Transfer Pricing in Canada, the United States and around the World

Transfer Pricing  in Canada, the United States and around the World

Catégorie: Business Strategy Transfer Pricing

Total 72 articles

OECD: Request for Input on the Tax Challenges of the Digital Economy

The OECD recently released a request for input on the tax challenges of the digital economy.

The OECD explains:

“The request for input outlines the background on the work regarding the tax challenges of digitalisation from the BEPS Action 1 report and invites comments on the impact of digitalisation on business models and value creation, challenges and opportunities for tax systems, the implementation of the measures outlined in the BEPS package and potential options to address the direct tax challenges of digitalisation.”

We intend to provide some comments before the October 13, 2017 time-limit on that matter.

The complete library on BEPS and Transfer Pricing is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Fiscalité / Tax (RBRT inc.)
514-742-8086
robertrobillard@rbrt.ca
rbrt.ca

The information in this blog post is general information only. Data and information come from sources believed to be reliable but accuracy cannot be guaranteed. RBRT Inc., RBRT Concepts Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. RBRT Inc., RBRT Concepts Inc. or the author are not responsible or liable with respect to the content appearing on external sources nor regarding the language of this content. The opinions expressed in this blogpost are those of the author. Readers should seek advice from RBRT Inc. as required.

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Canada: Tax Treaty Negotiations with San Marino

This blogpost originally appeared on rbrt.ca.

Finance Canada recently begun negotiations with the Republic of San Marino to conclude a tax treaty.

Finance Canada indicated:

“Persons wishing to offer comments concerning the negotiations should send their views to the Department of Finance at:

Tax Legislation Division
Department of Finance
11th Floor
90 Elgin St.
Ottawa, ON  K1A 0G5
Fax: 613 369 3661

taxtreaties-conventionsfiscales@canada.ca

conventionsfiscales-taxtreaties@canada.ca

The library on Transfer Pricing in Canada is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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OECD: Guidance on the Implementation of Country-by-Country Reporting

This blogpost originally appeared on rbrt.ca.

The OECD has just released its “Guidance on the Implementation of Country-by-Country Reporting”.

CbC reporting is one of the cornerstone of the BEPS initiative.

The Communiqué explains that:

“A key pillar of the project focused on ensuring transparency while promoting increased certainty and predictability. One of the main outcomes of that work has been the adoption of country-by-country reporting, as set out in the 2015 BEPS Report on Action 13 “Transfer Pricing Documentation and Country-by-Country Reporting“. Under CbC reporting, MNEs will be required to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.”

The Guidance is available here: http://www.oecd.org/tax/exchange-of-tax-information/guidance-on-the-implementation-of-country-by-country-reporting-beps-action-13.pdf

The library on BEPS and Transfer Pricing is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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What the BEPS? Brexit!

This blogpost originally appeared on rbrt.ca.

Obviously Brexit is rattling the EU today (and the world).

Financial markets are (likely temporarily) in a free fall. This shall pass…

The British pound is getting hammered. This too shall pass…

On the tax front, Common Consolidated Corporate Tax Base (CCCTB) just got slapped across the face. Fairly hard at that.

The Anti Tax Avoidance Package also got some bruises this morning.

Both recently relaunched/ratified, they have just lost a significant player.

If other countries were to follow in the UK’s footsteps, this may get nasty. We shall see…

Coming back to the UK, will Brexit be followed by a “leave” movement by companies? We do not expect that.

UK’s corporate tax regime remains one of the most enticing in the BEPS era across Europe in spite of the newly born diverted profits tax.

However, as the “leave” process starts taking shape in the UK, new issues may arise.

Companies may have to revisit their corporate tax strategy and value chain management in Europe. Sales tax matters may also have to be revisited.

The next 6 to 12 months should provide a good indication of how Brexit will ultimately unfold.

But there is indeed nothing wrong with talking about and, in some case, revisiting tax planning at this time.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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BEPS Rules Now Officially Part of the OECD Transfer Pricing Guidelines

This blogpost originally appeared on rbrt.ca.

