Strategizing International Tax Best Practices – by Keith Brockman

TP 2020 & COVID 19

As COVID 19 ravages the world, the world of transfer pricing will also feel extraordinary consequences.  The attached articles from Rödl & Partner highlight transfer pricing considerations in China, which can apply in most other countries, and a COVID 19 tax summary of each EU Member State’s relevant developments, updated daily.

Highlights of China’s TP considerations:

  • Subsidiary losses: should they be borne by the Principal?
  • Intra-group financing, including thin capitalization, loss compensation (although contract adjustments require relevant approvals prior to taking effect), and guarantee fees
  • Adjustment of transfer pricing methods

It should be noted that current year comparables will include many loss making companies due to COVID 19, thus advance thinking may be necessary prior to year-end.

https://www.roedl.com/insights/covid-19/transfer-pricing-beps-corona-virus-transactions-cashflow

https://www.roedl.com/insights/covid-19/vat-tax-eu-commission-survey-measures-initiative-against-coronavirus

Deloitte’s March update of DAC6 legislation for the various countries is attached, providing a valuable reference as legislation is continually enacted.

You may also refer to the DAC6 blog page for hallmark transaction updates.

https://www2.deloitte.com/lu/en/pages/tax/articles/dac6-mdr-radar.html

Luxembourg, in a draft law, appears ready to adopt one of the EU recommended measures for non-deductibility of costs payable to an EU black list country.  However, there is also an economic exception in the draft, although the documentation to avail the exception is not yet known.

The new law should apply as of 1/1/2021, although not yet certain.

An alert from Goodwin provides additional details.

https://www.goodwinlaw.com/publications/2020/03/03_27-luxembourg-adopts-draft-bill

Mexico: DAC6 look alike

As DAC6 is rapidly approaching, Mexico has enacted new obligations for reportable transactions with similar excessive penalties as a deterrent.

Taxpayers with Mexican operations should be aware of, and prepare for, this new world of real-time reporting and a governance process for sustainability.

 

https://www.ey.com/Publication/vwLUAssets/Mexico-_Taxpayers_should_be_aware_of_Mexicos_new_reportable_transaction_obligation/$FILE/2020G_001313-20Gbl_Mexico%20-%20New%20reportable%20transaction%20obligation.pdf

ASC740:COVID-19 impact

This is a valuable reminder of the US GAAP tax accounting guidance in this strange time, when guidance of many companies is being withdrawn and significant uncertainties remain.

https://frv.kpmg.us/content/dam/frv/en/pdfs/2020/hot-topic-coronavirus-income-taxes.pdf

Attached is very transparent and informative tax report, including tax strategy, that is valuable to preview as part of the continuing trend for transparency.

https://www.vodafone.com/our-purpose/reporting-centre/tax-and-our-contribution-to-economics

Following up global support, the DAC6 Best Practices page has launched.

I invite your comments and valuable insights.

Thank you

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