Transfer Pricing Rules Compliance And Controversy Pdf
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- [PDF] Transfer Pricing: Rules, Compliance and Controversy (Fourth Edition) Full Colection
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- International Transfer Pricing Journal - All Articles
In recent decades, the Internal Revenue Service has pursued numerous long-running and complex transfer pricing audits. Although many have been resolved administratively, or prior to trial, the IRS has a decidedly uneven record in its litigation of high-profile transfer pricing disputes, not infrequently finding itself in the loss column in the courtroom. Not long after being sworn in as the new commissioner of the IRS in late , Charles Rettig addressed this record by making it clear that the IRS was undeterred by its losses in court.
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With 54 countries and 10 dependent territories, the African continent holds a diverse range of jurisdictions at varying stages of economic development. With significant foreign investment and rapid growth, many African countries are taking steps to shore up their tax systems and ensure their ability to tax a share of profits attributable to their jurisdictions. Many of them are also seeking to create favorable conditions for business activity and investment. This geopolitical push and pull has moved transfer pricing to the top of the agenda.
At the same time, companies face deepening scrutiny from tax authorities, investors and other stakeholders about their approach to tax and where they pay it, and the number of transfer pricing audits in Africa has grown dramatically. In this article, we look at some of the biggest forces affecting the transfer pricing landscape in Africa.
We highlight some of the most important transfer pricing reforms in this dynamic region and some leading practice for managing compliance and mitigating transfer pricing risk. These and other countries have been keen to implement the BEPS minimum standards. For example:.
Some countries are also exploring the adoption of safe harbor regimes. Below are snapshots of new and revised transfer pricing rules and practices being put in place in selected African jurisdictions. Since these rules were introduced, the number of transfer pricing audits has risen steadily and the Nigerian tax authority has been penalizing taxpayers found in default.
The tax authority now has greater access to information on the global activity of multinational enterprises, and it is also taking an aggressive stance toward revenue generation and collection. As a result, the volume of transfer pricing audits in Nigeria is expected to keep increasing in the future. Regulations issued in require companies with a threshold of 4. Penalties may be imposed of up to percent for adjusted transfer pricing amounts and up to USD23, for failing to maintain contemporaneous documentation.
Transactions with non-resident persons that lack economic substance will also be considered for transfer pricing adjustments. Other new rules require annual contemporaneous documentation, use of a prescribed method for commodity transactions, rejection of negative transfer pricing adjustments and acceptance of secondary transfer pricing adjustments. As Kenya increasingly becomes a preferred investment destination for multinational entities looking to set up in Africa, transfer pricing has become a point of focus of the Kenya Revenue Authority KRA.
Where provisional tax paid is less than 90 percent of the actual tax assessed, a penalty of 20 percent of the shortfall may apply. For documentation purposes, only a local file is required, and, for in-country transactions, a filing threshold of USD, applies.
Unilateral, bilateral and multilateral APAs are available. A directive requires related resident taxpayers with annual turnover of over USD22, to maintain transfer pricing documentation. Taxpayers can also apply for APAs under the directive. While Botswana, Swaziland, Zimbabwe and Mozambique impose rules on transfer pricing documentation, only South Africa currently requires country-by-country, master file and local file reporting. Botswana discussed below and Namibia intend to adopt country-by-country tax reporting in the future.
South Africa is therefore expected to release new transfer pricing guidance in the near future. Even though South Africa has had transfer pricing rules since , transfer pricing audit activity only commenced from about With the recently introduced transfer pricing documentation requirements, more relevant information is being provided to the tax authority, and their use of risk assessment and other IT tools has further improved capabilities.
As a result, taxpayers have seen significantly increased focus on transfer pricing since mid, and SARS has announced that it will focus on transfer pricing reviews to combat base erosion and profit shifting. Evidence of these efforts was seen in the national budget for presented on 26 February which proposed a significant change to the interest limitation provisions in respect of cross-border loans, introduced for years of assessment commencing on or after 1 January Among other things, the regulations:.
With new transfer pricing regimes coming into force and increasing tax authority scrutiny of transfer pricing policies and compliance, international companies are focusing on operationalizing their transfer pricing as part of their business control measures. Companies based in Africa can help improve the efficiency, accuracy and value of their transfer pricing programs with these leading practices. Botswana: Transfer pricing regulations, effective July KPMG International provides no client services.
