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1、TRANSFER PRICING GUIDE 2024Your global tax partnerLAST UPDATED ON 05TH FEBRUARY 2024TRANSFER PRICING GUIDE 2CONTENTSFOREWORD 3ARGENTINA 4AUSTRALIA 7AUSTRIA 10BELGIUM 14CANADA 17CHINA 21COLOMBIA 24CROATIA 27CYPRUS 29CZECH REPUBLIC 32DENMARK 34FINLAND 39FRANCE 42GERMANY 45GREECE 49HUNGARY 53INDIA 57IN

2、DONESIA 61ITALY 64JAPAN 68LUXEMBOURG 70MALAYSIA 72MALTA 77MAURITIUS 79MEXICO 81NETHERLANDS 84NORWAY 87POLAND 89PORTUGAL 92ROMANIA 96SERBIA 100SLOVAKIA 103SLOVENIA 107SOUTH AFRICA 110SOUTH KOREA 114SPAIN 117SWEDEN 121SWITZERLAND 124UNITED KINGDOM 128UNITED STATES 132QUICK REFERENCE:SUMMARY TABLES 135

3、TAXAND GLOBAL CONTACTS 176FOrEwOrdThe GuideThe Taxand Transfer Pricing Guide 2024 is a critical resource for any multinational organisation seeking to create efficiencies in its strategic management of transfer pricing.A distinguishing factor of this guide is territory specific insight into the nuan

4、ces that influence transfer pricing policy management and presents core recommendations for corporates to manage risks and align their strategies with evolving global standards.This first edition of the 2024 guide details the technical guidance from six continents compiled from the unmatched knowled

5、ge within Taxands international network of advisors,who are able to comment with full objectivity due to their independence within our global network.Through application of these insights,readers stand to be equipped with the guidance to drive more effective strategies,while ensuring confidence that

6、 transfer pricing affairs are fully aligned to local compliance and regulatory requirements.Global perspective,local knowledgeIn an increasingly interconnected but volatile global economy,the complexities of transfer pricing management continue to challenge a number of multinational corporations ope

7、rating across diverse jurisdictions.A critical aspect of transfer pricing is the adherence to local requirements and customary practices and the most effective planning relies on understanding the global picture.The intricacies of local regulations,economic environments,and enforcement practices nec

8、essitate a nuanced approach.The essence of transfer pricing lies in the valuation of transactions between related entities within a multinational enterprise.These valuations must reflect arms length conditions,ensuring that profits are allocated and taxed where economic activities and value creation

9、 occur.However,the application of transfer pricing principles is far from uniform across jurisdictions.Economic benchmarks must be carefully assessed,with market-specific adjustments considered.For instance,country risk adjustments are particularly pertinent in developing countries,reflecting the un

10、ique economic risks associated with these markets.The selection of comparables also varies,European and other jurisdictions may mainly consider private companies,while North American tax authorities typically emphasising reliance on audited financial information from publicly-listed companies.Prepar

11、edness is paramountAlthough transfer pricing documentation is often viewed as a“mere”compliance exercise,the potential benefits of maintaining contemporaneous documentation cannot be overstated.To note just a few,doing so can offer a business penalty protection in the event its transfer pricing resu

12、lts are challenged,the details of the analysis facilitate timely preparation of informational reporting that is required as part of most countrys corporate tax filing package,and its existence can streamline the processes around an M&A or other investment life event.The timings and formats of local

13、file documentation are equally important and vary significantly between jurisdictions.Requirements range from the necessity to file with tax authorities directly to simply having the documentation on hand and readily available upon request.In some cases,corporates are not required to prepare it in a

14、dvance at all.Our team at Global Taxand works seamlessly across jurisdictions to enable its clients to equip their business in navigating these myriad requirements and creating a bespoke“transfer pricing calendar”tailored to each companys unique needs.Managing business changeManaging business change

15、 is a pivotal element of transfer pricing.A thoughtful approach to documenting changes in a business and the rationale for how a company has addressed such changes is essential.This can include the economic and financial impacts of natural events,such as pandemics or natural disasters,or other globa

16、l occurrences like wars,elections,inflation,as well as local or regional recessions.Capturing these changes in a business on a timely basis is crucial,as delays can result in the loss of important details.Moreover,ensuring that the implementation of transfer pricing policies in the face of such chan

17、ges follows a consistent approach,aligned with the function and risk profile presented to tax authorities,is vital.Taxands Take The OECDs Base Erosion and Profit Shifting(BEPS)initiative,particularly the Pillars,are expected to have significant implications for existing transfer pricing policies.All

18、 multinationals must evaluate the potential impacts of countries implementingor choosing not to implementthese guidelines.The Taxand Transfer Pricing Guide 2024 provides a framework for understanding these developments and offers strategic recommendations for adapting and enhancing strategies that w

19、ill strengthen business resilience,support profitability and maximise the positive attributes of an international corporate network.Yours Truly RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 3Overview Bruchou&Funes de rioja,Taxand Argentina Bruchou&Funes de Rioja is a legal advisory firm based in Bue

20、nos Aires which offers a full range of legal services.With respect to tax services,and in particular with transfer pricing services,the team can assist in every aspect of transfer pricing advisory.This includes,among others,compliance and reporting requirements,analysis,planning,strategy,disputes,an

21、d controversy resolutions.Transfer Pricing FrameworkTransactions subject to transfer pricing rules are governed by Argentine Income Tax Law,its Regulatory Decree,and General Resolutions of Fiscal Tax Authority(“FTA”).Taxpayers subject to transfer pricing regulations are:i)those who have transacted w

22、ith“related”individuals or related legal entities domiciled abroad,ii)those who have transacted with individuals or legal entities established or located in non-cooperative or low-tax jurisdictions,iii)Argentine residents who entered into transactions with their permanent establishments located abro

23、ad,iv)Argentine residents who are owners of permanent establishments located abroad,in relation to the transactions that those permanent establishments enter into with individuals or other kinds of related parties domiciled,established or located abroad,and v)Taxpayers that carry out import and expo

24、rt operations between independent parties.The Arms length methods listed in Argentine regulations are the same as those in the OECD Transfer Pricing Guidelines,except for the specific method regarding exports of goods at known price in transparent markets(commodities).Accepted Transfer Pricing Metho

25、dologiesThe OECD Guidelines are not incorporated in Argentine regulations,however most of the Argentine rules are based on the OECD Transfer Pricing Guidelines.The work of the OECD in this field and the provisions of the aforementioned Guideline may constitute useful tools for interpreting and apply

26、ing the transfer pricing rules.In determining transfer prices,the most appropriate method regarding the type of transaction being examined and which reflects its economic reality shall be used.For such purposes,the following considerations should be taken into account when choosing the method:i)it i

27、s the most compatible method for the business and commercial structures;ii)it has the best quality and quantity information available for suitable justification and application;iii)it considers the most suitable level of comparability of the related and non-related transactions and of the companies

28、involved in such comparison;and iv)it requires the lowest number of adjustments for the purposes of eliminating the existing differences between the facts and the comparable situations.Additionally,Argentine regulations provide for the application of a method that consists in the obligation of the i

29、mporting or exporting agent,located in Argentina,to register with the FTA all contracts executed regarding imports or exports of goods with market quotation(commodities)that involve an international intermediary and where at least one of the following conditions exist:i)the international intermediar

30、y is related to the local agent,or ii)the exporting or importing agent is related to the local agent;or when the international intermediary is located in a non-cooperative or low-tax jurisdiction.The registration should include the relevant features of contracts,the comparability difference with the

31、 market quotation,or the discounts agreed upon the amount of which are above the market quotation.If the taxpayer fails to submit the contract registration,the income will be based on the quoted value of the goods on the shipment loading date(including the corresponding comparability adjustments if

32、applicable),rather than the contract date.Transfer Pricing documentation requirementsTaxpayers subject to transfer pricing rules must submit certain sworn statement such as the Local Report/Transfer Pricing Study,Master File Report,information regimes and CbCR,as follows:i)Report/Transfer Pricing St

33、udy:This Report describes the taxpayers structure,its activities,strategies,customers,related parties or entities in non-cooperative jurisdictions,and their operations,as well as their analysis.ii)Information Regime Form 2668:Includes taxpayers who engage in transactions with related parties or enti

34、ties located in low or non-tax jurisdictions,when in the last two fiscal periods prior to the period being reported,they were required to submit information on international transactions,and thresholds are exceeded.iii)Master Report:Taxpayers or entities linked to MNEs must submit this report to pro

35、vide general information about the MNEs groups composition,if the total consolidated annual income of the MNEs group exceeds ARS 4,000,000,000(approx.USD 4,761,905 at the Official Exchange Rate“OER”as of 12.19.2023)in the fiscal year preceding the submission,and thresholds are exceeded.iv)CbCR:Consi

36、sts of an annual information regime regarding the entities described as MNEs,as well as the fiscal jurisdictions in which they operate.MNEs whose total consolidated annual revenues are less than EUR 750,000,000 are excluded from this regime.v)Information Regime on resident entities in Argentina whic

37、h are part of MNEs groups:The information to be provided includes,among others,the following details regarding the last ultimate controlling entity(or the reporting entity,if it is not the same as the last ultimate controlling entity):Tax Identification Number,entity type,fiscal and legal address,pl

38、ace,and date of incorporation.ArGENTiNA RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 4ArGENTiNAIn addition to the Transfer Pricing Study,the taxpayer must keep the following documentation,among others:invoices,working papers(which allow for the identification of the operations under analysis and ju

39、stify the transfer prices method),the comparison criteria used,the amounts of consideration,and the profit margins reported in the sworn statement and in the Transfer Pricing Study.With respect to the import or export operations between independent parties,the taxpayers must keep,among other,the fol

40、lowing documentation:a)regarding the resident subject in the country:their identifying information,activities performed,and organizational structure of the business;b)regarding independent individuals or entities abroad the country:their last name and first names,trade name or legal name,Tax Identif

41、ication Number in the country of fiscal residence,fiscal address,and country of residence;c)description and characteristics of the operations,methods and execution,amount or price or agreed compensation,currency and form of payment used,and guarantees or coverages assumed.Local Jurisdiction Benchmar

42、ksArgentine regulations establish a preference for domestic comparable over foreign comparable.In this sense,domestic comparable,if any,should be considered as a priority in the analysis,to the extent that there are no significant differences between the comparable elements of the sample or that,if

