From Hong Kong to Peru, where you do business can have a major impact on your tax structure.

Our Transfer Pricing experts work to identify where your business is at risk and provide guidance that helps ensure your tax strategy is optimal in the market.

Below are international updates that could be affecting you and your business. For guidance on any of these issues, Briggs & Veselka is here to help.

 

United Kingdom

In addition to the increasing corporate tax rate from 19% to 25% over the next few years, the UK has also proposed steps towards greater transfer pricing alignment with the OECD standards for documentation.

The UK’s tax authority has begun collecting comments on proposed changes to its transfer pricing documentation rules. Three main changes are being considered:

  • Adopting mandatory master file and local file requirements for UK multinational enterprises.
  • Adopting additional disclosures about cross-border transactions with associated enterprises to be included in an International Dealings Schedule (IDS) as part of the annual tax return for all businesses within the scope of UK transfer pricing rules. It is not anticipated that the IDS would have any threshold for the requirement.
  • The potential use of an “evidence log” or similar document as a means for identifying key facts and evidence that underly and support transfer pricing methodologies and positions. We anticipate this will provide the UK’s HMRC with greater transparency to scrutinize cross border transactions.

These changes could increase the reporting obligations for UK taxpayers and anticipated scrutiny of cross border activities by multinational companies. Please contact us to discuss how you may be impacted.

Malaysia

Legislation which took effect in January of 2021 includes key tax considerations as it relates to Malaysia’s transfer pricing regulations.

  • Malaysian taxpayers with related-party transactions must prepare contemporaneous TP documentation on an annual basis. After January 1st 2021, penalties for not furnishing contemporaneous transfer pricing documentation can be incurred.

  • The Director General of Inland Revenue maintains the ability to disregard structures in place. In other words, if the Director General deems such tax structures are more appropriately characterized in a different form, they have the power to do so.
  • Surcharges on gross transfer pricing adjustments can be imposed regardless if tax underpayment is identified. This could put significant new burdens on businesses that would not be penalized under previous guidance.

Denmark

Danish Parliament has increased its documentation regulations for transfer pricing.

 

Effective for income years starting from January 1, 2021, there will be a mandatory submission requirement of the Master file and Local files of all Danish entities to the Danish Tax Authority within 60 days after the income tax return date.

 

An additional Danish Tax Authority office has been established and tasked with analyzing this new data, further increasing the risk of transfer pricing audits for businesses.

The new requirements will drive more contemporaneous preparation of transfer pricing documentation. The thresholds are low or not available for related party transactions with jurisdictions outside of the Danish treaty network.

Italy

The Italian Revenue Agency has issued the Act of the Director of the Revenue Agency no. 360494 (New Act).

The New Act introduces significant changes to the rules related to the Transfer Pricing documentation that must be prepared to gain penalty protection. Master File and Local File will be required for groups that may have subsidiaries in Italy, where previously only Italian headquartered groups were required to provide a Master File.

Italian subsidiaries of USA or other non-Italian headquartered groups will be excluded from small and mid-size enterprise exemptions previously more broadly available. Multinational groups operating in Italy should take note of emerging requirements within this New Act.

Chile

Chile has aligned with the OECD’s three-tiered transfer pricing documentation approach.

This will require the Country-by-Country Report, the Master File, and the Local File and will now be requiring submission of form number 1950 and form number 1951 annually in addition to supporting information through electronic file if the Chilean entity or its group meet certain criteria.

 

Our Transfer Pricing experts work to identify where your business is at risk and provide guidance that helps ensure your tax strategy is optimal in the market. 

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