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A range of transfer pricing developments and issues are likely to foreshadow the international tax/ transfer pricing landscape in 2020. Transfer pricing practitioners globally have identified the following issues as the key aspects of transfer pricing:
The Asian tax authorities have been following these global developments and have undertaken various initiatives both in-country as well as regionally. For example, a regional meeting on tax and digitalisation for Asia and the Pacific took place in the Philippines in November 2019. The meeting offered an opportunity for participants, civil society and the business community, to actively contribute their views to the discussions on the various OECD proposals currently under discussion.
Furthermore, various regional tax authorities have stepped up their focus and efforts on transfer pricing audits. Specifically, the Philippines and Malaysia revised their transfer pricing guidelines, increasing transfer pricing penalties and defining the scope of transfer pricing audits.
The OECD also intends to undertake a review of the effectiveness of CbC reporting, including a peer review. With regard to the most recent years, there has been a patchwork of inconsistent documentation deadlines across countries, a clear increase in transfer pricing documentation reports to be produced by companies, and enhanced enforcement of these new rules by tax authorities.
In this timely and practical workshop, our highly-experienced Trainer will take you through the key and recent developments, highlighting the practical implications and also share on effective ways to minimise potential risks and exposure in the current economic environment.
Summary of key global tax/ transfer pricing development
Transfer pricing aspects of the digital economy
Action Plan 1 was concerned with the tax challenges of the digital economy. However, it was not possible to ring fence and restrict the digital economy due to the overarching reach of the digital economy. Thus, post-finalisation of the BEPS Action Plans, the OECD initiated a task force for the digital economy which started working on additional global tax frameworks to address the tax challenges of the digitalization of the economy.
This segment will bring participants up to date with the debate and ideas that have been put forth by the OECD in terms of Pillar 1 which was concerned with the allocation of taxing rights for a highly digitalized business and Pillar 2 which was referred to as the global anti-base erosion (“GloBE”) proposal. This is work-in-progress and we will understand the key considerations that taxpayers should be aware of and how the current proposals can impact business operations.
Transfer pricing for intercompany financing
As part of the BEPS Action Plans, the OECD has introduced a wave of changes to the tax and transfer pricing landscape relevant to intercompany financing arrangements, such as Action 4 and Action 8-10. The transfer pricing guidance on intercompany financial transactions was finalised in February 2020.
This section of the workshop will outline the key guidance offered by OECD, understand if there are any inconsistencies with that offered by the IRAS, and understand how such analysis may be carried out. It should be noted that we are witnessing increasing maturity of the transfer pricing expertise of the tax authorities in the region leading to an increase in scrutiny involving intercompany financing arrangements.
Transfer pricing controversy, dispute resolution and joint audits
Tax authorities in Malaysia and the Philippines have issued transfer pricing guidelines that outline the process that will be adopted. Both Malaysia and Indonesia are promoting voluntary disclosure programmes in order to increase revenue collection. The OECD has also issued directives for joint audits. Thus, this section will help you understand that various strategies that are available to the taxpayer to help resolve/ prevent disputes.
How will COVID-19 impact your transfer prices?
One of the key shocks to our financial and economic system is the COVID-19 outbreak which is likely to negatively impact companies’ revenue and profit figures. This will also have an impact on the transfer pricing model or will it? This section of the seminar will address how taxpayers should be prepared to defend the transfer prices in light of COVID-19.
Dr Sowmya Varadharajan is a Director at IC Advisors Pte Ltd, a firm that helps companies design and document appropriate transfer pricing strategies and approaches for their related party transactions. Having been trained in the U.S. on international tax and transfer pricing issues through blue-chip corporations, Sowmya now applies her transfer pricing training to transfer pricing issues in the Asia Pacific region. Sowmya has extensive experience in the high technology/semiconductor as well as pharmaceutical/biomedical industries. In addition to transfer pricing, Sowmya is also skilled in IP valuation. With the growth in transfer pricing related audits in the Asia Pacific region, Sowmya has assisted clients in India, China, Malaysia, Indonesia and Singapore in defending their transfer pricing arrangements with tax authorities. Sowmya is an economist with Ph.D. in Economics from Cornell University and has more than 17 years of transfer pricing consulting experience.