Strategizing Multinational Tax Risks

The International Chamber of Commerce (ICC) has released the 2015 update of its policy statement on “Transfer Pricing and Customs Valuation” first issued in 2012 jointly prepared by the ICC Commission on Taxation and the Commission on Customs and Trade Facilitation. The statement supports companies that face the challenge of determining the appropriate related party valuation of goods in the context of disparity between governments’ customs and fiscal policies.

 
The proposals put forward in the statement are designed to help simplify regulations for companies and administrations and also to clarify rules for both parties so as to reduce the negative financial impact linked to divergent valuation. The compliance costs of companies would be significantly reduced if tax and customs administrations were to accept and implement ICC’s proposals that would contribute to a more coherent approach to cross-border trade. These policies would also minimise the risk of penalties that result from opposing views between customs and tax authorities.

 
In February 2015 the policy statement has been offered to the Organization for Economic Co-operation and Development (OECD). Within the context of the G20 mandated OECD Base Erosion and Profit Shifting (BEPS) taxation project. The OECD is working on a revision of its transfer pricing guidelines and the ICC Statement will be helpful in this regard.
Furthermore, the policy statement will be included by the World Customs Organization (WCO) in the WCO’s Revenue Package, which provides guidance (tools and guidelines) to customs administrations around the world on their revenue collection. The WCO Revenue Package will be released in spring 2015.

http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2015/ICC-Policy-Statement-Transfer-Pricing-and-Customs-Valuation-(2015)/

Best Practice observations: Customs is playing a larger role in today’s environment of tax transparency, although there continues to be a disparity between customs adjustments and transfer pricing determination.  It is hopeful this welcome update will introduce simplicity and transparency while avoiding the “one-sided” effect of adjusting customs or transfer pricing going forward.

Additionally, timing is also critical to review the MNE functional oversight of customs and transfer pricing, ensuring they operate seamlessly and in tandem as the international tax arena becomes more complex.