Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘contemporaneous documentation’

Poland’s new TP legislation, with CbC reporting

The referenced KPMG transfer pricing (TP) Alert provides details into the forthcoming sweep of new legislation expected to effective for 2016.  This is a major reform of its domestic legislation which is inclusive of BEPS TP discussion draft intentions, including submission of a country-by-country report (CbC), due one year after a company’s year-end, for for taxpayers with consolidated revenue exceeding EUR 750M.

Click to access poland-may27-2015.pdf

Key observations:

  • The CbC report appears to be applicable for companies exceeding the EUR 750M threshold, regardless of the parent’s place of incorporation.  Thus, this legislation does not rely on the exchange of information to receive this data.
  • Entities with revenues or expenses between EUR 2-10M will be required to produced only a local file, although such file is inclusive of the new BEPS items including organizational structure and restructurings.
  • Medium taxpayers (revenues or expenses exceeding EUR 10M) are required to submit local based comparable analysis.
  • Large taxpayers also have a CbC reporting requirement.  
  • TP documentation is a “contemporaneous” requirement by the due date of the tax return.
  • A Board member will be required to sign a statement confirming preparation of the “contemporaneous” documentation by the deadline.  This applies to all small, medium and large taxpayers.
  •  The 50% tax rate (i.e. penalty provision) to adjusted income is unchanged.

Although expected to become effective commencing in 2016, it is critical to monitor this date to the extent it would be earlier, as it would form a new deadline date for CbC reporting apart from the OECD draft guidelines.  Additionally, the local comparable requirement (similar to Russia) imposes additional cost and complexity for Poland’s new era of TP legislation.

TP disclosure on tax returns: Malaysia

The Malaysian Inland Revenue Board (MIRB) has added a new check box on the 2014 tax return form for corporate taxpayers to declare whether transfer pricing documentation has been prepared.  Contemporaneous documentation should be prepared accordingly (i.e. 7 months from the close of the financial year).  The KPMG Newsletter describing this new initiative is referenced at the following link:

Click to access tp-malaysia-may6-2014.pdf

Re: Best Practices, new transfer pricing boxes / questions on tax returns are becoming a common practice.  Some questions by a multinational to ensure proper governance for tax return transfer pricing disclosures include:

  • What internal governance mechanism is in place to alert the tax dept. timely of new disclosures for proper planning of contemporaneous documentation, etc.?
  • Is the tax return preparer / reviewer knowledgeable about the transfer pricing documentation processes in place to answer the questions accurately?
  • If a transfer pricing question is to be answered negatively (i.e., no documentation exists), is there adequate time to proactively address, as applicable?  Is there any correlative impact for a financial statement tax reserve?
  • For transfer pricing methodology questions, who ensures the proper methods are accurately disclosed?
  • Is there a pre-audit strategy, upon notification, to review tax return disclosures?
  • Is there a documented process in the global tax risk framework that alerts the tax dept. of new disclosures?

These questions, among others, should be discussed to ensure internal and external alignment in a corporation’s tax risk policy.


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