ANNUAL REVIEW

Transfer Pricing 2013

October 2013  |  CORPORATE TAX

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Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trends in transfer pricing.

 

UNITED STATES

Richard D. Shapland

Baker Tilly

“US companies generally do not devote enough resources to the creation of transfer pricing policies and compilation of annual contemporaneous documentation. More often than not, transfer pricing is given a last-minute priority in the income tax provision and tax return preparation processes, particularly with respect to services and intangible property. The principal impediment is cost, since most companies outsource their transfer pricing projects and these projects usually involve assistance with compiling the documentation rather than focusing on the creation of a policy.”

 

CANADA

David W. Chodikoff

Miller Thomson LLP

“Certainly, companies are improving their practices, but they still have a long way to go. Governments are hungry for revenue, and transfer pricing is an area where tax authorities have directed significant attention in their efforts to counteract the erosion of their respective tax bases. There is always a risk that tax authorities will automatically assume that related party transactions are suspect, making them ripe for audit.”

 

MEXICO

Jorge Narváez-Hasfura

Baker & McKenzie, S.C.

“There is a clear trend in Mexico for a growing number of companies, especially those belonging to large multinational groups, to properly address transfer pricing requirements. However, in our view, a large number of companies in Mexico still do not pay enough attention to the challenges and complexities of maintaining compliant transfer pricing policies and documentation. In most cases, and contrary to a sound legal advice, such companies do the minimum that is required by law to comply with their transfer pricing obligations – their approach is very simplistic and superficial.”

 

UNITED KINGDOM

Les Secular

True Partners Consulting

“Companies do not pay enough attention. Despite a number of attempts to convince companies that transfer pricing is an area that is receiving greater attention from the UK tax authorities, many companies outside of the top 250 continue to play a ‘wait and see’ game, preferring to deal with matters when challenged rather than be prepared in advance. This may seem an acceptable course of action given the lack of detailed challenges and court cases to date, but they fail to realise the upheaval that can arise when HMRC raise the issue and the amount of management time that is wasted.”

 

FRANCE

Sandra Hazan

Dentons

“Since France does not provide for any obligation to comply on an annual basis, but only at the time of an audit, companies generally decide to focus on their transfer pricing compliance obligations by the time an audit is being launched by the tax authorities. Companies certainly realise the complexities of maintaining compliance transfer pricing policies by the time they are being challenged by the tax authorities. At that stage, it becomes increasingly complex to rebut the tax authorities’ suspicion, which generally arises from poor documentation.”

 

ITALY

Andrea Musselli

Studio Musselli

“I think firms fear transfer pricing challenges and spend a lot of time, and money, in transfer pricing analysis. However, often organisations do not focus on the real problems involved with their group structures and with the way they manage their businesses. I think that many firm’s focus is often on formal answers to the transfer pricing problem-documentation – search of comparables, and so on – while quite often firms do not deeply analyse the business risk allocation which is connected to their way of doing business.”

 

SPAIN

Ángel Calleja

Garrigues

“As Spanish regulations on transfer pricing are still relatively new – the previous legislation was vague and seldom enforced – Spanish entities have been very much focused on complying with transfer pricing obligations. They have been trying to test whether the related party transactions already performed were compliant with the arm’s length principle. Nevertheless, as the tax departments of multinational groups resident in Spain gain experience in transfer pricing, greater importance has been given to the design, settlement and implementation of adequate transfer pricing policies.”

 

LUXEMBOURG

Jean-Luc Fisch

Elvinger Hoss & Prussen

“Operational companies in Luxembourg generally take into account transfer pricing issues. Nevertheless, transfer pricing issues have been less considered by the rest of Luxembourg’s companies. Most notably for those companies whose main objective is to hold assets especially intangibles, although it has been noted a growing concern for the matter due to an increase in transfer pricing regulations in Luxembourg and abroad.”

 

AUSTRALIA

Rob Mander

RSM Bird Cameron

“Whether brought to their attention by advisors, through the media, or Australia Taxation Office (ATO) compliance activity, more companies are now having discussions about their existing documentation and are more willing to invest the time and resources in establishing effective policies along with the necessary compliant documentation. The ATO is aggressive in respect of transfer pricing matters and now has access to significantly more information through new tax return disclosures.”

 

NEW ZEALAND

Brendan Brown

Russell McVeagh

“Companies within large multinational groups generally are alive to the importance of maintaining compliant transfer pricing policies. This reflects the fact that the largest companies have, during recent years, been prioritised for transfer pricing review by New Zealand’s Inland Revenue. Furthermore, these groups have had to deal with transfer pricing issues in other jurisdictions for some time.”

 

SOUTH AFRICA

Michael Fortmann

KPMG South Africa

“In our experience multinationals are increasingly adopting a proactive approach in order to face the likely challenges by reviewing their potential exposures, in particular those linked with current intangibles policies – including location, pricing, and value – and the evolution of business structures and trends. This type of internal check-up, followed by the development of a strategic action plan, will significantly improve the chances of a multinational group to be successful in facing new challenges that could go well beyond the traditional boundaries of taxation issues.”


CONTRIBUTORS

Baker & McKenzie, S.C.

Baker Tilly

Dentons

Elvinger Hoss & Prussen

Garrigues

KPMG South Africa

Miller Thomson LLP

RSM Bird Cameron

Russell McVeagh

Studio Musselli

True Partners Consulting


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