In this edition of the 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 will host the webinar “Transfer Pricing for Scale-ups”. If you are interested in attending this webinar, you can register here.
- On 27 February, a blog about Pillar One Amount B was published. The OECD released final guidance on a simplified tax approach aimed at providing tax certainty and easing compliance burdens for baseline marketing and distribution activities. You can read our blog here.
- Our clients have provided us with new testimonials from our clients and partners. You can find the testimonials here.
Quantera Global specialties
In the past month, we have completed several challenging and interesting projects worth mentioning, including:
- The finalization of our TP design study and TP policy report for an international (commodities) trading company in February. It has been a great journey together with our client and QG alliance partners around the world to reach that final stage, which has taken us beyond TNMM thinking.
- A debt capacity analyses for large loan transactions to substantiate the amount of equity that should be in place at the level of the borrower was performed.
If you would like to know more about these topics, please feel free to contact us.
News from around the world:
Australia
The Australian government released revised draft legislation on 12 February 2024 to implement public country-by-country (CbC) reporting, applicable to reporting periods starting on or after 1 July 2024.
Belgium
Belgium has implemented the EU public Country by Country reporting directive into national law. The provisions of the Belgian bill are largely aligned with the EU Directive. The rules apply to financial years starting on or after 22 June 2024.
Cyprus
- On 1 February 2024, the Cypriot tax department proposed updates to the threshold for preparing a local file for fiscal year 2022. The new thresholds, applicable to Cypriot tax residents and permanent establishments of non-tax resident entities involved in controlled transactions, would increase to 5 million for financial transactions and 1 million for other categories.
- On 23 February 2024, the Cyprus tax department extended the deadline for companies to submit their 2022 income tax return, including the table of summarized information (TSI), to 30 November 2024. This extension includes various documentation such as the local file and master file.
Ethiopia
The Ethiopian Ministry of Finance has issued Directive No. 981/2024, introducing new transfer pricing rules effective from January 2024. This directive replaces Directive No. 43/2015 and is largely in line with OECD Transfer Pricing Guidelines.
European Commission
On 25 January 2024, the European Commission sent formal notices to nine Member States for failing to report whether and to what extent the EU minimum tax directive has been transposed into their national law. These states are Estonia, Greece, Spain, Cyprus, Latvia, Lithuania, Malta, Poland, and Portugal.
Greece
On 23 February 2024, the Greek Ministry of Finance initiated a public consultation regarding a proposed bill to adopt the OECD’s pillar two model rules in accordance with the EU Minimum Tax Directive. The draft also includes safe harbours for transitional measures and outlines administrative procedures, including filing deadlines for relevant tax returns and payment schedules.
Indonesia
Effective from tax year 2024 onwards, Indonesian taxpayers must comply with the new guidelines outlined in Regulation PMK 172 of 2023. This regulation covers:
- Formal requirements concerning transfer pricing documentation.
- Content of the transfer pricing documentation.
- Minor adjustments to MAP (Mutual Agreement Procedure) and APA (Advance Pricing Agreement) regulations.
Kenya
On 9 February 2024, the Tax Appeal Tribunal of Kenya addressed a case regarding the Transfer Pricing method of a Kenyan subsidiary. The tax authorities disagreed with the company’s use of the TNMM method and applied the CUP method instead. The Kenyan subsidiary appealed, claiming that the authorities had misrepresented, failed to consider factors determining comparability of transactions and misapplied transfer pricing guidelines. Despite the appeal, the Tribunal ruled in favour of the tax authorities, dismissing the Kenyan subsidiary’s arguments.
Malta
- The Malta Tax and Customs Administration (MTCA) has published guidelines on Malta’s transfer pricing rules. These guidelines explain what constitutes a “material alteration” for grandfathering provisions and provide examples. They endorse the OECD Transfer Pricing Guidelines’ methods but allow other methods if deemed more suitable. Additionally, they accept a simplified approach for calculating arm’s length pricing for low value-adding intra-group services. Taxpayers are required to retain transfer pricing documentation (Master file and Local file) as per OECD guidelines. These documents must be disclosed to MTCA upon request.
- On 20 February 2024, legislation aimed at implementing minimum taxation under Pillar Two was published in the Official Gazette. Malta opts to delay the application of certain provisions, specifically the Income Inclusion Rule (IIR) and Undertaxed Payment Rule (UTPR), for six years, starting from December 31, 2029. Only administrative aspects necessary for implementing are being transposed at this stage such as the requirement for Maltese Ultimate Parent Entities (UPEs) to designate a foreign constituent to submit the Global Anti-Base Erosion information return.
The Netherlands
On 9 February 2024, the Advocate General noted that even if a loan and its interest deductions fall outside the scope of article 10a CIT (limitations on interest deduction), interest deductions may still be disallowed for tax purposes under the doctrine of fraus legis, which has a broader scope than article 10a CIT.
New Zealand
New Zealand will not implement the OECD’s simplified and streamlined approach to in-country baseline marketing and distribution activities (Pillar 1 amount B). New Zealand already has an existing simplified approach for small foreign wholesale businesses.
Nigeria
The Federal Inland Revenue Service (FIRS) announced the migration of the electronic platform for filing transfer pricing returns and country-by-country (CBC) reporting notifications from E-TPPLAT to TaxPro-Max (TPM). Taxpayers have until 30 June 2024 to complete all pending filing obligations on TPM.
OECD
- The OECD released an updated report on 19 February 2024, regarding Amount B under Pillar One of the OECD/G20 Inclusive Framework’s efforts to address tax challenges from the digital economy. The report offers a simplified approach in applying the arm’s length principle to baseline marketing and distribution activities, especially tailored for low-capacity countries. You can read our blog on this topic here.
- On 29 February 2024, the OECD published the Secretary-General’s tax report. This publication provides updates on the latest developments regarding international tax reforms, including the OECD’s base erosion and profit-shifting initiatives, tax transparency efforts, and other G20 tax-related objectives.
Portugal
On 15 February, the Tribunal Central Administrativo Sul published an appeal concerning a transfer pricing adjustment. The Portuguese tax authorities made a correction on the taxable result due to an adjustment related to an intercompany loan with a subsidiary. The taxpayer was unable to disprove the assumptions underlying the correction, as the comparable market price method used by the tax authorities adequately considered factors relevant to long-term loans and assessed comparable transactions between independent entities on the open market.
Singapore
Singapore’s 2024 budget contains plans to implement Pillar Two global minimum tax rules starting from 1 January 2025. Additionally, the budget proposes various tax measures.
South Africa
On 21 February, the South African government published draft legislation to enact the OECD’s Pillar Two Model Rules, aiming to implement a global minimum tax.