43、any,they do not affect the conditions analyzed,or adjustments can be made that allow their elimination and optimize the comparison.In relation to accepted methods in Argentine,FTA generally prefers the application of CUP and TNMM.Argentine regulations establish that when there is more than one appro

44、priate method regarding the type of transaction being examined,it should be assessed by interquartile range and median of the prices.In these cases,if the consideration amount set falls within the interquartile range,such prices will be considered as agreed upon between independent parties.Otherwise

45、,the price will be considered as arranged between independent parties if it is equal to the median.There are many cases of transfer pricing being litigated before Argentine Courts(Among others,Supreme Court,Tax court).These cases generally involve the services of pharmaceutical sector,commodities ex

46、ports sector,and automotive sector.Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewArgentine regulates the APA rules and the possibility of the taxpayer requesting its application to FTA.However,regulations are still pending.Transfer Pricing AuditsTransfer Pricing aud

47、its are not common in Argentina because there are few specialists in these matters in the FTA.However,when these do occur,tax audits performed by the FTA generally involve pharmaceutical,automotive and commodities(especially agricultural)operations/sectors more frequently than other types of operati

48、ons.Transfer Pricing Penalties Formal penaltiesFailure to comply with filing Transfer Pricing Study,Master Report,Information Regime Form 2668 and CbCR will result in the application,among others,of the following penalties:Up to ARS 200,000(approx.USD 238 at OER):a)omission to report the membership

49、in one or more MNEs,b)omission to report the identifying information of the designated reporting entity for the CbCR,indicating the capacity in which the entity acts,c)failure to report the submission of the CbCR by the designated reporting entity in the foreign tax jurisdiction.ARS 600,000(approx.U

50、SD 714 at OER)to ARS 900,000(approx.2,586 at OER)for the omission to report the CbCR or its late/incomplete filing.Up to ARS 300,000(approx.USD 357 at OER)for failure to comply with the requests made by FTA for supplementary information about the CbCR.Up to ARS 20,000(approx.USD 24 at OER)for not fi

51、lling the reports covered by Transfer Pricing Rules.Up to ARS 45,000(approx.USD 53 at OER)for failure to comply an information request made by the FTA in connection with international transactions,keep documentation to justify the price,and for failure to comply with requests made by FTA to submit t

52、he Transfer Pricing Tax Return.Up to ARS 450,000(approx.USD 536 at OER)when gross revenues are higher than ARS 10 million and the taxpayer fails to comply with three requirements made by the FTA to submit transfer pricing returns.Transfer Pricing AdjustmentsIn the event of deficiency assessment(tota

53、l or partial non-payment)of transfer pricing regulations,a compensatory interest at the rate of 5.91%per month will be applied.In case of the omission of taxes(due to failure to file a tax return)the applicable penalty will be 200%of the amount of the omitted tax.When fraud is committed,a penalty of

54、 up to 600%may be applied.Additionally,the FTA might file criminal action against the directors of the company which can result in imprisonment of between 2 and 9 years.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 5ArGENTiNALocal Hot Topics and recent Updates We highlight the following Hot Topics t

55、hat have been discussed in Argentina:1)Cases related to commodities,and specially the presence of intermediaries in their transactions,or the application/selection of transfer pricing methods.2)The FTA has challenged the criteria of taxpayers for using multiple fiscal years to select the comparable

56、of the transfer pricing report method.We emphasize that Argentine regulations do not provide for a certain criterion of years to make the report.3)The FTA has challenged the differences in prices between locally sold products and those exported to affiliated foreign companies,to whom products were s

57、old at a lower price than the local market.To make this audit,the FTA has based on the results of certain local entities,which were used to obtain comparable regarding the export prices challenged.In this regard,taxpayers have objected to being compared to the local entities.4)Argentine Regulations

58、establish a preference for domestic comparable over foreign comparable.documentation threshold Master fileTransactions with related parties which collectively exceed ARS 3,000,000(approx.USD 3,571 at the OER)or individually ARS 300,000(approx.USD 357 at the OER)(“The Thresholds”);and The total conso

59、lidated annual income of the MNEs Group exceeds ARS 4,000,000,000(or USD 4,761 at the OER)in the fiscal year preceding the filing.Local fileTransactions with related parties or located in low/non-tax jurisdictions when they exceed The Thresholds.CbCRIncludes those MNEs whose total consolidated annua

60、l revenues are more than EUR 750,000,000.Submission deadlineMaster fileWithin 12 months after the closing of the tax period.Local fileWithin 6 months after the closing of the tax period.CbCRWithin 12 months after the closing of the tax period of the ultimate parent entity.Penalty ProvisionsDocumenta

61、tion late filing provisionUp to ARS 20,000(approx.USD 24 at OER).Tax return disclosure late/incomplete/no filingUp to ARS 45,000(approx.USD 53 at OER)non or incomplete filling.This fine is cumulative with the late filing penalty.CbCR late/incomplete/no filingUp to ARS 200,000(approx.USD 238 at OER)f

62、ailing to meet the CbCR obligations.Up to ARS 900,000(approx.USD 1,071 at OER)for late or incomplete filing of CbCR.Up to ARS 300,000(approx.USD 357 at OER),or ARS 450,000(approx.USD 536 at OER)if thresholds are exceeded,for failing to answer FTA requests for additional information regarding CbCR.CO

63、NTACTEzequiel LipovetzkyBruchou&Funes de +54 11 5171-2311Mariano von SimonsBruchou&Funes de +54 11 5171-2393 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 6Overview Corrs Chambers westgarth,Taxand Australia Taxand Australia is the leading independent full service commercial law firm in Australia.Our

64、 team provides full service,end-to-end tax transactional support on domestic and cross-border mandates,starting with tax due diligence and structuring advice,through to legal documentation and post-merger implementation advice.Taxand Australia provides general tax advisory services in relation to th

65、e application of Australian transfer pricing law and related international related party tax issues.Transfer Pricing FrameworkAustralia has generally adopted the OECD approach to transfer pricing,including the application of the arms length principle.Australian transfer pricing rules are set out in

66、Division 815 of the Income Tax Assessment Act 1997(Cth).Under those rules,where an entity obtains a transfer pricing benefit from conditions that operate between it and another entity in connection with their“commercial or financial relations”,those actual conditions are taken not to operate and ins

67、tead arms length conditions are applied.In addition,Australian transfer pricing rules require the form of actual commercial relations between parties to be disregarded if they are inconsistent with the substance of those arrangements.Australian thin capitalization rules apply in addition to transfer

68、 pricing rules to reduce or further reduce debt deductions.An entity is required to disclose certain details of its international related party dealings in its corporate income tax return.Where the value of those dealings exceeds certain thresholds,an entity is required to prepare and file an Intern

69、ational Dealings Schedule that includes further details of those dealings(such as the extent to which transfer pricing documentation has been obtained and the degree to which it covers the dealings disclosed).Accepted Transfer Pricing MethodologiesAustralian transfer pricing rules require arms lengt

70、h conditions to be identified by reference to OECD transfer pricing guidelines.Acceptable transfer pricing methods include the comparable uncontrolled price method,the resale price method,the cost plus method,the transactional net margin method and the profit split method.The Australian Taxation Off

71、ice has published guidance regarding the factors that should be taken into account when choosing an appropriate methodogy.Transfer Pricing documentation requirementsAustralia has country-by-country(CBC)reporting obligations for entities that are CBC reporting entities.In general terms,a CBC reportin

72、g entity includes an entity that has annual global income of AUD 1 billion or more,or is a member for a group that has annual global income of AUD 1 billion or more.Australian CBC reporting requirements include a CBC report,a master file and a local file that is submitted as an XML file with the Aus

73、tralian Taxation Office.A reporting concession may be available where a CBC report or master file is submitted in another country.Reports must generally be filed within 12 months of the end of the income year to which the reports relate.The Australian local file may require the inclusion of further

74、details to those that are required in other countries.All Australian entities(whether subject to CBC reporting or not)are required to prepare valid transfer pricing documentation in respect of their international related party dealings by the time that the income tax return is due to be filed for th

75、at entity.Any transfer pricing adjustment that arises from a dealing that is not covered by transfer pricing documentation available at the due date for lodgement is subject to increased penalties.Australian transfer pricing documentation must address all requirements under Australian law to be vali

76、d.The documentation requirements are generally based on the OECD guidelines and allow the benchmarking methods permissible under those guidelines.There are additional obligations that must be addressed under Australian law(eg,reconstruction of transactions is allowable in all circumstances and not j

77、ust the exceptional circumstances under the OECD guidelines).There are significant uplifts in penalties that apply to significant global entities(SGEs)if additional tax is imposed in relation to any transfer pricing benefit and for failure to lodge returns,notices or statements on time(refer below).

78、Entities are required to include disclosures in income tax returns relating to its international related party dealings.Detailed disclosures(including dealing value,transfer pricing methodollogy and level of documentation prepared)may be required where the value of the dealings exceeds AUD 2 million

79、.Local Jurisdiction BenchmarksAustralian transfer pricing benchmarking and documentation requirements are generally based on the OECD guidelines and allow the benchmarking methods permissible under those guidelines.As noted above,the circumstances in which a transaction can be reconstructed for the

80、purpose of benchmarking is significantly expanded under Australia law.The Australian Taxation Office has sought to assert rights to reconstruct transactions and this approach has received a degree of endorsement by Australian courts.AUSTrALiA RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 7AUSTrALiAA

81、dvance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewAustralia has a unilateral and bilateral advance pricing agreement program.An APA request from a taxpayer will be considered having regard to the particular facts and circumstances,but the Australian Taxation Office is mo

82、re likely to enter into an APA where certain factors are present.These include consistency with the OECD transfer pricing guidelines,a high level of assurance of the taxpayers compliance with tax laws,the presence of significant complexity,the arrangement the subject of the request has been,or is hi

83、ghly likely to be,entered into,and where there is a high probability of economic double taxation.Based on published statistics,the average length of time to negotiate an APA is approximately 2 years.Transfer Pricing AuditsThe Australian Taxation Office has an active and well resourced transfer prici

84、ng audit function and has litigated a number of transfer pricing disputes.Details of routine audit activities are not made public but the focus of its audit activity seems directed towards large multinational groups.The Australian Taxation Office has published statements that it is focussed upon cro

