Quantera Global Newsletter – December 2020

We are pleased to share 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.

Send an e-mail to TPnews@quanteraglobal.com or call us at +31 88 221 5800 and we will introduce you to the relevant professional.

Quantera Global news, developments, and blogs:

–         Blogs

In November we released a number of blogs on developments in the Transfer Pricing landscape. We wrote blogs on the following topics: Transfer Pricing documentation update – time well spent?, Transfer Pricing in the Middle East and North & Central Africa, and Your 2021 TP compliance challenges.

–         Dutch Association of Tax Advisors (NOB) webinar on Digital Economy

On 25 November, Rudolf Sinx, one of the  founders of Quantera Global, acted as chairman of the day for a NOB-webinar on Digital Economy. In this webinar, four experts discussed the developments regarding the current OECD proposals on Pillar One and Two.

–         Quantera Global strategic partner update

We are proud to announce our strategic partnership with Advance Tax Group, a highly regarded firm specialized in tax process and data optimization and automation including data gathering and data management. This alliance enables us to provide an integrated solution for Operational Transfer Pricing.

–         Quantera Global UK webinar for start-ups

On 8 December 2020, our QG London office will host a webinar together with international law firm Pinsent Masons on the transfer pricing and tax issues for start-ups operating in the UK. If you would like to join, you can register via this link, or by sending a short email to London@quanteraglobal.com.

–         Webinars

Last month we organized a webinar on Transfer Pricing in the Middle East and North & Central Africa. We are proud that such a large audience participated. You can find the recordings here.

Please find below the schedule for our upcoming free webinars:

o    December 8:       Transfer Pricing and Tax for Start-ups (QG UK; to register see above)

We will also continue to hold free webinars in 2021:

o    February 18, 2021:     The good hope (our view on transfer pricing developments)

o    March 25, 2021:         Transfer Pricing Risk Management: compliance & organization

o    June 17, 2021:           Transfer Pricing Risk Management: APAs & MAPs

To register for one or more webinars, please send a short e-mail to QGAcademy@QuanteraGlobal.com indicating for which webinar you would like to register.

News around the world:

–       Australia

o    On 5 November, the Australian Tax Office (‘ATO’) made some minor amendments to the arm’s length debt test, which determines an entity’s maximum allowable debt for thin-capitalisation rules.

o    On 6 November, the Australian Full Federal Court ruled in the Glencore case against the ATO. An Australian transfer pricing analysis should take “reasonableness” and “commercial prudence” into account. This means that this analysis should not provide the perfect prediction what would occur, but that based on reasonableness and commercial prudence a number of outcomes may very well be acceptable.

o    The ATO has also released guidance on the treatment of employment-related relief in transfer pricing arrangements.

–       Burkina Faso

Burkina Faso has deposited its BEPS MLI ratification documents at the OECD. The multilateral treaty will be in effect as of February 1, 2021.

–       Chile

The Internal Revenue Service of Chile has established new transfer pricing documentation requirements. The new requirements are in line with the reporting obligations as recommended by the OECD. The information needs to be filed each year by 30 June in specific affidavits.

–       China

On October 29, China published its 2019 annual report on APAs. This includes information on the number of signed APAs (12 in 2019), industries covered by signed APAs, transaction types involved, and transfer pricing methods applied.

–       Colombia

Since 4 November, taxpayers have one month to register commodities agreements. The obligation to register commodity agreements led to many questions and the Colombian tax authorities have now issued a clarification on the obligation.

–       France

Whereas France suspended the payment of its digital service tax earlier this year, it now sent notices that the payment is due this December.

–       Germany

On 6 November, the German Ministry of Finance published guidance concerning the taxation of non-residents for income from IP-rights registered in a German public register.

–       Ghana

Ghana has issued new Transfer Pricing Regulations which are more in line with the OECD Guidelines. However, deviations from the guidelines still exist.

–       Guernsey

o    Guernsey has extended the country-by-country reporting filing deadline from 30 November 2020 to 28 February 2021.

o    On 17 November, the Guernsey Revenue Service published guidelines for requesting MAP assistance.

–       Ireland

Ireland has published guidance on DAC6 reporting of cross-border arrangements.

–       Italy

On 23 November, the Italian tax authority issued new transfer pricing documentation guidelines that fully replace the previous guidelines from 2010. The new documentation requirements eliminate differences between certain types of companies. The overall structure of the filing requirements is in line with the OECD guidelines.

–       Lithuania

Lithuania has updated its transfer pricing documentation requirements. The requirements are now more in line with the OECD Guidelines. The Lithuanian tax authorities have also announced that they will focus more on controlled international transactions and more specifically financing and services transactions.

