Strategizing International Tax Best Practices – by Keith Brockman

EY’s Global Tax Alert highlights the 250 risk-based transfer pricing (TP) audits that commenced recently, as well as the relevant risk factors and transfer pricing submission details that are useful in determining transfer pricing risk currently and ongoing.  The Transfer Pricing Unit of the Ghana Revenue Authority was established in September 2012, highlighting the focus that this Unit has placed on gaining access to transfer pricing information from which a risk-based approach can be implemented.

http://www.ey.com/Publication/vwLUAssets/Ghana_commences_transfer_pricing_audits/$FILE/2015G_CM5216_TP_Ghana%20commences%20TP%20audits.pdf

Summary:

  • Transfer Pricing disclosure return (due 4 months after year-end):
    • Related party transactional overview and values
    • Location of related parties
    • Arm’s length pricing methodologies
  • Transfer pricing risk factors (Yes / No format):
    • Intercompany transactions to / from Ghana
    • Intercompany transactions with low-tax jurisdictions
    • Other transactions
    • Local restructurings
    • Senior management secondments
    • Operating losses for 2 years or more
    • Royalties
    • Compliance with transfer pricing returns
    • Contemporaneous transfer pricing documentation

Best Practice points / learnings from Ghana’s approach:

  • Would a risk-based jurisdictional template be useful to compare other jurisdictions similarly to address potential risks
  • Focus on location of senior management highlights the use of a significant people function approach, highlighting coordination with the global mobility function and providing relevant rationales to justify the local benefit
  • Location of related parties and transactions with low-tax jurisdictions may require further disclosure in transfer pricing documentation to address perception-based conclusions
  • Necessity for local transfer pricing knowledge, with internal / external resources to answer questions accurately

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