85、ss border financing arrangements.Transfer Pricing PenaltiesPenalties are imposed for a failure to comply with Australian transfer pricing rules.These penalties may take the form of an administrative penalty or prosecution of an offence.Where a failure to comply with transfer pricing rules results in

86、 a shortfall of tax,an administrative penalty equal to 25%-75%of the shortfall in tax may apply(plus a general interest charge of approximately 11%per annum on the amount underpaid).The Australian Taxation Office has the discretion,but not an obligation,to reduce penalties based on the particular ci

87、rcumstances.However,the administrative penalty would be a minimum of 25%of the shortfall where a taxpayer does not have complying transfer pricing documentation.Penalty amounts are doubled for significant global entities(SGEs).An entity will be an SGE if it is a global parent entity with annual glob

88、al income of AUD 1 billion or more,or is a member of group that is consolidated for accounting purposes where the global parent entity has annual global income of AUD 1 billion or more.In addition,there are also significantly increased penalties for SGEs where certain documents are not lodged on tim

89、e(including income tax returns and CBC statements).These increased penalties may be between AUD 156,500-782,500,depending on the number of days after the due date that the documents are lodged.Local Hot Topics and recent Updates Australia has proposed amendments to its thin capitalization rules and

90、new legislation to deny deductions for payments attributable to a right to exploit an intangible asset of an owner resident in a low tax jurisdiction.Both measures are intended to broadly take effect from 1 July 2023,notwithstanding the measures are yet to be passed as law.While not strictly transfe

91、r pricing matters,these rules will impact the way in which transfer pricing rules may operate in Australia.For example,it is possible for interest deductions to be denied under both thin capitalization rules and transfer pricing rules and this could lead to a different result under transfer pricing

92、rules.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 8AUSTrALiAdocumentation threshold Master file Group revenue of AUD 1 billion or moreLocal file Group revenue of AUD 1 billion or moreCbCR Group revenue of AUD 1 billion or moreSubmission deadlineMaster fileGenerally 12 months after income year endL

93、ocal fileAs aboveCbCRAs abovePenalty ProvisionsDocumentation late filing provisionUp to AUD 782,500(i.e.,for SGEs)Tax return disclosure late/incomplete/no filingPenalty depends on circumstances but may be up to AUD 782,500 plus potential further penalties calculated as a percentage of tax shortfallC

94、bCR late/incomplete/no filingUp to AUD 782,500 CONTACTrhys JewellCorrs Chambers .au+61 3 9672 3455 Kieran EganCorrs Chambers .au+61 2 9210 6275 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 9Overview LeitnerLeitner GmbH wirtschaftsprfer Steuerberater,Taxand Austria Taxand Austrias experienced team c

95、onsisting of transfer pricing specialists assist with all aspects of domestic and foreign transfer pricing obligations and documentation requirements,and with the planning and implementation of international value chains.We analyse the current situation,adapt existing transfer pricing systems or wor

96、k with the client to develop recommendations for establishing a tax-optimised transfer pricing system that is designed take into account business parameters,reduce the risk of double taxation and prevent costly and time-consuming discussions with tax authorities.If needed,we also help defend existin

97、g intragroup transfer pricing mechanisms and systems.Taxand Austria provides tax advisory services in the following fields:Update of existing/conceptualisation and implementation of BEPS-compliant transfer pricing systems and tax-optimised value chains,Creation of clear functional and risk structure

98、s,and optimisation of intragroup supply and service transactions,Analysis of the impact of changes on group structures(business restructuring),Development of/support with depicting the transfer price-specific aspects of intragroup supply and service transactions(including the development of intragro

99、up supply,service,allocation and license agreements etc.),Intragroup financing,implementation of cash pools,Design of intragroup employee secondments,Efficient identification of transfer price risks and potentials for optimization,Tailored Quick Check for the rapid identification of potential transf

100、er price risks,Conceptualisation and implementation of efficient and customised transfer price documentation models in accordance with legal requirements(centralised documentation approaches,master/local files,CbC reporting etc.),Advice for automation-supported tools or web-based solutions to ensure

101、 uniform documentation across countries,Support with audits so disputes may be settled amicably without the involvement of the courts,Management of bilateral and multilateral arbitration and mutual agreement procedures(MAP),Defense of existing intragroup transfer pricing mechanisms and transfer pric

102、ing systems in appeal proceedings,Request for rulings pursuant to sec.118 BAO(Federal Fiscal Code),and initiation of advance pricing agreements(APAs),Benchmarking studies,DAC 6 analysis,Advice regarding VAT,customs and foreign trade legislation in connection with transfer prices.General:Transfer Pri

103、cing FrameworkIn Austria,no statutory provisions dealing specifically with intercompany pricing exist and any tax issues arising from transfer pricing have to be dealt with on the basis of general rules of Austrian income tax law.Therefore,the basic provision in Sec 6 para 6 Austrian Income Tax Act

104、contains provisions based on the principle that prices between related persons must be at arms length.Furthermore,transfer pricing documentation obligations exist due to the Transfer Pricing Documentation Act(“Verrechnungspreisdokumentationsgesetz”or“VPDG”)implemented in 2016.However,transfer pricin

105、g guidelines published by the Austrian Ministry of Finance in 2010 and updated in 2021 ensures the implementation of the OECD Guidelines(and any updates thereto)in Austria.From a legal point of view,the guidelines were published in the form of a ministerial decree and thus do not have the binding ef

106、fect of a law.Accepted Transfer Pricing MethodologiesAustrias transfer pricing guidelines are based on and refer to the OECD Guidelines and thereby follow the revised hierarchy of transfer pricing methods according to the OECD Guidelines.In line with the OECD Guidelines,the Austrian tax authorities

107、must begin a transfer pricing examination from the perspective of the method selected by the taxpayer.The taxpayer,however,must be able to substantiate why the chosen method is appropriate in view of the relevant facts and circumstances.The Austrian tax authority accepts the five following methods(w

108、hich are in line with the OECD):Comparable Uncontrolled Price Method(CUP)Resale Price Method Cost Plus Method Transactional Net Margin Method(TNMM)Profit Split MethodAs the Austrian Transfer Pricing Guidelines are based on and refer to the OECD Guidelines,the principles and the methods set out in th

109、e OECD Guidelines are the only recognized methods in Austria.Nevertheless,a taxpayer may use a different method to set prices,provided that it can demonstrate that it meets the arms length principle and is more appropriate to the facts of the case than one of the OECD methods.AUSTriA RETURN TO CONTE

110、NTS PAGETRANSFER PRICING GUIDE 10AUSTriARegarding method selection,the Austrian Transfer Pricing Guidelines specify that the method that provides the highest certainty for determining an arms length transfer price has to be chosen.As a consequence,the TNMM and the PSM are not regarded as methods of

111、last resort.However,if more than one method could be used and these methods are equally reliable,there is a preference for the standard methods and the CUP method over the other methods in Austria.There is no case law in Austria dealing with the selection and use of specific methods of transfer pric

112、ing.Transfer Pricing documentation requirementsThe Austrian government and tax authority fully followed Action 13 of the OECD BEPS Action Plan.Therefore,the Austrian Transfer Pricing Documentation Act was enacted on 1 August 2016 and applies for fiscal years beginning on or after 1 January 2016.CbC-

113、Report:Austria is requiring Austrian parented MNEs or a local subsidiary with a global consolidated group turnover of at least EUR 750 million in the previous year to file a Country-by-Country(CbC)report containing the information in Annex III of the OECDs BEPS Action 13 final recommendations.The Cb

114、C report has to be filed electronically via FinanzOnline in an XML format,which is very similar to the OECD XML format.CbC-Report notification:Every Austrian group entity or Austrian branches of MNE groups with annual revenues exceeding EUR 750 million in the preceding fiscal year has to notify the

115、tax authority which company will file the CbC-Report.This CbCR notification was initially set to be made annually,no later than the end of the reporting fiscal year.However,the latest Austrian Transfer Pricing Guidelines 2021 states that for fiscal years with a reporting obligation starting after 31

116、 December 2021,a notification is only required if there are changes compared to the previous years notification(e.g.if the ultimate parent company changes).Master File and Local File:In general,all entities(including permanent establishments)belonging to an MNE group that are tax resident in Austria

117、 are requested to prepare a transfer pricing documentation including a Master File and a Local File in German or English language.An entity will fall under the Master File and Local File documentation obligation if its turnover exceeded EUR 50 million in each of the two preceding years.However,a Mas

118、ter File must also be presented even if the Austrian entity will not exceed the revenue threshold but there is another group entity that must prepare a Master File.Master File and Local File must be prepared no later than the statutory deadline for filing the corporate income tax return(31 March of

119、the second year after the end of the reporting fiscal year if the taxpayer is represented by an Austrian tax advisor or 30 June of the first year after the end of the reporting fiscal year in other cases)and may only be requested by the tax authorities after such statutory deadline to be submitted w

120、ithin 30 days upon request from the tax authorities.Transfer pricing documentation is usually submitted to the tax authorities upon request during a tax audit.For entities not exceeding the threshold of a turnover of EUR 50 million in each of the two preceding years,the entities would have to prepar

121、e a transfer pricing documentation based on the administrative guidelines.As such,documentation is required upon the tax authorities request,though lacking any model/template.Formally,if documentation and/or supporting documents are not available in German,the tax authorities have the right to reque

122、st a translation at the taxpayers expense.No other transfer pricing returns of forms are applicable.Local Jurisdiction BenchmarksThe preparation of benchmark studies based on databases as Orbis,Amadeus,Ktmine,DealScan,S&P Credit Risk Pricing is accepted in Austria,if the requirements according to th

123、e Austrian Transfer Pricing Guidelines are fulfilled.In general,Austrian comparables should be included in the final set of comparables.However,the Austrian Ministry of Finance also accepts pan-European comparables.The Austrian Transfer Pricing Guidelines include specific requirements for the prepar

124、ation of benchmark studies.Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewSince 1 January 2011,there has been a unilateral advance ruling procedure in place in Austria,the so-called advance ruling or“Auskunftsbescheid”.This procedure provides for the possibility to r

125、equest a binding ruling on transfer pricing matters.Administrative fees of EUR 1,500 to EUR 20,000(if part of a group of companies according to local accounting standards)will be charged for the processing of the application of unilateral APAs depending on the companys sales.Advance tax rulings are

126、dealt with by the responsible tax office of the taxpayer.The APA request must be submitted electronically if the applicant has a domestic tax number.The application has to be processed within 2 months after submission.In Austria,no statutory provisions dealing specifically with BAPA or multilateral

