidelines. (TPG) addressing how transfer pricing principles and the corresponding treaty rules should apply to business restructuring.1 This concludes an initiative launched in 2005, which included a “discussion draft”2 published in September 2008. In June 2009, a consultation meeting was held on the discussion draft, where a number of fundamental concerns were expressed by business commentators. The voicing of these concerns, however — as is apparent from the new chapter — had little effect on the OECD’s views. The OECD has published a response to comments received during the consultation process, also released on 22 July.
IRS realigns and renames LMSB (124.49kb)6 August 2010The IRS recently announced that beginning 1 October 2010 the IRS Large and Mid-Size Business (LMSB) division will be renamed the Large Business and International division (LB&I). The release states the realignment is part of a continuing effort by the IRS to improve global tax administration efforts and is meant to create a more centralized organization dedicated to improving international tax compliance.
OECD releases revised Transfer Pricing Guidelines (168.64kb)30 July 2010On 22 July, the OECD concluded two recent initiatives to refi ne its guidance on transfer pricing with the publication of:
- Revisions to Chapters I-III of the Transfer Pricing Guidelines, those chapters that deal with the arm’s length principle, transfer pricing methods and comparability analysis1
- A new Chapter IX addressing how transfer pricing principles and corresponding treaty rules should apply to business restructuring2 Both sets of guidance closely follow drafts issued in 20083 and 20094 on which we have issued separate Alerts.
Business restructuring,transfer pricing focus of JCT report and Ways & Means hearing (168.64kb)28 July 2010On 22 July 2010, the House Ways & Means Committee held a hearing on business restructuring and transfer pricing issues, with a particular focus on issues involving transfers of intangibles. The centerpiece for the hearing discussion was a Joint Committee on Taxation (JCT) report issued on 20 July 2010 titled, Present Law and Background Related to Possible Income Shifting and Transfer Pricing (JCX-37-10) (JCT report). The JCT prepared the report in connection with an examination of business restructuring and the US transfer pricing rules initiated late last year by Select Revenue Measures Subcommittee Chairman, Richard Neal (D-MA).
Tax IRS concedes stock option (167.78kb)26 July 2010The Internal Revenue Service (IRS) has conceded the remaining cost-sharingissue in Veritas Software Corporation v. Commissioner, 133 T.C. 14 (2009).1 The announcement follows the US Court of Appeals for the Ninth Circuit’s decision in Xilinx v. Commissioner, 598 F.3d 1191, (9th Cir. 2010),2 in which it affi rmed the Tax Court’s holding that, under the cost-sharing regulations in effect for tax years 1997, 1998, and 1999, commonly-controlled companies are not required to share the value of certain stock-based compensation in the pool of costs to be shared under a cost-sharing arrangement (CSA).
Panama introduces complementary rules to double taxation conventions (2.33mb)9 July 2010Panama announced the introduction of complementary rules to the double taxation conventions, on transfer pricing, permanent establishment and tax residency in Law No. 33 dated 30 June2010. This makes Panama the first Central America country to adopt an approach on such matters, as well as brings Panama into line with the international standards of the Organization for Economic Cooperation and Development (OECD).
Provisional Measure 478 that amended Brazilian transfer pricing law has expired (666.10kb)1 July 2010The Provisional Measure 478 (MP 478), which amended the Brazilian transfer pricing legislation mainly by altering the minimum statutory profit margin required by the Resale Price Method, applicable to import transactions to 35% for both pure resale and manufacturing, was issued on 29 December 2009.
Tax authorities focus on increased transfer pricing related VAT and customs issues (148.97kb)18 June 2010There has been an increased focus in recent years from taxing authorities on the indirect tax implications of transfer pricing and customs duties and whether, in particular, the price used for direct tax purposes is appropriate for customs purposes. This focus by the tax authorities is taking place even in situations where any additional VAT that may be due is fully deductible by the importer of such goods and services and even where the imported goods are not subject to customs duties.
IRS reportedly will not appeal the Ninth Circuit's decision on Xilinx (147.29kb)14 June 2010In this decision, the Ninth Circuit affirmed the Tax Court decision that under the cost-sharing regulations in effect for tax years 1997, 1998, and 1999, commonly controlled companies are not required to share the value of certain stock-based compensation in the pool of costs to be shared under a cost-sharing arrangement (CSA).
South Africa proposes transfer pricing, thin cap changes (216.63kb)11 June 2010The draft Revenue Laws Amendment Act (RLAA) issued for comment on 10 May 2010 contain some far reaching changes to the current legislation around transfer pricing and thin capitalization. Purported to bring South Africa more in line with international standards, these changes will pose a real challenge to South African companies involved in cross border activities.
