international tax review world transfer-pricing-2014

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World TransferPricing 2014The comprehensive guide to theworld’s leading transfer pricing firms

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Introduction 3

Global transfer pricing developments 5

Argentina 8

Australia 11

Austria 15

Baltic States 18

Belgium 23

Brazil 27

Bulgaria 33

Canada 37

Chile 46

China 50

Colombia 55

Czech Republic 58

Denmark 61

Finland 64

France 68

Germany 75

Greece 85

Hong Kong 89

Hungary 94

India 97

Indonesia 106

Ireland 110

Israel 117

Italy 120

Japan 131

Luxembourg 136

Malaysia 140

Mexico 143

Netherlands 147

New Zealand 151

Norway 154

Peru 157

Philippines 160

Poland 163

Portugal 167

Romania 171

Russia 174

Singapore 177

South Africa 180

South Korea 184

Spain 191

Sweden 196

Switzerland 200

Taiwan 203

Turkey 207

Ukraine 214

UK 218

US 224

Uruguay 236

Venezuela 238

Vietnam 240

Index 243

World Transfer Pricing 2014 1

World Transfer Pricing 2014

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International Tax ReviewNestor House, Playhouse YardLondon EC4V 5EX UKTel: +44 20 7779 8308Fax: +44 20 7779 8500

Managing editor: Ralph CunninghamEmail: [email protected]

World Transfer Pricing editor: Sophie AshleyMagazine editor: Salman ShaheenCorporate tax editor: Matthew GilleardTax disputes editor: Joe Dalton

World Transfer Pricing writers: David Corrado,Toby Hill, Jamie Moore, Willow Yang

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W elcome to the first edition of WorldTransfer Pricing 2014, International Tax

Review’s directory to the leading transfer pric-ing advisory firms around the world.

Multinational companies’ transfer pricingoperations have never been under more scruti-ny; not just from the tax authorities but frompoliticians and the public as well. Consequently,finding the right transfer pricing adviser, thatcan manage all a company’s transfer pricingdemands and offer industry experience, hasnever been more crucial.

Going to the biggest firm, or the adviser withthe highest profile, may seem like the obviousthing to do. Or hiring the team that has anestablished reputation in related industries orareas of practice may seem logical. What aboutthe practice that does the largest transactions?

A tax executive can go down many routesbefore finding the right adviser. Listening torecommendations from peers, relying on inter-national networks and opening the work up totender offers are all options available to tax andtransfer pricing directors.

World Transfer Pricing is another resource.Each edition rates the transfer pricing expertiseoffered in more than 50 jurisdictions globally,giving tax executives the most comprehensiveinformation about the market for tax advice.

The publication is unique among directoriesas it classifies professional services, law firmsand other transfer pricing advice providers, suchas economists, together, rather than looking atthem separately, because they undoubtedlycompete for work.

The fact that this competition exists is alsoevident in the regular moves that practitionersmake between law firms and other providers. Itis common for advisers to spend different peri-ods at law firms and a Big 4 practice during theircareers.

It’s all about qualityIf this guide was just about depth and breadthof practice, then the firms who have the largestpractice would always come out on top. Butthose practices may have stayed the samenumerically for a number of years and whiledoing solid work, only retain clients out of loy-alty. They may not have equipped themselves todeal with key transfer pricing developments.

It is usually clear-cut in most jurisdictionscovered in this publication where firms shouldbe placed relative to the tier criteria and toeach other. The criteria (which you can seeelsewhere in this introduction) covers size,breadth and depth and practice, and spe-cialisms. While these are all important, theyare not the crucial factors. Quality of workhas to be.

The few marginal decisions required aboutwhich firms should go in which tiers are madeaccording to the ingenuity and innovation thatlawyers and advisers bring to client engage-ments.

Much goes into that criterion – knowledge,experience of advisers, attentiveness, diligence– to work out a seemingly intractable issuewhere the advice has been in conflict.

Any other way is just not helpful to tax exec-utives.

It is in this context that International TaxReview presents World Transfer Pricing 2014,its comprehensive guide to the world’s leadingtransfer pricing firms. We hope it will help taxexecutives obtain the best advice for their situ-ation.

MethodologyInternational Tax Review researchers and jour-nalists interviewed corporate tax and transferpricing directors and their advisers by phone, e-mail and face-to-face to compile the tiers of


Introduction

leading firms and write the commentaries for51 jurisdictions in World Transfer Pricing 2014.

The corporate interviewees were chosenfrom a representative sample of clients of theleading firms in the market. One of the ques-tions we asked was: “Who is your primary advis-er?” We clearly could not know this in advanceso the representative sample could only be con-structed after the interviews were completed.

Interviews with tax and transfer pricingdirectors were much more extensive this yearthan ever before. On an anonymous basis, weasked them questions about, for example, thequality of advice received, opinions about teamsand individual advisers and what their advisersdid well or badly.

The objective of interviewing both practition-ers and tax executives was to get an opinion oftransfer pricing advisers from their peers andtheir clients.

Tax directors have their own view of the mar-ket, based on the advisers they use, while prac-

titioners have a broader view of practicebecause they advise many more clients than thenumber of external advisers a tax director uses.

At the same time, there was a possibility ofbias and ulterior motive in what anyone con-tributed to the research and we tried to min-imise this as much as possible through a verifi-cation process.

No recommendation from any adviser fortheir own firm or their colleagues in that firmwas taken into account. Firms could not pay tobe included in the tiers or to have their individ-uals listed but were offered independently theopportunity to list their professional details fora fee.

Tiers of leading firms from 51 countries orterritories have been included.

Unique rankingsLeading individuals have been highlighted in thetext about their firm in the market commen-taries on each country and territory, rather thanbeing listed separately by specialism.

At the top end of the rankings are the firmsthat have the greatest depth of resources, expe-rience, and range of specialisms. They are con-sidered the best teams overall for tax advice inthe country concerned. The important point tonote about the rankings is that all the firms list-ed have highly reputable tax individuals in theiradvisory teams.

We hope you find World Transfer Pricing2014 to be a valuable tool in helping you identi-fy the appropriate advisers in the jurisdictionscovered.

Sophie AshleyOnline editor International Tax Review &Managing editor TPWeek

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Tiers and methodology

Tier 1Firms have a leading reputation in theirjurisdiction. They have a varied portfolio of work.They offer a range of transfer pricing services.They boast a variety of different clients.

Tier 2Firms have a leading reputation in theirjurisdiction. They have a varied portfolio of work.They offer a range of transfer pricing services.

Tier 3Firms have a leading reputation in theirjurisdiction. They have a varied portfolio of work.


The OECD is working on significant reportson intangible assets, transfer pricing safe

harbours and documentation issues. The organ-isation is also working new BEPS (Base Erosionand Profit Shifting) action plan. The BEPSaction plan states that the OECD will developrules regarding transfer pricing documentationto enhance transparency, and the intangibleswork is specifically listed in the BEPS actionplan.Let us start with BEPS, as the breadth of this

project will likely encompass the other OECDprojects and affect worldwide transfer pricingfor decades to come.

BEPSThe OECD presented a BEPS action plan atthe G-20 finance ministers’ meeting inMoscow on July 19 2013. The action planidentifies 15 actions: (1) address the chal-lenges of the digital economy; (2) neutralisethe effects of hybrid mismatch arrangements;(3) strengthen the controlled foreign companyrules; (4) limit base erosion via interestdeductions and other financial payments; (5)counter harmful tax practices more effective-ly, taking into account transparency and sub-stance; (6) prevent treaty abuse; (7) preventthe artificial avoidance of permanent estab-lishment status; (8, 9, and 10) assure thattransfer pricing outcomes are in line withvalue creation regarding intangibles, risks andcapital, and other high-risk transactions; (11)establish methodologies to collect and analysedata on BEPS and the actions to address it;(12) require taxpayers to disclose their aggres-sive tax planning arrangements; (13) reexam-

ine transfer pricing documentation; (14) makedispute resolution mechanisms more effec-tive; and (15) develop a multilateral instru-ment to enable interested countries to imple-ment measures developed in the course of theBEPS work and amend bilateral tax treaties.Many of these projects will directly affect the

future of worldwide transfer pricing. The actionplan also specifies deadlines for completing thework: September 2014, September 2015 andDecember 2015.

OECD intangibles projectIn 2010, the OECD announced the commence-ment of a project on the transfer pricing aspectsof intangibles. A scoping paper was publishedfor public comment. Three public consultationswere held with interested commentators. TheOECD then published a revised discussion draftin July 2013.The initial discussion draft contained two

principal elements: (1) a proposed revision ofthe provisions of Chapter VI of the OECDTransfer Pricing Guidelines; and (2) a pro-posed revision of the Annex of Chapter VIcontaining examples illustrating the applica-tion of the provisions of the revised text ofChapter VI. The revised draft adds a discussion on fea-

tures of the local market, location savings,assembled workforce and group synergies, andmakes certain other amendments, such as com-mentary on the use of a corporate name.The word intangible in the guidelines is

intended to address something that is not aphysical asset or a financial asset, and that iscapable of being owned or controlled for use in


Worldwide transfer pricing is in the midst of potentially big changes. James Fuller, DavidForst, Kenneth Clark, and Ron Schrotenboer of Fenwick & West discuss thedevelopments that have impacted transfer pricing on a global scale over the past year.

Global transfer pricing developments

commercial activities. Rather than focusing onaccounting or legal definitions, the thrust of atransfer pricing analysis in a matter involvingintangibles should be the determination of theconditions that would be agreed upon betweenindependent parties for a comparable transac-tion.The availability and extent of legal, contrac-

tual, or other forms of protection may affectthe value of an item and the returns that shouldbe attributed to it. The existence of such pro-tection is not, however, a necessary conditionfor an item to be characterised as an intangiblefor transfer pricing purposes. Similarly, whilesome intangibles may be defined separately andtransferred on a segregated basis, other intangi-bles may be transferred only in combinationwith other business assets.The guidance is intended to address transfer

pricing matters exclusively. It is not intended tohave relevance for other tax purposes, the dis-cussion draft states.Distinctions are sometimes made between

trade intangibles and marketing intangibles,between soft intangibles and hard intangibles,between routine and nonroutine intangibles,and between other classes and categories ofintangibles. The approach used in the discussiondraft for determining prices in cases involvingintangibles does not turn on these categorisa-tions. Accordingly, no attempt was made in theguidelines to delineate various classes or cate-gories of intangibles.The draft discusses numerous illustrative

intangibles or items that might be candidatesfor intangibles status: patents; know-how andtrade secrets; trademarks, trade names andbrands; licenses and similar limited rights inintangibles; goodwill and going concern value;group synergies; market specific characteristics;and assembled workforce. Group synergies andmarket specific characteristics, however, are notintangibles in that they are not owned or con-trolled by a single enterprise.

Transfer pricing documentationTransfer pricing documentation requirementshave been rapidly growing around the world.This trend continues every year with new addi-tions to the list of countries requiring the prepa-ration of transfer pricing documentation. TheOECD’s White Paper on transfer pricing docu-mentation was developed as part of an effort tocoordinate and simplify transfer pricing docu-mentation requirements. It now interrelateswith BEPS, as well. The BEPS action plan states that the OECD

will develop rules regarding transfer pricingdocumentation to enhance transparency for taxadministration, taking into consideration thecompliance cost for business. The transfer pric-ing documentation project seeks to modify therules around the world to make transfer pricingcompliance easier and more straightforward,while at the same time providing tax authoritieswith more focus on useful information for con-sideration in connection with transfer pricingrisk assessment and transfer pricing audits.

Advance pricing agreements (APA)In the US, the APA programme has undertakenan interesting digression from what otherwiseshould be the goals of the programme; namely,certainty.Eaton Corporation and the IRS entered into

two APAs establishing a transfer pricingmethodology for covered transactions betweenEaton and its subsidiaries. The IRS determined for unstated reasons

that Eaton did not comply with the APAs’ appli-cable terms and unilaterally cancelled them.The IRS then issued a deficiency notice toEaton based on an alternative transfer pricingmethodology. Eaton argued with the IRS and incourt that the APAs are enforceable contractsand that the IRS must show that it was entitledto cancel the APAs under general contract lawprinciples. The IRS asserted that it can cancelthe APAs under certain of its revenue proce-

Global

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dures that reserve specified discretion to theIRS. In Eaton Corp. v. Commissioner, 140 T.C.

No.18 (2013), the Tax Court held for the IRSon the cross motions for summary judgment onthis issue. It stated that the APAs’ legal effectand administration were governed by the IRSrevenue procedures. To succeed in challengingthe IRS’s terminations, the taxpayer must showthat the IRS’s cancellations were arbitrary,capricious or without sound basis in fact. Thatis, the taxpayer must demonstrate that the IRSabused its discretion in cancelling the APAs.General contract law principles do not apply.

Development in other countriesOther countries have experienced changes aswell. Canada, India and Denmark seem to beamong the most aggressive countries in makingtransfer pricing adjustments. India presents spe-cial problems in the transfer pricing world. TheUS competent authority recently took a sur-prising action in this regard: He stated in publicthat the US competent authority has been frus-trated by positions taken by his Indian counter-part. Unfortunately, the competent authorityprocess between the US and India has beendescribed as “broken”. Tax practitioners arehopeful that recent changes in India (theappointment of a new competent authority)will improve the transfer-pricing relationshipbetween India and other countries.Many treaties now include arbitration provi-

sions in their mutual agreement articles to pro-vide the taxpayer with an alternative possibilityfor relief in case the competent authorities areunable to resolve matters between themselves.Some companies have been forced to litigatetransfer pricing adjustments in situations inwhich the competent authorities could notagree. GlaxoSmithKline and Caterpillar are twofairly recent examples where the US competentauthority could not agree with the relevant for-eign competent authority.

However, competent authority arbitrationprovisions have also found their way into court.In Canada, TeleTechCanada, Inc. v. Minister ofNational Revenue involved a case in which thecourt declined to compel the Canada RevenueAgency (CRA) to accept the company’s requestfor competent authority assistance and submitit to arbitration. The taxpayer seems to havesuffered a grave injustice, although the courtkept its decision narrow, pointing to alleged tar-diness with respect to the company’s compe-tent authority filing. A review of the court’sopinion indicates that the company was notreally tardy since the US IRS had advised CRAthat the taxpayer’s “self adjustment” had beenmade in the US and invited CRA to participatein a mutual agreement proceeding. Instead ofresponding, CRA simply closed its file on thetaxpayer’s matter. The taxpayer only learnedabout the letter after the litigation started.Documentation requirements also have

found their way into court. A recent SpanishSupreme Court decision rejected intercompa-ny charges for services from the entity’s Swissparent. The ultimate parent was a US chemi-cal company. The Spanish company receivedmanagement support from the Swiss entityacting as the multinational group’s parent inEurope. The court said the mere recording ofan expense does not justify its deductibility.Instead, the expenses must be proven neces-sary for the production of income, and theremust be a direct relationship between theincome and expense. The court was concernedthat the taxpayer had not attested to the actu-al supply of the service, the amount thereof, orquantification of the costs invoiced. This deci-sion certainly emphasises the importance ofproper documentation.

SummaryIn summary, the world of transfer pricing is anextremely active one with major changes likelyon the short-term horizon.

Global


LEADING FIRMS

1 Bruchou, Fernandez Madero & Lombardi - TaxandDeloitteEY (Pistrelli, Henry Martin y Asociados)KPMGPwCRosso Alba Francia & Asociados

2 Estudio O’FarrellGrupo GNPTeijeiro y Ballone, Abogados

Some of Argentina’s largest agricultural exporters arechallenging the scope of their country’s transfer pric-ing regime in a dispute that reaches all the way tothe Federal Supreme Court. The court’s pending deci-sion in the March 2013 case could result in most ofthe tax authority’s notices of deficiencies againstagricultural exporters being declared null and void.The core constitutional issue of the case con-

cerns the so-called sixth transfer pricing methodfor commodity exports, which originated inArgentina’s 2003 law that established its generalanti-avoidance rule (GAAR). Developing nations fre-quently use variations of this method to avoidprice manipulations (and lower tax revenues) intransactions involving an intermediary in a countrywith a lower tax rate. The sixth method mandates that when exporting

to a related party through a foreign intermediary, thebenchmark for evaluating the transaction should bethe price of the commodity at the contract date or atthe shipment date; whichever is greater.

The law states that the sixth method applies onlyif the intermediary is not a third party, in that it is ashell company that exists to obtain passive incomeor serve as an exclusive intermediary in transactionsbetween the related parties. However, formerPresident Nestor Kirchner, in his 2004 decree imple-menting the law, overlooked this requirement, thuswidening the scope of the method. The decree is unconstitutional because “it violated

the will of the congress,” said Cristian Rosso Alba, themanaging partner of Rosso Alba, Francia &Asociados and counsel to the agribusinesses. “Wesay implementing the regulations goes beyond thelaw. No taxation without representation,” he added.

Tier 1Led by Matias Olivero Vila, Bruchou, FernandezMadero & Lombardi – Taxand advises clients – most-ly multinationals – on transfer pricing planning, com-pliance and litigation. The firm also assists with cus-toms valuation. Documentation services are out-sourced to José Luis Eguia, a partner within the trans-fer pricing group at the Buenos Aires office of Eguia &Asociados. Clients include the Argentine subsidiaries ofProsegur, a Spanish private security company;onMobile, an Indian telecommunications company;and Bunge, a New York-based agribusiness giant. Thefirm also has a strong presence in the agribusiness,automotive and pharmaceutical sectors. Bruchou,Fernandez Madero & Lombardi enjoys an excellentreputation among competitors as a litigator, and rep-resents clients in some of the most important transferpricing-related cases in Argentina. The firm is litigatingagainst the Federal Tax Authority in tax court, challeng-ing its suspension of Molinos Rio de la Plata in the

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ArgentinaTax authoritiesAdministración Federal de Ingresos Publicos (AFIP)Hipólito Yrigoyen 370, C1086ADD, Buenos AiresTel: +54 11 4347 2000Website: www.afip.gov.ar

http://www.afip.gov.ar


Fiscal Registry of Grain Traders. It is also supervisingPwC’s defense of Molinos against a $40 million taxassessment.

Deloitte provides planning, documentation andvaluation services, and represents clients before thetax authority and in court. Horacio Dinice leads thepractice.

Pistrelli, Henry Martin y Asociados, an EY memberfirm, has one of Argentina’s largest transfer pricingteams, with roughly 40 professionals, including twopartners. It is also one of EY’s most dynamic,accounting for roughly 15% of the tax practice in

terms of both head count and revenue. The teamfocuses on planning and compliance services,including reviews of documentation, supply chainstructures and transaction flows. It takes a proactiveapproach to transfer pricing controversy, analysingtransactions before their implementation, to reduceor prevent potential challenges from tax authorities.The transfer pricing team is led by Carlos Casanovasand Gustavo Scravaglieri, who are also in charge ofEY’s International Tax Service.

KPMG’s transfer pricing practice assists clients withdesigning, documenting and implementing sound

Argentina


Tax rates at a glance (As of August 2013)

Corporate income tax rate 35% (a)Capital gains tax 35%Branch tax 35% (b)

Withholding taxDividends 0% 35% (c)Interest 15.05% (d)Royalties 12.25% 21% 28% 31.5% (e) Branch remittance tax 0%

Net operating losses (years)Carryback 0Carryforward 5

a) A 1% asset tax, which operates as a minimumincome tax, is imposed on corporate assets,including shareholdings in foreign companies (butnot holdings in resident companies). Asset taxpaid may be credited against the company'sincome tax liability for up to 10 fiscal years.

b) Branches are taxed at the same rate as domesticcompanies. There is no branch remittance tax.

c) Dividends paid to non-resident shareholdersgenerally are exempt from withholding tax.However, a 35% rate is imposed (via withholding)on profit distributions, including dividends, thatexceed taxable accumulated profits.

d) The general 35% withholding tax is reduced to15.05% if the borrower is a financial institution;

the lender is a bank or financial institutionlocated in a non-tax haven jurisdiction; theinterest relates to certain bonds registered incountries that have concluded an investmentprotection agreement with Argentina; or thetransaction involves the financing by a seller ofdepreciable movable property.

e) Royalty payments made to non-residents for theexploitation of copyrights in Argentina are subjectto a final withholding tax of 35% on 28% of thegross payment effective rate of 12.25%, providedthe works are registered with the NationalCopyright Bureau and other conditions aresatisfied. Patent royalties and fees for technicalassistance, engineering or consulting servicespaid to non-residents are subject to a finalwithholding tax of 35% on a prescribedpercentage of the gross payment, which variesaccording to the type of payment. The effectivewithholding tax rates are 28% (35% x 80%) onpatent royalties and 21% (35% x 60%) on feesfor technical assistance, engineering or consultingservices if the agreement under which theroyalties or fees are paid is registered by theNational Institute of Industrial Technology (INTI)and, in the case of fees, the services cannot beobtained in Argentina. If these conditions are notsatisfied, the effective rate on the royalties or feesis 31.5% (35% x 90%).

and sustainable transfer pricing strategies. Led byMarcelo Castillo, the transfer pricing team has acomprehensive understanding of the country’s trans-fer pricing rules and regulations, including the newrules for 2013. Led by Juan Carlos Ferreiro, PwC’s transfer pricing

practice in Argentina comprises a multidisciplinaryteam of transfer pricing specialists who advise ontransfer pricing strategy, documentation, regionaltransfer pricing policy developments and auditdefense. The practice also includes associate part-ners Violeta Maresca and José María Segura.

Rosso Alba Francia & Asociados provides a fullrange of transfer pricing services, with controversyaccounting for a significant part of its business. Thefirm litigates in some of the largest transfer pricingcontroversies before the Argentine courts, includingthe Supreme Court of Argentina. In March 2013, itrepresented clients who are challenging the consti-tutionality of former President Kirchner’s transfer pric-ing rules for commodity exporters. The decision,which will affect all commodity exporters is pending.The firm is also active in mutual agreement proceed-ings. Cristian Rosso Alba leads the practice, whichalso provides consultancy and planning services todomestic and international clients in the oil and gas,pharmaceutical, automobile and agricultural com-modities industries. It is one of the few law firms inArgentina to have in-house economists andaccountants.

Tier 2Miguel Teson leads the transfer pricing practice ofEstudio O’Farrell, which assists some of Argentina’slargest domestic and foreign corporations with thedevelopment and defense of their transfer pricingstrategies. The practice consists of several lawyers

who are transfer pricing experts and have litigationexperience at every judicial level, from the NationalTax Court to the Supreme Court of Justice. One of itskey members, Eduardo Baistrocchi, lectures at theLondon School of Economics, and is the author of aleading book on resolving transfer pricing disputes.Clients also receive assistance in the preparation ofdocuments to show compliance with related partypricing rules and on the interpretation of nationaland OECD rules on transfer pricing. Clients include oiland gas, pharmaceutical and automobile compa-nies. Led by Guillermo Perez, Grupo GNP’s transfer pric-

ing practice assigns a multidisciplinary team compris-ing economists, accountants, market research spe-cialists and business administrators to every transferpricing engagement. The practice advises on transferpricing planning and preparing and filing documen-tation. Its clients are mostly mid- to large-sized com-panies in such key economic sectors as logistics, realestate, pharmaceuticals and retail.Guillermo Teijeiro, a founding partner of Teijeiro y

Ballone, Abogados, is head of both tax and transferpricing at the practice. Teijeiro co-founded the prac-tice in 2012 with Mario Ballone, who has workedwith Teijeiro for the last 15 years. It has two otherpartners, Ana Lucia Ferreyra and Gloria Gurbista,who previously worked at Negri & Teijeiro withTeijeiro and Ballone. Together, the partners adviselocal and international companies on transfer pricingplanning and compliance issues. They also representclients in litigation, and are representing a largeagribusiness company in its appeal of a $200 milliontransfer pricing adjustment. The size of the adjust-ment and the client’s importance to the economymake this one of the most important transfer pricingdisputes in Argentina.

Argentina

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 AshurstBaker & McKenzie

3 DLA Piper

Australia’s transfer pricing legislation has experi-enced an overhaul since it was first introduced over30 years ago in 1981, which changes the transferpricing landscape significantly. The new laws aremore vigilant with a broader coverage and taxpayersneed to figure out how the Australian Taxation Office(ATO) will enforce them.“Although the new rules have been introduced in

bill form, there is an urgent need for guidance fromthe ATO as to how the rules are going to be admin-istered,” said Andrew Sommer from Clayton Utz.The new legislation allows the ATO to reconstruct

the related party transaction if the price paid isdeemed not in line with the arm’s-length price. TheATO can also challenge deductions for intercompanyinterest, in spite of the thin capitalisation safe har-bour limit. “One clear message is that the ATO isgiven much broader power to investigate compa-nies,” Baker & McKenzie’s John Walker observed.As the new rules apply retrospectively from July 1

2004, taxpayers need to make sure they haveappropriate supporting documents for related party

transactions and cross border funding dating backnine years. Intense scrutiny is placed on multina-tional corporations (MNCs), especially for highlyprofitable ones.“Transfer pricing traditionally was only an issue of

big conglomerates, but now matters in a broadersense,” Peter McCullough of Ashurst said. “SinceAustralia joined the global model, it potentiallybecomes much harsher in rules, to make itself cred-ible in the globe.” Being a member of the OECD,Australia continues to be consistent with the OECDviews. A significant number of profit-shifting risk reviews

and audits have been flagged by the ATO in 2013.Meanwhile, the ATO also established a new taskforceto collaborate with tax authorities offshore investigat-ing corporate tax evasion under the BEPS (base ero-sion profit shifting) project. “They would look at lowertax jurisdictions to review the operations ofAustralian businesses,” disclosed Anthony Seve fromKPMG.

Tier 1 The reputed transfer pricing practice in Deloitte isunder the leadership of Fiona Craig and the head ofits tax department Paul Riley is a transfer pricing (TP)specialist as well. The team has added three new per-sonnel since last year and now comprises eight part-ners and 50 specialists. Mark Kenny and CameronSmith are based in Sydney and Melbourne, and OckieOlivier is based in Perth. The practice now has a well-rounded service. It is sharp in helping clients reducerisks by advising concrete solutions, preparing strate-gic documentation and managing disputes.


AustraliaTax authoritiesAustralian Taxation OfficeGround Floor, Ethos House, 28-36 Ainslie Ave Civic Square ACT 2600Tel: +61 2 6216 1111 Fax: +61 2 6216 2830 Website: www.ato.gov.au

http://www.ato.gov.au

Deloitte is a leader in TP related issues in energy andresources as well as financial services. And these arealso the two industries that generated the most rev-enue for the team, given the heightened focus of theAustralia Taxation Office (ATO). Craig and Riley success-fully assisted a large Australian listed mining companyin a TP audit matter in early 2013. Thanks to theteam’s efforts on factual and functional studies andanalysis of the issue, the ATO was finally convinced todrop the case, and no further action was taken.Besides substantial audit cases, the team has also

concluded a large number of advance pricing agree-ment (APA) cases and renewals. In addition, the teamregularly contributes to the TP development inAustralia by publishing niche articles and preparingsubmissions to the tax authority about latest obser-vation and analysis in the market.

Paul Balkus leads the transfer pricing practice at EYin Australia, supported by Jesper Solgaard. The prac-tice offers all the TP related services one mightexpect from a top-tier firm. Additionally, the team pro-vides supply chain management to traditional serv-ice provisions such as compliance, documentation,planning and controversy. Because the Australian TaxOffice is increasing compliance requirements, theteam is prepared to meet the market trend: itemploys professionals with an economic degree, aswell as a diverse experience in industry. Extractiveindustries and financial services are two sectors theteam has deep knowledge and experience with.Over the past year, the team sees compliance con-tinue to be the area to generate the most revenue.However, it is handling more advance pricing agree-ment (APA) and dispute settlement cases.

Australia

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Tax rates at a glance (As of September 2013)

Corporate income 30% (a)Capital gains 30%Branch tax 30%

Withholding tax (e)Dividends 0% - 30% (b)Interest 10% (c)Royalties 30% Branch remittance tax 0%

Net Operating Losses (Years)Carryback 0Carryforwards Indefinite (d)

a) As a general rule, tax rates and treatment arethe same for all companies, including branchesof foreign companies; however, there areexceptions for special types of companies suchas cooperative firms, mutual and other lifeinsurance companies, and non-profitorganisations, which are taxed at slightlydifferent rates.

b) Dividends paid by Australian residentcompanies from profits already taxed at the

corporate rate may carry franking credits for thetax paid. Dividends are referred to as “fullyfranked,” “partially franked” or “unfranked,”depending on the extent to which a companyhas chosen to use its franking credits. To theextent distributions to foreign residents areunfranked distributions, they are subject towithholding tax at the statutory rate of 30%,which may be reduced under a tax treaty.

c) Interest paid by an Australian company to aforeign resident is generally subject to a 10%withholding tax. There are some exemptions,including for certain public offer debentures andlimited nondebenture debt interests. An interestwithholding tax exemption applies for interestpaid to unrelated foreign financial institutions orgovernment bodies under specific tax treaties.

d) Tax losses may be utilised and carried forwardindefinitely to offset against future assessableincome provided a “continuity of ownership”(more than 50% of voting, dividend, and capitalrights) or a “same business” test is satisfied.However, capital gains can only be offsetagainst capital gains.


Anthony Seve heads KPMG’s transfer pricing team,comprising five partners and 42 fee earners. Theteam is highly industry specialised, especially indealing with issues relating to financial services andenergy/resources. In the meantime, KPMG maintainsclose connections with the tax authority, which com-bines with its sound field and technical knowledgeto create unique and tailored solutions for differentclients. The TP practice offers assistance on areas ofcompliance, future planning and risk management tointernational business activities. The team is proud of its flexibility and its collabo-

ration of resources within the firm in dealing withcases that require a particular specialty. Seve, forinstance, has worked together with a partner in cor-porate tax to defend a client for a TP audit in front ofthe ATO. The ATO proposed a significant adjustmentthrough a hybrid TP method challenging the client’sinternal transaction. The team has successfully con-vinced the tax office about the appropriatenessbeneath the transaction, and the client thereforeavoided the significant penalties.

PwC’s transfer pricing practice has upheld a repu-tation for its technical proficiency. Clients has madepositive comments on its practice as “strong… verygood at bringing about new ideas”. The team hasAsia Pacific TP leader Pete Calleja based in Sydney.Calleja, who has experience in over 30 countries fora number of large multinationals, has the know-howof implementing effective TP methodologies in cross-border transactions.In Melbourne, managing partner Helen Fazzino

has been building up her specialisation in TP since1996, serving clients from a broad range of indus-tries. She has extensive experience coordinating TPmatters in the industrial and consumer productionsector. Advance pricing agreement implementation isalso a focus for her. Besides traditional services in TP such as business

transformation planning, compliance, documentationmanagement and audit defence, PwC adds value toclients by closely tracking TP development from thetax office. Because the new co-operative complianceprogramme actively targets large and medium sized

organisations, the team has helped clients to reviewtheir TP approaches and ensured they are in linewith the updated rules.

Tier 2Ashurst has been making efforts to gain marketshare in this TP advice with solid legal background toits team. The firm’s TP practice has a differentiationfrom its accountancy competitors, as it is able toinject sophisticated legal analysis into TP cases. Inthe first half of 2013, the firm obtained a successfuloutcome for an Australian listed group in defence ofa TP audit by the ATO. The case involved complexcombinations of Australian tax and TP rules. Peter McCullough, as the leader of the tax team,

oversees the service line in TP. McCullough used towork in two Big 4 firms and brings along the expe-rience to Ashurst. Senior consultant Ian Fullertonwho joined the firm in 2012 has been involved in anumber of TP cases by applying his specialty in inter-national tax and financial matters. His capacityboosts the firm with a good portfolio in assistingclients from the financial industry with TP relatedmatters. In addition, partners Vivian Chang and PaulO’Donnell have also worked on TP issues for thefirm.

Baker & McKenzie’s transfer pricing group isanother popular alternative in the Australian market.Being a law firm, the practice has established a dif-ferent model on TP by combining professionalknowledge in law and economics Also thanks to itsglobal network, the team is able to absorb thatexperience where necessary . The TP team at Baker & McKenzie comprises two

partners, including tax head John Walker. TP hasbeen a principal area of practice for Dixon Hearder,especially in legal, compliance, risk managementand documentation. Hearder’s other specialty is inindirect tax, which adds value to the team’s TP solu-tion provision together with Walker’s expertise in cor-porate tax.In early 2013, Hearder, Walker and Tom Brennan

assisted a large agricultural company on its intra-group debt management for a large takeover valued

Australia


at US$ 969 million. The trio developed a TP pricingstrategy for the client, making it comply with recentchanged thin capitalisation and TP rules.

Tier 3DLA Piper has good exposure in the market place forits transfer pricing practice. Tax partner-in-charge,Jock McCormack, has recognisable capability in TPgranted by his extensive market experience in inter-national tax advice. Senior associate, Anshu

Maharaj, regularly supports McCormack for cross-border contentious matters involving TP. Benefitting from DLA’s international network, the firm

is able to outsource talents from other hubs to furtherassist complicated TP issues. The firm also uses thelocal Big 4 offices to complement its services. In 2012,McCormack and Maharaj teamed-up to work togetherwith KPMG and successfully settled a TP audit case fora client. The duo provided legal advice and draftedfinal settlement documents with the ATO.

Australia

www.TPWeek.com14


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzieLeitner & Leitner

3 Freshfields

It has been a demanding year for advisory firms inthe Austrian tax market. While several advisers notedthe embryonic signs of economic recovery, the finan-cial crisis continued to make itself felt in other ways,in particular by the tax authority, which is workinghard to maximize its revenue.

Transfer pricing has been at the very centre of thegovernment’s focus. With an initiative by the OECD onbase erosion and profit shifting due to introduce toughmeasures in 2014, the Austrian authorities havealready initiated a great deal of transfer pricing litiga-tion. “There is a much stronger need of documenta-tion in transfer pricing,” said one adviser. “You have tobe absolutely watertight. The authorities want moneyand have become very litigious to get it.”

“We experience a much tougher match with thetax inspectors, they really challenge taxpayers thesedays,” said another adviser. “This makes things moredifficult because tax structures are more frequentlychallenged, so it is harder to come up with tax plan-ning that is innovative and at the same time holdswater. Our clients want to have maximum comfortand maximum compliance and maximum savings –lining up all three can be very difficult.”

There have been several broader legislativechanges designed to swell the flow of revenue intothe Austrian coffers. One significant ruling, relating tocapital markets, came into effect at the beginning of2013. Previously, if a company or individual heldportfolio shares for a period of longer than a year,they could sell them without incurring any capitalgains tax. Now, they must pay 25% tax on theirgains regardless of the holding period. A similarchange came into effect regarding real estate.Whereas previously if property had been held for tenyears or more then the owner would pay no tax,now, as one adviser put it, “you can hold it for a hun-dred years and sell it and you’d still owe tax”.

Another revenue-generating ruling occurred in thecontext of Austria’s R&D tax code. The jurisdictionhas a generous 10% R&D cash premium in place,


AustriaTax authoritiesFederal Ministry of FinanceJohannesgasse 5, 1010 ViennaTel: +43 1 51 433 0 Fax: +43 1 51 262 00 Website: www.bmf.gv.at


Corporate income tax 25%Capital gains 0% Branch tax 25%

Withholding tax (a) Dividends 0/25%Interest 0%Royalties 0/20%Branch remittance tax

Net operating losses (Years)Carryback 0Carryforwards unlimited

a) Qualifying payments to companies in the EUmay be exempt under EU directives

http://www.bmf.gv.at

but the rules governing qualification for this havebeen made much stricter. Any company wishing toclaim this R&D benefit must gain an opinion fromAustria’s national funding agency (FFG) for industrialR&D before they are can do so.

This ruling has had the side-effect of creating extrawork for the country’s accountancy firms. Following apositive verdict by the FFG, taxpayers have to havetheir R&D expenses certified in an audit. Previously itwas only the tax authority that could do this, butnow this power has been extended to accountancyfirms.

This generates yet more work for the advisoryfirms. “There is more corporate income tax scrutinyfrom our tax authorities,” said another adviser,“which changes the work we do in the sense thatclients come to us with requests such as “let’sreview these structures within the current climate”.What we’ve done before in good faith might now beseen as too aggressive, and we’ve seen severalclients change their views on past structures.”

Tier 1 Deloitte Austria’s Transfer Pricing practice comprises12 dedicated professionals, including specialists fromGermany, Russia, Luxembourg and the CzechRepublic, providing a pan-European perspective.They also offer an specialist experience of a range ofindustries, with different fee earners having workedin the automotive, manufacturing, food and bever-ages, computer, pharmaceutical and financial servic-es industries.

The head of the department is Andrea Lahodny,who takes responsibility for transfer pricing docu-mentation projects, benchmark analysis and taxaudit defences, as well as APA, competent authori-ties and arbitration procedures. A second key part-ner is Gabriele Holzinger, who has defended multi-national enterprises in transfer pricing audits and isextensively involved in providing planning and doc-umentation solutions to companies performingcross-border transactions. She also specialises intransfer pricing projects regarding intellectual proper-ty transfers.

A significant project for Holzinger over the past yearinvolved supporting the development of an inter-group loan concept for an Austrian real estate devel-opment group with more than 700 subsidiaries ineight countries. Andrea Lahodny worked on thedevelopment of a documentation system for a bank-ing group headquartered in Austria with subsidiariesin central and Eastern Europe, which was worth over$500,000.

One client of EY Austria’s transfer pricing servicessaid: “They’ve always been excellent, proactive,attentive, creative.” The practice has a well-regard-ed transfer pricing team with a particular focus ontax effective supply chain management; it is partic-ularly well known for its work on supply chaindesign business restructuring. The practice alsooffers documentation services, helping clientsreview, document, manage and defend their trans-fer pricing policies and processes, ensuring theirstrategy has substance and is aligned with broad-er business processes.

KPMG has a particularly strong tax practice inAustria and within it transfer pricing has grown rap-idly in recent years. Two partners have expertise inthe sector, Sabine Bernegger and Barbara Pollster-Gruell, although neither is devoted full-time to trans-fer pricing. Senior Associate Werner Rosar is focusedentirely on transfer pricing and so generally overseesthe smooth running of the practice’s work in thatsector.

KPMG Austria offers the full spectrum of transferpricing services, including documentation, negotiat-ing APAs, litigation, planning, and supply chain opti-misation. For the more economic aspects of transferpricing it cooperates closely with KPMG Austria’steam of economists, which is situated within thefirm’s financial advisory division. A client praised thetransfer pricing work as “absolutely fine, everythingwas managed perfectly”.

In the past year, in the context of transfer pricing lit-igation, the practice represented a big internationalcompany during an arbitration procedure.

PwC “meet their global reputation, they are veryefficient and effective,” said one client employing

Austria

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PwC’s transfer pricing team and operating in theAustrian jurisdiction. The firm has a well-regardedtransfer pricing practice in Austria, providing thewhole spectrum of transfer pricing services.

Tier 2Imke Gerde is the head and sole partner of Baker &McKenzie’s Austria practice, which is focused on inter-national tax law and is not engaged with purelydomestic Austrian tax work. Gerde’s practice spanstransfer pricing and general corporate tax, including alarge bulk of international tax planning. Her role asvice chairman of the Austrian branch of STEP (theworldwide professional association for practitionersdealing with family inheritance and succession plan-ning) also gives the practice some expertise in wealthmanagement. Gerde has particular familiarity with theluxury goods, IP, dot com, and automotive industries.

Over the past year Gerde tackled a diversity ofinternational tax work. In transfer pricing disputes,she successfully closed down two cases in whichthe tax authorities claimed for large quantities ofadditional tax by negotiating a much lower figure. Inone instance, this resulted in a reduction from a taxclaim of €8 million ($10.5 million) to a tax paymentof €1.5 million.

Baker & McKenzie’s Austria practice also does a lotof transfer pricing planning. This includes supplychain restructuring, for example restructuring a USmultinational’s supply chain and implementing an IPstructure in a total overhaul of the firm’s Europeandistribution structure. One client who had workedwith Gerde in this context praised her “exquisiteknowledge” which is “always absolutely up to date.”

Leitner and Leitner are one of the few law firms inAustria with broad transfer pricing capabilities, along-side specific partners with expertise in the sector.Clemens Nowotny and Manfred Wänke both focuson transfer pricing; Nowotny leads transfer pricingwork in the firm, while Wänke is a certified auditor

and tax adviser with an educational background ineconomics.

In the last year, Wänke took the lead with regard toan important transfer pricing project for an energybusiness. He worked on calculating the transferprices and also directed the documentation of thesetransfer prices. In a separate project in the pharma-ceutical field, Wänke was the lead adviser in a proj-ect that generated the first ruling on transfer pricesever issued in Austria under the latest proceduralregulations.

Tier 3Freshfields in Austria has a small practice led by asingle partner, Michael Sedlaczek, who has beenwith the firm for fourteen years. He focuses on cor-porate and M&A tax work and also has particularexpertise in the financial institutions sector and inproviding structured finance advice. The practice alsoengages in a reasonable amount of medium-sizedbusiness, family, and private client work. AlongsideSedlaczek, it consists of the principle consultantClaus Staringer and seven further associates. Theprincipal associate, Hans Jorgen Aigner, left in thecourse of the last year to establish his own tax bou-tique; two new associates have been taken on.

Freshfields do a small amount of transfer pricingwork in their Austrian offices. This focuses on tax lawand implementation and does not include the moreeconomic aspects of transfer pricing. It draws onSedlaczek’s expertise in financial institutions to pro-vide advice on transfer pricing in relation to that sec-tor. And it advises on the arm’s-length principle,working with companies aiming to become moreefficient by concentrating their functions within cer-tain group entities. Such restructurings lead to thequestion of whether this concentration is being dis-charged at arm’s-length, and the Freshfields tax prac-tice looks into this, advising, negotiating, and, if itcomes to it, dealing with litigation.

Austria


LEADING FIRMS

1 DeloitteEYKPMGPwCSorainen

2 VARUL

3 BoreniusLAWIN

Until recently, Latvia had no established transfer pric-ing practice and the tax authorities are still relativelyunder-developed in this field. In the past few years,there have been a small number of court casesbetween the taxpayer and the authorities in relationto transfer pricing issues. Due to the increased num-ber of transfer pricing investigations over the pastyear, the number of cases brought before the courtis expected to increase.

Until relatively recently, the legislation of theRepublic of Latvia did not establish the mandatoryrequirement to prepare transfer pricing documenta-tion to justify compliance with the market prices. InJuly 2012, amendments were made to the Law OnTaxes and Fees, introducing this requirement.

In Latvia, companies with a turnover exceeding LVL1 million ($200,000) are now obliged to preparetransfer pricing documentation, however, there areno fines or penalties associated with this obligation.Since 2004, Lithuania has enforced the mandatory

inclusion of transfer pricing documentation for com-panies earning over LTL 10 million.

Advanced pricing agreements (APA) are now avail-able in Latvia, under a mutual agreement procedurebetween the taxpayer and the authority (SRS). Thisprocedure is approved in the OECD guidelines. APAsare also now applicable in Lithuania. As of yet, tax-payers in Estonia are not able to apply for APAs.

The official authorities overseeing transfer pricing inthe Baltics are “still developing” but they are muchbetter than they have been in the past, explainedone partner. The transfer pricing audits are becomingincreasingly accurate as the authorities sophisticate.

Mantas Juozaitis, senior associate at the Balticsfirm Motieka & Audzevičius noted that there hasbeen a “constant increase in tax litigation over thepast three years”. Specifically, the Lithuanian taxauthorities have become more and more aggressivein their stance towards tax issues. This has resultedin a good deal of uncertainty for clients operatingwithin the jurisdiction. The establishment of a newLithuanian parliament in 2012 means that advisersand clients alike await proposals from the govern-ment detailing a variety of planned tax measures.

Tax avoidance measures are to be introduced inLithuania. One adviser predicted that the outcome ofthese changes will be “much more complexity”,necessitating the use of more complex forecastingmethodologies such as financial modelling. This islikely to result in more instability, a situation which isbad for both taxpayers and their advisers in Lithuania.

At the start of 2013 a new holdings companyregime was put into place in Latvia. Because this

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Baltic StatesTax authoritiesEstonian Tax and Customs BoardNarva mnt 9j, 15176 TallinnTel: +372 676 1002Fax: +372 676 2709Email: [email protected]: www.emta.ee

Latvian Ministry of Finance1 Smilsu Street, Riga, LV-1919Tel: +371 6709 5405Fax: +371 6709 5410Email: [email protected]: www.fm.gov.lv

Lithuanian Ministry of FinanceLukiskiu 2, 01512 VilniusTel: +370 5 239 0237Fax: +370 5 239 0102Email: [email protected]: www.finmin.lt


http://www.emta.ee


http://www.fm.gov.lv



http://www.finmin.lt

regime promises the possibility of companies payingno corporation tax for a number of years, the juris-diction is becoming increasingly attractive to foreigninvestors. Jānis Taukačs, partner at Sorainen,explained that, as a result of these tax regimechanges, his clients were in a state of relative secu-rity. Most decisions regarding tax in this region havebeen made in Latvia so it is likely that the tax envi-ronment will continue to stabilise. This stability inLatvia is underpinned by some of the strongest eco-nomic growth in Europe.

Tier 1 The Deloitte practices in the Baltic States perform afull range of transfer pricing services. All of the trans-fer pricing team comes from an economic back-ground making them particularly proficient in thisarea. The firm benefits from having offices in all threeBaltic states.Ivo Vanasun, the Deloitte Estonia tax manager, is

one of five people officially nominated by theEstonian Minister of Finance, as an independent andcompetent person who will form a transfer pricingadvisory commission to hear disputes between EUMember States.

Another notable adviser at the practice is JaninaLandisa, a Deloitte Latvia senior tax consultant, whoregularly lectures on a variety of transfer pricingissues. These lectures benefit clients, as Deloittecooperates closely with the Latvian Tax Authoritieswho are invited to present their views on transferpricing issues.

The practices recently worked on deals involvingthe preparation of statutory transfer pricing docu-mentation, assisting a client in the course of a trans-fer pricing audit and the preparation of a pan-European transfer pricing policy.

The firm is particularly experienced in work for thefinancial services industry and insurance.

Deloitte tax advisers are also involved with work fornon-governmental organisations. This includesmembership of the Estonian Service IndustryAssociation, Foreign Investors Council in Latvia, theLatvian Chamber of Commerce and Investors Forum

in Lithuania, and actively participates in the develop-ment of fiscal policy in the Baltic States.

The tax practice at EY in the Czech Republic offersa broad range of tax services. The practice is sub-divided into specialist teams, each focused on onespecific area of tax. Some of the areas covered bythe practice include, among others, cross border tax,human capital, personal taxes, tax performance advi-sory, tax policy and controversy, transaction taxes,and transfer pricing.

The transfer pricing team offers the full suite ofservices including planning, documentation, contro-

Baltic States


Estonia: Tax rates at a glance(As of September 2013)

Corporate income tax 21% (a)Capital gains 0% (b)Branch tax 21%

Withholding taxDividends 0%Interest 0% to 21% (c)Royalties from patents and

licences 0% to 10% (d)Branch remittance tax N/A

Net operating losses (Years)Carryback UnrestrictedCarryforwards Unrestricted

a) Only distributions are subject to tax, retainedearnings are not taxable.

b) There is no corporate income tax on capitalgains unless profits are distributed, at whichpoint a rate of 21% applies

c) Interest is exempt from withholding tax unlessinterest is paid to a non resident company andexceeds the market interest rate. In suchcases, interest is subject to tax at a rate of21% on the difference between interest ratecharged and the market rate.

d) A rate of 10% withholding tax applies unlessreduced under an applicable tax treaty

versy and risk management, tax effective supplychain management, transfer pricing in financial serv-ices, and transfer pricing and customs.

The practice is a member of the global EY firm thatpossesses a network of approximately 28,000 pro-fessionals in more than 120 countries worldwide.The tax practice therefore benefits from this interna-tional presence and knowledge, especially whenworking in an international context.

The practice offers regular client events in the formof seminars and workshops, with the aim of clarifying

the finer points of the Czech transfer pricing systemand any changes therein, as and when they occur.

The transfer pricing team at KPMG in the Balticsoffers a full range of transfer pricing services includ-ing documentation, economic analyses, implementa-tion of service fee systems, tax efficient intra-grouppricing policies, intra-group agreements and transferpricing audits.

The practice in the Baltics is part of the globalKPMG professional services firm. The firm operates in156 countries – an extensive international resource

Baltic States

www.TPWeek.com20

Latvia: Tax rates at a glance(As of September 2013)

Corporate income tax 15%Capital gains 15%Branch tax 15%

Withholding taxDividends 0% to 15% (a)Interest 5% to 10% (b)Royalties from patents and

licences 5% to 15% (c)Branch remittance tax N/A

Net operating losses (Years)Carryback Not allowableCarryforwards Unrestricted

a) Dividends paid by a Latvian resident to a non-resident company established in a jurisdictionwith low or no taxes are taxable at a rate of15% withholding tax. Otherwise, nowithholding tax is paid.

b) The rate of 10% applies to interest paid to anon resident company, 5% is applied if interestis paid by a commercial bank to a nonresident company. Rates may be reducedunder a tax treaty.

c) The rate varies from 5% to 15% withholdingtax on royalty payments made to a nonresident company depending on the type ofroyalty

Lithuania: Tax rates at a glance(As of September 2013)


Withholding taxDividends 0% to 15% (a)Interest 0% to 10% (b)Royalties from patents and

licences 0% to 10% (c)Branch remittance tax N/A

Net operating losses (Years)Carryback Not allowableCarryforwards Unrestricted

a) The rate is set at 15% unless the participationexemption applies. Under this exemption,dividends are exempt from corporate incometax if the parent company holds at least 10%of the shares of the payer companycontinuously for at least 12 months

b) No withholding tax is applied to interest paidto a company resident in an EEA country, or ina country that has a tax treaty with Lithuania.Otherwise, a 10% rate applies.

c) A rate of 10% applied unless the rate isreduced under a treaty, or an exemptionapplies under the EU interest and royaltiesdirective


beneficial to the Baltics firm, especially when work-ing on international tax matters.

The practice draws from KPMG’s global resourcepool and can deploy experienced local and foreignfinancial, legal, business, performance, IT and otheradvisors to offer tailor-made sessions to their clients.

The transfer pricing practice of PwC in the CzechRepublic is headed by David Borkovec and consistsof a specialised team of tax professionals withexpertise in both national and international tax law.Combined with this, these individuals also possessspecific industry experience and are able to providerisk processing and benchmarking analyses enablingthe determination of the prices for services andgoods at arm’s length.

In 2013, Sorainen of Latvia in the Baltics receivedthe “Baltic States Transfer Pricing Firm of the Year”award at the International Tax Review European TaxAwards. The firm is a member of various internation-al networks including the WTS Alliance (tax network)and TPA Global (transfer pricing).The firm also bene-fits from informal relations developed through JānisTaukačs, the regional head of the Sorainen tax andcustoms team, who attends the International FiscalAssociation conference once a year as the only rep-resentative from Latvia.

Taukačs also boasts the role of deputy chairman ofthe Tax Committee at the Latvian Bar Association. InFebruary 2013, the firm was joined by Ilze Berga, ex-head of the transfer pricing consulting practice atPwC.

Taukačs, was commended by a client for his“recognised expertise and knowledge”, compoundedby “publishing regularly and working with the gov-ernment on various acts”. Another adviser com-mended by a client for “good, high quality service”was Rokas Daugėla, tax associate at the practice.

The firm offers the full range of legal and tax serv-ices related to transfer pricing design, implementa-tion, and risk management.

Sorainen recently advised Stockmann, a Nordicretail business operating department stores, on theirtransfer pricing documentation, advising that theyredraft it to comply with Estonian regulation.

Sorainen’s knowledge of the Baltic States was exem-plary in this case, transfer pricing being a key areathat the Estonian authorities have begun to aggres-sively investigate.

Tier 2In January 2013, VARUL reopened an office in Latviafollowing a merger with the local firm BDO Zelmenis& Liberte, established by Janis Zelmenis and VitaLiberte – both of whom previously worked forDeloitte. VARUL now spans the whole of the Balticswith offices in all three of the Baltic States and, fol-lowing the merger, the firm employs a total of 86attorneys and lawyers.

The transfer pricing team across all three of theBaltic States consists of six partners and four otherprofessionals. The practice offers a full range of trans-fer pricing services including the economic aspects –a capacity bolstered by the presence of economistsin the team.

Liberte recently led a transfer pricing project involv-ing Arcers, one of the leading construction compa-nies in the Latvian market. The work involved con-sultation for Arcers on their tax obligations concern-ing a new project in Belgium, including transfer pric-ing and PE taxation. Success in this matter wasessential for Arcers, because the value of their activ-ity was worth several million Euros – potential taxexposure in this case was $3 million.

The practice also analysed the transfer prices for anumber of clients to ensure their compliance withthe local rules.

Tier 3Borenius has offices in all three of the Baltics Statesand is therefore able to provide seamless tax advice forthe entire region. Each of the offices is populated byone partner and four or five other tax professionals.

The practice offers some transfer pricing services;predominantly documentation and compliance work.Their clients will have often already completed theirown benchmark analyses. As such, this is not a serv-ice they specialise in, but with aid from their Finnishcolleagues, they can offer it to their clients.

Baltic States


The practice is experienced in working withclients from the energy industry. The practice alsodeals regularly with clients from the pharmaceuticalindustry.

The LAWIN tax team represents major internation-al and domestic banks, investment firms, insurancecompanies and other financial institutions in theregion. The team has assisted with the introduction

of some complex and innovative financial instru-ments in the region.

The tax team works seamlessly with the otherpractice areas of the firm which include corporate,mergers and acquisitions; finance; industry and reg-ulatory; real estate; and dispute resolution.

The tax team offer transfer pricing services such aslitigation and compliance.

Baltic States

www.TPWeek.com22


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzieLoyens & LoeffMayer Brown

Belgium is known as a country that rigorously fol-lows OECD guidelines, and so it is not surprising tosee that they have bolstered their tax authority inresponse to the increased international pressure onplanning and emphasis on substance.

“The number of inspectors doing transfer pricingaudits has doubled, and the number of transfer pric-ing audits in Belgium has really exploded,” said Dirkvan Stappen, head of transfer pricing at KPMG. “Thathas of course increased the interest of taxpayers intransfer pricing topics, because a huge number ofcompanies have faced transfer pricing audits inBelgium.”

This increased focus on the part of the tax author-ities is seen in tangible changes they have made totheir forces. They have a special fraud squad ofaround 275 individuals, and increased the number“by 20% or 25%” according to one adviser.

The increased vigour of the tax authorities hasmade some companies a little twitchier, according toadvisers.

“The degree of uncertainty has increased. Morefirms are keen to get agreements in advance withthe authorities to avoid being on the front page of

newspapers,” said one. “There is a much higherneed to be compliant.”

All this has meant that the audit firms, especially,have expanded their transfer pricing teams to copewith the swelling demand, while a number of lawfirms stated their intention to do so in the very nearfuture.

On the other hand, some forms of international taxplanning that would once have made up a signifi-cant chunk of advisory firms’ deal flows havebecome near-impossible. “You simply cannot do thetax planning that was common even two years ago,”said Astrid Pieron of Mayer Brown. “We have a gov-ernment that is determined to tackle aggressive taxplanning.”


BelgiumTax authoritiesService Public Fédéral FinancesNorth Galaxy, boulevard du Roi Albert II 33, B - 1030 BruxellesTel: +32 2 576 2111 Website: www.fiscus.fgov.be

Tax rates at a glance (As of July 2013)

Corporate income tax 33.99% (a)Capital gains 0/0.412/25.75/33.99%Branch tax 33.99%

Withholding taxDividends 0/10/15/20/25%Interest 0/15/25%Royalties 0/15/25%Branch remittance tax N/A

Net operating losses (years)Carryback N/ACarryforwards Unlimited

a) Surcharge of 3% on income tax makeseffective corporate tax rate 33.99%.

Source: Tax advisers from AB Taxand

http://www.fiscus.fgov.be

Transfer pricing in Belgium is busier than ever butit is also shape-shifting rapidly. Advisers are movingaway from a heavy focus on complex tax planningand supply chain optimisation, and towards a strat-egy that incorporates a much greater focus on con-trolling risk and reputational issues.

Tier 1 Deloitte’s transfer pricing practice draws on its stronginternational network and global reservoirs of data toposition itself as one of the strongest transfer pricingteams in Belgium. It is led by Patrick Cauwenbergh,an expert in transfer pricing and business modeloptimisation (BMO) as well as a professor at AntwerpUniversity. Cauwenbergh is assisted by two otherpartners who bring economics expertise to the headof the practice:André Schaffers, a reputed economistand leader of Deloitte Belgium’s T&L EMEA transferpricing economists network; and Jeroen Lemmens,an economist and lawyer with years of in-houseexperience in industry. These three partners overseea team of 20 fee earners.

Deloitte, consequently, has both depth and breadthin transfer pricing expertise in Belgium. This encom-passes supply chain optimisation, economics, indi-rect tax and law, enabling the practice to advise onmultiple themes: BMO, debt, pricing, intellectualproperty valuation and structuring, transfer pricingimplementation, mutual agreement procedures andarbitration, and negotiation of unilateral, bilateral andmultilateral APAs.

An example of the practice’s work from 2012, aproject worth $3 billion, involved an all-round trans-fer pricing servicing in relation to refinancing, cashpooling, and a central entrepreneur ruling. Thisincluded assessments of synergies in an ExcessProfit Ruling Context; the negotiation of a centralentrepreneur ruling with the Belgian tax administra-tion; the establishment of transfer pricing defenceand APA negotiation for a cash pooling systeminvolving more than 30 countries; and in-depthanalysis of conditions applicable to the core refi-nancing of European operations through a largemezzanine refinancing including hybrid instruments.

EY have had a strong couple of years in theBelgian jurisdiction in terms of transfer pricing, mak-ing up for what was perceived by some advisers asa weak link within the practice. “EY was laggingbehind but I believe they have managed recently tocatch up,” said one peer about the practice’s transferpricing team. The practice has a particular focus ontax effective supply chain management, and alsooffers documentation services and undertakes thefull spectrum of transfer pricing work.

KPMG Belgium has eleven full-time professionalsdevoted to transfer pricing. This team is led by Dirkvan Stappen, who has been participating as a pri-vate sector member of the EU Joint Transfer PricingForum since its establishment in 2002. Broadly, thepractice covers five areas of transfer pricing work.

Firstly, it prepares transfer pricing documentation forclients, ensuring that multinationals are complyingwith the rules in each jurisdiction. Secondly, it workson planning, helping multinationals design tax effi-cient supply chain structures while taking intoaccount issues of substance. This often involves cre-ating a structure in which the principal entity is locat-ed in a tax efficient country.

Thirdly, the firm assists clients in resolving tax dis-putes, especially in Europe where tax authorities arestepping up the rate at which they audit taxpayers.This also involves dealing with the threat of doubletaxation within the EU, making use of internationalinstruments such as the European ArbitrationConvention.

Fourthly, it negotiates APAs (advance pricing agree-ments) with tax authorities in jurisdictions around theworld, gaining certainty for clients that their businessstructures will be accepted. During 2012 and 2013KPMG negotiated a number of both bilateral andmultilateral APAs. Finally, the firm also utilised market-leading software to work in relation to operationaltransfer prices.

PwC’s transfer pricing practice was frequently men-tioned by advisers as equal to the other big fourpractices in the Belgian jurisdiction. It offers the fullspectrum of transfer pricing services, and was espe-cially quick off the mark in responding to the

Belgium

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observed upsurge of audit activity by the Belgiangovernment. It encouraged and assisted its clients tobe proactive in assessing how well prepared theywere for the sudden advent of an audit. “It’s difficultto say because we haven’t had the tax audits yet,”said one client of these services. “But they are veryefficient and proactive.”

Tier 2Baker & McKenzie have one partner, GéryBombeke, and one associate, Matthias Doornaert,focused on transfer pricing work in Belgium. Morecomplex transfer pricing projects invariably involvethese two practitioners working alongside the firm’sAmsterdam office, which has a team of economists.With their assistance, Bombeke is able to offerBelgian firms and multinationals a full range of trans-fer pricing services: planning, supply chain remodel-ing, documentation, APA negotiation, litigation, andso on. Much of the advising and litigation work canbe done by the Belgian team alone; the Amsterdameconomists then come into help with benchmarkingand certain aspects of documentation.

In the past year, Bombeke has negotiated a cou-ple of significant rulings with the Belgian tax author-ities. He successfully obtained a bi lateral advancepricing agreement between Belgium and Switzerlandfor a US multinational with a principal structure inSwitzerland and a commissioner in Belgium. Thiswas one of the first APAs concluded betweenBelgium and Switzerland. Another negotiation result-ed in an excess profit ruling for a listed US multina-tional with a principal company in Belgium, whichenabled the firm to reduce their effective tax rate suf-ficiently to enable Belgium to remain a palatableprincipal company location for the client.

Finally, the firm also works in close collaborationwith the business consultancy Delaware, who havedeveloped a unique cross-charge transfer pricingassessment model, enabling clients to assess withgreat accuracy the consequences of implementingsuch a model.

The new head of Loyens & Loeff’s tax practice,Enrico Schoonevilt, reports a “booming year” in

transfer pricing, citing it as the firm’s most dynamicsector. Accordingly, in July, the lead lawyer in transferpricing work, Natalie Reypens, was promoted to theposition of partner. Working alongside her are threeattorneys-at-law. Together they cover a range oftransfer pricing work unusual for a law firm, includ-ing documentation, planning, negotiations with taxauthorities and dispute resolutions.

One high-profile client in 2012 was Heinz. Reypensadvised them on the Belgian tax implications of arestructuring of its European business model, focus-ing in particular on the transfer pricing aspects of theconversion itself as well as on the future transferpricing policy of the new business model.

In another deal, worth $8.1 million, Reypens led aproject assisting Altana – a German based group inthe chemical sector – with the Belgian tax implica-tions of the acquisition of a Belgian production plant.This included an assessment of permanent estab-lishment issues and the tax implications of outsourc-ing. Such work, orientated around the details ofBelgian international tax law, is typical of the prac-tice’s caseload. Astrid Pieron leads transfer pricing work at Mayer

Brown, and her strong reputation is attested to byher membership of the European Joint TransferPricing Forum. Through 2012, she drew on plentifulexperience in disputes to handle a rapidly growingnumber of transfer pricing litigation cases. Authoritieshave increasingly utilised transfer pricing audits toraise much-needed revenue, requiring Pieron’sclients to take steps to protect themselves againstlarge assessments. Some of this work has come atvery short notice, and required a prompt responsefrom Pieron and, often, Charles Albert-Helleputte, aVAT specialist and the other key member of MayerBrown’s team in Brussels.

In one such instance, Pierron and Albert-Helleputteput together an in-depth review of existing intercom-pany flows for a division of a multinational groupwith operations in France, before helping the firmimplement an EUTPD (European Union TobaccoProduct Directive) compliant framework. They alsohelped another large European group, with presence

Belgium


in France, Belgium, Ireland, Luxembourg andSwitzerland, to re-assess their transfer pricing strate-gy. Another project necessitated collaboration withMayer Brown’s tax practice in France. This involvedassisting a Moroccan-based credit institution with

significant presence in Europe to structure its opera-tions, including dealing with the arm’s-length natureof specific intra-group support services and the allo-cation of profits within the institution’s head officeand its permanent establishments.

Belgium

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LEADING FIRMS

1 Castro, Barros, Sobral GomesDeloitteKPMGLilla, Huck, Otranto, Camargo AdvogadosRolim, Viotti e Leite Campos AdvogadosSiqueira Castro AdvogadosTrench, Rossi e WatanabePwC

2 EY TercoCFA AdvogadosFelsberg e AssociadosMachado Associados – Advogados e ConsultoresMattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados

3 Barbosa, Müssnich & Aragão – Taxand

Brazil’s transfer pricing professionals agree that con-troversy grew last year, but differ on what this meansfor their firms, or for transfer pricing, in the long run. Transfer pricing expanded in Brazil last year evenas the economy cooled. Tax receipts shrank, but theBrazilian government’s appetite for revenue did not. The government remains opposed to the OECD’stransfer pricing guidelines, however. Intercompanytransactions are still priced according to statutoryprofit margins rather than market prices, which max-imises tax revenue regardless of economic condi-tions. Some transfer pricing professionals believe OECDconvergence will come with time. “Transfer pricing

rules were established in Brazil, in 1996, say, 15years ago,” said Henrique Munia e Erbolato, of CFAAdvogados. “The structure of our IRS is not asadvanced as those of the US or Europe in evaluat-ing transfer pricing rules,” he said.Others see Brazil as something of a trailblazer.Clarissa Machado, of Trench, Rossi e Watanabe,said that within the OECD countries, there is a trendof more countries “having to apply statutory mar-gins as we have in Brazil, because the rules havebecome so complex”. What is beyond dispute is that Brazil’s taxauthority is getting better at handling transfer pric-ing. “Tax authorities are getting more sophisticatedand better equipped to identify transactions andchallenge them,” said Gustavo Haddad, of LefosseAdvogados. “The consulting side of a tax practice must be

more deeply involved not only in planning but inexecuting transactions,” he added. Cristiano Viotti, of Rolim, Viotti & Leite CamposAdvogados, agreed, adding that Brazil’s tax author-ity is “maturing,” and “is beginning to forego strictinterpretation in favour of a more intuitiveapproach”. Paulo Bento, of Barbosa, Müssnich & Aragão –Taxand, agreed, pointing out that Brazil recentlyamended its transfer pricing laws to correct some dis-tortions. He believes that “the transfer pricing environ-ment will begin to favour the taxpayer”. “I would saythe government is finally accepting many things thatshould have been accepted before. They are movingin the right direction,” he said.


BrazilTax authoritiesSecretaria da Receita Federal do BrasilMinistério da FazendaEsplanada dos Ministérios, Bloco PCEP 70048-900, Brasilia, DFTel: +55 61 3412 2000/3000Website: www.receita.fazenda.gov.br

http://www.receita.fazenda.gov.br

Tier 1Andre Gomes de Oliveira leads Castro, Barros,Sobral, Gomes’ transfer pricing group, which spe-cialises in sophisticated transfer pricing planningand business model optimisation for multinationalcompanies. During the past year, the firm struc-tured the management fees and royalty contractfor a US marketing company with operations inBrazil, and advised a global agricultural exporter onselecting a jurisdiction for a trading subsidiary inLatin America. Deloitte is a full-service transfer pricing practicethat focuses on compliance and advisory services.Over the past year, the practice has experienceddouble-digit growth, in terms of both headcount andrevenue. Deloitte is widely recognised by peers for itsexcellence in transfer pricing. The practice is led byCarlos Ayub, who is also head of tax.The transfer pricing practice of Lilla, Huck, Otranto,

Camargo Advogados focuses on assisting domesticand foreign companies in complying with Brazil’stransfer pricing rules on imports and exports. Thepractice is led by Mauricio de Carvalho SilveiraBueno, who is also head of tax and a member of thefirm’s litigation team. The practice also comprises

Joao Paulo de Seixas Maia Krepel and Isabel GarciaCalich de Fonseca. Lilla Huck is advising a portfolio management com-pany on organising its activities regarding intra-grouptransactions. This required the practice to analyse allof the client’s intra-group transactions regarding therendering of services to make sure they compliedwith Brazil’s transfer pricing rules, particularly withrespect to the export of services, to avoid the coun-try’s PIS/COFINS social welfare taxes and municipaltax. The practice is also advising an international ship-ping company on the complete restructuring of itsBrazilian activities, for the purpose of enhancinglogistics and efficiency. This has required Lilla Huck toanalyse several companies scattered across Braziland abroad, and to restructure the new activitiesbetween the Brazilian companies and their overseasparent companies while complying with federal andstate tax law, with special attention paid to transferpricing rules. Led by Marienne Coutinho and Eliete Ribiero,

KPMG’s transfer pricing practice specialises in plan-ning, advisory and documentation services for inter-national companies latest transfer pricing rules,

Brazil

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Corporate income tax rate 15% (a)Capital gains tax 15% 25% (b)Branch tax 15% (c)

Withholding taxDividends 0%Interest 15% 25% (d)Royalties 15%Branch remittance tax 0%

Net operating losses (years)Carryback 0Carryforward Unlimited (e)

a) In addition to the statutory corporate income taxrate of 15%, a surtax of 10% on income in

excess of BRL240,000 per year is imposed onlegal entities and a 9% social contribution tax(CSLL) is levied on adjusted net income. Forfinancial institutions, the CSLL rate is 15%.

b) If the capital gains are derived by a tax havenresident, the rate is increased to 25%. Foreigninvestors on the financial market may be subjectto different rates.

c) Branches are taxed at the same rates asdomestic companies.

d) The rate is 25% if the recipient is domiciled in atax haven.

e) The amount of the carryforward is limited to 30%of taxable income in each carryforward year.

Source: tax advisers from BM&A Consultoria Tributaria – Taxand


which were implemented earlier this year. Coutinho,who is also head of international tax, has spent 18years at KPMG, where she has also worked at thefirm’s Customs Group in New York. Ribeiro is a 15-year company veteran with a strong reputation as aleading transfer pricing adviser. She has particularexpertise in the chemical, automobile, electronicsand consumer goods industries.Rolim, Viotti e Leite Campos Advogados’ 12 trans-fer pricing partners focus primarily on complianceissues, as well as planning and controversy. Theleader of the transfer pricing practice, Joao DacioRolim, is a transfer pricing expert who has writtenextensively on the subject, including the chapter onBrazil in a popular book on resolving transfer pricingdisputes published by the London School ofEconomics and Cambridge University Press. Clientsinclude global corporations that are market leaders.In the last year, the firm advised a well-known USinformation management services company on com-pliance with Brazilian transfer pricing rules. It alsoprepared a study on a tax-efficient trade structure forthe export operations between Brazilian andUruguayan subsidiaries of a leading French compa-ny in the energy sector. Led by Richard Dotoli, Siqueira Castro Advogados’transfer pricing practice focuses on transfer pricingplanning for large domestic and foreign multination-al corporations. Since late 2012, it has focused onproviding advice to local subsidiaries of foreign cor-porations on the application and the impact of thechanges to Brazil’s transfer pricing laws that wereimplemented in January 2013. Also known for itsstrong controversy practice, Siqueira Castro defendsclients in audits, appeals and litigation related totransfer pricing. The controversy team also has expe-rience in negotiating cross-border pricing agree-ments, particularly with Argentina and Switzerland.Clients represent a broad cross-section of businesssegments, and include oil and gas, health care andautomobile companies, and banks. The transfer pricing practice of Trench, Rossi e

Watanabe focuses on high-end consulting work,including planning, studies and litigation. It also

reviews documentation, particularly in preparation forlitigation, while leaving the calculations to accountingfirms. Clarissa Machado heads the practice, whichcomprises five partners and eight fee earners. Clientsinclude large Brazilian companies such as Braskemand foreign multinationals including Eaton and Adidas. In May, Trench, Rossi e Watanabe completed a verycomplex and detailed analysis for a global client ofthe application of the new transfer pricing rules onintercompany loans and export finance. The analysisrequired the firm to interpret the new transfer pricingrules that the Brazilian government implementedearlier this year, and to measure the risks for eachadopted interpretation. The firm is also representing the same client in alawsuit filed in 2004, challenging the calculation ofthe resale price method under the transfer pricingrules enacted in 2002. This calculation results in asignificantly higher tax burden than the calculationunder the 1996 transfer pricing rules.Led by Cristina Medeiros and Graziela Batista,

PwC’s transfer pricing practice focuses on transferpricing planning and documentation that is in com-pliance with Brazil’s new transfer pricing rules, whichwere enacted in September 2012 and implementedthe following January.

Tier 2EY Terco’s rapidly expanding transfer pricing practiceserves a client base that includes some of the largestcompanies involved in the exploration, extractionand export of the country’s oil, natural gas and min-erals. EY Terco also serves clients in the financialservices, pharmaceutical and technology sectors. Thepractice comprises two partners and 46 other trans-fer pricing professionals. The practice leader, WernerStuffer, focuses on compliance issues, while MarcoOliveira, who leads the practice in Rio de Janeiro, hassignificant expertise in documentation and planning.EY Terco is also strong in transfer pricing controversy,and is aligned with law firms that can litigate onbehalf of clients. CFA Advogados advises foreign clients on planningand compliance matters related to Brazil’s transfer

Brazil


pricing rules, with special attention paid to new rulesimplemented in 2012 on safe harbours anddeductible interest rates. The practice, which is led byHenrique Munia e Erbolato, also handles transferpricing controversy, at both the administrative andthe judicial levels. In recent months, Erbolato hasadvised clients on transfer pricing methods that com-ply with the revised safe harbour rules for importsand exports. He also conducted a compliance reviewof a client’s transfer pricing position in relation toBrazil, in order to ensure that both Brazilian andOECD transfer pricing rules were followed. Felsberg e Associados not only provides guidanceon transfer pricing planning but reviews procedures,calculations and criteria used by companies engag-ing in transfer pricing in Brazil. It also reviews docu-mentation and represents clients in transfer pricingdisputes. Thiago Rufalco Medaglia leads the prac-tice, taking over from Antonio Amendola, who left tojoin Dias Carneiro Advogados in July 2013. In recentlitigation, Felsberg successfully defended a globalengineering company with a substantial presence inBrazil in a dispute involving the company’s credit andcertain long-term operations.The transfer pricing practice of Machado Associados

– Advogados e Consultores provides advice ontransfer pricing planning, calculation and litigation todomestic and international corporations of everysize. Lead by Luis Rogerio Farinelli, the practicecomprises three partners and four fee earners. Itsnewest associate, Pedro Leonardo Stein Messetti,joined the practice from Deloitte Touche Tohmatsu inJuly 2012. The firm represents companies from a

variety of business sectors, including oil and naturalgas, chemicals, pharmaceuticals, electronics, auto-motive and food. Led by Luiz Felipe Ferraz, the transfer pricing prac-tice of Mattos Filho, Veiga Filho, Marrey Jr. eQuiroga Advogados focuses on assisting clients,comprising large domestic and foreign multination-als, with transfer pricing strategies and dispute reso-lution. It also assists with the preparation and filingof documentation, with pricing calculation performedby an accounting firm. Clients include the local sub-sidiaries of Dow Chemical and Fujifilm andSTMicroelectronics. Its highly respected controversyteam is defending a number of local subsidiaries offoreign multinationals against assessments levied bythe tax authorities. In April, it successfully defendedCamargo Correa, one of Brazil’s biggest conglomer-ates, against a charge of illegal distribution of dis-guised profits.

Tier 3Barbosa, Müssnich & Aragão – Taxand is a transferpricing boutique specialising in transfer pricing policyand planning for multinational corporations. The prac-tice is led by Paulo Marcelo Bento, who joined thefirm as head of tax in May 2012 from Souza Cescon,Barrieu & Flesch, where he was a partner for sixyears. Clients include the Latin American branch of acompany that makes tools used in some of Brazil’sfastest-growing industries, including automobiles andaerospace. The practice also advises clients of inter-national law firms on a regular basis, regarding trans-fer pricing planning for their Brazilian subsidiaries.

Brazil

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OfficeAv. Rio Branco, 110 – 14th floor20040-001 – Rio de Janeiro – RJBrazilPhone: (+55 21) 2132-1855Fax: (+55 21) 2132-1856

ContactAndré Gomes de [email protected]

www.cbsg.com.br

Deloitte Touche Tohmatsu Carlos Eduardo AyubTax Partner – Transfer PricingTel: +55 11 [email protected]

Our team of recognized specialists part-ners with corporations of different sizesoperating across various industries whichare subject to the Brazilian TransferPricing rules. To assist your companycomplying, managing and planning itsintercompany pricing policies Deloitteoffers a variety of solutions, including: • A diagnosis of the company’s transferpricing readiness;

• Support preparing enquiries andrequests to tax authorities;

• Use of a proprietary enabling-technology – TPS® – developed byDeloitte to determine the tax effectsof transfer pricing operations;

• Licensing of TPS® to our clients sothat they can calculate and managetransfer prices;

• Review of transfer pricing studies pre-pared by the companies for potentialtax optimization or contingencies;

• Solutions to extract informationnecessary to calculate transfer pricesfrom the company’s database;

• Training company’s professionalsresponsible for managing transferprices;

• Support in tax inspection processesand assistance in defense proceedingsat the administrative level.

Brazil



http://www.cbsg.com.br


http://www.deloitte.com.br

KPMG Transnational Tax Services LtdaPaulista Avenue, 2313 - 5th and 6th floors01311-300 – São Paulo/ SP/ BrazilTel: +55 11 3138-5000Fax: +55 11 3138-5058Website: www.kpmg.com/BR

Contacts: Marienne CoutinhoPartnerTel: +55 11 [email protected]

Eliete RibeiroDirector Tel: +55 11 [email protected]

ProfileKPMG is a global network of profession-al firms providing Audit, Tax andAdvisory services. We operate in 156countries and have 152,000 people work-ing in member firms around the world. InBrazil, approximately 4.000 professionalsworking in 20 cities located in 11 Statesand the Federal District.

KPMG in Brazil relies on a TransferPricing team of experienced advisors whoprovide advisory services on transfer pric-ing matters including global policy, plan-ning and implementation. Our approachdifferential lies in the experience of ourprofessional team which combines knowl-edge of the market and legislation withthe use of information technologyresources.

Brazil

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http://www.kpmg.com/BR




LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker TillyDelchev and Partners Law FirmGrant ThorntonPavlov & Partners

3 Tax and Financial Solutions

Transfer pricing in Bulgaria is rudimentary in relationto the rest of Europe. The transfer pricing authoritiesdo not have access to any databases so it is stilltroublesome for them to check whether prices arecorrect. Advisers have noted that this state of affairsis set to change with authorities making a concertedeffort to sophisticate their methodology.

The Bulgarian Corporate Income Tax Act stipulatesthat the arm’s-length principle must be observed anddetermines cases where the prices are deemed notto comply with the principle.

Bulgarian legislation requires taxpayers to holddocumentation containing evidence that its relationswith associated parties are in line with the arm’s-length principle. However, there is presently norequirement to file this documentation as a matter ofcourse with the revenue authorities.

Advance pricing agreements (APA) are still unavail-able for taxpayers. However, PwC Bulgaria clarifiedthat “it is possible to obtain a written opinion from

the revenue authorities on a case-by-case basis” –these are not binding but can provide some protec-tion from assessment.

One adviser said clients are yet to show any greatinterest in the area of transfer pricing. The authoritiesare still in the process of devising transfer pricingmethodology for the jurisdiction and it is likely, once


BulgariaTax authoritiesMinistry of Finance102, G.S. Rakovski str. Sofia, 1040Tel: +359 2 9859 2027Email: [email protected]: www.minfin.bg

Tax rates at a glance (As of 2013)

Corporate income tax rate 10%Capital gains tax rate 10%Branch tax rate 10%

Withholding taxDividends 0% to 5% (a)Interest 5% to 10% (b)Royalties from patents and 5% to 10% (b)

licencesBranch remittance tax No

Net operating losses (years)Carryback NoCarryforwards 5

a) Dividends paid to companies and other entitiesthat are residents of EEA country are exemptfrom withholding tax.

b) As of January 1 2011 until December 31 2014,a 5% tax rate applies on interest and royaltiespayments made between associatedcompanies.

Source: Professionals from Eurofast Global, Sofia Office/Bulgaria


http://www.minfin.bg

this has been completed, that clients will begin toengage with transfer pricing more regularly.

Bulgaria remains a relatively favourable tax jurisdic-tion for business. It currently has some of the lowesttax rates in the world with corporate and personal taxrates of 10%. VAT is set at 20% with a reduced rate of9% applying to hotel accommodation services. Thecourts process is also relatively short with a high courtdecision taking approximately only about three years.

However, the tax authorities themselves compli-cate the stability of the tax environment as they are“unsophisticated”, explained Delchev, and it cansometimes feel like one is “talking to a wall” whendealing with them.

The authorities have also become slightly moreaggressive. A number of advisers noted that theamount of tax litigation has increased, somethingresulting from the occasionally spurious approachof the tax authorities with regards to their taxassessments.

Pavlov Gentscho, of Pavlov & Partners complainedthat a lack of sophistication in the Bulgarian taxauthorities means that some audits can take up tosix months. Because the sum of the tax in con-tention is unavailable to the taxpayer during thesesix months; this will cause liquidity problems for thetaxpayer involved.

Tier 1The transfer pricing team at Deloitte offers a full rangeof services. They recently performed a number of trans-fer pricing studies for clients, with a cumulative valueof $9 million. In addition, because the OECD principlesof transfer pricing apply in Bulgaria, Deloitte producedocumentation for their clients to comply with these.

The client portfolio of the practice is formidable,and includes: two of the three leading telecommuni-cations operators in Bulgaria; one of the biggestenergy and resources projects in Bulgaria; three ofthe big shopping mall operators in the capital Sofia;leading financial institutions and leading multination-al pharmaceutical companies.

The transfer pricing team at EY Bulgaria consists ofone partner and four other fee earners. They are

capable of offering the complete range of transferpricing services. Although they do not perform bench-mark analyses in-house, they are able to utilise theglobal EY network to do this for their clients.

One client explained that, having had experienceof other Big 4 firms, EY is “quicker and more efficient”and therefore his tax firm of choice for all tax issuesincluding transfer pricing.

Over the past year, the team provided mainly trans-fer pricing documentation services to a number ofthe local subsidiaries of big multinational enterprisesfrom a variety of industries, for example, retail, phar-maceutical, and manufacturing.

EY regularly holds events for its clients and manyof these recently have had a transfer pricing focus.

EY is one of the few tax firms actively participating inthe committees of American Chamber of Commerce inBulgaria; German – Bulgarian Chamber of Commerceand Hellenic Business Council in Bulgaria; as well asthe Confederation of Employers and Entrepreneurs.Through active participation in these forums, EY has aleading role in an ongoing initiative for requesting a taxreform by local and foreign investors in Bulgaria.

The transfer pricing team at KPMG Bulgaria offers afull range of transfer pricing services including docu-mentation, economic analyses, implementation ofservice fee systems, tax efficient intra-group pricingpolicies, intra-group agreements, transfer pricingaudits, and transfer pricing seminars.

The transfer pricing team is led by tax partner, KalinHadjidimov. Hadjidimov has been with KPMG since1996 and became partner in October 2006.

The practice in Bulgaria is part of the global KPMGprofessional services firm. The firm operates in 156countries – an extensive international resource ben-eficial especially when working on international taxmatters.

The practice also offers tax seminars to their clientsto offer them the opportunity to expand and furthertheir knowledge of key areas. The practice drawsfrom KPMG’s global resource pool and can deployexperienced local and foreign financial, legal, busi-ness, performance, IT and other advisers to offer tai-lor-made sessions to their clients.

Bulgaria

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The tax practice at PwC Bulgaria, led by tax partner,Paul Tobin, consists of two partners and 20 other taxprofessionals. Because the practice is relatively smallin reflection of the Bulgarian market, the team adopta generalist approach to tax, in that all advisers arecapable of acting on the majority of tax matters.

They do however; have specialists who performtransfer pricing work for their clients. They are able toperform benchmarking, produce documentation andprove market prices. The relatively underdevelopednature of the transfer pricing department is reflectiveof the under developed state of the area in Bulgariaat large.

PwC Bulgaria works with PwC Assurance and attor-neys-at-law from Tsvetkova, Bebov and Partners todevise, not simply tax solutions, but comprehensivebusiness solutions for their clients.

Tier 2Petya Atanasova is the head tax partner at BakerTilly and oversees all the work with the aid of oneother paid professional. Atanasova worked at Ernst &Young for a number of years before moving to BakerTilly and, as such, is experienced in a very widerange of tax matters.

The Bulgarian tax practice is a member of theBaker Tilly Klitou group, an independent member ofthe English, Baker Tilly International. Baker Tilly Klitouhas offices in Bulgaria, Romania, Cyprus, Moldova,and Serbia. In this context, the Bulgarian branchworks very closely with the Baker Tilly in Cyprus andRomania.

The transfer pricing team at Baker Tilly recentlyworked on a number of deals where they wereresponsible for the preparation of the transfer pricingdocumentation. This aspect of transfer pricing is thearea with which Baker Tilly is predominantly con-cerned . If their clients require a more holistic trans-fer pricing service including aspects such as bench-mark analyses, the practice is able to consult withthe Romanian branch of the firm.

The transfer pricing team at Delchev and Partnersis led by partner Veselina Petkova, who is supportedby two additional paid professionals.

The practice offers the full range of transfer pricingservices. As it is a legal firm, there are no economistsemployed in house. If the clients need this aspect oftransfer pricing done, the practice is able to tap intothe WTS Alliance, an international tax firm networkrepresented by firms in approximately 100 countriesworldwide.

The practice has completed transfer pricing workfor many large Bulgarian companies over the pastyear including BTL Industries AD, a global manufac-turer of medical and aesthetic equipment, and HBOBulgaria EOOD, the local entity distributor of HBO TVChannels. This work involved the preparation oftransfer pricing documentation.

The transfer pricing team at Grant ThorntonBulgaria consists of one partner and four other ded-icated tax professionals. The main service that theteam performs is the preparation of transfer pricingdocumentation files which includes: business, func-tional, benchmarking, and economic analyses; char-acteristics of the transaction; and a cover letter onrisks and opportunities.

Grant Thornton Bulgaria is a member firm of GrantThornton International Ltd which has member firmsin more than 100 countries worldwide.

The practice’s client base is varied including compa-nies from the production and services industries, aswell as the financial services industry. The internation-al pedigree of the practice is exemplified by a numberof recent clients including Ixetic, a large German man-ufacturer, and LCWaikiki, a Turkish clothes company.

Pavlov & Partners in Bulgaria works in associationwith the law firm CMS Reich-Rohrwig Hainz that hasa significant European presence. CMS, headed by taxpartner, Gentscho Pavlov, consists of ten memberfirms and has 54 associated offices in 29 differenttax jurisdictions throughout Europe. This networkenables Pavlov & Partners to offer comprehensivecross-border tax support.

The transfer pricing team has access to all of thedatabases in Europe as a of their links to the otherfirms associated with CMS. This means they are ableto offer the majority of services required presently inBulgaria. Should clients require economic analyses

Bulgaria


completed, the practice will work with affiliatedaccountants; they do not offer this service in-house.

The Bulgarian tax practice boasts an impressiveclient portfolio including two IT companies listed inthe New York stock exchange and number of signif-icant companies from the defence sector. Othernotable clients include Barclays, the multinationalbank, and EVN, the prominent electricity supplier.

Tier 3Tax and Financial Solutions is jointly led byPlamen Grozdanov, Dimitrinka Spiridonova and

Andreana Premyanova. Each of these individuals isa professional tax adviser with extensive experi-ence working for the tax authorities and / or Big 4professional firms.

Spiridonova possesses a prodigious knowledge oftransfer pricing; something developed in her previousemployment for EY and Deloitte Bulgaria. She hasbeen nominated by the national tax authorities andapproved by the European Commission to act as oneof the Arbiters of Bulgaria in the case of transfer pric-ing disputes between Bulgaria and third countriesunder the Arbitration convention.

Bulgaria

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O ver the last several years, the Canadianfederal tax authority, the Canada Revenue

Agency (CRA), has become increasingly aggres-sive in auditing the affairs of multinationalenterprises. In the face of growing fiscaldeficits and increased demands for governmentspending, the CRA has devoted greaterresources to reviewing international transac-tions that may be aimed at reducing Canadiantaxes payable. Recent Canadian legislative proposals have

also imposed more extensive reporting obliga-tions on Canadian taxpayers that enter intotransactions with non-residents, and haveextended the period in which such taxpayersmay be reassessed if they fail to comply withsuch reporting requirements. As a result of the increased scrutiny of inter-

national transactions by the Canadian govern-ment, it is critical that tax directors and theiradvisers properly manage Canadian transferpricing audits.

Identification of audit targetsAny Canadian taxpayer that enters into a trans-action involving a party with which it does notdeal at arm’s length may be at risk of being sub-ject to a transfer pricing audit. While there is anelement of chance inherent in whether a partic-ular taxpayer will be selected for a Canadian

transfer pricing audit, certain circumstances canincrease the likelihood of a taxpayer beingaudited. Such circumstances include:• The persistent reporting of losses over anextended period of time;

• The payment or receipt of material intra-group charges in respect of intangibles, serv-ices or guarantees;

• The receipt or provision of bundled supplies;• Contract manufacturing arrangements;• Business reorganisations and/or intellectualproperty migrations;

• Transactions involving parties resident in lowtax jurisdictions;

• Reporting deficiencies/anomalies on CRAForm T106, Information Return Of Non-Arm’s Length Transactions With Non-Residents (including indications that the tax-payer has not prepared contemporaneousdocumentation in respect of a cross-bordertransaction); and

• Changes to historically applied transfer pric-ing methodologies.

Contemporaneous documentationThe Income Tax Act (Canada) (the Tax Act)permits the CRA, in certain circumstances, toassess a special transfer pricing penalty, general-ly equal to 10% of the amount of anyunfavourable annual net transfer pricing adjust-


An audit guide by Michael Friedman, Todd Miller, Mickey Yaksich, and Andrew Stirling ofMcMillan LLP.

Canada

Tax authoritiesInternational Tax Services Office2204 Walkley Road, Ottawa ON, K1A 1A8, CanadaTel: +1 613 952 3741

+1 613 954 9681+1 613 952 2344

Fax: +1 613 940 8495+1 613 940 8497+1 613 940 8495+1 613 940 8499

Website: www.cra-arc.gc.ca

http://www.cra-arc.gc.ca

ment, if the unfavourable net adjustmentexceeds a statutory safe harbour equal to thelesser of (i) C$5 million ($4.8 million), and (ii)10% of the taxpayer’s gross revenue. However,a transfer pricing penalty may not be applicableto the extent the taxpayer has “made reasonableefforts to determine arm’s length transferprices” in respect of the subject transactions. Ata minimum, this requires the taxpayer to pre-pare contemporaneous documentation thatcontains a complete and accurate description of:• The property or service to which the transac-tions at issue relate;

• The key terms and conditions of the relevanttransactions and the relationship between thecontracting parties;

• The functions performed, the property used,and the risks assumed by each party to thetransactions at issue;

• The data and methods considered, and theanalysis performed, to determine acceptablearm’s length transfer prices; and

• The assumptions, strategies and policies thatinfluenced the determination of the appropri-ate transfer prices.For an indication of the types of contemp -

oraneous documentation that the CRA frequentlyseeks to review, see the “Pacific Association of TaxAdministrators (PATA) Transfer PricingDocumentation Package” available athtt://www.cra-arc.gc.ca/ tx/ nnrsdnts/cmmn/trns/pt-eng.pdf.

Initiation of a transfer pricing auditThe CRA generally has broad authority under theTax Act to inspect or examine the books, recordsand property of a taxpayer for any purpose relat-ed to the administration or enforcement of theTax Act. An audit is generally initiated by a written

request by the CRA for documentation, includingcontemporaneous documentation as describedabove, in the form of a letter or audit query sheet.A copy of a typical initial CRA transfer pricing

audit letter can be accessed at http://www.cra-arc.gc.ca/ tx/ nnrsdnts/ cmmn/ trns/tpm05-eng.html#AppendixA.Upon receiving notice from the CRA that it is

initiating a transfer pricing audit, a taxpayershould promptly compile all relevant documenta-tion in its possession. In this regard, systemsshould be put in place to ensure that privilegeddocumentation is not inadvertently disclosed tothe CRA.It is critically important that a taxpayer provide

requested contemporaneous documentation tothe CRA within three months after being servedwith a written request for such documentation. Ataxpayer that fails to provide contemporaneousdocumentation to the CRA within three monthsafter properly being served with a request forsuch documentation will be deemed not to havemade reasonable efforts to determine arm’slength transfer prices and may be subject to trans-fer pricing penalties.The CRA may obtain information regarding a

taxpayer’s financial and transfer pricing practicesfrom a variety of public sources, including publiccompany filings and the taxpayer’s website. Incertain cases, the CRA may also use its audit pow-ers to request information from third parties.

The auditTaxpayers are generally free to carry on theirbusiness during a transfer pricing audit.However, some disruption to the activities of ataxpayer is inevitable where the auditor isreviewing documentation at the taxpayer’spremises. Generally, a single representative of the tax-

payer should be designated as the individual tointeract with the auditor and respond to anyrequests for additional documentation. It mayalso be advantageous to have a professional advis-er present during an audit to respond to queriesregarding the taxpayer’s rights and obligations. The length of time needed to complete an

audit will depend on the particular facts and cir-

Canada

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htt://www.cra-arc.gc.ca/

http://www.cra-arc.gc.ca/




cumstances of the taxpayer. Generally, an auditorwill commence an audit by reviewing certain basedocumentation and thereafter may attend at thepremises of the taxpayer to review additionalmaterials and/or seek to interview certain keypersonnel. Subsequent to completing his/her initial fac-

tual review, an auditor will normally issue (i) aletter indicating that no adjustments arerequired, or (ii) a proposal letter setting out theauditor’s initial views on proposed adjustments.Taxpayers are typically provided an opportunityto respond to a CRA proposal letter with a for-mal submission and/or additional information. The exchange of proposal letters and

responses can extend over a lengthy period oftime and it is not uncommon for an audit to lastfor many months. The CRA will ultimatelyissue a final letter setting out its proposed trans-fer pricing adjustments, if any, which is there-after followed by the issuance of formal federal(and provincial) Notices of Reassessment.The CRA has an administrative policy requir-

ing auditors to refer matters to the CRA’sTransfer Pricing Review Committee (theTPRC) before seeking to levy transfer pricingpenalties or issuing an assessment to recharac-terise a transaction pursuant to paragraphs247(2)(b) and (d) of the Tax Act. Taxpayers aregenerally entitled to make written submissionsthat will be reviewed by the TPRC in such cir-cumstances. Under CRA policy, a taxpayer isalso entitled to respond to an auditor’s draftstatement of facts before a referral report rec-ommending a recharacterisation assessment isdelivered to the TRPC.

RecommendationsAdvance preparation for a Canadian transfer pric-ing audit is the key to potentially securing a suc-cessful outcome. There are certain common errors that many

taxpayers make when managing their transferpricing affairs, including the following:

• Maintenance of insufficient/incomplete con-temporaneous documentation;

• Inappropriate use of transfer pricing compara-bles/methodologies;

• Failure to update contemporaneous documen-tation;

• Failure to provide contemporaneous documen-tation within three months of a writtenrequest;

• Failure to appreciate jurisdictional differences;• Failure to maintain agreements in writing;• No inter-affiliate coordination/consistency;• Compromise of legal privilege; and• T106 reporting errors.Audit risk and penalty exposure can be min-

imised with diligent record keeping and the main-tenance of detailed contemporaneous documen-tation. Up-to-date and organised records enable ataxpayer to advance their strongest arguments atthe outset of an audit, rather than having to disa-buse an auditor of an opinion that has alreadybeen formed without the benefit of certain rele-vant documentation.At the outset of an audit, the taxpayer should

engage the CRA auditor in a discussion of thescope of the audit review, required information,and timelines. Open and candid communicationwith the CRA at the beginning of an audit min-imises the risk of misunderstandings or adverseinferences being drawn and generally increasesthe efficiency of the audit review process. In managing a transfer pricing audit, the tax-

payer must also remain mindful of limitations toseeking relief under the Competent Authorityprovisions of an applicable treaty and must ensurethat timely notifications are made, as required.Ultimately, diligence in establishing compre-

hensive transfer pricing policies and practiceswill help to minimise Canadian transfer pricingaudit risk.The foregoing provides only an overview and does notconstitute legal advice. Readers are cautioned againstmaking any decisions based on this material alone.Rather, specific legal advice should be obtained.

Canada


LEADING FIRMS

1 Blake, Cassels & GraydonDeloitteEYGowlings – TaxandKPMG CanadaMcCarthy TetraultPwC

2 McMillan

3 Stikeman & Elliott

One year after Canada’s government lost the firsttransfer pricing case to reach the Supreme Court, thecountry’s transfer pricing professionals have reportedthat demand for transfer pricing controversy servicesis still on the rise. “Canada has a relatively mature transfer pricing

market,” said John Oatway, of EY, adding that thegovernment has invested heavily in audit and com-petent authority personnel through the years. As aresult, “the government has become sophisticatedfrom the perspective of looking at transactions.”In Canada v. GlaxoSmithKline, the Supreme Court

ruled unanimously against the Canada RevenueAgency (CRA) and affirmed the decision of theFederal Court of Appeal to send the case back to theTax Court. The case began when the CRA issued a$52 million income tax assessment toGlaxoSmithKline (GSK), for paying a Swiss affiliate toohigh a price for the active ingredient used in its pop-ular ulcer drug, Zantac.GSK challenged the assessment in the Tax Court,

arguing that the CRA, in determining an arm’s-lengthprice for the transaction, did not take into account aseparate license agreement that granted GSK theright to sell the drug under the Zantac trademark inexchange for an annual royalty of 6% of net salespaid to its parent company, Glaxo Ltd. The Tax Court agreed with the CRA that determin-

ing whether an arm’s-length approach is reasonablerequires a strict transaction-by-transaction basis. The

Court of Appeal overturned this decision, and thegovernment in turn appealed to the Supreme Court.Finding for GSK, the Supreme Court rejected the

transaction-by-transaction approach. Rather, thecourt held that any determination of a reasonablearm’s-length price must account for all agreementsbetween the parties in the transaction that set itapart from the arm’s-length transactions to which itis compared.Previously, Canada’s judiciary had provided little

judicial guidance on transfer pricing. The court’sopinion on what constitutes a reasonable arm’slength price serves as “real world” guidance ontransfer pricing that is consistent with the OECD’stransfer pricing guidelines. The Supreme Court’s willingness to overrule the

government on transfer pricing has not made theCRA any less aggressive, however.

“An increase in transfer pricing audits in the lasttwo to three years has been a key driver of growthfor the firm,” said Heather Evans, of Deloitte. “Taxauthorities are looking for inconsistency in howtransfer pricing is set up vis-à-vis how the businessoperates.”Andrew Sterling, of McMillan, agreed, adding: “The

CRA has indicated that transfer pricing will become akey focus of audits of international enterprises. Webelieve such audits will likewise serve to grow thetax businesses of law firms, including our own, forsome time.”

Tier 1Blake, Cassels & Graydon provides clients with a fullrange of transfer pricing services, from planning andcompliance to defense. The practice is also helpinga growing number of clients to avoid transfer pricingdisputes through mutual agreement procedure andadvance pricing agreements. The practice is led by Scott Wilkie and Janice

McCart, who have a combined 65 years of transferpricing experience. Wilkie, who joined the practice inSeptember 2012 from Couzin Taylor, is highly regard-ed by his peers for his transfer pricing work and taxtreaty advice.

Canada

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The resolution of transfer pricing disputes, at boththe administrative and judicial levels, accounts for asignificant part of the practice. Blake, Cassels &Graydon is representing McKesson Canada beforethe Tax Court of Canada in ongoing litigation. Theclosely watched case concerns the related party debtfactoring arrangement between McKesson CanadaCorporation and a Luxembourg subsidiary. There areno similar cases in Canada or elsewhere, and thecourt’s decision will likely set a precedent affectingfuture transfer pricing operations.Deloitte offers a comprehensive suite of services

related to transfer pricing design, planning and

engagement. The practice, led by Markus Navikenas,focuses on domestic and international corporationsthat want to revise their approach to transfer pricing,to align it with the restructuring and growth of theirbusinesses and to support M&A transactions.Deloitte’s business model optimisation team, led byRichard Garland, advises clients on setting up trans-fer pricing studies and making sure their transfer pric-ing planning is consistent with their business mod-els, operations, people and technology. Clientsinclude oil services, mining, energy, automobile, tech-nology and financial services companies. Deloittealso represents clients in audits and administrative

Canada


Tax rates at a glance (As of July 1 2013)

Corporate income tax rate 15% (a)Capital gains tax rate 7.5% (b)Branch tax rate 25% (c)

Withholding taxDividends 25% (d)Arm’s-length Interest 0% (e)Non-arm’s length interest 25% (f)Rent, royalty or similar payments 25% (g)

Net operating losses (years)Carryback 3Carryforward 20

(a) The general federal corporate rate is 15%applicable to income earned by corporationsother than Canadian-controlled privatecorporations. A general corporation typicallyincludes public companies and theirsubsidiaries that are resident in Canada andCanadian resident private companies that arecontrolled by non-residents. As a result ofprovincial tax, the combined federal-provincialgeneral corporate tax rate varies by province orterritory, from 25% to 31%.

(b)Only 50% of capital gains are included inincome as taxable capital gains and taxed atthe general corporate rate.

(c) The branch tax rate applies to taxable income ofa non-resident corporation not reinvested inCanada, and may be reduced by virtue of anapplicable tax treaty. Where a treaty does notspecifically reduce the branch tax rate, butreduces the withholding tax rate on dividends,the branch tax rate generally equals the reducedwithholding tax rate on dividends.

(d) Canada's tax treaties generally reduce the rate ofwithholding tax on dividends to between 5% to15% depending on the treaty and the status ofthe beneficial owner of the dividends.

(e) Canada does not impose withholding tax onarm’s-length interest (other than “participatingdebt interest”) paid to a non-resident in anycountry .

(f) Withholding tax applies to non-arm’s lengthinterest paid to a non-resident, but Canada’s taxtreaties generally reduce the rate of withholdingon interest. Under the Canada-US Income TaxConvention, there is generally no withholding taxon interest (other than participating interest) paidto non-arm’s length US residents.

(g) Canada’s tax treaties generally reduce and, insome cases, eliminate withholding tax on certaintypes of royalty payments.

Source: Tax advisers from Gowlings – Taxand

trials through its controversy group. Deloitte Tax Law,its affiliated law firm, represents clients in court.Prominent transfer pricing litigators Cliff Rand andDave Muha joined Deloitte Tax Law from StikemanElliott in January 2013.John Oatway leads EY’s full-service transfer pricing

group, comprising 12 partners and approximately 70other transfer pricing professionals. It is dividedamong six regional offices located in Vancouver,Calgary, Kitchener, Ottawa, Toronto and Montreal.Clients are multinationals from both inside and out-side of Canada. A large part of its controversy prac-tice is devoted to advance pricing agreements –bilateral and multilateral and to mutual and acceler-ated competent authority agreements. It also advis-es on treaty compliance. Litigation is handled by theaffiliated law firm of Couzin Tailor.Gowlings – Taxand’s transfer pricing and compe-

tent authority team focuses on transfer pricing plan-ning and implementation strategy. Its leader is DaleHill, whose international transfer pricing experienceincludes 16 years at the Canadian Revenue Authority,where he participated in more than 40 advance pric-ing agreements and hundreds of competent author-ity requests. The team’s attorneys are supported byeconomist and fellow CRA alumnus, Jamal Hejazi.Clients include more than 60 Canadian and foreignmultinational companies from Canada and abroad.In recent months, their growing demand for APAsand mutual agreement procedure transactions hasbecome a key business driver. In one instance,Gowlings filed a competent authority request andAPA on behalf of a Canadian pharmaceutical compa-ny with a foreign parent. The case was resolved inearly 2013 with a value of approximately $1 billionin potential income adjustments. KPMG’s transfer pricing practice comprises 10 part-

ners and 40 earners in four offices across the coun-try. The practice, led by Michael Glaser, advisesmultinationals on avoiding transfer pricing disputesthrough competent authority procedure and advancepricing agreements. KPMG has 20 APAs under nego-tiation with the Canadian Revenue Authority. OneAPA involves IP developed by a Canadian company

but implemented by its US subsidiary, which is itsmost profitable. The APA shifts the residual, entrepre-neurial profit from the US to Canada, which enjoys alower corporate tax rate. The practice also provides services related to

transfer pricing compliance and planning. In anengagement which began in June 2012, KPMG isdesigning a single transfer pricing policy for threeacquired businesses with three different historicaltransfer pricing approaches. KPMG’s clients vary by region, with the Calgary

and Vancouver offices respectively serving oil andgas companies and mining companies, while theToronto office serves a number of insurance com-panies, reinsurance companies and banks. Newhires include David Francescucci, who joinedKPMG as a partner after serving as a senior man-ager in Deloitte’s Montreal office.Douglas Cannon leads the transfer pricing prac-

tice of McCarthy Tetrault, which focuses heavily ontransfer pricing dispute avoidance and resolution. During the past year, McCarthy Tetrault won sev-

eral significant victories in transfer pricing casesbefore the Canadian Revenue Authority and incourt. In April 2013, the firm convinced the CRA towithdraw proposed reassessments worth $48 mil-lion, thereby avoiding an appeal. In another matter, in May 2013, the firm con-

vinced the Canadian Competent Authority to takethe rare and exceptional step of unilaterally andcompletely withdrawing a substantial CRAreassessment, in this case as much as $480 mil-lion. Led by Michael Glaser, PwC provides a wide

range of transfer pricing services, including docu-mentation, risk assessment and advance pricingagreements (APAs), and represents clients in audits,appeals and competent authority requests.

Tier 2Mickey Yaksich leads McMillan’s transfer pricingteam, which assists global corporations from awide range of industries on developing transferpricing strategy and preparing the documentation

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necessary for showing transfer pricing at arm’s-length. Clients include domestic and internationalcompanies from every major sector of the Canadianeconomy, including oil and natural gas, mining,financial services and automobiles. As one ofCanada’s most experienced transfer pricing practi-tioners, Yaksich has extensive experience advisingsome of the country’s largest and most importantcompanies, particularly in the automobile industry.McMillan also represents clients at all stages of thedispute resolution process, including litigation, and

assists clients in negotiating bilateral and multilat-eral advance pricing agreements.

Tier 3Led by John Lorito, the transfer pricing team ofStikeman & Elliott focuses primarily on planning andcompliance with respect to Canadian transfer pricingrules on income, consumption and customs duties.It also defends clients in transfer pricing disputesbefore both the Canadian Revenue Authority and thefederal and provincial courts.

Canada


Unique among Canadian law firms,Gowlings has a Transfer Pricing andCompetent Authority Team that includessenior partners with over 50 years com-bined experience working for the CanadaRevenue Agency (“CRA”), that is dedicat-ed to assisting organizations in optimizingtheir global tax position and reducingexposure to unfavourable audit assess-ments through proper tax planning andimplementation strategies.

Located in Gowlings’ Ottawa office nearthe headquarters of the CRA, Gowlingshas become Canada’s pre-eminent trans-fer pricing group, achieving appropriateresults for clients when dealing with boththe CRA and foreign tax authorities.Multinationals seek out Gowlings’expertise in the areas of Advanced PricingAgreements and Audit Defence.

Gowlings invaluable work experiencewith CRA allows them to provide effi-cient solutions to clients’ complex legalmatters. Gowlings is the only Canadianlaw firm that has a PhD economist (Dr.Jamal Hejazi) with CRA experience dedi-cated solely to its transfer pricing prac-tice. This allows for complex economicanalysis that goes above and beyond tradi-tional comparability analysis, which isoften needed to settle client matters in afavourable manner. The transfer pricingteam is an integral part of Gowlings’ taxpractice, which has been ranked as a lead-ing Canadian firm in the areas ofInternational Tax Transactions andInternational Tax Planning Excellence by

ITR for the past five years (2008-2012).The transfer pricing team has been recog-nised as “Transfer Pricing Firm of theYear” in Canada by Finance Monthly(2012, 2013) and Transfer Pricing Firm ofthe Year by ITR (2011).

Gowlings is, exclusively, Taxand Canada.Taxand provides high quality, integratedtax advice worldwide and access to morethan 400 tax partners and over 2000 taxadvisors in nearly 50 countries. Being apart of Taxand allows Gowlings to seam-lessly deliver responsive practical taxadvice to clients anywhere in the world.

Website: gowlings.com

Contacts:LEADERDale Hill Tel: 613-786-0102Email: [email protected]

Quality tax advice,

globally

Canada

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McMillan LLPLawyers | Patent & Trade-mark AgentsBrookfield Place181 Bay Street, Suite 4400Toronto, Ontario M5J 2T3www.mcmillan.ca

Transfer Pricing ContactMichael FriedmanPartner, Co-Chair, [email protected]: +1.416.865.7914

Fax: +1.416.865.7048

Deloitte LLP30 Wellington St .WP.O. Box 400Toronto, OntarioM5L 1B1Canada

Phone: +1 (416) 874 3874Fax: +1 (416) 874 3888www.deloitte.ca

Contact: Markus NavikenasEmail: [email protected]: +1 (403) 267 1859

The Deloitte transfer pricing team inCanada is led by Markus Navikenas andconsists of over 70 professionals servingclients across the nation from its offices inMontreal, Toronto, South Western

Ontario, Ottawa, Winnipeg, Calgary andVancouver.

Our multidisciplinary team of profession-als has extensive backgrounds in econom-ics, tax, law, and accounting. In addition,the team has several prominent high rank-ing former Canada Revenue Agency exec-utives who specialize in resolving transferpricing disputes. The Canadian transferpricing practice plays an instrumental rolein the American TP network which wonthe North American (Canada, U.S. andMexico) Transfer Pricing Firm of the Yearby International Tax Review for 2011 and2012.

Deloitte Canadian Transfer Pricing team’scapabilities include:

Business model optimization: aligningchanges to business models and supplychains in a tax efficient and supportablemannerRisk Assessment & Planning: developingtransfer pricing policies, evaluating risksinherent in processes, and policies andtesting of controlsCompliance: to ensure that our clientshave robust documentation and meets therequirements of the tax authoritiesDispute avoidance: to assist our clientsproactively achieve greater certainty viaadvance pricing agreements (APAs) ontheir transfer pricing methods with one ormore tax authoritiesTax controversy management: to supportour clients with tax examination defense,voluntary disclosures, transfer pricingreview committee submissions and mutu-al agreement procedures Training: delivery of customized transferpricing training to in-house tax teams

Canada


http://www.mcmillan.ca


http://www.deloitte.ca


LEADING FIRMS

1 Baker & McKenzieCarey y CiaDeloitteEYKPMGPwC

2 Cariola Diez Perez-Cotapos

The Chilean government adopted a new Income TaxLaw in September 2012 aligning the country’s trans-fer pricing rules with OECD guidelines. The rules,which went into effect in January 2013, also estab-lish an advance pricing agreement (APA) programmeand authorise the tax authority to conduct transferpricing audits, while requiring disclosures from tax-payers that describe related party transactions ingreat detail.The disclosure requirements require a taxpayer to

file an annual sworn affidavit itemising all of its relat-ed party transactions, or else risk a fine of up to$49,000. The annual statement must disclose,among other things, the transfer pricing methodsused in the transaction; related party information,such as its address and taxpayer identity number;financial transactions between the related parties;and any restructuring of the taxpayer’s Chilean busi-ness. The taxpayer is also required to retain all docu-

mentation that shows how they reached the pricesor results agreed upon with related parties. If the taxauthority requests this documentation in an audit,and determines it does not prove that related party

transactions were at arm’s-length, it can impose anadjustment subject to a 35% tax plus a 5% penalty. Chilean multinationals are wasting no time seeking

tax certainty from APAs. Baker & McKenzie is alreadynegotiating with the country’s tax authority to reachwhat could be first the APA in Chile. PwC is negotiat-ing several APAs between Chile and other LatinAmerican countries, and between Chile and Japan,the UK and Singapore. However, Chilean companies are still adjusting to

the new transfer pricing rules, having little or noexperience with the OECD guidelines. Juan PabloOrellana, a partner at Cariola Diez Perez-Cotapos,expects domestic companies expanding overseaswill drive the market for transfer pricing services.“They’re going to require more advice, more audits,more planning in that field,” said Orellana. Juan Pablo Guerrero, a partner at KPMG, agreed,

adding that compliance under the previous transferpricing regime was orderly, while the new rulescaused confusion. Guerrero suggested many lawfirms reacted to the new rules at the last minute.“There are a lot of advisers who thought if they readthe OECD guidelines, they could be transfer pricingadvisers,” said Guerrero.Guerrero said he learned from tax officials that many

firms either filed incomplete or incorrect affidavits orneglected to file them at all. He added that in the newregulatory environment, transfer pricing professionals“that have experience and have support will find newopportunities”, whereas a string of the audits will leadclients to become “comfortable with the Big 4”.

Tier 1Alberto Maturana leads the transfer pricing practiceof Baker & McKenzie, which provides advice to large

www.TPWeek.com46

ChileTax authoritiesServicio de Impuestos Internos (SII)Calle Teatinos 120, SantiagoTel: +56 2 395 1000/395 1330/395 1313 Website: www.sii.cl

http://www.sii.cl


multinational corporations on the design and docu-mentation of transfer pricing strategy. Clients repre-sent every major sector of the Canadian economy.These are large domestic and international compa-nies such as Eaton, the American power manage-ment company and Brazilian petrochemical giantBraskem. The practice is also active in transfer pric-ing controversy, and is representing several globalfirms, including Adidas and Herbalife, in litigation. Led by Jaime Carey, Carey y Cia’s transfer pricing

group provides strategic advice on the design andimplementation of transfer pricing strategies and onhow to file documentation with the Chilean taxauthority. Recently, Carey has taken several steps to

enhance its transfer pricing practice. It hired ClaudiaGajardo, a senior lawyer with abundant transfer pric-ing experience, from the Chilean IRS. The firm is alsoinvolved in what might become one of Chile’s firstadvance pricing agreements (APAs). Carey also offers controversy services, including

appeals and litigation. It is currently representing oneof the largest mining companies in Chile, in connec-tion with a transfer pricing challenge over the pricefixed in a long-term supply contract. It has workedclosely with well-known economists in Chile to sus-tain the financing arrangement underlying the fixedprice. It is also working on a transfer pricing case fora large consumer goods company that has its

Chile



Corporate income tax rate 17% (a)Capital gains tax 17% (b) Branch tax 17% (c)

Withholding taxDividends 35% (d)Interest 4%/35% (e)Royalties 15%/30% (f)Branch remittance tax 35%

Net operating losses (years)Carryback UnlimitedCarryforwards Unlimited

a) The rate was reduced from 20% to 18.5% as ofJanuary 1 2012. In addition to the corporate tax,an entity must pay a tax (either the globalcomplementary tax for individual residents orthe additional withholding tax for nonresidententities and individuals) upon the distribution ofprofits. The rate was reduced to 17%, effectivein 2013.

b) Capital gains on the disposal of certain assetsmay be exempt from tax or subject to reducedrates if certain requirements are met.

c) Branches are taxed at the same rates asdomestic companies. In addition to the

corporate tax, a 35% additional withholding taxapplies to the remittance of profits.

d) Dividends paid to a non-resident are subject toa 35% withholding tax with the 18.5%corporate tax paid creditable against thewithholding tax, lowering the effective rate.

e) A 4% reduced tax rate applies to interestderived from loans granted by a foreign bankor financial institution, provided the lenderand borrower are unrelated parties; if theparties are related, the thin capitalisation rulesmust be observed. The rate is 35% in allother cases.

f) Royalty payments made on trademarks, patents,formulas and other similar services are subjectto a 30% withholding tax. Payments for theuse, enjoyment or exploitation of inventionpatents, models, industrial designs anddrawings, blueprints or topography of integratedcircuits, and new vegetable varieties are subjectto a 15% withholding tax. The 15% rate alsoapplies to payments for the use, enjoymentand exploitation of computer programmes. Therate increases to 30% if the parties are relatedand/or if the beneficiary is resident in a taxhaven included on a list issued by the ChileanTreasury.

regional office in Brazil, and sells products to relatedentities in Latin America. Other clients include ener-gy, infrastructure and finance companies.

Deloitte’s transfer pricing group provides a fullrange of transfer pricing services, including planning,documentation and business model optimisation.The group also has a strong transfer pricing disputeavoidance and resolution service that representsclients in negotiations for advance agreements, com-petent authority assistance and audit defense. Thegroup is led by Pablo Vera, who is also the tax prac-tice leader.

EY provides a full range of transfer pricing services,including the preparation of benchmark analysis,transfer pricing studies, transfer pricing complianceservices, planning and dispute resolution through lit-igation and negotiations with tax authorities. Also,while advance pricing agreements are still new toChile, the firm has negotiated APAs with the taxauthorities of other countries. Mauricio Loy leads thepractice, which comprises 16 dedicated transfer pric-ing practitioners from Chile, Spain, Peru, Ecuador andVenezuela. The firm’s clients include some of themost important foreign companies doing business inChile, as well as a growing number of Chilean com-panies that are expanding overseas. Chile’s first practice with a dedicated transfer pricing

team, KPMG provides planning and compliance serv-ices for some of the country’s largest domestic com-panies, including a third of its top twenty multination-als. It also advises foreign-based multinationals, partic-ularly US and European-based companies. Juan PabloGuerrero, who leads the 10-member transfer pricingteam, focuses on providing assistance to clients unfa-miliar with Chile’s new transfer pricing rules. In 2012,KPMG hired Alberto Cuevas, the tax authority officialwho drafted the rules, as a managing director. KPMGalso consults with companies interested in negotiatingadvance pricing agreements, which Chile acceptsunder the new regulations. KPMG Chile offers a strong controversy practice,

which is highly successful in obtaining positive reso-lutions to transfer pricing audits. Presently, the firm isalso serving as an advisor in the country’s first trial

related to transfer pricing, in recognition of its expe-rience and reputation in this area. Its diverse clienteleincludes several well-known foreign brands of tires,networking solutions and food and drink, amongothers. It is also heavily concentrated in the country’sall-important mining sector.

PwC’s transfer pricing practice in Chile, the coun-try’s first, is led by Roberto Rivas and 19 other feeearners. With the implementation in September 2012of OECD transfer pricing standards, the firm focuseson advising domestic and international companieson related planning and compliance issues. Roughlytwo-thirds of clients are multinationals doing busi-ness in Chile, including giants in pharmaceuticalsand finance. Domestic clients include some of thecountry’s largest and most important companies,representing such key business sectors as miningand agribusiness. It also represents clients in appealsto the country’s tax authority, and in litigation. PwCalso works on advance pricing agreements (APAs),which were introduced to Chile in January 2013. It ispresently working on APAs between Chile and otherLatin American countries, and between Chile andJapan, the UK and Singapore, which, if accepted bythe Chilean tax authority, will be among the first inthe country. The firm enjoys close relationships with Chile’s

best-trained resources in transfer pricing, includingthe tax authority officials responsible for implement-ing the OECD standards. It has also added experi-enced practitioners from other Latin American coun-tries, creating a transfer pricing team capable ofmeeting Chile’s growing demand for transfer pricingservices.

Tier 2Led by Pablo Orellana, Cariola Diez Perez-Cotapos’transfer pricing team advises mostly foreign compa-nies on complying with Chile’s new set of transferpricing rules that were enacted in November 2012and implemented in January 2013. The team focus-es on the reporting of transfer pricing methods andon the conducting of transfer pricing transactionsunder the provisions of the rules.

Chile

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Roberto Carlos Rivas Partner Tel: +56 2 29400151 [email protected]

Gabriel BernalSenior Manager [email protected]

Carolina AlexandresManager [email protected]

Maria Carolina [email protected]

Chile






LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzieDLA PiperGrant ThorntonHendersen – TaxandNERA

3 King & Wood MallesonsWTS Consulting

China’s transfer pricing regime follows the OECD guide-lines, and continues to develop through the years.In October 2012, China contributed a manifestochapter in the UN’s Practical Transfer Pricing Manualfor Developing Countries. The State Administration ofTaxation (SAT) explained its transfer pricing focus onissues associated with location specific advantages,local marketing intangibles and alternative transferpricing methods. “It’s good to see China’s learning from the west intransfer pricing policy setting, but potentially that alsocreates problems to multinationals,” Glenn DeSouzafrom Baker & McKenzie said. “Higher tax would belevied in China for local brands created by foreigninvestors.” Chinese tax authorities now look at intra-groupequity transfer as an additional type of relatedparty transaction. More tax disputes are arising dueto the government’s more aggressive focus.

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ChinaTax authoritiesState Administration of TaxationNo 5 Yangfangdian West RdHaidian District, Beijing 100038 Tel: +86 10 6341 7114 Website: www.chinatax.gov.cn


Enterprise Income Tax 25% (a)Capital Gains 10%

Withholding TaxDividends 10% (b)Interest 10% (b)Royalties 10% (b)

Net Operating Losses (Years)Carryback 0Carryforwards 5

a) From January 1 2008, when the NewEnterprise Income Tax (EIT) Law becameeffective, a common 25% tax rate (down from33%) applies to both domestic and foreigninvestment enterprises (FIE). Under certaintransition grandfather rules, FIEs that enjoyedsubstantially lower than 25% tax rates underthe old EIT law will gradually increase to thenew 25% rate over a five-year period.However, some incentives still exist for specifickinds of enterprises. “New & High TechnologyEnterprises” which shall be recognised byspecial recognition authorities in accordancewith established criteria qualify for a 15% taxrate. Qualified small-scale enterprises mayenjoy a 20% tax rate.

b) The standard withholding rate is 10%. Treatyrelief to a reduced rate may be applicable.

Source: Taxand advisers from Hendersen Taxand

http://www.chinatax.gov.cn


Requirements on contemporaneous documenta-tion therefore are being elaborated and drafted bythe tax authorities. DeSouza reminds taxpayers to “read through thenew requirements, show respect to the tax authorityand get supporting documents ready”. In addition,applying for advance pricing arrangements (APA) isviewed as a good measure to prevent future dis-putes. “Previously I would not recommend APA toclients, but now it becomes thinkable,” said MaHongxiang from WTS Consulting.However, the APA development in China is not yetsophisticated. “APA in China is just like the situation for IPOs (ini-tial public offerings), people are waiting in the longqueue for authority to solve one by one,” Rose Zhoufrom Grant Thornton said. The tax authorities are saidto inject more resources in this field according to sev-eral market observers.Moreover, the market is also curious to see thetransfer pricing arrangements of the high/new-techenterprises (HNTE). To encourage the development ofhigh-industry, companies qualified for HNTE aregranted 15% corporate income tax deduction. HNTEsshould not pay significant amount of royalties onlicensed technologies and should earn a higher prof-it margin than the industry average.

Tier 1 Eunice Kuo is Deloitte China’s transfer pricing leader.She leads the team of over 200 transfer pricing pro-fessionals who deliver quality services across north-ern, eastern and southern China. Liantang He sup-ports Kuo as her deputy. Gangte Muer and PatrickCheung oversee Chinese business from the northand south. Cheung has profound industry experiencein serving multinational clients in banking, insuranceand securities sectors.Since transfer pricing practice often requires knowl-edge and experience in economics, Deloitte boastsone of the largest teams of PhD degree holders inChina to help clients assess and reduce risks in theirbusiness activities. Also numerous specialists in theteam are former tax officials who not only benefit

from that experience but facilitate negotiations withthe tax offices as well.Noticing the close business relationship betweenChina and Japan, the firm has opened a Japaneseservice group to better serve Japanese clients withcomplex issues. In late 2012, for example, partnerVictor Li assisted a leading Japanese manufacturerfor office appliances to negotiate and conclude aSino-Japan bilateral advance pricing agreement(BAPA). The project involves prolonged communica-tions with the tax authorities in both countries, con-vincing them the rationale behind the TP methodol-ogy. In the end, the result has helped the client tominimize double taxation possibilities and bringscertainty to further internal transactions, whichamount $5 billion every year.With Jessica Tien at the helm, EY has a transferpricing team of ten partners from its 15 offices acrossChina. Practicing in this field more than 20 years,Tien’s work includes planning, contemporaneousdocumentation preparation, controversy resolutionand advance pricing agreement (APA) negotiations.The team offers a full range of transfer pricing serv-ices with talents from diverse professional back-grounds. As the SAT tightens documentation require-ments, the team has actively assisted clients to pre-pare supporting documentation for transactions. Inaddition, dispute resolution and planning are twoother service areas that generate growth for the firm.The team also has a strong financial services focus.Over the past year, the department has concludedthree bilateral advance pricing agreement (BAPA)cases in China, one with Korea and two with Japan.Although the market generally observes a slowprocess of APA in the central tax authority, EY is con-fident with its negotiations and good connections inSAT, and expects to enter more BAPAs by the end of2013.

KPMG has more than 20 partners and directorsspecialised in transfer pricing in China. Cheng Chiheads the national transfer pricing practice coveringboth China and Hong Kong. He has extensive expe-rience handling projects in Asia and Europe includ-ing APA negotiations, cost sharing arrangements,

China


documentation and dispute resolution. Irene Yan, aPRC certified tax representative, who also hasexpertise in APA negotiation, supports Chi as thepartner-in-charge in northern China. Chi has advised a landmark APA case for aFortune200 multinational group. The client has over20 Chinese entities that are often restricted by SAT inpaying intercompany service fees. Chi adopted aninnovative benefit testing mechanism to help theentities fulfill conditions required by the authority.Finally, the client entered into an APA for a betterguarantee of certainty.Beyond assisting with documentation, KPMG pro-vides planning advice, dispute advice and risk man-agement initiatives such as APA and mutual agree-ment procedure (MAP). Despite being an accountingfirm, it offers a comparably strong dispute service forclients because fewer cases in China go to litigation.The understanding of the technical issues and alsothe philosophy of the tax administration ensuressuccess in solving.

PwC is a leading transfer pricing service provider inChina with a steady growth. It boasts 13 partnersand directors together with over 200 full time trans-fer pricing professionals and conducts a wide varietyof services from eight offices across the country.Spencer Chong acts as the transfer pricing leaderwho oversees operations in China and Hong Kong,supported by Jeff Yuan as the TP leader of China. RayZhu leads the new tax valuation advisory teamestablished this year, to offer a one-stop solution torestructuring.in the firm offers a full range of services and man-ages a variety of clients across a number of indus-tries including automotive, electronic components,office appliances, franchising and retailing. APA assistance is another service on offer. Numerousbilateral advance pricing agreement (BAPA) cases,including the first five formal APA cases in the country,were concluded thanks to the team’s efforts.

Tier 2Glenn DeSouza leads Baker & McKenzie’s transferpricing practice in China with five other specialists

under his leadership. The team is proficient in han-dling planning and documentation studies. It hasdeveloped an advanced database for econometricsand benchmarking, which has proved to be a valu-able product for clients. Relying on information in thedatabase, clients are able to compare and evaluatetheir pricing methodology and minimise their busi-ness risks. The firm has been providing numerousdocumentation projects to 40 large multinationalcompanies from industries such as retail, IT, chemi-cals, semiconductor and fashion.Former SAT, Shanwu Yuan, joined the team thisyear. His experience as state delegate at internation-al organisations including the UN and the OECDbrings the team up-to-date with regard to policyinsights. For example, DeSouza and his team areadvising a top international electronics companywith seven affiliates on implementing an innovativetransfer pricing model. The model was just issued inthe UN transfer pricing manual’s China chapter.The transfer pricing team at DLA Piper has six spe-cialists including Daniel Chan who is also the headof its tax practice in Asia. Windson Li has over tenyears of experience in advising matters in China suchas structuring, documentation, benchmarking, auditdefence, APAs and cost sharing arrangements. The team is proud of its integrated transfer pricingservice that combines with its corporate and legaladvisory provisions. Clients who seek solutions fromDLA would not only get standalone answers in termsof the area about which they are asking, but alsohave their problems reviewed from a broader per-spective. Chan, Li and Tina Xia advised a Fortune 10 com-pany’s TP structuring in China by providing planningand business model restructuring. The projectrequired thorough deliberation into accounting treat-ment, tax treatment and legal implication. The newmodel makes the client defendable under theChinese tax authority’s transfer pricing scrutiny.

Grant Thornton’s transfer pricing team is headquar-tered in Shanghai and operates from five other officesacross China to cover the client needs in the risingeconomy. Rose Zhou and her team of 20 profession-

China

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als have solid knowledge and experience in transferpricing. Grant Thornton has become a popular optionfor clients who need transfer pricing assistance inChina. “They are comparably good and cost effective,”one source said.The team offers a full transfer pricing service, help-ing clients to identify risks and opportunities, prepar-ing documentations with benchmark studies, com-plying with transfer pricing requirements, optimisingbusiness processes and minimising tax burdens. One key area the team has been engaged in issupporting clients in tax audits that involve intangi-ble assets. Although APA is not particularly popular inChina, Grant Thornton provides services in this areato taxpayers who seek elimination of future disputepossibilities. In the meantime, the team also bringstransfer pricing experience to CFOs and in-house taxmanagers to equip them with TP capabilities.The firm has published a comprehensive guide-book to transfer pricing practice in China. The book isfirst of this kind and has been used by tax officials inChina as official training materials.Dennis Xu, who also leads the tax practice, man-ages the eight person transfer pricing team ofHendersen – Taxand. The firm provides Chinesetransfer pricing solutions to large multinationalclients, in industries including manufacturing, logis-tics, financial services, retailing, food and beverage. As more Chinese businesses invest overseas, thefirm has attracted more domestic clients with itspractice in transfer pricing studies. A recent exampleis that the team has assisted an eminent alcoholand spirit producer in China with its transfer pricingrelated matter overseas. The team has developedlong-term and short-term model for the clients.Thanks to Hendersen’s strategy, the client is not onlyable to avoid double taxation but eliminate transferpricing risks in their business expansion.

NERA operates two offices in Beijing and Shanghaito offer a full range of standalone transfer pricing

services in China. The team is affluent with industryanalysis, value chain analysis, economic analysis, IP(intellectual property) mapping as well as valuation,which guarantees the legitimacy in its transfer pric-ing advisory. Benefited from its international network,the team actively supports multinationals who seektax efficient business opportunities in China. It hassuccessfully assisted numerous international clientsby assessing the risk and designing effective transferpricing models. Complex issues involve IP valuation,location advantage evaluation and royalty payment.

Tier 3As the China tax authority has increased focus intransfer pricing regulation and documentationrequirements, King & Wood Mallesons is fully pre-pared to answer the growing client demands intransfer pricing as a local firm. Under the leadershipof Tony Dong, the firm provides professional assis-tance in analysis, reporting and filing, audit andreview, disputes and cost sharing arrangements toboth domestic and international clients. Although thefirm has not yet handled any advance pricing agree-ment (APA) application, because of a slow develop-ment of APA in China, it is also capable in this area.The firm has recently taken over a case transferredby a Big 4 firm and successfully resolved the issuethat involved multiple parties in Asia and Europe.

WTS consulting has three people to form a dedi-cated transfer pricing team. Tax leader MaHongxiang contributes transfer pricing assignmentswith her profound international tax knowledge. Thefirm also has strength in Sino-European businessactivities. Since transfer pricing practice consumes alot of manpower and financial support in documen-tation studies and audits, the focused area of WTS’stransfer pricing service is on documentation prepara-tion. Specific service provisions include cost sharingarrangement studies, comparable analysis and otherrelevant advice.

China


Deloitte Touche Tohmatsu CertifiedPublic Accountants LLP30/F Bund Center222 Yan An Road EastShanghai 200002, PRCTel: + 86 21 6141 8888Fax: + 86 21 6335 0003Deloitte Touche Tohmatsu35/F One Pacific Place88 QueenswayHong KongTel: +852 2852 1600Fax: +852 2541 1911Website: www.deloitte.com/cn

Contact: Eunice KuoEmail: [email protected]

China

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http://www.deloitte.com/cn



LEADING FIRMS

1 DeloitteKPMGBaker & McKenzieBrigard & Urrutia AbogadosDeloittePwC

2 EYPrieto Carrizosa

The Colombian government has made severalamendments to the country’s transfer pricing rulesto strengthen them and bring them into line withOECD standards. The amendments are included inthe December 2012 tax reform law and are effec-tive from January 2013. Among the most important amendments areadditional criteria for determining whether a busi-ness entity is a related party. The amendments,which are consistent with OECD guidelines, aremeant to bring more taxpayers under the transferpricing regime. In general, the amendments establish that an enti-ty is a related party if it receives 50% or more of thegross revenue, profits or production of a subordinat-ed entity. An entity that conducts business through acollaborative agreement, such as a joint venture, orthrough a third party, is also a related party. Another amendment requires transactionsbetween a domestic entity and a related partylocated in one of Colombia’s free trade zones to fol-

low the country’s transfer pricing rules. Previously,Colombia had no transfer pricing law applicable tothese types of transactions. Finally, the transfer pricing rules were amended toapply to an entity that enters into a transaction witha related domestic company devoted to mining, oiland gas or other extractive business. The amend-ment is an attempt to prevent these businessesfrom exporting profits. The tax reform law also allows a taxpayer toobtain an advance pricing agreement (APA) for upto five years. An APA may now cover a prior tax year(also known as an APA rollback), in addition to thetax year it was approved and the three followingtax years. Other provisions implement a gradual penaltyregime to boost voluntary compliance from taxpay-ers. In determining a penalty amount, theColombian tax authority will now take into consid-eration the duration, severity and cost of a violation. Broader related party criteria, APA rollbacks andgraduated penalties show that Colombia’s govern-ment wants to increase its tax take from transferpricing, but avoid potential transfer pricing disputes.The country’s transfer pricing professionals agreethat litigation is on the rise.Martin Acero of Prieto Carrizosa is representing alarge US mining company in the largest transferpricing litigation in the country. The Colombian taxauthority wants the company to pay an amountwhich, with interest, could reach a billion dollars,said Acero. “This is a landmark case that couldaffect the company, its competitors and transferpricing in general,” he added.


ColombiaTax authoritiesDirección de Impuestos y Aduanas Nacionales (DIAN)Carrera 8 No 6 – 64 Edificio San AgustínBogotaTel: + 57 1 325 6800Website: www.dian.gov.co

http://www.dian.gov.co

Tier 1Deloitte has one of Colombia’s largest transfer pric-ing practices in terms of both the number of transferpricing professionals and of clients. Led by PedroSarmiento, the practice provides a number of trans-fer pricing services, including compliance, consultingand planning, value chain management, valuationsand dispute resolution. Its clients are some of theregion’s largest and most important companies,including Carvajal and Ecopetrol, Colombia’s state-owned oil company. During the past year, Deloitte advised a French lux-ury goods company on optimising its value chainand reducing its tax risk in several jurisdictions inLatin America and the Caribbean. It also advised amajor Colombian oil and gas company on optimis-ing its value chain, including upstream and down-stream operations. Led by Vicente Javier Torres, KPMG’s transfer pricing

practice focuses on planning and compliance servic-es for multinationals with operations in Colombia andelsewhere in Latin America. Active clients includemajor domestic and foreign corporations in the oiland gas, food, pharmaceutical and air travel indus-tries. The Baker & McKenzie transfer pricing group pro-vides documentation and audit defense services forcompanies throughout Central and South America.The practice is led by Gustavo Sanchez, who previ-ously headed Baker & McKenzie’s transfer pricinggroup in Venezuela from 2004 to 2006. Clientsinclude a number of foreign companies in the oiland gas, power, life science, pharmaceutical andconsumer products sectors. Lucas Mora leads the transfer pricing group, one ofseveral specialised tax groups at Brigard & UrrutiaAbogados, with the support of in-house economistand transfer pricing expert Cristian Mora. The group

Colombia

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Corporate income tax rate 33%Capital gains tax 33% (a) Branch tax 33% (b)

Withholding taxDividends 0% 33% (c)Interest 0% 14% 33% (d)Royalties 33% (e)Branch remittance tax 0%

Net operating losses (years)Carryback 0Carryforward Unlimited

a) Capital gains derived from the sale of assetsheld for two years or more are subject tocapital gains tax. Otherwise, gains are treatedas ordinary income.

b) Branches are taxed at the same rates asdomestic companies. There is no branchremittance tax.

c) Dividends paid to a foreign company or entity

not domiciled in Colombia may be remittedabroad free of tax if the profits from which thedividends are paid already have been taxed atthe corporate level. Otherwise, tax is imposedat the 33% corporate tax rate.

d) The rate is 33% if the loan term does notexceed 12 months; otherwise, the rate is 14%.Interest derived from the following is exempt:short-term import credits and overdrafts; creditto finance or pre-finance exports; creditobtained by financial corporations andauthorized banks; credit for trade transactionsobtained through financial corporations orauthorized banks; and credit obtained byforeign, mixed or local companies whoseactivities are considered beneficial to nationaleconomic development under guidelines set bythe National Council on Economic and SocialPolicy.

e) Royalties paid for the exploitation of softwareare subject to a 33% withholding tax, but onlyon 80% of their amount.


advises global companies on transfer pricing strategyand documentation and in litigation. Its practitioners,who have transfer pricing experience from a number ofjurisdictions, also have working knowledge of advancepricing agreements, and have organised seminars forthe purposes of familiarising the tax authority withAPAs and suggesting ideas on how to regulate them.Brigard & Urrutia is also one of three top law firms inColombia to sign a legal stability agreement with thegovernment, exempting a client from further changesto tax and transfer pricing law for up to 20 years inexchange for an annual premium. It is representing aglobal media holding company in ongoing litigationchallenging an adjustment on operating expensesderived from services rendered abroad. One of the fewtransfer pricing processes not yet subject to a decisionby the tax authority or the courts, the court’s decisionwill set a precedent for future transfer pricing work.

Deloitte’s transfer pricing practice is one of the old-est and most experienced in Colombia. PedroSarmiento Perez leads the practice, which is active incompliance, pricing planning, value chain manage-ment, valuations and dispute resolution. Among itslocal clients are Grupo Carvajal, which has operationsin 17 jurisdictions, and Ecopetrol, Colombia’s state oilcompany. Recently, Deloitte has helped severaldomestic and foreign multinationals to optimise theirvalue chains and reduce tax risks. It is also engagedin an ongoing review of transfer pricing compliancemeasures implemented by a Canadian oil and natu-ral gas services company that is expanding into LatinAmerica. The review, which covers Colombia, Mexico,Canada, Argentina, Ecuador and Peru, is intended toidentify optimisation cross service charges in theregion as well as to minimise risk.

PwC’s transfer pricing group is one of the largest inColombia, with three partners and 57 fee earners.Led by Carlos Mario Lafaurie Escorce, the groupadvises clients on a broad range of transfer pricingmatters, including documentation, planning, valua-tions and regional policy developments. The practicealso represents clients in negotiating advance pricingagreements and competent authority assistance,and in audit defense and litigation.

Tier 2EY’s transfer pricing group in Colombia is led byAndres Parra, a highly respected transfer pricingadviser with more than 20 years of law practiceexperience. The group advises domestic and multi-national companies on a number of transfer pric-ing matters, including planning, documentationand transfer pricing matters involving cross-bordertransactions and valuations. Led by Martin Acero, Prieto Carrizosa’s transferpricing practice advises on a wide range of trans-fer pricing issues, including structuring, benchmark-ing, contract drafting, documentation and litigation.The firm also has a special arrangement witheconomist Marcela Lopez, formerly of Charles RiverAssociates, who assists with some of its transferpricing cases. Prieto Carrizosa is defending Drummond in thefirst transfer pricing case brought before Colombianjudges. This is the largest tax litigation in the coun-try, with the tax authorities seeking $600 millionfrom Drummond, an amount which, with interest,would eventually reach $1 billion. This is a land-mark case that could affect Drummond, its com-petitors and transfer pricing in Colombia.

Colombia


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 WTS Alfery

The transfer pricing environment in the CzechRepublic has recently been aligned with OECD andEU approaches. This means that for tax purposes,prices agreed between related parties have to meetthe definition of arm’s-length principle, and theseprices are often subject to tax audits carried out bythe tax authorities.

Following an amendment to the transfer pricinglegislation in 2006, taxpayers in the jurisdiction areable to approach the authorities and apply foradvanced pricing agreements (APA). PwC CzechRepublic cited that, according to their experience,“the average time needed for processing an APA inthe Czech Republic is approximately eight months”.

Taxpayers in the Czech Republic are not presentlyobliged to maintain any transfer pricing documenta-tion (this includes the preparation of benchmarkingstudies or risk analyses). However, this documenta-tion may be required when be subjected to a taxaudit, to prove that the arm’s-length principle hasbeen observed.