127、APA exist.However,the new guidance on MAP and arbitration procedure published in 2022 includes details on bilateral/multilateral APA.Therefore,bilateral APAs should start with an informal discussion(prefiling meeting)prior to formal initiation of an APA.The prefiling meeting is intended to offer the

128、 taxpayer the opportunity to discuss,together with the competent authority the suitability of an APA in the specific case,the nature and scope of the available documentation,as well as a rough schedule.A request must be submitted by the taxpayer.Prior to conclusion of an APA,the taxpayer will receiv

129、e a statement of the agreement reached from the authorities.If the taxpayer agrees,the APA will become binding for the competent authorities.In addition,there is also the option of a“roll-back”,RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 11AUSTriAi.e.extending the solution obtained through the APA

130、 for periods prior to the APA by means of a MAP.Since only a few bilateral APAs are requested in Austria,the timing mainly depends on the other contracting state.Transfer Pricing AuditsIt is unusual for the tax authority to carry out an audit specifically in respect of transfer prices alone.However,

131、experience shows that at the beginning of a tax audit,inspectors request a description of the transfer pricing system and a transfer pricing documentation.Typically,transfer prices represent a considerable part of a tax audit of Austrian-based MNEs or subsidiaries of MNEs in Austria.The tax authorit

132、y has special TP experts who retrace and review the correctness and comparability of transfer pricing documentation including benchmarking studies.The tax authorities have access to the Orbis database.Transfer Pricing PenaltiesCbC-Report:A maximum penalty of EUR 50,000 and up to EUR 25,000 for gross

133、 negligence applies in case of non-timely or incompelte or incorret filing of the CbC report.There are no specific penalty provisions in case of non-timely filing or incomplete or incorrect filing of Master file or Local file.However,the Austrian Administrative Code requires the taxpayer to provide

134、the tax authority with all relevant Information.If no Transfer pricing documentation is submitted,a fine of up to EUR 5,000 might be imposed and if wilful tax evasion or tax fraud can be proven by the tax authority the fact of non-filing could aggravate the fine for such conduct.Additional penalties

135、 can arise in case of TP adjustments.Local Hot Topics and recent Updates Focus on Financial TransactionsMost recently,Austrian Tax officers challenge the advance of funds and further financial transactions within MNE groups more frequently.Therefore,clients are advised on the specifics of structurin

136、g such transactions and robust transfer pricing documentation(including specific benchmarking studies)is prepared taking into account the recommendations of new Chapter X OECD Guidelines in order to defend the proposed structure in future tax audits.Transfer Pricing documentation for SME advantageou

137、s Within tax audit,entities not exceeding the threshold of a turnover of EUR 50 million in each of the two preceding years are regularly requested to submit a(subsidiary)transfer pricing documentation based on the administrative guidelines.To avoid inconvenient queries with an uncertain outcome by A

138、ustrian Tax officers,entities slightly not exceeding the thresholds are encouraged to consider the content requirements for Local Files as stipulated in the OECD Guidelines and voluntarily prepare sufficient transfer pricing documentation.Multilateral risk AssessmentSince July 2022,a procedural basi

139、s for the participation of the tax administration in the International Compliance Assurance Program(“ICAP”)or European Trust and Cooperation Approach(“ETACA”)for multilateral risk assessment.In accordance with the CbC reporting,the prerequisite for participation in the multilateral risk assessment i

140、s a group turnover of at least 750 million euros.The risk assessment is divided into three phases:1)the selection phase,in which the ultimate parent entity applies for the procedure to the senior financial administration responsible for it,2)the risk assessment phase and3)the outcome phase,which end

141、s with a report on the risk assessment(“outcome letter”).These procedures shall provide a certain degree of tax and planning certainty for multinational companies,although it is not legally binding and has no prejudicial effect on later assessments or subsequent mutual agreement procedures in Austri

142、a.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 12AUSTriAdocumentation threshold Master fileEntity of MNE group with turnover exceeding EUR 50 million in each of the two preceding yearsLocal fileEntity of MNE group with turnover exceeding EUR 50 million in each of the two preceding yearsCbCRglobal c

143、onsolidated group turnover of at least EUR 750 million in the previous yearSubmission deadlineMaster fileOnly upon requestLocal fileOnly upon requestCbCR12 months after the last day of the reporting fiscal year of the MNE groups ultimate parent companyPenalty ProvisionsDocumentation late filing prov

144、isionno specific penalty provisions applicableTax return disclosure late/incomplete/no filingAssessment interest:in addition to the current annual rate of interest of the Austrian National Bank,an annual simple interest rate of 2%of the tax dueLate filing penalty:10%of the tax assessed may be charge

145、d by the tax office,unless the taxpayer can prove that the late filing was not his fault.If the taxpayer does not file a tax return,despite reminders from the tax authorities,the tax authorities may impose a penalty of up to EUR 5,000.CbCR late/incomplete/no filingA maximum penalty of EUR 50,000 app

146、lies and up to EUR 25,000 for gross negligence with the CbC report.CONTACTHarald GallaLeitnerLeitner GmbHHarald.G+43 1 71 89 890 532Clemens NowotnyLeitnerLeitner GmbHClemens.N+43 732 70 903 359Alexander Kras LeitnerLeitner GmbHAlexander.K+43 662 847 093 621Norbert Schrottmeyer LeitnerLeitner GmbHNor

147、bert.S+43 1 71 89 890 580 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 13OverviewArteo,Taxand BelgiumArteo is a Brussels-based independent law firm founded in 2020 by the members of the tax department of a large,full-service Belgian law firm.Arteo has developed strong expertise in matters involving

148、 transfer pricing,an evolving area in the Belgian tax market:Arteo regularly advises on transfer pricing issues and frequently assists in an increasing number of transfer pricing audit and litigation cases;Arteos broad tax litigation experience is a key asset when dealing with transfer pricing issue

149、s;Arteo also has a substantial know-how in assisting clients in applying for advance tax rulings with respect to transfer pricing before the Belgian Ruling Commission(in collaboration with economists for the drafting of transfer pricing studies).General:Transfer Pricing FrameworkAs a general princip

150、le,Belgium adheres to the arms length criterion as proposed by the fiscal committee of the OECD.In 2004,Belgium explicitly introduced the arms length principle into its domestic law(inspired by Article 9 of the OECD Model Convention).The main transfer pricing adjustments are traditionally based on d

151、omestic law.Several articles of the Belgian Income Tax Code 1992(“BITC”)provide the Belgian tax authorities with a tool for scrutinizing intercompany transactions,among which:Art.26 of the BITC:“abnormal or gratuitous benefits”granted by a Belgian enterprise to foreign affiliated companies are added

152、 to its taxable income;Art.206/3,1,first indent,of the BITC:losses(whether current-year or carried forward)and tax attributes(e.g.,dividend received deduction)cannot be offset against profits derived from“abnormal or gratuitous benefits”obtained from an enterprise with which the taxpayer has direct

153、or indirect relationship of interdependence.Such profit constitutes therefore a minimum taxable basis effectively subject to Belgian corporate income tax;Art.55 of the BITC:interest is deductible as a business expense,provided the interest rate is fixed on an arms length basis taking into account th

154、e risks relating to the operation,the financial position of the debtor and the duration of the loan;Art.54 of the BITC:payments of interest,royalties and service fees made to tax haven beneficiaries are deductible only if the Belgian taxpayer proves that they correspond to genuine and sincere transa

155、ctions and that they do not exceed normal limits.Belgium has introduced the requirement to prepare and file transfer pricing documentation(see below),which is intended to enable the Belgian tax authorities to carry out a proper analysis of transfer pricing risks and to conduct a more effective audit

156、.Accepted Transfer Pricing MethodologiesAs a general principle,Belgium follows the OECD transfer pricing guidelines(see Administrative Circular 2020/C/35 dated 25 February 2020).There is no hierarchy between the transfer pricing methods,provided that the method chosen results in an arms length outco

157、me for the specific transaction.In practice,taxpayers usually use one of the five OECD transfer pricing methods.Other transfer pricing methods(or a combination of transfer pricing methods)may also be acceptable depending on the case.The Administrative Circular 2020/C/35 recognizes that pricing betwe

158、en related companies is not an exact science and that both the Belgian tax authorities and the taxpayer need to show flexibility and cooperation to arrive at an arms length price.Transfer Pricing documentation requirementsA Belgian entity of a multinational enterprise(“MNE”)group is required to file

159、 a master file as well as a local file(statements 275 MF and 275 LF)if it exceeds one of the following thresholds in its stand-alone financial statements of the prior financial year:Operating and financial income equal to or exceeding EUR 50 million(excluding non-recurring items);or Balance sheet to

160、tal equal to or exceeding EUR 1 billion;or Average annual number of 100 or more FTEs.The master file should be filed within 12 months of the last day of the reporting period of the MNE group.The local file must be filed annually as an attachment to the Belgian corporate income tax return(Art.321/4 a

161、nd 321/5 of the BITC).A Belgian entity may also be required to file a country-by-country(“CbCR”)report and/or CbCR notification form(statements 275 CBC and 275 CBC NOT)if it belongs to a MNE group having a gross consolidated revenue of at least EUR 750 million as reflected in the consolidated financ

162、ial statements during the year preceding the reporting year.The CbCR report must be filed within 12 months of the last day of the reporting period of the MNE group.The CbCR notification form should be filed no later than the last day of the reporting period of the MNE group and only insofar the info

163、rmation differs from that provided for the previous period(Art.321/2 and 321/3 of the BITC).BELGiUM RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 14BELGiUMLocal Jurisdiction BenchmarksA comparability analysis is important for all transfer pricing methods used in order to assess whether related trans

164、actions comply with the arms length principle.Benchmarking and the establishment of a transfer pricing policy is therefore recommended and constitutes the basis for any justification of the prices used.In line with the OECD transfer pricing guidelines,the emphasis is more on the reliability of the c

165、omparability results than on the process to be followed.In practice,external comparable may be sought in publicly accessible data or commercial databases(from domestic and/or foreign information sources).The Belgian tax authorities accept pan-European benchmarks.In practice,the Belgian tax authoriti

166、es consider that an update of the results obtained from the comparability analysis should be carried out every three years(except when facts and circumstances require an earlier update).Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewIt is common to apply to the Rulin

