In this edition of the Quantera Global newsletter, you will find the most important national and global developments in tax law that are (closely) related to the transfer pricing world.
Please feel free to contact us if you have any questions.
Quantera Global news, developments, and blogs
- On 27 March, Quantera Global hosted the webinar “Transfer Pricing for Scale-ups”. Interested to learn more about this topic? You can watch this webinar, as well as our previous webinars, Here.
- On 4 April, we published a blog about ‘’Italian Transfer Pricing documentation requirements’’. The Italian tax authorities’ aggressive approach to audits and penalties necessitates careful attention to Transfer Pricing documentation. You can read our blog here.
Quantera Global specialties
In the past month, we have completed several challenging and interesting projects worth mentioning, including:
- Assisting a mid-sized multinational with the preparation of their intercompany agreements;
- Performing benchmark analyses for various functions;
- Determining the creditworthiness of several borrowing companies.
If you would like to know more about these topics, please feel free to contact us.
News from around the world:
Australia
On 8 March 2024, the Federal Court dismissed the taxpayer’s appeal in a transfer pricing dispute regarding cross-border intercompany financing. The court ruled that the taxpayer failed to meet the burden of proof. It emphasized the need for a common-sense approach to establish arm’s length consideration. This for focusing on the characteristics of the transaction itself rather than the subjective concerns of the taxpayer and other parties involved.
Belgium
On 6 March 2024, a draft bill was submitted to the Belgian Parliament. It introduced changes to the investment deduction regime and tax credit regime. The bill enables taxpayers to claim a deduction for tangible or intangible fixed assets used in Belgium for business purposes, provided certain conditions are met under the three newly introduced options.
Cyprus
- The Cypriot Tax Department has released a list with 10-year government bond yield rates on 31 December 2023 to be used for the notional interest deduction on equity for FY 2024. The list includes several countries.
- The Ministry of Finance has released draft legislation to implement the EU Minimum Tax Directive in Cyprus. This legislation proposes the introduction of an income inclusion rule (IIR) and undertaxed profit rule (UTPR) for large multinational enterprises (MNEs) and domestic groups with annual consolidated revenues exceeding €750 million. These rules aim to bring the Cyprus tax framework in line with the EU directive.
Finland
Finland has implemented the EU Minimum Tax Directive into its legislation, introducing a Finnish domestic minimum top-up tax. This tax comes into effect for financial years beginning on or after 31 December 2023.
France
A company had deducted a loss from its taxable income due to a debt waiver granted to a related party. After an audit, the tax authorities disallowed the deduction, as it was not compliant with the arm’s length principle and relevant tax regulations. The company appealed to the Administrative Court, but in December 2022, the court dismissed the appeal. Subsequently, the company appealed to the Administrative Court of Appeal. On 19 March 2024, the Administrative Court of Appeal upheld the tax authority’s assessment and dismissed the company’s appeal
Italy
- On 12 January 2024, a legislative decree was published requiring taxpayers to submit their income tax returns within nine months of the end of the financial year. This adjustment also impacts the timeline for transfer pricing documentation. It reduces the preparation deadline by two months, making the deadline 30 September 2024.
Subsequently, another Legislative Decree has extended the deadline for fiscal years ending on 31 December 2023, by an additional 15 days (i.e., until 15 October 2024, for entities aligned with the calendar year).
For more information on this topic, we refer to our blog here.
- On 4 March 2024, the Italian Ministry of Economy and Finance published a decree introducing the Investment Management Exemption regime (‘’IME regime’’). Under the IME regime, foreign investment institutions and their direct or indirect subsidiaries can claim that there is no Italian permanent establishment when certain criteria are met.
Jamaica
Jamaica presented its 2024-2025 budget on 12 March 2024, which introduces a domestic minimum top-up tax. This measure aligns with the Pillar Two global minimum tax rules.
Poland
The Council of Ministers in Poland will consider a bill that incorporates the EU Minimum tax Directive. The bill is expected to be approved by the Council of Ministers before the third quarter of 2024.
Luxembourg
The Luxembourg tax authorities recently released an FAQ on Pillar Two. It focuses on Article 53 of the law enacted in December 2023. The FAQ, published on 25 March 2024, provides clarifications on the treatment of deferred tax assets and liabilities in annual and consolidated accounts, emphasizing that they must be reliably traceable to the Luxembourg constituent entity.
Malta
Malta has published guidance note on the application of the EU minimum tax directive. This came into force on 20 February 2024. Among the comments is that Malta decided to opt for a six-year deferral on the Income inclusion rule and the undertaxed profits rule.
The Netherlands
- On 22 March, the Supreme Court in the Netherlands ruled that one-time borrowing costs such as arrangement fees, may fully be deducted in the year in which they are due. Although capitalization of one-time borrowing costs and their subsequent amortization over the life of the loan are considered good business practices, the court’s decision allows immediate deduction of these costs.
- On 1 March 2024, the Netherlands published a decree on the implementation of the EU directive on public country-by-country (CbC) reporting, effective for financial years beginning on or after 22 June 2024.
South Africa
A South African telecommunications company faced an additional tax assessment. This due to a disputed 1% flat royalty fee charged to its foreign subsidiaries for intellectual property. The company appealed the tax authority’s assessment, leading experts to determine the arm’s length royalty charge.
While experts’ testimonies favored the transactional profit split method, the first court in South Africa determined that the Comparable uncontrolled price (CUP) method was the most reliable method based on the facts of this case.
United States of America
On 26 March 2024, the IRS released its annual report on APAs for 2023. The report highlights a record of 156 APAs executed, a 47% renewal rate, and more than half of the APAs related to transactions between non-US parent companies and US subsidiaries.