global transfer pricing conference...pwc today’s presenters global transfer pricing conference...

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

October 2014

www.pwc.com/tp

Fit for the future

PwC

Today’s presenters

October 2014 Global Transfer Pricing Conference

Slide 2

Diane Hay, UK

Lyndon James, Australia

Ulf Andresen, Germany

Greg Barton, USA

Carlo Romano, Italy

Sanjay Tolia, India

Kevin Tsoi, China

PwC

Agenda


Slide 3

Current environment

Recent country developments

Panel discussion

Wrap up and takeaways

PwC

Understanding the current state of play

• Unprecedented level of scrutiny on MNCs – not just regulators

• G20/OECD BEPS program represents a paradigm shift in the international tax landscape

• BEPS TP actions targeting greater transparency and an increased focus on substance, risk and value creating activities are forcing MNCs to reassess their approach to transfer pricing and their engagement model with tax authorities

• Today’s session will look at developments across a number of countries and assist you in working toward agreement with the tax authorities in those countries.


Slide 4

PwC

Agenda


Slide 5

Current environment


Panel discussion


PwC

Australia APA developments

• Increasingly, the ATO are not accepting as many APA applications.

• APA renewals are not guaranteed, with recent examples of the ATO challenging previously accepted pricing policies.

• APA negotiations are taking longer and are being evaluated in the context of BEPS.

The ATO’s view on APAs has continued to evolve over the last 12 months

Slide 6


PwC

Australia TP Audit developments

• Unprecedented media coverage- now lead to Senate Enquiry

• Specialist ATO team set up (ISAPS) to audit/review BEPS type risks

• Centralised principal structures and intangible transfers are under heightened ATO scrutiny.

• Transfer pricing audits are no longer limited to questions of arm’s length pricing – the ATO are increasingly introducing questions of anti-avoidance.

• Since the introduction of BEPS, transfer pricing has increasingly become politicised. As a result, the ATO feels strong political pressure to keep tax dollars at home.

Government warned that ATO not up to catching tax avoiders - Sydney Morning Herald September 30, 2014

ATO caught short on tax dodgers - The Australian October 1, 2014

Recent headlines

Corporate tax avoidance costs Australian business - Sydney Morning Herald September 30, 2014

Slide 7


PwC

China

• Outbound service fees and royalties (“non-trade payments”) under spotlight

• Article responding to United Nation (“UN”)

• The “six tests” : Benefit Test, Need Test, Duplication Test, Value Creation Test, Remuneration Test, Authenticity Test

• A nation-wide comprehensive tax examination on outbound related non-trade payments


Slide 8

• China tax authorities’ views on anti-trust investigation

• China's anti-trust investigations into foreign companies

• China tax authorities are reviewing the anti-trust issues from a TP perspective

• China tax authorities recently listed four common transfer pricing issues with monopolistic features: (1) Price mismatch via products bundling, (2) Price mismatch via goods/services bundling, (3) Offsetting transactions, (4) Concealed under third party transactions

PwC

Germany

• Central tax office has created a second department for the negotiation of APAs and MAP/arbitration cases with Mrs. Halfter and Mr. Fluechter as heads of the two departments

• State initiatives to conduct bilateral cross-border tax audits, in particular in Bavaria and North Rhine Westphalia are perceived as a good approach going forward, yet with a limited scope and breadth (primary partner countries are Austria, Italy and the Netherlands)

• Balancing adjustments within the meaning of Art. 9 (2) and 7 (3) OECD-MTC (should) gain (even) more importance

• Singular cases of corresponding unilateral efforts to provide relief from double taxation can be detected both in legally binding and non-binding form subject to the size of the respective adjustment though


Slide 9

PwC

India


Slide 10

Rollback

Financial Year

MAP

Before 2011-12

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

APA

PwC

Italy

• Increasing number of APAs' applications – 131 between 2010 and 2013 out of total 183 in 2004-2013

• APAs also for the existence of Italian PEs

• Bilateral APAs - implemented in 2010 - 26 ongoing as of 30 April 2014 (FYs covered by the agreement?)

• Extended validity period – 5 FYs renewable for additional 5 FYs

• Predominance of transactional profit methods (79% of the cases) instead of traditional transaction methods (21% of the cases) in TP methods agreed


Slide 11

PwC

United Kingdom

• First tax authority to commit to introduce the CbC template. 2017 likely to be earliest date.

• Transfer of profits legislation - unilateral BEPS action by UK to deter arrangements that move profits from the UK through the use of derivatives, but very widely drawn and could potentially affect many structures eg captive reinsurance

• Changes to APAs – ability to revoke APAs if there are changes in UK law or OECD Guidelines

• Consultation on hybrids – may well hit US deferral structures employing US finance branches and other arrangements involving payments for goods, royalties etc


Slide 12

PwC

United States -Notice 2013-78: Proposed Revisions to Competent Authority Process Additional requirements regarding upfront disclosures for taxpayers seeking MAP relief:

• Imposes strict mandatory pre-filing conferences in certain situations (e.g., taxpayer-initiated adjustments) and pre-filing memorandum in certain situations (e.g., adjustment of more than $10M for all years combined, IP development arrangement, and global trading arrangement).

Mandatory roll forward and increased scope of MAP cases:

• Encourages and/or mandates roll-forward of MAP resolutions to subsequent years and to additional issues (e.g., “ancillary issues” such as MAP repatriation, interests and penalties, or foreign tax credit issues).

• Allows the U.S. Competent Authority to initiate a MAP case without a request by the taxpayer.


Slide 13

PwC

United States - Notice 2013-79: Proposed Revisions to APA Process

Proposed new procedure would:

• impose additional requirements regarding upfront disclosure during the APA process (including mandatory pre-filing conferences in certain situations),

• encourage and in some cases mandate rollback of transfer pricing methods (TPMs) to years prior to the APA term,

• significantly reinforce the IRS’s strong preference for bilateral APAs by permitting unilateral APAs only in extremely limited circumstances if a treaty country is involved in the covered transaction.

• Mandate prefiling conferences in certain more complex cases

• Require much greater information in APA submissions, including “covered issue diagrams” which are essentially worldwide functional and supply chain diagrams


Slide 14

PwC

Agenda


Slide 15

Current transfer pricing environment


Panel discussion


PwC

Panel Session

Question 1

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


Slide 16

PwC

Panel Session

Question 2

Has the type of engagement with your tax authority changed as a result of the current environment?


Slide 17

PwC

Panel Session

Question 3

Are you seeing a change in the APA process?


Slide 18

PwC

Panel Session

Question 4

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


Slide 19

PwC

Panel Session

Question 5

What should MNCs be doing to ensure their TP engagement strategy is fit for the future?


Slide 20

PwC

Agenda


Slide 21

Current transfer pricing environment


Panel discussion


Today’s panel

© 2014 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its

member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for

further details.

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

http://www.pwc.com/structure

global transfer pricing conference...pwc today’s presenters global transfer pricing conference...

Documents