167、g Commission,an autonomous section of the tax authority,for a unilateral APA in the form of an advance tax ruling(officially named“advance decision in tax matters”).The process usually starts with a pre-filing phase,in which the envisaged structure is explained and discussed.In the second phase,a wr

168、itten ruling application is submitted in which the facts and circumstances and tax analysis are set out in detail(together with supporting documents,such as benchmarking studies),and the decision is rendered based on this application.The entire process generally takes four to six months.An anonymize

169、d version of the advance tax ruling is subsequently published.Unilateral APAs are in principle valid for a(renewable)period of three years.Bilateral APAs are infrequent.Applications go to the tax authorities International Relations Department and need to be submitted before the end of the first year

170、 intended to be covered.The International Relations Department co-ordinates applications with the other relevant jurisdictions.Bilateral APAs are not published.The time taken for the process varies and can extend over several years in complex files.The procedures to obtain advance rulings and bilate

171、ral APAs entail no filing fees in Belgium.Transfer Pricing AuditsLately,tax auditors have been very much on the lookout for transfer pricing and international transactions generally.They are helped by a number of transfer pricing documentation requirements(namely master file,local file and CbCR repo

172、rting;see above)and a special schedule attached to the corporate income tax return listing payments made directly or indirectly to entities established in tax havens.There has been a substantial increase in transfer pricing litigation in Belgium as a consequence of the governments development of its

173、 transfer pricing unit,a specialist team within the federal tax authority.The transfer pricing unit controls transfer pricing arrangements of multinational companies as well as smaller international companies.The audit usually begins with the reception of a standard transfer pricing questionnaire li

174、sting questions to be answered within 30 days.The questions relate to intra-group transactions,company overall business,functions,risks and assets(in particular intangible assets).In addition,detailed information regarding the existence of transfer pricing documentation and methodology is requested.

175、The profile of the companies audited is diverse:industrial and trading companies,as well as holdings,or financing centres.Transfer Pricing PenaltiesAdministrative fines can be imposed by the tax authorities for failure to comply with the transfer pricing documentation requirements(lump-sum fines ran

176、ging from EUR 1,250 to EUR 25,000)and/or in case of transfer pricing adjustments(ad valorem tax increases from 10%to 200%,depending on the seriousness of the infringement and the taxpayers previous conduct).Also,the additional tax base determined by the tax authorities cannot be offset with tax loss

177、es and other tax attributes(except where no tax increase or a tax increase below 10%was imposed).Local Hot Topics and recent UpdatesOn 20 September 2023,the General Court of the European Union ruled that the so-called Belgian regime of“excess profit tax rulings”constitutes an unlawful State aid sche

178、me and dismissed the actions that were initiated by the Belgian State and 29 beneficiary companies.These tax rulings were granted to Belgian subsidiaries and permanent establishments of multinational groups and exempted the so-called“excess”profits(i.e.,profits exceeding the profit that would have b

179、een made by comparable standalone companies operating in similar circumstances)from corporate income tax,irrespective of whether the other State adjusted the taxable profit upwards.According to the Belgian tax authorities,these excess profits were the result of synergies,economies of scale or other

180、advantages arising from part of a multinational group,and were therefore not attributable to the Belgian entities in question.With its judgements of 20 September 2023,the General Court reversed its prior decision in 2019 which ruled that the European Commission had erred in treating the different ta

181、x rulings granted as the implementation of a“scheme”.To our knowledge,an appeal(limited to points of law only)has been lodged before the Court of Justice in most of the cases.If these appeals are dismissed,the beneficiaries of the excess profit tax rulings will have to refund definitively to the Bel

182、gian State the advantage they have derived from it.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 15BELGiUMdocumentation threshold Master file Operating and financial income equal to or exceeding EUR 50 million(excluding non-recurring items);or Balance sheet total equal to or exceeding EUR 1 billion;

183、or Average annual number of 100 or more FTEsLocal fileSame criteria as for the master fileCbCRGross consolidated revenue of at least EUR 750 millionSubmission deadlineMaster fileWithin 12 months of the last day of the reporting period of the MNE groupLocal fileWithin the deadline for filing the corp

184、orate income tax returnCbCRWithin 12 months of the last day of the reporting period of the MNE groupPenalty ProvisionsDocumentation late filing provisionFines up to a maximum of EUR 25,000Tax return disclosure late/incomplete/no filingFines up to a maximum of EUR 1,250;ad valorem tax increase rangin

185、g from 10%to 200%CbCR late/incomplete/no filingFines up to a maximum of EUR 25,000CONTACTJean-Michel degeArteojm.degeearteo.law+32 2 392 81 00Steven PeetersArteos.peetersarteo.law+32 2 392 81 00Xavier PaceArteox.pacearteo.law+32 2 392 81 00 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 16Overview Bo

186、rden Ladner Gervais LLP,Taxand CanadaCanadas largest law firm offers clients advice on all aspects of business law from coast to coast in every major city across the country.BLGs Tax Group provides advice on all varieties of taxes in Canada,including transfer pricing in an income tax context.In part

187、icular,members of BLGs Tax Group have advised clients on obtaining advance pricing agreements,preparing contemporaneous documentation,managing transfer pricing audits,and resolving controversies at various levels,including mutual agreement procedures and before the courts.We work with Taxand group m

188、embers who have in-house economics and valuation expertise to address client needs on issues requiring such specialized transfer pricing knowledge.General:Transfer Pricing FrameworkCanadas transfer pricing regime in s.247 of the Income Tax Act(Canada)“ITA”adopts the arms length principle as its foun

189、dation.Unlike other regimes that are far more detailed and prescriptive,the Canadian statute adopts a somewhat minimalist approach.Briefly,where a Canadian and a non-arms-length non-resident transact on terms and conditions that differ from those that would have been made between arms-length persons

190、,amounts that must be determined for Canadian tax purposes are adjusted to the amounts that would have been determined if the terms and conditions made by arms length parties had applied.In limited circumstances,a so-called“recharacterization”rule allows the Canada Revenue Agency“CRA”to go beyond re

191、-pricing a transaction and re-determine the amounts that would have resulted from whatever transaction(if any)arms length parties would have entered into instead of the transaction actually undertaken by the taxpayer.The Canadian rules require the particular transaction or series of transactions the

192、 taxpayer entered into with the non-arms length non-resident(the“tested transaction”)to be identified and then measured against the arms-length standard set out in s.247.Defining exactly what the tested transaction is can be critical,and is frequently a source of dispute.One of Canadas leading trans

193、fer pricing cases cautioned against“an overly broad series that renders the analysis required by the transfer pricing rules impractical or even impossible by unduly narrowing(possibly to zero)the set of comparable circumstances and substitutable terms and conditions.”(Cameco Corp.v.The Queen,2018 TC

194、C 195 at para.704).As a general rule Canadian transfer pricing jurisprudence has focused carefully on the legal rights and obligations created by each participating legal entity,and applied s.247 based on those legal rights and obligations.The CRA adopts and applies the OECD Transfer Pricing Guideli

195、nes in its administration of s.247,and as a result tends to focus less on actual legal rights and obligations and more on the economic results and what the CRA believes the taxpayer should have done.The result has been an increasing frequency of transfer pricing disputes in Canada,as courts have rep

196、eatedly observed that while OECD pronouncements may be a useful resource,“the OECD Transfer Pricing Guidelines are not controlling as if they were a Canadian statute and the test of any set of transactions or prices ultimately must be determined according to the ITA rather than any particular method

197、ology or commentary set out in the Guidelines.(Canada v.GlaxoSmithKline Inc.,2012 SCC 52,para.20).Canadas transfer pricing regime is described in greater detail in Suarez,“Transfer Pricing in Canada”,Tax Notes International,December 2,2019,p.781.Accepted Transfer Pricing MethodologiesThe Canadian st

198、atute does not prescribe any particular method or hierarchy for determining and applying arms-length terms and conditions.The CRA endorses the“typical method”described in the OECD Transfer Pricing Guidelines for performing a comparability analysis,including a review for comparables,selection of the

199、most appropriate transfer pricing method and application of the selected method to the taxpayers facts.In this regard,the CRA identifies three traditional transfer pricing methods:comparable uncontrolled price“CUP”;resale price;and cost-plus.The profit-split and transactional net margin methods are

200、also considered acceptable.The CRAs view is that there is no strict hierarchy of transfer pricing methods,and that what is truly relevant is“the degree of comparability available under each of the methods and the availability and reliability of the data”for the purpose of providing“the most direct v

201、iew of arms length behaviour and pricing”(TPM-14).That said,the CRA continues to espouse the view that a“natural hierarchy”exists amongst these methods in favour of the traditional transaction methods(and in particular CUP).Transfer pricing disputes frequently involve disagreement as to what constit

202、utes the most appropriate methodology in the taxpayers particular circumstances.Transfer Pricing documentation requirementsThere are no“master file”/”local file”obligations in Canada.The primary role of documentation in Canadian transfer pricing is as a means of demonstrating to the CRA(and if neces

203、sary a court)that the taxpayer has carefully considered which transfer pricing methodology to use and applied that methodology in such a manner as to have made reasonable efforts to establish and use arms-length transfer prices.The better the quality of the taxpayers transfer pricing documentation,t

204、he easier it is to sustain the transfer prices in fact used by the taxpayer in the face of a CRA audit,so as to prevent the CRA from adjusting them.Transfer pricing documentation that is prepared within 6 months from the relevant taxation year-end and meets the substantive requirements set out in s.

