With conflicting requirements, Year End Financial Statement auditors are in many cases declining to sign off on audits where there is no ‘evidence’, a company has satisfied the new transfer pricing requirements. The quandary for many companies is how to achieve this when transfer pricing documentation is not required to be prepared until approximately 6 months after year end, whilst the auditors come in 2 months after year end.
On September 16 the OECD released guidance on transfer pricing topics as part of the Base Erosion and Profit Shifting (BEPS) Action Plan announced in July 2013. These topics include guidance on Action 13 on transfer pricing documentation and country-by-country reporting.
Intercompany loans continue to be a hot topic and focus point for the Tax Authorities around the world as this type of transactions are considered high risk from a transfer pricing prospective. If your company has entered into intercompany loans it is critical to assess any transfer pricing risk related with the transaction and to have evidence of compliance with the arm’s length principle.
The Australian Treasury has released exposure draft legislation (Subdivision 815-E) to implement new OECD standards on transfer pricing documentation (Master File and Local File) and Country-by-Country (CbC) reporting. The new draft legislation makes Australia the second country (after Spain) to release legislation on this issue as a direct result of the recent guidance set by the OECD as part of its base erosion and profit shifting (BEPS) initiative with respect to Action Plan 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting.
The Australian Treasury released an exposure draft bill to impose stronger penalties to combat tax avoidance and profit shifting. The draft legislation will apply to companies with annual global revenue exceeding AU$1 billion that are obliged to comply with the Country by Country (CbC) reporting.
The Australian Taxation Office (ATO) has released a new process for advance pricing arrangement (APA) negotiations (Practice Statement, PS LA 2015/4). The new process will apply to all ongoing APA negotiations and future APA requests (both new APAs and renewals). The APA program has been updated to ensure it reflects changes in global economy and the ATO’s anti-profit shifting work.
The new process includes three key steps as follows:
