Transfer Pricing In the News

Ozg Transfer Pricing Consultant

Ozg Center | London | New Delhi | New York | Mumbai

Back Office Phone # 0091-9811415861-72-84-92-94

Email: transfer.pricing@0zg.co.uk

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In the United States, the conceptual foundation for Code Sec. 482 and transfer pricing originated in 1917 but when did transfer pricing become such a global media sensation? Here is a summary of a few key transfer pricing developments and highlights from the headlines (for additional information on the history of transfer pricing, see Transfer Pricing: Rules, Compliance and Controversy by Marc Levey and Steven Wrappe). 

Developments

Greece

On January 11, 2013, the Greek parliament ratified Law 4110/2013 to amend the Income Tax Code. While the new law makes sweeping changes to the Code as a whole, Articles 39 and 39A with respect to transfer pricing were also amended. Under the new law, all intercompany transactions fall within the scope of the transfer pricing provisions. A Transfer Pricing Documentation File must be maintained but certain transactions may be exempt from the documentation requirement based on gross revenue thresholds. The law also provides when and how the file must be prepared, updated, and submitted. Additionally, the new law permits Advance Pricing Agreements. 

Philippines

The Bureau of Internal Revenue (“BIR”) issued transfer pricing regulations on January 23, 2013, with respect to the Commissioner’s allocation and apportionment authority under Section 50 of the National Internal Revenue Code of 1997, which is available in Global Tax and Commercial Laws. Pursuant to Section 50, the Commissioner may distribute, apportion or allocate gross income or deductions between two or more organizations, trades or business that are owned or controlled (directly or indirectly) by the same interests—regardless of whether they are organized in the Philippines. The authority is triggered where the Commissioner determines such distribution, apportionment, or allocation is necessary to prevent tax evasion or clearly reflect income. 
Revenue Regulations No. 2-2013 (RR 2-2013) applies the arm’s length standard to both cross-border and domestic transactions between related parties. The regulations are largely based on the OECD Transfer Pricing Guidelines and suggest a three-step approach in applying the arm’s length principle, including a comparability analysis, identification of the appropriate transfer pricing method, and determination of arm’s length results. 
For additional coverage, see Global Daily Tax News, Philippines Introduces Transfer Pricing Guidelines (Feb. 4, 2013) 

Brazil

Brazil has enacted numerous amendments to its transfer pricing regulations. The latest amendment, Normative Instruction 1,322, was published in the Official Gazette on January 18, 2013. It amends Normative Instruction 1,312, which was enacted to amend Law 12,766. The amendments pertain to intercompany financial transactions and benchmarking of interest expenses.
In the Headlines

India

Nokia made headlines in India this week. According to an article published by The Hindu Business Line on January 30, the Income Tax Department is investigating possible transfer pricing related income tax violations by Nokia India. The article reported that per the Income Tax Department’s investigation, Nokia India downloaded software from its Finland-based parent company to manufacture mobile devices valued at Rs 30,000 crore. While a royalty is paid for the downloaded software, the company allegedly failed to pay over a 10% TDS (tax deduction at source) payment. The article quoted a Nokia spokesperson as follows: “Nokia is fully cooperating with the Indian tax authorities. We are duly responding to all queries raised by them and extending our full support in completing the investigation… We always observe applicable laws and rulings in the countries where we operate. Since we arrived in India 17 years ago, we have honoured all local laws and paid all taxes legally due.”

According to an article by The Economic Times on January 31, the Income Tax Department is also investigating Shell India for undervaluing…its shares. According to the article, Shell India issued shares to a foreign affiliate, Shell Gas BV, at Rs 87 crore per share. The Income Tax Department is challenging the methodology used to derive the share value. Instead, it contends the value should have been Rs 180 crore per share. Ketan Dala of Pricewaterhouse Coopers is quoted as follows: “In the context of issue of shares and the consequently alleged under-pricing, one would tend to think that this is a real stretch of transfer pricing provisions.”

February 1, 2013 by CCH Editorial

 

Ozg Transfer Pricing Consultant

Ozg Center | London | New Delhi | New York | Mumbai

Back Office Phone # 0091-9811415861-72-84-92-94

Email: transfer.pricing@0zg.co.uk

www.TransferPricingConsultant.com

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