205、247(4)ITA is a necessary(but not sufficient)condition to preventing CANAdA RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 17CANAdApenalties from being applied in the event that the CRA makes transfer pricing adjustments in excess of a specified threshold.There is no statutory obligation to prepare su

206、ch documentation or to file it with the CRA however.A Canadian taxpayer is obliged to file a Form T106 for each non-arms length non-resident with whom the taxpayer has transacted during the year(subject to a de minimus exception).The Canadian taxpayer must also file a T106 Summary form annually summ

207、arizing all such transactions with all non-arms-length non-residents during the year.These forms constitute the primary way in which the CRA is alerted to transactions of interest from a transfer pricing perspective.Each late-filed T106 form is subject to a penalty of$25/day($2,500 maximum)and a fai

208、lure to file is penalized at$500($12,000 maximum),which is doubled($1,000/month,$24,000 maximum)where the CRA has served a demand to file.Local Jurisdiction BenchmarksIdentification of suitable comparables remains the foundation of Canadas transfer pricing system.There are no legislative guidelines

209、for establishing comparability,so determining appropriate comparables is an area of judgment on which taxpayers and the CRA frequently disagree.Foreign comparables are acceptable,and the CRA has expressed the view that while domestic comparables would be assumed to be more reliable where the Canadia

210、n taxpayer is the tested party,foreign comparables meeting the same standards of comparability are valid.The CRA insists on establishing current-year comparables for each particular taxation year under review.Multi-year data is not considered acceptable for any particular year,and the use of an inte

211、r-quartile range is also rejected,at least formally(although it is sometimes used in practice).The are no“safe harbours”for these purposes.The CRA often uses comparables taken from other taxpayers the source of which the CRA will refuse to disclose to the taxpayer under audit(so-called“secret compar

212、ables”).Such confidential third-party information can be frustrating to deal with during an audit,since without full knowledge of the source of the“secret comparable”it is difficult for the taxpayer to assess its true comparability.Usually the taxpayer will only be able to gain full knowledge of suc

213、h“secret comparables”at the litigation stage,once the audit has been completed and the CRA Appeals process concluded.Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewAPAs are available in Canada,and are frequently a cost-effective alternative to lengthy and expensive a

214、udit disputes.APAs may be unilateral,bilateral or multilateral.The CRA has a strong preference for bilateral or multilateral APAs.Business restructurings are not accepted for the APA program.The typical term of an APA is 3 5 taxation years.The APA process involves a pre-filing meeting with the CRA t

215、o discuss potential suitability.This is followed by the taxpayer making a formal request setting out the relevant taxpayers,transactions and years to be covered by the APA requested.If the CRA accepts the taxpayers proposal,the taxpayer prepares the formal APA submission setting out the proposed tra

216、nsfer pricing methodology and underlying data,for the CRA team to review.There are usually a number of follow-up information requests for the taxpayer from the CRA before the final version is settled and executed,as well as negotiations with other relevant tax authorities for bilateral or multilater

217、al APAs.Depending on the countries and issues involved,two years is a common time-frame from start to finish.Transfer Pricing AuditsThe CRA regularly and aggressively conducts transfer pricing audits,which are extremely document-intensive and time-consuming to respond to.The CRA applies a“risk-based

218、 approach to file selection,proper assessment of the facts and circumstances relevant to OECD comparability factors,well-supported and documented audit files,and assessments that respect the arms-length principle.”The audit process generally begins with a formal demand for the taxpayers contemporane

219、ous documentation,which triggers a 90-day period for the taxpayer to deliver such to the CRA(there are no extensions permitted for this deadline).The CRA audit team will generally also seek oral interviews with various personnel within the multinational enterprise of which the Canadian taxpayer is a

220、 member,and(depending on the circumstances)site visits.Recent legislative changes have significantly expanded the CRAs powers to require oral interviews,and the CRA views this tool(and in particular functional interviews to determine how functions and risks are allocated within the MNE)as an essenti

221、al element of the audit process.It is essential for the taxpayer to assemble a team of internal and external resources to conduct the transfer pricing audit in an organized and effective manner,and to minimize the risk of the CRA audit team receiving misinformation that creates an unfavourable or mi

222、sleading image with the CRA.This is generally achieved by establishing a single point of taxpayer contact with the CRA audit team,a process for handling the CRA audit teams requests,and identifying communications and analysis that are protected from disclosure under lawyer-client privilege.Near the

223、end of the audit,the CRA team leader will issue a“proposal letter”indicating the adjustments that the CRA intends to make and inviting final submissions in response(the usual response time offered is 30 days,which can often be lengthened if requested).Following that process,the taxpayer will general

224、ly receive a final letter stating what adjustments the CRA is making,followed by the issuance of a formal notice of re-assessment.The taxpayer has 90 days from there to initiate the appeals process within the CRA Appeals branch by filing a Notice of Objection,with RETURN TO CONTENTS PAGETRANSFER PRI

225、CING GUIDE 18CANAdAother potential recourse(i.e.,MAP,litigation before the courts)potentially available.The taxpayer can usually obtain a copy of the auditors T20 report and supporting working papers on request,which should be scrutinized for factual deficiencies.Transfer Pricing PenaltiesTransfer p

226、ricing penalties apply under s.247(3)ITA in certain circumstances,serving as a deterrent to under-allocating income to Canada.The amount of the penalty is computed as 10%of the taxpayers net adverse transfer pricing adjustments made by the CRA(not 10%of the increased tax resulting therefrom).As such

227、,penalties can apply even if the taxpayer is in a loss position for the year,and are onerous by international standards.These penalties apply where the taxpayers net transfer pricing adjustment for the year exceeds the lesser of C$5 million and 10%of the taxpayers gross revenue for the year.In this

228、regard,the taxpayers net transfer pricing adjustment for the year is defined to exclude those adjustments in respect of which the taxpayer made“reasonable efforts”to determine and use arms-length prices and allocations as such,“reasonable efforts”are a defence against penalties even where an adverse

229、 adjustment occurs.While what constitutes such“reasonable efforts”is not set out in the statute(there are no safe harbours)and so must be determined in each case based on the taxpayers particular circumstances,a taxpayer is deemed not to have made such reasonable efforts unless it prepares contempor

230、aneous documentation within 6 months of each taxation year-end(a shorter time period than the 1 year applicable in many countries)that meets the substantive requirements in s.247(4)ITA,and delivers it to the CRA within 90 days of a demand for it.Whenever the dollar threshold is met for transfer pric

231、ing adjustments,the CRA will frequently assess penalties on the basis that the taxpayers contemporaneous documentation does not meet the required substantive standard.Such a penalty assessment requires approval from the CRAs internal Transfer Pricing Review Committee.While not a penalty per se,when

232、adverse transfer pricing adjustments are made to the Canadian taxpayer,there will usually be a“secondary adjustment”to reflect the value of the Canadian taxpayer having charged too little for goods and services it has delivered to,or paid too much for goods and services received from,a non-arms-leng

233、th non-resident.The amount of that secondary adjustment will usually be treated as a deemed dividend triggering non-resident withholding tax(25%unless reduced by a tax treaty),unless the non-resident has repatriated the relevant amount back to the Canadian taxpayer with the CRAs concurrence.Local Ho

234、t Topics and recent Updates In June 2023,the federal government released a consultation paper on Canadas transfer pricing rules,which included draft legislative amendments to the ITA.If enacted,these proposed amendments would significantly amend Canadas existing transfer pricing regime.While ostensi

235、bly providing“greater clarity”on the application of the arms-length principle,the proposals are clearly geared towards moving Canadas transfer pricing rules further towards the OECD Transfer Pricing Guidelines by de-emphasizing reliance on the legal rights and obligations created by the parties and

236、elevating the importance of their“economically relevant characteristics.”This initiative is a response to the governments resounding defeat in the Cameco case,where the CRA sought unsuccessfully to apply the“recharacterization”rule in s.247(2)(b)and(d)ITA.The proposed amendments would make it easier

237、 for the government to entirely replace(rather than merely reprice)the taxpayers intra-group transaction.They would also include a rule requiring Canadas transfer pricing rules to be generally interpreted in a manner consistent with the OECD Transfer Pricing Guidelines.The proposals set out in the J

238、une 2023 transfer pricing consultation paper also include the following:increasing to$10 million the threshold for transfer pricing adjustments to potentially trigger penalties;aligning existing contemporaneous documentation standards with those used by the OECD;and adopting streamlined approaches f

239、or certain situations(e.g.,intra-group loans,routine distribution activities,etc.).RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 19CANAdAdocumentation threshold Master fileNot ApplicableLocal fileNot ApplicableCbCR 750MSubmission deadlineMaster fileNot ApplicableLocal fileNot ApplicableCbCR12 months

240、 from year-endPenalty ProvisionsDocumentation late filing provisionNot Applicable;however,absence/inadequacy of timely contemporaneous documentation exposes taxpayer to penalties if transfer pricing adjustments exceed prescribed thresholdTax return disclosure late/incomplete/no filingLate filing pen

241、alty of 5%of taxes owing plus a further 1%per month late(maximum 12 months)CbCR late/incomplete/no filing$500/month to a maximum of 24 monthsCONTACTSteve SuarezBorden Ladner GervaisSS+416 367 6702 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 20OverviewHendersen,Taxand ChinaHendersen is a boutique p

242、rofessional tax and accounting service firm estalished in 2004.With extensive exposures to world-class clients and hands-on experiences in various industrial business,our technical and industrial expertise as well as practical experiences is simply among the top class in China.We have dedicated and

243、experienced transfer pricing specialists,worldwide professional databases,close interaction with Taxand global transfer pricing network as well as strong connection with tax authorities.We always focus on clients specific needs and aim to provide tailor-made solutions to our clients.All these enable

244、 us to provide top-quality transfer pricing services to our clients and be highly competitive in this special areas including conducting transfer pricing model and policy review,planning and restructuring,as well as transfer pricing risk and opportunity assessment;documentation clients transfer pric

245、ing policies and prepare supporting materials in a systematic manner to prepare for any checks from the tax authority,including preparation of transfer pricing contemporaneous documentation;providing transfer pricing audit defense support including risk management,documents preparation and negotiati

246、on with tax authority to achieve the best audit result;assisting in Advanced Pricing Arrangement(“APA”)from pre-filing meeting,formal application,negotiation,to signing and execution of the APA;assisting the clients to review and structure intercompany transactions,in order to lower the overall tax

247、burden on their China operations while in full compliance with China tax and transfer pricing regulations,etc.General:Transfer Pricing FrameworkUnder article 110 of the Implementation Regulations of the Enterprise Income Tax Law(EITIR),the arms length principle is defined as the principle adopted by

248、 unrelated parties when conducting business transactions based on fair transactional prices and normal business practices.Transfer pricing legislation is governed by Notice 42/2016 with the requirements of related party reporting and contemporaneous documentation.The State Administration of Taxation

249、(SAT)issued Notice 64/2016 to improve the administration of APAs.In additon,Notice 6/2017 regulars the administration of Special Tax Investigation and Adjustment and Mutual Agreement Procedures and clarifis certain key transfer pricing issues,as well as the methodology and procedures for special tax

250、 audits and adjustments.Accepted Transfer Pricing MethodologiesIn addition to the traditional five transfer pricing methodologies recommended by the OECD principles,Notice 6/2017 introduced other methods,including asset valuation methods such as the cost method,market method,income method,etc.,which

