documentation and country-by-country reporting · transfer pricing documentation under beps...
TRANSCRIPT
Documentation and
country-by-country
reporting
Excelsior Hotel Gallia
Piazza Duca D'Aosta, 9 - Milan
April 29, 2015
1© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Agenda
BEPS Action 13
■ Project roadmap
Transfer pricing Documentation under BEPS
■ Objectives and Approach
■ Master File and Local File
■ Country by Country
What's New?
■ Comparison with OECD/Italian TP Standards
Key consideration
2© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Agenda
BEPS Action 13
■ Project roadmap
Transfer pricing Documentation under BEPS
■ Objectives and Approach
■ Master File and Local File
■ Country by Country
What's New?
■ Comparison with OECD/Italian TP Standards
Key consideration
3© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
BEPS Action 13
Project roadmap
January
2016
Be Prepared
to Produce
BEPS-ready
Documenta-
tion
Future
Review,
Update, and
Enhance as
Needed
- Reflect
business
evolution -
Experience
with tax
authorities
February
2015
Guidance
on the
Implementa-
tion of
Transfer
Pricing
Documenta-
tion and
Country-by-
Country
Reporting
July
2013
Release of
Action Plan
January
2014
Publishing
of a
discussion
draft
May
2014
Public
consultation
September
2014
Guidance on
TP
Documenta-
tion and
Country-by-
Country
Reporting
4© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Agenda
BEPS Action 13
■ Project roadmap
Transfer pricing Documentation under BEPS
■ Objectives and Approach
■ Master File and Local File
■ Country by Country
What's New?
■ Comparison with OECD/Italian TP Standards
Key consideration
5© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Objectives of Transfer Pricing Documentation
Objectives
1 Ensure taxpayer give proper consideration to transfer pricing requirements
2 Provide tax administrations with information to conduct risk assessment
3 Provide tax authorities with information to conduct transfer pricing audits
Three tier approach
6© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Objectives and Approach
Master
file
Country
file
Country
file
Country
file
Country
files
CbC
Report
■ Standardized information relevant for all
group members
■ Details on the operations and transactions
relevant to that jurisdiction
■ Summary data by jurisdiction including
revenue, income, taxes, and indicators of
economic activity
7© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Transfer Pricing Documentation
Master File
CBCR Template
Local
File 1
Local
File 2
Local
File 3
Local
File 4
Objective – “By requiring taxpayers to articulate convincing,
consistent, and cogent transfer pricing positions, transfer
pricing documentation can help to ensure that a culture of
compliance is created”
Solution - Three tier approach
Best practice
■ Timeline – Local file no later than due date of tax return;
CBCR template within one year of the end of the fiscal year
■ Materiality – Should be established by local jurisdictions
■ Frequency of updates – Searches every 3 years
■ Language – “Commonly used languages”
■ Penalties – Either direct or via penalty protection or shift in
burden of proof
■ Confidentiality
■ Local comparables
Still to come – Mechanism for sharing information
Revisited no later than 2020
8© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Master File and Local File
High Level overview (group-wide or line of business basis) – and descriptions of:
■ The businesses including drivers of business profit, charts on supply chain (for five largest and/or 5% of turnover); a
list of intra-group services; functional analysis; any business restructurings
■ Intangibles including the group’s strategy for the development of intangibles, a list of material intangibles, a list of
agreements relating to intangibles, any transfers of intangibles and TP policies related to R&D and intangibles
■ Intercompany financial activity including how group is financed, identification of treasury companies, and TP polices relating
to financing
■ Financial and tax positions including unilateral APAs, and other tax rulings relating to the allocation of income
Master File
CBCR
1 2 3 4
For each jurisdiction
■ Description of the management structure, organisational chart, restructurings, key competitors
■ For each category of controlled transactions,
– description of material controlled transactions and list of associated enterprises
– copies of material intercompany agreements
– intercompany payments for each category by jurisdiction of counter-party
– detailed functional analysis including any changes to prior years (can be cross-referenced to Master File)
– most appropriate TP method & tested party
– list of comparables and assumptions made
– reasons for concluding transaction was conducted on arm’s length basis