The OECD recently indicated:

“On 23 May 2016, the OECD Council approved the amendments to the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“Transfer Pricing Guidelines”), as set out in the 2015 BEPS Report on Actions 8-10 “Aligning Transfer Pricing Outcomes with Value Creation” and the 2015 BEPS Report on Action 13 “Transfer Pricing Documentation and Country-by-Country Reporting“. These amendments provide further clarity and legal certainty about the status of the BEPS changes to the Transfer Pricing Guidelines, which were endorsed by the Council on 1 October 2015, by the G20 Finance Ministers on 8 October 2015, and by the G20 Leaders on 15-16 November 2015.

[…]

The specific changes introduced in the Transfer Pricing Guidelines by these Reports are as follows:

  • The current provisions of Chapter I, Section D of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.
  • Paragraphs are added to Chapter II of the Transfer Pricing Guidelines, immediately following paragraph 2.16.
  • A new paragraph is inserted following paragraph 2.9.
  • The current provisions of Chapter V of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance and annexes.
  • The current provisions of Chapter VI of the Transfer Pricing Guidelines and the annex to this Chapter are deleted in their entirety and replaced by new guidance and annex.
  • The current provisions of Chapter VII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.
  • The current provisions of Chapter VIII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.”

The complete communiqué is available here.

The latest update on BEPS was provided on June 16, 2016. View this update and the OECD presentation here: http://www.oecd.org/tax/tax-talks-webcasts.htm

Among the subjects covered, a Concept Note titled The Platform for Collaboration on Tax was released in April 2016 by the IMF, UN, World Bank and the OECD. It is available here: https://www.imf.org/external/np/sec/pr/2016/pdf/pr16176.pdf

The upcoming 8 toolkits for “tax collaboration” stem from this initiative (see slide 21).

All this to reiterate that BEPS is far from over…

The library on BEPS and Transfer Pricing is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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ICC: What the BEPS?

This blogpost originally appeared on rbrt.ca.

The International Chamber of Commerce recently indicated:

“[ICC] recognizes the efforts of an increasing number of tax authorities to revise their tax policies in response to the international guidelines outlined in the G20 mandated Organisation for Economic Co-operation and Development (OECD) Base Erosion Profit Shifting (BEPS) project. ICC urges national governments to seriously consider the broader implications of their proposed measures and strongly recommends an alignment with existing guidelines that would facilitate greater consistency internationally and incentivise cross-border trade, investment and economic growth.”

The ICC also added:

“The global focus on creating a fairer and more transparent international tax system has resulted in many jurisdictions implementing measures at a local level in an effort to address offshore tax avoidance. In some cases these measures go beyond the proposals set out in the BEPS recommendations. While it is entirely within the prerogative of national governments to decide on their policies, ICC reiterates the need for coherent and co-ordinated implementation of the internationally agreed guidelines across all countries and in close cooperation with business, in order to align tax systems, protect government revenues and safe-guard cross-border trade and investment.”

[…]

“ICC has already cautioned against measures proposed in the European Commission’s Anti-Tax Avoidance Package including provisions for public disclosure of tax data which fall well beyond the scope of international guidelines and remains concerned that a number of other countries seem to be following in the same vein.

Notably, India has recently adopted into law an equalization levy that would be imposed on the payments for digital transactions, and not income, and therefore not fall under the scope of existing tax treaties, giving rise to potential instances of double taxation. Furthermore the Chinese State Administration of Taxation has implemented an initiative to collect financial data from the top 1,000 companies in China using their own software that could pose confidentiality and data security concerns. The US has also recently proposed regulations on debt and equity which would, if they were adopted, override the agreements between the OECD and G20 countries regarding the treatment of interest deductions.”

There is little doubt that these unilateral “measures” will lead to more and more international tax litigation in the coming years.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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WCO: New Instrument on Transfer Pricing and Customs Valuation

This blogpost originally appeared on rbrt.ca.

The World Customs Organization explains:

“The case study illustrates a scenario where Customs took into account transfer pricing information in the course of verifying the Customs value.”

The 4-page case study is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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Canada’s Notice of Ways and Means Motion Introduces changes to FAPI and Withholding of Tax Rules

This blogpost originally appeared on rbrt.ca.

The Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures and Explanatory Notes introduces changes to withholding of tax by a nonresident employer and some subtle changes to FAPI calculation.

