Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘Indonesia’

BEPS related developments

EY’s Global Alert highlights several OECD / unilateral actions resulting from the BEPS Action Items announced earlier this month.

Click to access 2015G_CM5827_The%20Latest%20on%20BEPS%20-%2026%20October%202015.pdf

Highlights:

  • Czech Republic’s 2016’s income tax proposal, including the EU Parent-Subsidiary Directive change limiting exemption of tax deductible distributions, although retaining its own general anti-abuse rule (vs. that in the Directive).
  • EU’s State Aid decisions re: Luxembourg and Netherlands, for which legal appeals are expected.
  • Honduras transfer pricing information return requirement.
  • Indonesian thin capitalization limit of 4:1, remainder of interest non-deductible (thereby incurring one-sided taxation re: interest income of recipient).
  • Ireland’s Knowledge Development Box, following the OECD’s recommendations, and country-by-country (CbC) reporting by Irish headquartered groups with a secondary filing mechanism.
  • Norway’s 2016 budget proposal, with an interest limitation of 25% of taxable EBITDA.
  • Slovakia’s 2016 income tax changes, including implementation of the EU Parent-Subsidiary Directive.

This new post-BEPS period is starting off with a multitude of activities by countries and the EU that is not expected to slow down in the near future.  These developments will shape the transfer pricing regime, and resulting complexity and disparity, around the world.  Accordingly, these trends should be monitored and addressed in a corporation’s tax risk framework accordingly.

Category:

OECD

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Indonesia APA: Methodical approach

The Indonesian Minister of Finance has released recent Regulations addressing the methodical approach for which taxpayers and the tax administration are to be aligned in seeking an APA.  Most importantly, the approach outlines the advance timing and necessary information by which tax authorities will utilize in considering APA requests.

A link to KPMG’s Tax News Flash is provided for reference:

Click to access TNF%20APA.pdf

As countries continue to enact unilateral legislation, with or without BEPS Actions, it may be prudent to consider a proactive transfer pricing approach to enter into APA’s for significant intercompany transactions.  As the Mutual Agreement Procedure (MAP) procedures are still being refreshed, the transition period would be an excellent time to prepare for additional certainty via APA’s.  The Indonesian approach provides an excellent example to better appreciate the timing, information and exchanges that will become part of this process.

Armed with the foresight that such APA’s may be included in transfer pricing documentation and exchanged between tax authorities around the world, it may be a worthwhile roadmap demonstrating consistency for significant transactions.

Category:

Transfer Pricing

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