– a summary of the financial information used in applying the TP methodology
– a copy of existing APAs and other tax rulings which are related to the controlled transactions
■ Financial information for local entities, including local financial accounts and linkages between info used for TP and financial
statements
Separate template – More on this later
9© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Country by Country Reporting
Stated purpose of CbC
■ High level transfer pricing risk assessment
■ Evaluate other BEPS related risks
■ Economic and statistical analysis
NOT
■ Global formulary apportionment of income
How CbC reporting achieves this
■ Providing a global view of a multinationals value chain
■ Understanding of the “bigger picture”
■ Identifying if revenues and profits generated are
commensurate with substance
■ Identifying artificial shifting of substantial amounts of
income into tax-advantaged environments
■ Visibility of where groups are located in low tax
jurisdictions havens or have tax incentives
■ Greater transparency on the location of permanent
establishments and branches
10© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Country by Country Reporting - What is required
■ Multinationals where the ultimate parent entity is resident in an
OECD or G20 country
■ Exemption for multinationals with consolidated group revenues
of less than €750m (or local equivalent) in the previous fiscal
year
■ All types of business structure will be within scope including for
example corporations, partnerships, investment trusts
■ Could be wider if non OECD/G20 countries decide to implement
similar requirements into local law
■ The first period in scope will be the accounting period beginning
on or after 1 January 2016
■ The report must be filed with the parent country tax authority
within 12 months of the year end
■ The first filings will therefore be 31 December 2017
■ Countries will need to implement the requirements into local
legislation
■ The OECD will be working on an implementation framework to
facilitate this – Further details expected (April 2015)
■ The ultimate parent company will be required to prepare a
country by country template for the entire in scope group for
certain financial and tax information shown on the next page
■ The basic scope is all entities included in the consolidated
group for financial reporting and there is no materiality level
■ This will need to be produced on an annual basis and submitted
within 12 months of the year end of the parent
■ Group reporting data or local GAAP information may be used
(*) Defining the reporting multi national may be complex depending on group structure
■ The report will be filed with the parent country tax authority
■ That tax authority will automatically share the report with
countries in which the group operates providing certain
conditions are met:
– Confidentiality: certain confidentiality protections in place
– Consistency: implementing filing requirement for resident
parent companies and not requiring more than is in the
OECD template
– Appropriate use: commitments to using this for assessing
high level transfer pricing risk and not for income allocation
on a formula basis. Commitment around competent authority
approach to counter formula apportionments
Who? When?
What? How?
11© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Country by Country Reporting – Template – Page 1
CbyC Template – Page 1
Revenue
Tax
Jurisdiction
Unrelated
Party
Related
Party Total
Profit (loss)
before
income tax
Income tax
paid (on a
cash basis)
Income
tax
accrued
- current
year
Stated
Capital
Accumulated
Earnings
Number of
employees
Tangible
Assets
other than
Cash and
Cash
Equivalents
Country A
Country B
Not
resident in
any tax
jurisdiction
12© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Transfer pricing Documentation under BEPS
Country by Country Reporting – Template – Page 2
CbyC Template – Page 2
Activities
Tax
Jurisdiction
Constituent
entities
resident in
the tax
jurisdiction
Tax jurisdiction
of organisation
or incorporation
if different from
tax jurisdiction
of residence Re
se
arc
h &
de
ve
lop
me
nt
Ho
ldin
g o
r M
an
ag
ing
inte
lle
ctu
al p
rop
ert
y
Pu
rch
as
ing
or
pro
cu
rem
en
t
Man
ufa
ctu
rin
g o
r p
rod
ucti
on
Sa
les
, m
ark
eti
ng
or
dis
trib
uti
on
Ad
min
istr
ati
ve
, m
an
ag
em
en
t
or
su
pp
ort
se
rvic
es
Pro
vis
ion
of
se
rvic
es
to
un
rela
ted
pa
rtie
s
Inte
rna
l g
rou
p f
ina
nc
e
Re
gu
late
d f
ina
nc
ial s
erv
ice
s
Ins
ura
nc
e
Ho
ldin
g s
ha
res
or
oth
er
eq
uit
y i
ns
tru
me
nts
Do
rma
nt
Oth
er
Country A Entity A Country B
Entity B
Country B Entity C
Entity D
PE 1
13© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Agenda
BEPS Action 13
■ Project roadmap
Transfer pricing Documentation under BEPS
■ Objectives and Approach
■ Master File and Local File
■ Country by Country
What's New?