251、 are consistent with the arms length principle as“supplementary methods”.There is no special order of the methods to be used.The taxpayer is given the right to choose any method or combination of the above methods as long as the method is reasonable and appropriate taking into account the factors su

252、ch as type,nature of transactions and investigation results of the tax authority.Transfer Pricing documentation requirementsIn addition to the annual reporting forms on related party transactions,Notice 42/2016 introduces a three-tier documentation framework,as set out in the OECDs framework in BEPS

253、 Action 13.Transfer pricing contemporaneous documentation consists of a Master File,a Local File and a Special Issue File.Local entity whose annual related party transactions exceed one of the prescribed thresholds should prepare the local file.These thresholds are as follows:For tangible buy-and-se

254、ll related party transactions:RMB 200 million;For intangible buy-and-sell related party transactions:RMB 100 million;For all other related party transactions:RMB 40 million.As for the Master File,the local entity shall submit the Master File if either of the following conditions is met:The local ent

255、ity has overseas related party transactions,and the groups ultimate holding company has prepared a Master File;or The local entity has related party transactions exceeding RMB 1 billion during the year.The Special Issue File is required for taxpayers engaging in a cost sharing agreement or falling u

256、nder the thin capitalization requirement.The CbCR forms are part of reporting forms on the transactions between related parties together with the annual enterprise income tax return.The CbC reporting forms are required from the Chinese resident enterprise if:it is the ultimate holding company of a g

257、roup with consolidated revenues of over RMB 5.5 billion;or it is nominated as the CbCR entity.CHiNA RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 21CHiNALocal Jurisdiction BenchmarksBased on Notice 42/2016,a comparable analysis must be made in order to select reasonable transfer pricing methods.The

258、following factors should be considered in the comparable analysis:characteristics of the assets or services transferred;functions,risks and assets of the parties involved;terms of contracts;economic environment;and business strategies.For more detailed information on Chinese companies,such as segmen

259、ted profit and loss statements,Chinese specific databases(in Chinese language)such as Wind or Tianxiang are used.Public information for companies listed in Shanghai,Shenzhen and Shenzhen small-medium size enterprises are used for Chinese comparables.For comparables worldwide,China Tax authorities us

260、ually would adopt the international database such as OSIRIS,as well as their internal database.Taxpayers are expected to determine whether internal comparable information can be found within the company.If the information is unavailable,companies are expected to carry out an external comparable stud

261、y using Chinese and/or foreign comparable companies.Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewArticle 42 of the Enterprise Income Tax Law(EITL)provides for the possibility of negotiation and entering into an APA with the tax authority.According to Notice 64/2016

262、,APA candidates must meet all of the following requirements for 3 years prior to the application:the annual related party transactions must exceed RMB 40 million;they have reported related party transactions in their annual tax filings properly;and they have maintained the required contemporaneous d

263、ocumentation.According to Notice 64/2016,an APA usually covers a period of 3 to 5 years following the year of application.Notice 64/2016 also allows an APA to apply retroactively to the year of application or previous years upon approval of the tax authority.There is no filing fee for APAs in China.

264、The applicant can submit application to the local tax bureau,or SAT if the APA involves more than one province or if it is a bilateral/multilateral APA.Negotiation and execution of an APA usually involves six stages,i.e.pre-filing meeting,formal application,examination and appraisal,negotiation sign

265、ing of arrangements and supervision of implementation.Transfer Pricing AuditsThere is a 10-year statute of limitation for tax adjustments.This does not apply in cases of fraud,wilful default or negligence.The transfer pricing audit process is generally initiated by a request for financial and manage

266、ment information such as statutory accounts,tax computation,pricing information,management accounts and transfer pricing documentation.Based on this information,the tax authority will carry out a review of the documents and decide if a more detailed review is required.A field visit will be carried o

267、ut if it has been found necessary after review of the submitted information.Transfer Pricing PenaltiesTaxpayers who fail to comply with the requirements for providing information or provide false information or do not provide the infor-mation in time will be fined according to the relevant articles

268、of the Administration of Tax Collection Law(TCAL).The penalty described in the TCAL could range from CNY 10,000 to CNY 50,000 in serious cases.Penalty interest will generally be imposed on tax adjustments made under the EITL(including transfer pricing adjustment).The interest rate shall be calculate

269、d based on an RMB loan benchmarking rate published by the Peoples Bank of China plus 5%.The interest on underpaid taxes is on a daily basis,starting from 1 June of the tax year following the one to which the tax payment is related until the day the underpaid tax is settled.In addition,if a taxpayer

270、can provide contemporaneous documentation and/or other information/documents requested by the tax authority,the additional 5%surcharge may be waived.The additional tax assessment,together with penalty interest(if any),should be-settled with the tax authority within the prescribed deadline,overdue pa

271、yment would be subject to an additional 0.05%penalty interest per day.Local Hot Topics and recent Updates Transfer pricings,particularly of MNCs who have extensive intercompany charges,become the focus of the Chinese tax authorities and Customs offices attention.Weve seen cases that the tax authorit

272、ies supervision and review of related party transactions has been enhanced by the“Golden Tax Project Phase IV”.Customs authorities,by leveraging the newly established Customs National Supervision Center for Duty Collection,have increased the supervision and monitoring of import transactions between

273、related parties.Therefore,its essential for MNCs to consider the balance between tax authority and Customs office when structuring pricing model of intercompany transactions.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 22CHiNAdocumentation threshold Master fileRelated party transactions exceeding R

274、MB 1 billionLocal fileTangible buy-and-sell related party transactions RMB 200 million;intangible buy-and-sell related party transactions RMB 100 million;all other related party transactions RMB 40 millionCbCRRMB 5.5 billionSubmission deadlineMaster fileWithin 12 months after the fiscal year-endLoca

275、l file30 June of the following yearCbCR31 May of the following yearPenalty ProvisionsDocumentation late filing provisionUnder RMB 2,000;RMB 2,000 to RMB 10,000 in serious casesTax return disclosure late/incomplete/no filingRMB 10,000 to RMB 50,000 in serious casesLate payment interest 0.05%per dayCb

276、CR late/incomplete/no filingUnder RMB 2,000;RMB 2,000 to RMB 10,000 in serious casesCONTACTEloise PanH+86 21 6447 7878Eve XiaoH+86 21 6447 7878 RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 23TRANSFER PRICING GUIDE 24OverviewGmez Pinzn Abogados,Taxand Colombia.Taxand Colombia is a comprehensive advi

277、sory firm located in Bogot and Medelln,offering a wide spectrum of legal services,which encompass tax advisory services for various client categories,such as individuals,local private entities,estate entities,multinational corporations,and private equity firms.Taxand Colombias dedicated team is prof

278、icient in handling all facets of transfer pricing services,including:Compliance and Reporting:This involves preparing transfer pricing informative returns,master files,and local file documentation,which can be customized to suit your specific needs.We can assist with local filings and reviewing file

279、s prepared by foreign global advisors,ensuring that your functional and financial data is presented comprehensively.Additionally,we offer support for Country-by-Country reporting.Analysis and Planning:Our services extend to optimizing the value chain,facilitating business restructuring,providing com

280、prehensive assistance in devising your transfer pricing strategy and policy,or simply offering a thorough review and sustainability analysis to avoid penalties or litigation.Strategy:We offer guidance in transfer pricing audits and help in preventing or resolving tax disputes,ensuring that your tax

281、matters are managed effectively and efficiently.General:Transfer Pricing FrameworkChapter XI of the Colombian Tax Code(“CTC”),specifically articles 260-1 to 260-11(introduced by means of Laws 788 of 2002 and 863 of 2003,subsequently modified by Law 1607 of 2012 and Law 1819 of 2016),along with Decre

282、e 3030 of 2013,which was amended by Decree 2120 of 2017 and compiled under Title 2 of the General Tax Decree(GTD),serve as the prevailing legal framework in Colombia governing transfer pricing matters.Per Article 260-2 of the CTC,individuals and entities subject to income tax in Colombia,who engage

283、in transactions with foreign related parties,tax heavens,low taxation or preferential regimes(“Special Tax Regimes”1)and/or local free trade zones,must comply with the arms-length principle and the general documentation requirements,if they have a gross income equal or greater than 61.000 Tax Units2

284、 (2023:COP$2.587.132.000 Approx.USD$631.000)or gross assets equal or greater than 100.000 Tax Units(2023:COP$4.241.200.000 Approx.USD$1.035.000)Accepted Transfer Pricing MethodologiesArticle 206-3 of the CTC determines the transfer pricing methods that are available in the Colombian legislation.Unde

285、r this legislation,the taxpayer is required to substantiate why the selected method is appropriate,considering the 1.Transactions with these regimes will be subject to the same rules as transactions with related parties.2.Tax Unit for 2023:42.412 Approx.10,5 USDrelevant facts and circumstances.The C

286、TC acknowledges the five primary methods recognized by the OECD:(i)CUP Method,(ii)resale price method,(iii)Cost Plus Method,(iv)Transactional Net Margin Method,and(iv)profit split method.1.ComparableWhile the CUP method is the preferred approach in principle,it is often challenging to find comparabl

287、e uncontrolled transactions.Consequently,the TNMM method is also commonly used as a transfer pricing method in practice.Notwithstanding,except for commodity transaction which must be analyzed under the CUP method,Taxpayers are allowed to apply other methods as long as they can demonstrate that such

288、methods result in an arms length outcome.Transfer Pricing documentation requirementsThe CTC imposes a set of formal obligations on taxpayers engaged in transactions with foreign related parties,provided they meet specific criteria.Under this regulation,taxpayers subject to income tax in Colombia,who

289、se stand alone gross assets on the last day of the year are equal to or exceed 100,000 Tax Units or whose gross income exceeds 61,000 Tax Units,are required to submit an informative return detailing all transactions with foreign related parties,Special Tax Regimes,and/or local free trade zones.Addit

290、ionally,taxpayers must prepare and submit supporting documentation,which comprises a Master File containing relevant global information of the multinational group,and a Local File containing information related to each type of transaction carried out by the taxpayer,demonstrating the proper applicat

291、ion of transfer pricing rules.Its important to note that the Master File requirement only applies if the taxpayer belongs to a multinational group;otherwise,it is not necessary.A Local File,however,is still requiredTransactions conducted by taxpayers with individuals,companies,or entities located,re