Regarding FAPI calculation, the Notice explains (see pp. 19-20):

“Determination of certain components of foreign accrual property income
ITA
95(2)(a.2) to (a.23)

Paragraph 95(2)(a.2) of the Act includes in the income from a business other than an active business and thus the foreign accrual property income (“FAPI”) of a foreign affiliate of a taxpayer resident in Canada, the income of the affiliate from the insurance of risks (including income from the reinsurance of risk) where the risks insured were in respect of

 a person resident in Canada
 property situated in Canada, or
 a business carried on in Canada.

The rule does not apply, however, where more than 90% of the gross premium income of the affiliate from the insurance (net of reinsurance ceded) of risks was derived from the insurance of other risks of persons with whom the affiliate deals at arm’s length. Where the rule applies to the foreign affiliate of the taxpayer, the insurance of those risks is deemed to be a separate business other than an active business of the affiliate.

Paragraph 95(2)(a.2) is amended in two ways. First, it is modernized and restructured, by replacing its former subparagraphs (a.2)(i) to (iii) with references to the new defined term “specified Canadian risks”, which are defined in new paragraph 95(2)(a.23) as the same risks that were previously described in those subparagraphs. It is further restructured by moving the existing rule into new subparagraphs (a.2)(i) and (ii), to accommodate the addition of the new rules in new subparagraphs (a.2)(iii) and (iv). The changes described above are merely structural and not substantive changes.

Second, paragraph (a.2) is amended by adding new rules in subparagraphs (a.2)(iii) and (iv). Subparagraph (a.2)(iii) provides that, to the extent income in respect of the ceding of Canadian risks is not already included in a foreign affiliate’s income from a business other than an active business because of subparagraph (a.2)(i) or (ii), it is to be so included. For these purposes, an affiliate’s income in respect of the ceding of Canadian risks includes (but is not limited to):

 income of the affiliate from services in respect of the ceding of specified Canadian risks, and
 the amount, if any, by which the fair market value of the consideration provided in respect of the ceding of the specified Canadian risks exceeds the affiliate’s cost in respect of those specified Canadian risks.

Subparagraph (a.2)(iv) is analogous to subparagraph (a.2)(ii) and, where subparagraph (a.2)(iii) applies in respect of the ceding of specified Canadian risks, deems

 the ceding of those risks to be a separate business, other than an active business, carried on by the affiliate, and
 any income of the affiliate that pertains to or is incident to that business to be from a business other than an active business.

Paragraph 95(2)(a.21) is amended by adding references to the new defined term “specified Canadian risks”. No substantive changes are made to this paragraph.

New paragraph 95(2)(a.23) defines the new term “specified Canadian risks”, for purposes of paragraphs (a.2) and (a.21). These risks are the same ones that were previously described in subparagraphs (a.2)(i) to (iii), and the new definition replaces the description previously in those subparagraphs.

Specifically, specified Canadian risks are defined as risks in respect of a person resident in Canada, a property situated in Canada or a business carried on in Canada.

These amendments apply to taxation years of a taxpayer that begin after April 20, 2015.

Example: Paragraph 95(2)(a.2)(iii) and (iv)
Assumptions

 FA1 is a non-resident corporation, all of the shares of which are owned by a corporation resident in Canada (“Canco”).
 FA1 reinsures risks of an arm’s length Canadian insurance company, which constitute “specified Canadian risks” (as defined in paragraph (a.23)), and pays a cash “ceding commission” to the Canadian insurance company.
 Subsequently, FA1 retrocedes these risks to an arm’s length, non-resident reinsurer. As part of the same arrangement, the non-resident reinsurer also retrocedes foreign risks to FA1.
 Paragraph (a.21) does not apply to deem the foreign risks to be specified Canadian risks because, based on certain other facts concerning the arrangement, the condition in subparagraph (a.21)(ii) is not satisfied.