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We want to make sure you're kept up to date. Please take a moment to review these changes. You will not receive KPMG subscription messages until you agree to the new policy. Ignore and log out. Aligning transfer pricing programs with changing international norms. Share close. For example: South Africa, Nigeria and Gabon have implemented country-by-country tax reporting, and a number of other countries, such as Kenya , are expected to follow suit.
Many African countries are taking part in the global transfer pricing debates, especially regarding requirements for service transactions, capital-rich and low-function entities, and analyses of intangibles based on development, enhancement, maintenance, protection and exploitation DEMPE.
Recent transfer pricing reforms: region by region Below are snapshots of new and revised transfer pricing rules and practices being put in place in selected African jurisdictions. Western Africa. Other key transfer pricing reforms announced by Nigeria include new requirements on procurement and intra-group service transactio introduction of guidelines on pricing of commoditie a limitation of deduction on royalty payment clarification that only pricing arrangements approved by the tax authority and not other government agencies qualify for a safe harbor strict penalties for non-compliance.
Eastern Africa. Tanzania Regulations issued in require companies with a threshold of 4. Other new rules include: elimination of royalties for locally developed intangibles that are transferred and then licensed for use in Tanzania rejection of service transactions where remuneration is based on a percentage i. Southern Africa. Among other things, the regulations: Prescribe five approved methods of transfer pricing, prioritizing use of the comparable uncontrolled price method CUP when other methods equally apply, and use of a traditional method when a traditional method and a transactional method are equally applicable.
Authorize the making of corresponding adjustments, provided certain conditions are met. Prescribe rules for maintaining contemporaneous documentation. New focus and enhanced scrutiny — The focus of transfer pricing has traditionally been on documentation activities. Revenue authorities are now focused on reviewing the intricate details of the intercompany transactions. Identifying audit trends and triggers — Revenue authorities in Africa tend to initiate audits on all companies operating in particular sectors or certain economic groups to examine industry- or sector-specific anomalies, such as cash transactions and offshore activities.
Service transactions are routinely challenged by revenue authorities, who increasingly look for proof that services and benefits were actually provided. Exchange of information — Tax authorities are increasingly using exchange of information mechanisms to tackle illicit financial flows. More tax authority collaboration — Collaboration between tax authorities has increased across Africa through initiatives and organizations such as Tax Inspectors without Borders and the African Tax Administration Forum, among others.
Rising tax controversy — Tax disputes are rapidly increasing in Africa as tax authorities step up their scrutiny of international companies operating in the region. Project and service companies are seen as high risk. Advancing tax technology — Companies stand to improve their transfer pricing compliance by increasing their use of technology to effectively manage the transfer pricing lifecycle.
Operationalizing transfer pricing with support from technology can help tax and transfer teams effectively manage intercompany activity and transfer pricing risks. Takeaways for tax and transfer pricing leaders With new transfer pricing regimes coming into force and increasing tax authority scrutiny of transfer pricing policies and compliance, international companies are focusing on operationalizing their transfer pricing as part of their business control measures.
Set up a transfer pricing control framework to provide a structured approach for implementing and monitoring of transfer prices. Establish an enterprise-wide transfer pricing strategy that is documented and owned by senior management. Assign responsibilities to dedicated transfer pricing teams , while recognizing the responsibilities of others in the process e.
Monitor the possible impact of current and emerging tax administration priorities in areas such as: distribution — marketing intangibles, value creation manufacturing — product and process intangibles service transactions — benefit test, routine vs non-routine, substance financial transactions — control over risk, implicit support. Footnotes 1. Botswana: Transfer pricing regulations, effective July 4.
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[PDF] Transfer Pricing: Rules, Compliance and Controversy (Fourth Edition) Full Colection
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With 54 countries and 10 dependent territories, the African continent holds a diverse range of jurisdictions at varying stages of economic development. With significant foreign investment and rapid growth, many African countries are taking steps to shore up their tax systems and ensure their ability to tax a share of profits attributable to their jurisdictions. Many of them are also seeking to create favorable conditions for business activity and investment. This geopolitical push and pull has moved transfer pricing to the top of the agenda. At the same time, companies face deepening scrutiny from tax authorities, investors and other stakeholders about their approach to tax and where they pay it, and the number of transfer pricing audits in Africa has grown dramatically. In this article, we look at some of the biggest forces affecting the transfer pricing landscape in Africa.
[PDF Download] Transfer Pricing: Rules Compliance and Controversy (Third Edition) [Download]
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International Transfer Pricing Journal - All Articles
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