PwC has conducted a survey, as referenced in the attached link, of transfer pricing aspects for financial transactions in over 40 countries in the Americas, Asia Pacific and Europe. The insightful information, current as of 1/1/2013, initially provides a comprehensive overview of intercompany loans, cash pooling and guarantees followed by transfer pricing details for each country.
Each country included in the survey provided responses to the following topics:
- Transfer pricing rules and regulations, domestic / OECD guidelines
- Thin capitalisation
- Intercompany loans (arms-length nature, transfer pricing methodologies, etc.)
- Cash pooling; transfer pricing methodologies
- Intercompany guarantees
- Documentation requirements
- Advance certainty via APA, etc.
Transfer pricing questions and issues re: intercompany loans and various aspects of financial transactions are becoming more common and complex as businesses are continuing global expansion. Accordingly, multinational tax and treasury departments need to be mutually aware of transfer pricing rules for arms-length principles, contemporaneous documentation requirements, and inherent risks / opportunities for intercompany financial transactions.
Evolving rules in this area dictate continual training, awareness and strategizing risks from a global tax and treasury perspective. Transfer pricing training should be provided at regional / global treasury conferences; conversely treasury should ensure tax is aware of new financing tools that arise in different markets to ensure alignment.
The BEPS report, previously released, and the new Action Plan are available for public review, with many commentators already providing insight on the Action Plan.
The 24 month Action Plan is comprehensive and aggressive, with tax transparency and disclosure rules likely to be implemented early in that timeline. The report also discusses an improvement of global rules in developing countries, further referenced by work of the Tax Inspectors without Borders study, as discussed in my 9 June 2013 post.
One very interesting proposal in the report is the development of a multilateral convention to address BEPS issues. This will allow countries to rapidly implement some actions without formally renegotiating bilateral treaties. Additionally, Appendix C provides examples of tax planning structures by multinational organizations.
The OECD BEPS report and Action Plan will provide additional momentum and debate for the proposed actions, for which multinationals should prepare an internal action plan to address such initiatives.
The Global Forum has 120 members and is the premier international body re: implementation of internationally agreed transparency standards and exchange of information. This Forum is very active in today’s tax environment, as demonstrated by its recent activities including:
- 2nd meeting of the Competent Authorities on 30-31 May 2013, attended by 174 delegates from 77 jurisdictions. Delegates shared procedures for Exchange of Information networks to tackle tax evasion, tools to enhance effective communication between Competent Authorities, as well as providing opportunities to share experiences and practices.
- Regional Training Seminar in Brazil 7-10 May 2013, attended by 70 tax administrators from Argentina, Brazil, Columbia, Costa Rica, Dominican Republic, El Salvador, Paraguay and Uruguay. Panama and the United Kingdom provided expert trainers, focusing on an OECD overview of Exchange of Information, the 2012 update to Article 26 of the OECD Model Tax Convention and its Commentary, and the Multilateral Convention on Mutual Administrative Assistance.
- Regional Training Seminar in Dakar, Senegal 24-26 April 2013, attended by 20 tax authorities in 8 francophone African countries (Burkina Faso, Cameroon, Democratic Republic of Congo, Gabon, Morocco, Niger, Senegal and Tunisia). The African countries are recent members of the Global Forum and will have Phase 1 peer reviews in 2014. Belgium and Qatar provided expert trainers, focusing on the peer review process and preparation for evaluation of legal and regulatory frameworks for the exchange of information.
The activities of this Forum are visibly expanding transparency initiatives and the exchange of information around the world. The recent G8 conference encouraged all countries to join in order to share mutual benefits.
Regional and global tax teams should review internal processes to ensure global consistency and adherence with internal governance protocols. Additionally, a dialogue should be established between tax and the business leaders to heighten global awareness and ensure strategic alignment.