Issue November 2012
We are proud to present to you the latest edition of Transfer Pricing Insights – Deloitte Switzerland's bi-monthly newsletter focusing on Transfer Pricing issues affecting MNCs in Switzerland. It covers Swiss „hot‟ topics and economic related news as well as the latest Deloitte global edition of the Arm's Length Standard.
Hot Transfer Pricing Topics
French Tax Authorities to focus on Permanent Establishments
During a public meeting held in September 2012, the French Tax Authorities made it clear that they will place additional scrutiny on Principal company structures. In particular, mention was made that when a Swiss Principal company benefits from Circular number 8 (whereby a portion of the profits realised by the Principal company is deemed to be attributable to a foreign PE and is therefore tax exempt in Switzerland), the French Tax Authorities have now received instructions to check whether or not a French PE is recognised in the name of the Principal company.
From a practical standpoint, we can expect an upward trend in PE challenges by the French Tax Authorities for companies with operations in France. In light of this announcement, Swiss Principal companies should carefully consider how to structure their business operations in France.
For further details on this topic, please click here.
Ukraine applies new transfer pricing rules as from 1 January 2013
In line with a wider amendment of its Tax Code, Ukraine has updated its transfer pricing rules. The latter will come into effect as of 1 January 2013 and are based on the OECD Transfer Pricing Guidelines.
Further, the new rules specify a list of official sources of information that are acceptable for establishing an arm's length price and they comprise amongst others data from state authorities, banks, specialised commercial publications or stock exchange quotations.
From 1 January 2013 onwards, large Taxpayers may also conclude Advance Pricing Agreements with the Ukrainian Tax Authorities.
Our clients doing business in Ukraine should note that there will be no official requirement for transfer pricing documentation but it might nevertheless be advisable to have documentation prepared for controlled transactions (in Ukrainian or Russian language) in line with the new rules since these new and more sophisticated transfer pricing regulations will likely increase scrutiny from the Ukrainian tax authorities.
Brazil enacts major changes to its transfer pricing law
Brazil enacted major changes to its transfer pricing law as published on 18 September 2012, impacting the resale price minus profit method (PRL) and the comparable uncontrolled price method (PIC). Brazil also introduced two new transfer pricing methods: the commodity exchange import price and the commodity exchange export price. Both methods are based on a comparison of the average commodity exchange price for the relevant commodities at the date of the transaction, adjusted for upward or downward spreads. The application of these methods is mandatory for the pricing of commodities.
Finally, the amended law looks at loan transactions and stipulates that the transfer pricing law does not apply to loans registered with the Brazilian central bank. In addition, any interest expense paid to related parties and which exceeds the sum of the six-month dollar LIBOR plus a 3% annual spread will not be tax deductible.
Clients with intercompany transactions involving Brazilian entities should comply with the above mentioned changes as of 1 January 2013. It is advisable that they remain mindful of the fact that the Brazilian transfer pricing rules different somewhat from OECD transfer pricing guidance. Therefore OECD compliant transfer pricing policies and documentation might not always meet the Brazilian transfer pricing regulations.
For further details on this topic, please click here to read our Transfer Pricing Alert.
The Arm’s Length Standard
The recent issue of Deloitte's global Transfer Pricing newsletter focuses particularly on the following topics:
- Issue of APA rules by India
- New retroactive transfer pricing legislation passed by Australia
These and further topics can be accessed by downloading your copy of the Arm’s Lengths Standard here.
We hope that you have enjoyed this edition of Transfer Pricing Switzerland Insights. If you have questions in relation to one of the above topics or you would like to discuss your situation and receive a professional opinion on any Transfer Pricing related topics, please feel free to contact us directly via phone or email.