■ Comparison with OECD/Italian TP Standards
Key consideration
14© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Group intangibles (per
Chapter VI )
Description of Group
business(es)
Group financial
activities
Group’s financial
and tax positions
Global Transfer Pricing Documentation – What’s New?
Master file – BEPS vs Italian TP standards
■ Key profit drivers
■ Supply chain of 5 largest
products/services by
turnover plus those > 5% of
group turnover (chart/
diagram)
■ Description of group services
(other than R&D), including
activities of principal service-
providing locations and
transfer pricing policies for
any cost allocations
■ Main geographic markets
■ Brief FAR analyses of
principal activities of group
entities
■ Description of key business
restructuring (acquisitions
and divestitures)
transactions
■ Group strategy for
development, ownership and
exploitation of IP, including
location of principal R&D
facilities/management
■ List of key intangibles along
with the entities having their
legal ownership
■ List of key intangible related
agreements, including cost
contribution arrangements,
R&D/license agreements
■ TP policies related to R&D/
Intangibles
■ Description of major group
transfers of IP (entities,
countries, compensation
involved)
■ Description of group
financing + key 3P financing
arrangements
■ Details of entities that may
be providing a central
financing function including
country of operation/
organisation
■ Description of TP policies
related to group financing
arrangements
■ Annual consolidated
financial statements
■ List and brief description of
any existing unilateral
APAs/other tax rulings
Organization Structure: Group legal and ownership structure along with geographical location of group entities
New New
New
New
New
15© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Controlled transactionsLocal entity Financial information
Global Transfer Pricing Documentation – What’s New?
Local file – BEPS vs Italian TP standards
■ Local management
structure/org chart,
individuals to whom local
management reports and
country(ies) of their offices
■ Details of local business/
strategy including any
involvement in business
restructurings/intangibles
transfers in recent one
year, along with relevant
factors affecting local
operations
■ Key competitors
For each material category of controlled transactions:
■ Description of controlled transactions
■ Amount of intra-group payments/receipts broken down by jurisdiction
of foreign payor/recipient
■ Group entities involved and relationship amongst them
■ Copies of intercompany agreements
■ Detailed functional analysis of entities involved + any changes
compared to prior years
■ Most appropriate TP method applied, tested party selection and
reasons for same
■ Summary of assumptions involved and reasons for performing a
multi-year analysis, if relevant
■ List/description of comparable uncontrolled transactions (internal/
external) if any used; financials of independent entities involved if
any, and description of search methodology + sources used
■ Description of adjustments performed
■ Reasons for concluding arm's length basis
■ Any unilateral and bilateral/multilateral APAs or tax rulings not
involving local entity but related to controlled transaction
■ Annual local entity financial
accounts
■ Audited/unaudited statements
■ Information/allocation
schedules for tieing financial
data used in TP analysis to
annual financial statements
■ Summary of comparables'
financial data used in TP
analysis as well as source of
data
New
New
New
Based on the results of the comparison it is possible to assume that the Italian TP Doc already
covers the 70%-80% of the information required by the New Guidance
16© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Agenda
BEPS Action 13
■ Project roadmap
Transfer pricing Documentation under BEPS
■ Objectives and Approach
■ Master File and Local File
■ Country by Country
What's New?
■ Comparison with OECD/Italian TP Standards
Key consideration
17© 2015 Studio Associato - Consulenza legale e tributaria, an Italian professional partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity. All rights reserved.
Key consideration
Reconsider your transfer pricing policies in light of BEPS developments
■ Understand data need
■ Map current status of documentation
■ Identify data source and define data gathering plan
Thank you
Contacts
Maria Eugenia Palombo
Associate Partner, Transfer Pricing
T: 06 8096 3505
The KPMG name, logo and "cutting through
complexity" are registered trademarks or trademarks
of KPMG International.
© 2015 Studio Associato - Consulenza legale e
tributaria, an Italian professional partnership and a
member firm of the KPMG network of independent
member firms affiliated with KPMG International
Cooperative ("KPMG International"), a Swiss entity. All
rights reserved.