Analysis

To the extent income in respect of the ceding of the Canadian risks by FA1 to the non-resident reinsurer is not already included in FA1’s income from a business other than an active business because of subparagraph (a.2)(i) or (ii), subparagraphs (a.2)(iii) and (iv) will apply in this case. In this regard, subparagraph (a.2)(iii) provides that, for these purposes, a foreign affiliate’s income from the ceding of Canadian risks includes an amount equal to the difference between the fair market value of the consideration provided in respect of the ceding of the specified Canadian risks and the affiliate’s cost in respect of those specified Canadian risks. Since, as part of the same arrangement under which the non-resident reinsurer reinsures the specified Canadian risks, FA1 also reinsures the foreign risks of the non-resident reinsurer, the portfolio of foreign risks constitute consideration provided by the non-resident reinsurer in respect of the ceding of the specified Canadian risks by FA1. Accordingly, FA1’s income from the ceding of the specified Canadian risks is equal to the difference between the fair market value of the foreign risks and FA1’s cost in respect of those specified Canadian risks (which costs may include the ceding commission paid by FA1 to the Canadian insurance company).”

With respect to withholding of tax by a nonresident employer, the Notice indicates (p. 53):

“Withholding
ITA
153(1)(a)

Section 153 of the Act requires the withholding of tax from certain payments described in paragraphs 153(1)(a) to (t). The person making such a payment is required to remit the amount withheld to the Receiver General on behalf of the payee. Paragraph (a) requires withholdings with respect to salary, wages and other remuneration paid to an employee, including a nonresident employee working in Canada for a non-resident employer, other than amounts described in subsection 115(2.3) (relating to the 2010 Vancouver Olympics) or 212(5.1) (relating to certain acting services).

Paragraph (a) is amended to exclude from the withholding obligations, in addition to amounts described in 212(5.1), amounts paid at any time by a qualifying non-resident employer to a qualifying non-resident employee if, at the time of the payment, the employee is a “qualifying non-resident employee” and the employer is a “qualifying non-resident employer”, both as defined in subsection 153(6). The reference to subsection 115(2.3) is no longer necessary and so, it is not included in the revised paragraph (a).

This amended paragraph applies in respect of payments made after 2015.”

The complete legislative provisions are available here : http://www.fin.gc.ca/drleg-apl/2016/bia-leb-0416-l-eng.asp

The library on Transfer Pricing in Canada is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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IRS: 2015 APA and APMA Program Report Now Available

This blogpost originally appeared on rbrt.ca.

The Announcement and Report Concerning Advance Pricing Agreements was released on March 31st, 2016:

“Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents statistical data; and Part III includes general descriptions of various elements of the APAs executed in 2015, including types of transactions covered, transfer pricing methods used, and completion time.”

We learn that, once again, the bulk (70%) of bilateral APAs occurred with Japan (45%) and Canada (25%).

The CPM/TNMM accounted for over 80 % of the APA concluded in 2015.

The complete document is available here.

The 2015 APMA statutory Report has been added to the Transfer Pricing in the USA available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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Canada: $444 Million Investment to “Crack Down” on Tax Evasion

This blogpost originally appeared on rbrt.ca.

The Panama Papers obviously did not go unnoticed.

The OECD recently stated that “Tax administrations [are] ready to act on “Panama Papers”” in this Communiqué.

In Canada, the Government of Canada indicated this morning:

“The Government of Canada has committed to crack down on tax evasion and tax avoidance. Most middle class Canadians pay their fair share of taxes, but some wealthy individuals avoid taxes by hiding their money in offshore tax havens. This is not fair and it needs to change. These wealthy Canadians should not be able to buy their way out of paying the income tax that they owe.

Today, the Minister of National Revenue, Diane Lebouthillier, announced that the Government of Canada will invest over $444 million to enhance the Canada Revenue Agency’s (CRA) ability to detect, audit, and prosecute tax evasion – both at home and abroad.

[…]

In order to combat tax evasion and tax avoidance, the CRA will create a special program dedicated to stopping the organizations that create – and promote – these tax schemes for the wealthy. This will result in a twelve-fold increase in the number of tax schemes examined by the CRA. This team will apply penalties and refer cases for criminal investigation, where appropriate.

The federal investment will give the CRA the ability to hire more auditors and specialists. This will increase the number of examinations focused on high-risk taxpayers – from 600 per year to 3000 per year – and will bring in $432 million in new tax revenue. In addition, the new government funding will help the CRA bring in 100 additional auditors to investigate high-risk multinational corporations, a strategy that will collect an additional $500 million in revenue over five years.”

See the complete Communiqué of the Government of Canada here.

The library on Transfer Pricing in Canada is available here.

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at” rbrt.ca
www.rbrt.ca

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.

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