292、sident,or domiciled in Special Tax Regimes are subject to the transfer pricing regime and require the submission of supporting documentation,including both the Master File and Local File.However,its worth noting that,according to Article 1.2.2.1.2.of the GTD,there is no obligation to prepare and sub

293、mit the Local File or master file if the annual cumulative amount of each operation does not exceed the equivalent of 45.000 Tax Units(2023:COP$1,908,540,000 Approx USD$466.000)for the year or taxable period relevant to the supporting documentation.If the transaction is conducted with(or jointly wit

294、h)a Special Tax Regime,this threshold is reduced to 10,000 Tax Units(COP$424.120,000 Approx.USD$103.000).Furthermore,taxpayers belonging to a multinational group with consolidated gross earnings exceeding 81,000,000 Tax Units(2023:COP$3,435,372,000,000 Approx.USD$838,000,000)must submit a Country-by

295、-Country report if they are the parent company of the COLOMBiA RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 25COLOMBiAmultinational group or if they have been designated by the parent company as a substitute to file the Country-by-Country Report.If these requirements are not met,but the multination

296、al company is subject to the Country-by-country report,a country-by-country notification must be filed in the informative transfer pricing return.This notification should include details such as the name of the multinational group,the entity responsible of filing the country-by-country report,and th

297、e domicile of said entity.On the other hand,the report itself should contain information regarding the global allocation of income and taxes paid by the multinational group,along with specific indicators related to its global economic activity.Local Jurisdiction BenchmarksThe Colombian Tax Authority

298、 accepts global or local benchmarks,provided that they meet comparable search strategy standards set by the Colombian Tax Authority;however,please consider that if there are internal comparables,the taxpayer must prioritize them when conducting the transfer pricing analysis.Under Colombian regulatio

299、n a financial update is to be conducted every year.Advance Pricing Agreement“APA”/Bilateral Advance Pricing Agreement“BAPA”OverviewThe Tax Administration is vested with the authority to enter into agreements with taxpayers subject to income tax,whether they are of national or foreign origin.These ag

300、reements are designed to determine the prices or profit margins of various transactions carried out by taxpayers with their related parties.The determination of prices through such agreements will be based on the methods and criteria applicable to transfer pricing operations.These agreements can tak

301、e effect in the year they are signed,the immediately preceding year,and up to three taxable periods following the agreements signing.To initiate this process,taxpayers must formally request the conclusion of the agreement in writing.Upon receiving this request,the Tax Administration has a maximum pe

302、riod of nine months from the date of the unilateral agreement request to conduct necessary analyses,seek modifications and clarifications,and accept or reject the request.For bilateral or multilateral agreements involving two or more states,the timeframe will be determined jointly by the competent a

303、uthorities.In cases of unilateral agreements,the entire process must be completed within two years from the date of acceptance of the request.If this timeframe expires without the signing of the advance pricing agreement,the proposal may be deemed rejected.Once the advance pricing agreement is signe

304、d,the taxpayer may request its modification if they believe that significant changes have occurred in the assumptions considered at the time of its conclusion during its validity period.The Tax Administration has two months to accept,reject,or deny the modification request,as per the regulations.Sho

305、uld the Tax Administration determine significant changes in the assumptions considered when the agreement was signed,they will inform the taxpayer.The taxpayer has one month from the knowledge of the report to request the modification of the agreement.If this deadline expires without the correspondi

306、ng request,the Tax Administration will cancel the agreement.If the Tax Administration finds that the taxpayer has failed to comply with any of the conditions agreed upon in the signed agreement,it will proceed to cancel the agreement.Furthermore,if the Tax Administration discovers that the taxpayer

307、provided inaccurate information at any stage of the agreement process or during its validity period,the agreement will be revoked and rendered ineffective from the date of its signing.The taxpayer who enters into such an agreement is obligated to submit an annual report on the transactions covered b

308、y the agreement in accordance with the regulations.Its important to note that there are no appeals allowed against acts issued during the stages prior to the signing of the agreement or during the process of analyzing a modification request for an agreement.However,against resolutions by which the T

309、ax Administration unilaterally cancels or revokes the agreement,the an appeal is admissible,which must be filed before the official who made the decision within fifteen days following its notification.The Tax Administration then has two months from the filing to resolve the appeal.Transfer Pricing A

310、uditsThe Colombian tax authorities have the authority to carry out two types of audits,which are conducted randomly:1.Formal Audits:Formal audits involve a review of the submitted documentation to ensure that all aspects of the files are completed and that all required annexes have been provided.The

311、se audits are primarily concerned with verifying the completeness and adherence to formal requirements of the documentation related to transfer pricing and related party transactions.Formal audits can be conducted within the three years following the submission of the documents.2.In-Depth Audits:In-

312、depth audits,on the other hand,go beyond the formality check and involve a thorough examination of the functional and economic analysis.The purpose of these audits is to assess whether the transactions in question comply with the arms length principle.These in-depth audits can be conducted at any ti

313、me before the statute of limitations for the income tax return applies,which is currently set at five years.Its noteworthy that while formal audits have historically focused on verifying the completeness of documentation,there has been a recent shift towards conducting more in-depth audits,especiall

314、y for large multinational groups.RETURN TO CONTENTS PAGETRANSFER PRICING GUIDE 26COLOMBiAThis shift signifies an increased emphasis on evaluating the economic substance and pricing of transactions between related parties to ensure compliance with transfer pricing regulations.Transfer Pricing Penalti

315、esColombian law establishes three primary types of penalties concerning transfer pricing issues:(i)failure to file documentation,(ii)delayed filing of documentation,(iii)omission of information,and(iv)inclusion of incorrect information in the documentation.Each of these penalties is subject to speci

316、fic calculations and thresholds.Additionally,the Colombian Tax Authority has the authority to modify the income tax return if the transfer pricing documentation does not align with the arms length principle.In such cases,amending the return can result in a penalty for inaccuracies,which may be as hi

317、gh as 100%of the greater tax amount owed or the lesser balance in favor,as determined by the tax authority.Local Hot Topics and recent UpdatesThe most recent ruling issued by the Administrative Supreme Court(the State Council)in transfer pricing matters addresses the question of whether it is approp

318、riate to make adjustments in the comparability analysis between the controlled operation/part and the comparables within the transfer pricing regime.This ruling examines the practice of making adjustments to the financial data of comparable transactions or companies when conducting a transfer pricin

319、g analysis.These adjustments are often made to align the financials of the comparables more closely with those of the controlled operation or party,thereby enhancing the accuracy of the arms length pricing determination.documentation thresholdMaster fileCOP$1,908,540,000 Approx USD$466.000Local file

320、COP$1,908,540,000 Approx USD$466.000CbCRCOP$3,435,372,000,000 Approx.USD$838,000,000Submission deadlineMaster fileDecember of each yearLocal fileSeptember of each yearCbCRDecember of each yearPenalty ProvisionsDocumentation late filing provisionN/A(a more complex rule)Tax return disclosure late/inco

321、mplete/no filingN/A(a more complex rule)CbCR late/incomplete/no filingN/A(a more complex rule)RETURN TO CONTENTS PAGECONTACTAlvaro Andres diaz Palacios Gmez Pinzn +57 601 5144098Manuela OrozcoGmez Pinzn +57 601 5144017 TRANSFER PRICING GUIDE 27OverviewLeitnerLeitner,Taxand CroatiaLeitnerLeitner Cons

322、ulting d.o.o.is a consulting firm based in Zagreb,Croatia and offering a full range of services.We offer individual and innovative solutions for all questions around tax,accounting,payroll-related and financial advisory services.Our services related to transfer pricing include all aspects of transfe

323、r pricing services,including compliance and reporting,analysis,tax planning and strategy and assistance during tax audits.We are focused on the preparation of customized transfer price documentation in compliance with local legislation.General:Transfer Pricing FrameworkIn Croatia,transfer pricing do

324、cumentation legislative framework is set out with the Profit Tax Act and the Profit Tax Regulations,as well as the Transfer Pricing Audit Manual(issued by the Ministry of Finance,with the latest version dated July 2019).In addition,Croatian Tax Administration uses the OECD Transfer Pricing Guideline

325、s in practice,although it is not directly adopted into Croatian legislation,nor it contains any references to it.The use of an arms length range or statistical measures is not proscribed in the domestic legislation.However,the use of interquartile range is accepted and used in practice.Accepted Tran

326、sfer Pricing MethodologiesIn principle,the Comparable uncontrolled price method(“CUP”)method is the preferred method by the Croation Tax Authorities(“CTA”)but because comparable uncontrolled transactions are difficult to find,in practice,Transactional net margin method(“TNMM”)method is the most comm

327、on transfer pricing method used.The taxpayer is allowed to apply any other method as long as it can be demonstrated that it leads to an arms length outcome.The most commonly used methods are CUP,mainly for financial transactions and license fees,and TNMM due to the ability to perform a benchmark wit

328、h sufficient reliable comparable data.The profit split method is becoming more accepted by the authorities over time but in practice this method is felt to be complicated from a practical perspective.Transfer Pricing documentation requirementsEntities required to prepare transfer pricing documentati

329、on in Croatia are companies that conduct transactions with foreign related parties and domestic related parties if one of the related parties is in a privileged tax position or has the right to carry forward tax losses from a previous period.Taxpayers are required to prepare transfer pricing documen

330、tation but submit it only upon request of the tax authorities.The three-tier standardized approach as proposed by the OECD has been implemented in Croatia.There are no local guidelines summarizing the recommendations from BEPS Action 13,but the latter are followed by the competent tax authorities.In

331、 general,compliance with the recommendations of the BEPS Action 13 imply compliance with local rules.Also,there is no threshold below which the transaction does not fall under transfer pricing rules.The transfer pricing documentation must be submitted in Croatian language.The documents that must be

332、submitted without specific request by a tax inspector are the notification and filing of a country-by-country report for MNEs that exceed the 750 million annual revenue threshold.Filing of a country-by-country report is only required if the ultimate parent entity or the surrogate parent entity is ta

333、x-resident in Croatia.Also,it is required to submit a“PD-IPO form”together with the corporate income tax return which includes an overview of transactions effected with related parties.Local Jurisdiction BenchmarksBenchmarking helps to demonstrate that transfer prices are set at arms length.The CTA accepts pan-European benchmarks if they meet comparable search strategy standards set by the CTA.The