Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘transfer pricing risk’

Australia’s DPT: License to tax

EY’s Global Tax Alert provides details on Australia’s new Diverted Profits Tax (DPT), effective in 2018 for calendar year taxpayers.

  • Penalty up to 40% can be assessed
  • Interaction with transfer pricing documentation and country-by-country (CbC) risk assessment
  • Diverted profits taxed at less than 24% are vulnerable
  • Proactive review of one’s documentation and risk assessment is recommended

Australia has patterned their DPT after the UK implemented a similar scheme, although posing some different characteristics.

As countries are reaching out to tax profits that are subject to a lower rate of tax elsewhere, this is providing a license to tax that cannot be ignored by multinationals with Australian operations.

http://www.ey.com/Publication/vwLUAssets/Australia_passes_Diverted_Profits_Tax_and_Penalties_law/$FILE/2017G_01485-171Gbl_Australia%20passes%20Diverted%20Profits%20Tax%20and%20Penalties%20law.pdf

Angolan TP documentation penalty: Lessons learned

The Angolan transfer pricing documentation submission deadline was 30 June 2015 re: tax year 2014 for large taxpayers.  EY’s publication provides details on the recent enforcement penalties, including business limitations and reputational risk considerations notwithstanding the insignificant penalty amount for late filing.

http://www.ey.com/Publication/vwLUAssets/Angolan_Tax_Authorities_apply_penalties_for_failure_to_file_transfer_pricing_documentation/$FILE/2015G_CM5706_TP_Angolan%20TAs%20apply%20penalties%20for%20failure%20to%20file%20TP%20documentation.pdf

Key observations / lessons learned:

  • Insignificant monetary penalties due to non-filing or incomplete transfer pricing documentation may be a consideration in modifying a standard OECD documentation template based on cost/benefit.  However, other factors that may be ignored in this analysis may have more inherent risks for consideration.
  • Business and reputational risks should be an essential input for filing complete, and accurate, transfer pricing documentation.  As countries seek to individualize such documentation, this task is more timely and costly, although ignoring such nuances may prove to be damaging.
  • In Angola, the list of non-compliant taxpayers are provided to the National Bank of Angola (via requirements of a Presidential Decree).  Accordingly, inclusion on this list may limit foreign exchange transactions ongoing.
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