Italian government adopts transfer pricing documentation discipline (131.30kb)4 June 2010On 31 May 2010 the Italian government issued Law Decree n 78 concerning the “urgent measures for the financial stabilization and for the economic competitiveness” in order to address the current economic crisis. The Law Decree has been in force since its official publication in Official Gazette n. 125 published on 31 May 2010.
2010 Japan tax reform (147kb)3 June 2010Following the 22 December 2009 outline of the 2010 tax reform proposal, Japan’s Ministry of Finance released a revision to the Special Taxation Measures Law Enforcement Regulation on 31 March 2010. This revision to the regulation is effective 1 April 2010 and provides the legal framework for the documentation items that taxpayers are expected to provide to the tax authorities in a transfer pricing examination.
Vietnam issues new transfer pricing circular (207kb)26 May 2010Subsequent to the release of several draft circulars on transfer pricing (Draft Circulars) for public comments, Vietnam’s Ministry of Finance (MOF) issued Circular 66/2010/TT-BTC (Circular 66) which amends the current transfer pricing regulation, Circular 117/2005/TT-BTC (Circular 117).
Irish transfer pricing grandfathering: the clock is ticking (135.64kb) 21 May 2010The transfer pricing rules (Rules) announced in the 2010 Irish Finance Bill on 4 February have become law. Our alert of 4 February 2010 outlined in detail the scope of the new Rules. Arrangements, the terms of which are agreed prior to 1 July 2010, are not subject to the new Rules, provided they are not substantially amended after this date. With the grandfathering deadline of 1 July 2010 fast approaching, if you have not already done so, it is now time to act to avail of this short-lived opportunity.
India-US Competent Authorities' negotiations on transfer pricing
matters (117.24kb) 13 May 2010This Tax Alert provides an updated on the recent negotiation between the Competent Authorities (CAs) of India and the USA under Article 27 of the India-US tax treaty (Tax treaty). Article 27, which deals with the Mutual Agreement Procedure (MAP), provides for a dispute resolution mechanism where the CAs shall endeavor, by mutual agreement, to resolve the situation of taxpayers subject to taxation not in accordance with the provisions of the Tax Treaty. A Memorandum of Understanding (MoU) between the two countries provides that the CAs would endeavor to resolve such disputes within a period of two years and also provides for obtaining a stay on collection of the disputed taxes during the pendency of the MAP.
Recent Customs Ruling – US Customs and Border Protection concludes importer’s appraisement supported by transfer pricing study was acceptable (152.21kb) 11 May 2010In a welcome development for multinational corporations attempting to comply with both US Customs and Border Protection (Customs) and Internal Revenue Service (IRS) rules regarding intercompany pricing, Customs has issued an internal advice, HQ HO 37375 ruling, approving related-party pricing supported by a transfer pricing study prepared for Internal Revenue Code Section 482 (Section 482).
Thailand issues bilateral advanced pricing agreement guidelines (150.46kb) 7 May 2010On 23 April 2010, the Thai Revenue Department (TRD) issued bilateral advance pricing arrangement (APA) guidelines (Guidelines). The Guidelines outline procedures for bilateral APA applications, the level of information required, circumstances under which the TRD may discontinue an APA, and taxpayer compliance after conclusion of an APA.
Statistical bulletin examines progress of unilateral advance pricing agreements in Italy (139.80 kb) 4 May 2010In a bulletin published 21 April 2010, the Italian Central Revenue describes the results of the first five years since the implementation of the Italian unilateral APA (so-called Ruling di Standard Internazionale) from 2004 through 2009. (Please note that the procedure has only been actually activated in 2005 after European Commission approval.)
Tax authorities publish rules clarifying transfer pricing disclosure in Mexico (205kb) 16 April 2010The Tax Administration Service (TAS) published on its website Exhibits 16 and 16-A of the Miscellaneous Tax Resolutions for 2009. These exhibits provide Instructions for Completion and Guideline Forms for (electronic) filing1 Tax Audit Reports by certified public accountants. Significant changes related to transfer pricing are included in the new exhibits.
IRS issues 11th annual APA report (175kb) 1 April 2010The IRS issued the eleventh congressionally-mandated, annual Advance Pricing Agreement (APA) report on 29 March 2010, in Announcement 2010-21. The eleventh annual report provides an update of the APA Program, including its experience, structure, and activities for calendar year 2009. The report provides useful insights into the operation of the Program, and can give some indication of the treatment and process that companies applying for an APA can expect.
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