–       Luxembourg / Russia

Luxembourg and Russia have signed a new treaty raising withholding taxes on dividends and interest. 

–       Malta

The Maltese Commissioner for Revenue has released the DAC6 XML Scheme and user guide.

–       Mexico

o    The mandatory disclosure regime (MDR) came into effect on January 1, 2020 in Mexico. The deadline for the first reportable transactions that need to be reported is set on February 15, 2021.

o    On 5 November, the Mexican Chamber of Deputies approved legislation to implement a digital service tax. This tax will become effective as of 1 January 2021.

–       Netherlands

o    The Netherlands has agreed with the Ecofin proposal on DAC7, which deals with the obligation for digital platforms to automatically exchange information to tax authorities.

o    The Dutch and Polish tax authorities have amended their tax treaty for further prevention of tax avoidance.

–       OECD

o    Statistics on mutual agreement procedures (‘MAPs’) released by the OECD show that the amount of cross-border tax disputes increased in 2019. Despite the efforts of the OECD, the total amount of transfer pricing related MAPs increased more than 20% compared to 2018.

o    In order to address the abovementioned, the OECD has also requested public feedback on proposals designed to strengthen the Action 14 minimum standards on cross-border tax dispute resolution.

o    On 21 November, the OECD reported BEPS MLI developments for Bahrein, Chile, Indonesia, Russia, and Kazakhstan. Bahrein signed the MLI and Chile deposited its instrument of ratification. Indonesia, Russia, and Kazakhstan have made several notifications under a number of specific articles.

–       Panama

Panama has deposited its BEPS MLI ratification documents with the OECD. The multilateral treaty will take effect on March 1, 2021.

–       Peru

The Peruvian tax authority has met the global and confidentially standards of the OECD and as such will receive information from other tax authorities as of December 2020. 

–       Philippines

The Philippine Bureau of Internal Revenue has issued a Memorandum (Circular No. 76-2020) which gives clarifications on the filing of transfer pricing information returns. The Related Party Transaction Form will need to be filed from fiscal year 2020 onwards together with the Annual Income Tax Return. The deadline for fiscal years ending on 31 March 2020 to 30 April 2020 has been extended to 29 December 2020.

–       South Africa

o    The South African Revenue Service (‘SARS’) announced on 20 November that the deadline for the country-by-country report is extended to 28 February 2021 (if the original deadline was 31 December 2020 or 31 January 2020) or 31 March 2021 (if the original deadline was 28 February 2021).

o    The SARS has also announced that it has scheduled testing and system changes for the country-by-country reporting electronic filing system. This means that the system will be switched-off from 4 December 2020 to 31 January 2021. This does not affect the filing of Master Files and Local Files.

–       Thailand

On 6 November, the Thai Minister of Finance published new transfer pricing guidelines, which show an increase in focus on transfer pricing in Thailand.

–       United Arab Emirates

The UAE has launched its country-by-country reporting platform.

–       United Kingdom

On 3 November, US-based investment management corporation BlackRock won its appeal against the UK Tax Authority HMRC. The case revolved around the deductibility of intercompany interest payments. To buy Barclays Global Investors back in 2009, the BlackRock parent company issued $4 billion in loans to its UK subsidiary that would buy Barclays Global Investors. Although a tax advantage for the loans was present, the commercial rationale of the loan was appointed as the main purpose of the loans. The ruling of the judge shows the need that intercompany loans must also be properly substantiated regarding options realistically available to the parties, potential covenants, and intercompany agreements, as well as supporting the commercial rationale.

–       United Nations

In October, the UN Committee of Experts on International Cooperation in Tax Matters agreed upon adding a new, optional, article to the UN Model Tax Treaty. This article would grant additional taxing rights to countries where an automated digital services provider’s customers are located.

–       United States

o    The IRS has announced that it will limit the use of ‘telescoping’ (i.e. making amendments in the current year instead of the applicable year to which the adjustment relates to) in MAP and APA cases.

o    The United States and Mexico have agreed to continue the current transfer pricing approach for US taxpayers regarding maquiladoras engaged in contract manufacturing and assembly operations.

o    The IRS announced on 30 November that it will start to automatically exchange country-by-country reports together with Monaco.

o    On 18 November, the US Tax Court ruled that Coca-Cola’s US income should be increased by around 9 billion USD. The dispute between the IRS and Coca-Cola revolved around the amount of royalties that should have been paid by related foreign entities for using Coca-Cola’s intangible property (e.g. brand names, secret formulas, and trademarks). This is another case surrounding the appropriate valuation of intercompany royalties for a large and profitable multinational.