The tax authorities have announced that they areplanning to increase their focus on transfer pricingaudits. A new, specialised tax office has been estab-lished, equipped with transfer pricing specialists, withthe goal of administering more transfer pricing audits

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Czech RepublicTax authoritiesThe Central Financial and Tax DirectorateLetenská 15, 118 10 Praha 1Tel: +420 257 042 788 Email: [email protected] Website: www.mfcr.cz


Corporate income tax 19%Capital gainsBranch tax 19%

Withholding tax Dividends 15% to 35% (a)Interest 15% to 35% (a)Royalties from patents and

licences 15% to 35% (a)Branch remittance tax N/A

Net operating losses (Years)CarrybackCarryforwards

a) A final withholding tax of 15% to 35% is leviedon dividends paid to a non-resident, unless therate is reduced under an applicable tax treaty.15% is the standard rate with the 35% rate beinglevied on any income being paid to a tax haven(any jurisdiction with which the Czech Republichas not concluded a tax treaty or an agreementfor the exchange of information on tax issues).The EY parent-subsidiary directive dictates thatdividends paid by a Czech company to a parentcompany located in another EY member stateare exempt from withholding tax if the parentcompany maintains a holding of at least 10% ofthe distributing company for an uninterruptedperiod of at least 12 months. The exemptionalso applies to dividends paid to a parentcompany from Iceland, Norway, or Sweden.

Source: Deloitte (2013) International Tax: Czech Republic Highlights


http://www.mfcr.cz


on large taxpayers in the jurisdiction. As a result ofthis, the majority of tax inspections on large taxpay-ers will include consideration of transfer pricing.

Daniel Weinhold of Weinhold Legal explained thatthe current tax environment in the Czech Republic is“not a tax paradise but also not a tax hell”. A newcivil court is to be established at the beginning of2014. This will involve an entirely new set of process-es and terminology which is likely to cause some ini-tial unsettlement. However, in the long term,Weinhold predicted that this new system will even-tually improve the processes resulting in anincreased level of stability.

There is still a good deal of uncertainty in the juris-diction with a new interim government expected tolast only temporarily. As a result, planned changessuch as the corporate tax rate amendment are notguaranteed to last beyond the general election nextyear. A new civil code that was planned for January2014 might also be postponed because of thisuncertainty. This situation has instilled a sense ofinstability into the jurisdiction.

Jana Alfery, head partner of WTS Alfery, explainedthat the tax authorities in general, have becomemore aggressive in their stance towards tax mattersover the past year.

Despite this increased level of aggression from thetax authorities, improvements in sophistication meansthat it is now easier to have a reasonable, informedconversation with the authorities than in the past. Oneadviser cited research that has been carried out inrelation to the efficacy of the tax authorities over thelast year. The results showed that despite only carry-ing out half the number of audits last year than theydid in the previous one, the authorities managed tocollect twice as much tax.

One source of concern for clients in the CzechRepublic is the absence of the use of precedent inthe legal process. For this reason, it was argued byadvisers, no two cases are treated as comparableand tax-related injustices may result. However,although there is no formal use of legal precedent,nevertheless, some Supreme Court decisions will bemade where previous tax cases are referenced.

A major change with reference to the financialservices authority is the introduction of the FATCArules. These rules have impacted banks markedly,who are now required to share information regardingthe accounts of US citizens with their banks with theUS Internal Revenue Service.

Tier 1 Deloitte Czech Republic has a specialised transferpricing team as part of its tax practice. The team isespecially experienced in producing transfer pricingdocumentation and employs economists in-houseto contribute to this service.

The practice also has a series of sub-departmentsspecialising on specific industries, for example, thefinancial services (spilt into a number of teams),energy, life science and healthcare, manufacturing,and automotive industries.

Despite the Czech economy being in economic dif-ficulty, as a result of a sixth consecutive quarter ofrecession, Deloitte grew by 9% over the last year.

Deloitte Czech Republic held over 30 client semi-nars over the past 12 months, where expertsaddressed hot topics and regulation changes. Eventswere also arranged in cooperation with the Britishand American Chambers of Commerce addressingsubjects relevant to British and American firms oper-ating in the Czech Republic or together with thePrague Stock Exchange.

The tax practice at EY in the Czech Republic is sub-divided into five dedicated service lines, each special-ising in a specific area of tax. These areas are humancapital, indirect, business, transaction, and internation-al tax. The transfer pricing team at the practice formspart of the international tax service line.

EY offers the full range of transfer pricing servicesincluding transfer pricing structuring, flows, efficient,and supply-chain management. The practice alsooffers a dedicated transfer pricing audit and legisla-tion team.

Over the past year the practice successfullydefended two substantial tax audits. They alsoworked on seven advanced pricing agreements (APA)at various stages of development.

Czech Republic


The practice works with clients from a range ofindustries but is especially experienced with theenergy, automotive, telecoms, and financial servicesindustries.

Radek Halíček leads the tax practice at KPMGCzech Republic. Halíček specialises in working withfinancial institutions and foreign investors. He has anextensive knowledge in the area of cross-borderinvestment structuring, dispute settlement, acquisi-tions and restructuring.

The transfer pricing practice at the firm offers arange of services: tax optimising business structuring;the preparation of transfer pricing documentation;assistance in obtaining APAs from the Czech author-ities; and assistance during tax audits and transferpricing court proceedings.

Since January 2013, the tax practice at PwC CzechRepublic has been led by Peter Chrenko and consistsof eight partners and 130 other fee earners. Chrenkohas more than twenty years of experience in taxadvisory and came to PwC from the Ministry ofFinance where he was Deputy Minister for taxes andduties for three years.

The transfer pricing team at the practice offer serv-ices such as assessment of transfer pricing policies;

business analysis and optimisation; benchmarkinganalyses; APAs; transfer pricing documentation; andrepresentation in the event of a transfer pricing litiga-tion.

Tier 2WTS Alfery has been a member of the global tax-driven network WTS Alliance since 2011. WTS Allianceis a strong network of tax firms in 27 countries whichis supported by further associates across the globe,resulting in an overall presence of selected tax firmsin more than 90 countries. Although the firm alreadypossessed a body of international clients before join-ing the network, it has subsequently taken on morecross-border VAT and transfer pricing work.

An example of a recent cross-border transfer pric-ing deal is the work WTS Alfery did with Pfeifer Holz,in relation to the analysis of the changing transferpricing rules between the Czech Republic andGermany in deal worth $500,000.

The transfer pricing department is growing, saysJana Alfery, head of transfer pricing at WTS Alferywho believes that within the next couple of yearsthe firm will be able to compete with the Big 4 taxfirms.

Czech Republic

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Bech-Brunn – Taxand

3 Hannes SnellmanPlesner

If two trends have characterised the Danish juris-diction through recent years, they are a market par-ticularly hard hit by the economic crisis, and a taxauthority that leads Europe in the energetic exer-cise of its powers. Both issues again dominatedthe country’s tax market through 2013, and trans-fer pricing was at the centre of the tax authority’sinterest.

“Transfer Pricing is still very much the focus of liti-gation,” said Eduardo Vistisen, of litigation boutiqueVistisen Attorneys. “This has been a trend in the lastfive years , and it has increased this year with all thetax avoidance coverage.”

In 2012, the value of the transfer pricing adjust-ments made in the Danish jurisdiction tripled fromDKK6.2 billion ($1.1 billion) to DKK21.2 billion, andthe number of companies affected rose from 47 to67.

Several advisers suggested that the Danish authori-ties are front-runners in the broader European contextin terms of their aggressive attitude to tax collection.“Denmark has a very aggressive attitude towards tax

planning,” said Søren Lehmann Nielsen of Bruun &Hjelje. “It has a long tradition of making legislativeanti-avoidance rules as soon as a scheme seems tocome up in the international market – it is often oneof the first countries to introduce regulation. So it is notthe same situation, the same sudden change, as inother European countries such as the UK.”

The Danish government’s particular scrutiny oflarge corporations has also placed transfer pricing atthe centre of Danish tax work. “There is a terrificfocus on multinationals,” commented Ida Jensen atBDO. This is reflected in specific legislative changesthat have come into force. In transfer pricing itself,the rules and regulations surrounding documenta-tion have been made much more rigorous. And theinterest reduction rules in relation to thin capitalisa-tion have been adapted to significantly narrow thescope of their application.


DenmarkTax authoritiesDanish Ministry of TaxationNicolai Eigtveds Gade 28, 1402 Copenhagen KTel: +45 3392 3392Fax: +45 33 14 91 05Website: www.skm.dk

Told- og Skattestyrelsen – Danish Tax and CustomsAdministrationØstbanegade 123, 2100 Copenhagen ØTel: +45 72 22 18 18Website: www.toldskat.dk



Withholding tax Dividends 0/15/27%Interest 0/25%Royalties 25% Branch remittance tax

Net operating losses (Years)Carryback not permittedCarryforwards indefinitely

http://www.skm.dk

http://www.toldskat.dk

Unsurprisingly, this limits some of the possibilitiesof tax work in the Danish jurisdiction. “You can’t sellDenmark as a holding jurisdiction, you can’t even try,”says Anders Oreby Hansen at Bech-Brunn. “We evenadvise against it.”

Tier 1 The past year has been relatively turbulent forDeloitte’s Danish practice, with a raft of changes atthe highest levels and a number of partners leavingthe firm. The previous head of the tax practice, LarsLoftager Joergensen, stepped down from the role inwhat peers in the market described as difficult cir-cumstances, returning to his previous position inindirect tax. He was replaced by Jacques Peronard, aless high-profile figure promoted from within thepractice.

In the context of transfer pricing, one departurewas noted in particular by the market. JensWittendorff, previously a leading specialist in thefirm’s transfer pricing practice and a well-respectedfigure in the Danish jurisdiction, moved to competitorEY.

The head of Deloitte’s Danish transfer pricing serv-ice line is Asger Kelstrup, who was also responsiblefor the Deloitte European economist network forgoods and services for several years. This is sugges-tive of the strength of Deloitte’s transfer pricing workand its market-leading economic capabilities in par-ticular.

While Deloitte maintains strict confidentiality inrelation to its transfer pricing work, a generaloverview of their recent caseload can be given. Theyhave worked on business model optimisationsacross several countries. They have advised on con-troversy, initial planning and risk management. Theyhave provided guidance on an overlapping docu-mentation and controversy issue. And they haveadvised on complex pricing issues, and negotiatedAPAs in a number of contexts.

EY, a leading global firm in tax, transactions, andadvisory services, has a well-regarded transfer pricingpractice in Denmark. It was boosted in the past yearby the recruitment of Jens Wittendorff from Deloitte’s

transfer pricing team. Wittendorff was described by apeer in the market as “a very well-known doctor intransfer pricing” and “an excellent new partner forEY”. Conversely, EY lost Niels-Winther Sørensen toPwC, which one adviser characterised as “a realloss”.

Transfer pricing at KPMG Denmark is led byHenrik Lund, who oversees a team of three otherpartners and 24 fee earners. Lund has been part ofKPMG’s global transfer pricing network since 2001,working for three years in the Netherlands group,and has particular expertise in competent authori-ty proceedings, exercised in the negotiation of alarge number of MAPs and APAs. Lund advisesnumerous multinational groups on the structuringof their transfer pricing policies, the implementa-tion of tax efficient supply chain managementstructures and restructurings, financial transactions,and intangible assets.

KPMG’s transfer pricing practice has, since 2007,distinguished itself from its competitors with itstransfer pricing audit task force, created by Lund inresponse to the Danish tax authorities’ intensefocus on transfer pricing, and the concomitant sub-stantial adjustments and demands imposed onmultinationals. This task force continues to providespecialised assistance in dispute management andresolution, controversy, and strategic handling ofprocesses connected with international tax andtransfer pricing audits. Among its members are sen-ior tax officials, valuation specialists, economistsand tax lawyers.

PwC’s transfer pricing work is praised “very highly,”by a client, who said she was “very happy with theirservices”. The practice offers the full spectrum oftransfer pricing work in Denmark and has been par-ticularly responsive to the Danish government step-ping up the pace of transfer pricing audits, a tempt-ing target for increases in tax revenue. The practicecan draw on PwC’s international network to helpclients develop compliant, tax-efficient structures,prepare for rapid audit response, resolve transfer pric-ing disputes, and decrease transfer pricing exposurein future periods.

Denmark

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Tier 2Bech-Brunn – Taxand has a small transfer pricingpractice, which nonetheless generated a revenue ofalmost €1 million ($1.3 million) in 2012. The overallhead of the tax practice, Anders Oreby Hansen,devotes around 50% of his time to transfer pricingmatters. He is assisted in this work by one seniorassociate and two junior associates, who divide theirtime between transfer pricing and other issues.

This small team is active in two broad areas oftransfer pricing work. Around 60% of the caseloadcomes from transfer pricing disputes, in which con-text the firm can draw on the expertise of partnerand litigation specialist Kaspar Bastian. The remain-ing 40% of transfer pricing work comes from docu-mentation preparation, strategic transfer pricingadvice and second opinions on transfer pricing doc-umentation. The firm does not do database search-es, and consequently work related to this area is out-sourced to other practices.

Tier 3Hannes Snellman are a Finnish law firm that in recentyears has begun to expand its operations across theNordic area. They opened an office in Denmark in2011, recruiting Nikolaj Bjørnholm from Bech-Brunn tooversee the tax practice. Significant clients since thattime have included Shell and the Australian miningcompany BHP Billton, and the firm’s work has receivedpraise from across the Danish tax market. Bjørnholmhimself was described by a peer as “far better thansome of the individuals in the other big law firms, bothin planning and litigation”.

Hannes Snellman is one of the few law firms inDenmark to engage meaningfully in transfer pricingwork, although this does not extend as far as anyprojects necessitating specialised economic expert-ise. Instead, Bjørnholm and his team are primarilyengaged in transfer pricing litigation, an area inwhich they are strong.

In 2013, Bjørnholm successfully represented Tycoin a tax dispute concerning taxation of a deemedcontribution from a foreign parent company. He isalso representing an international packaging busi-

ness in a tax dispute concerning a transfer pricingadjustment made by the Danish tax authorities.

Beyond litigation, the practice does a small amountof documentation work for international firms thatoperate in the Nordic area.

Plesner are a law firm with a highly-regarded taxpractice, and an especially strong reputation in litiga-tion: “Plesner is still a brilliant litigation firm,” said oneadviser from a Danish competitor. In the context oftransfer pricing, the firm does not work with puredocumentation projects, nor does it have any eco-nomics expertise. But their outstanding reputation forlitigation extends into the realm of transfer pricingdisputes.

Work in this area is led by their overall head of tax,Hans Severin Hansen, and one of their partners withan expertise in corporate litigation work, LasseEsbjerg Christiensen. They are in the process ofassisting a number of clients pursued by the Danishtax authorities. The aggregated income increasessought by the Danish government in these casesexceeds €5.4 billion; mandates related to a third ofthis total were won in the first half of 2013, much ofit by Plesner’s transfer pricing team.

Firms to noteVistisen Tax Attorneys is a litigation boutique handlinga wide range of tax cases, but with a particular spe-cialty in transfer pricing. Eduardo Vistisen, who estab-lished his own firm after leaving Kromann Reumart in2011, has in his career worked on some of Denmark’slargest and most prominent transfer pricing cases, rep-resenting clients such as Microsoft and Intel.

He is now working on the largest aggregated trans-fer pricing case in Denmark, which involves all of thecountry’s municipalities. Each of the tax-exemptmunicipalities set up two taxable companies, one forwater and one for waste water, so the basis for tax-ation needs to be established through valuation ofthese companies. Vistisen Tax Attorneys are doingthe barrister’s work at the Danish Administrative TaxTribunal, in a case that is worth an aggregated$20bn. It is most likely the first transfer pricing casesince the 1990s to go to court.

Denmark


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Alder & Sound OyBorenius – Taxand

3 Roschier

The Finnish tax authority has applied its focus totransfer pricing for a number of years now.

“The focus has increased over the past few yearsin Finland,” said Titta Heikkinen, head of transfer pric-ing at Deloitte. “The tax authorities have centralisedtheir transfer pricing work nationally to a large trans-fer pricing office and they have formed a specifictransfer pricing team.”

This crack squad consists of 37 practitionersfocused on transfer pricing, handling all the litigationand auditing issues related to the sector. Adviserswere unanimous in noting a more aggressive atti-tude in transfer pricing audits, and those with expert-ise in the sector shrewdly acknowledged that it wasyielding the most significant controversies.

“The atmosphere is difficult for companies becausethere is so much discussion around tax, and somuch pressure from media and politicians on taxplanning,” said Janne Juusela, head of Borenius’s taxpractice. “As soon as someone notices there is a taxhaven in a company structure then you have a prob-lem and you have to provide some explanations.

This is something companies need to consider rightnow; what is their position regarding internationalstructures? Tax planning is not popular right nowbecause of this pressure.”

Despite this pressure, market-orientated transferpricing work has remained active. The Finnish mar-ket has traditionally been quite conservative, and soa drop in interest in aggressive tax planning is not asterrain-changing for tax advisory firms as it might be

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FinlandTax authoritiesNational Board of TaxesHaapaniemenkatu 4 A, P.O. Box 325, FIN-00052 Verotus, Helsinki, FinlandTel: (from inside Finland) 020 697 051Tel: (from outside Finland) +358 20 697 051Website: www.vero.fi

Tax rates at a glance (As of 2014)

Corporate income tax 20%Capital gains 30% (32% for capital income

exceeding €40,000) Branch tax 20%Withholding tax (a)

Dividends - corporate entities 20% - individuals 30%Interest 0%Royalties- corporate entities 20%- individuals 30%Branch remittance tax

Net operating losses (years) Carryback Carryforwards

a) Payments to European companies that qualifyunder EU directives may be exempt

Source: Tax advisers from Borenius – Taxand

http://www.vero.fi


in other jurisdictions. Instead, transfer pricing remainsa key practice area, but the goals of companies inrelation to it have become wider than just money.

“Of course they take tax issues into account in allbusiness planning but they rarely drive decisions,”said Heikkinen. “Planning projects are still there, butthe focus is not on getting the last penny saved fromtax. It is on tax risk planning and control of conse-quences. Companies have not been focusing on thebenefits of tax planning, they have been payingattention to compliance and documentation – theyreally don’t want to see themselves in the press.”

It is clearly a time of transition in Finnish transferpricing work, and practitioners are following develop-ments with a great deal of interest.

Tier 1 Deloitte has a medium-sized transfer pricing practicein Finland, the smallest of the Big 4’s but still a signif-icant and established force. The practice consists of 10fee earners and two partners – Titta Heikkinen andOuti Ukkola – whose time is overwhelmingly dedicat-ed to the sector. The department has grown in thepast year with the recruitment of two new juniors.

Together, this small team covers the entire range oftransfer pricing challenges, from basic documenta-tion through to business model and supply chainoptimisation. They also work in litigation, preparingappeals and assisting firms in the lead up to interna-tional pricing audits.

A significant project from the last year involvedworking with a Finnish-based group with a multibil-lion dollar turnover in the development of three dif-ferent business lines. The most sizeable challengeinvolved a completely new business line, whichrequired the whole range of business model plan-ning: how to arrange manufacturing, distribution,sales, IP location and so on. The other two smallerbusiness lines needed assistance determining anoverall strategy and also more specifically with theirprocurement activity.

EY’s transfer pricing is spearheaded by the partnerHarri Pettersson, while Kari Pasanen also takes onmuch of the corporate business modelling side of

transfer pricing work. In general, the majority of thefirm’s small tax team will contribute to transfer pric-ing whenever their skills are relevant.

EY Finland has extensive access to economicsexpertise, both in-house and through its networkand relationships with other EY tax practices; EYFinland can work with whichever team has the mostappropriate resources in each particular instant. Thepractice is engaged in all forms of controversy relat-ed to transfer pricing, and it ensures clients are com-pliant through its documentation work. The tax teamis also active in assisting clients when changingbusiness and transfer pricing models, working toboth ensure compliance and to optimise the taxstructure. Most of all, the firm has seen increasingdemand in the context of supply chain optimisation.

“KPMG has the strongest transfer pricing team inFinland,” said one competitor, echoing a sentimentexpressed by several Finnish tax practitioners.KPMG’s market-leading team is led by Eric Sandelin,who can draw on transfer pricing expertise both fromwithin KPMG’s Finnish firm, as well as in the networkmore broadly. The practice covers all areas of trans-fer pricing, including documentation, litigation, andbusiness model and supply chain optimisation.

PwC have the second largest transfer pricing teamin Finland behind KPMG. It is led by Sari Takalo, whois assisted by partner and accountant Merja Raunio.One client, who relies on PwC for transfer pricingassistance, said: “They work as a global company, ona very high level and to a very good standard. Wehave a very smooth working relationship.”

Tier 2Alder & Sound first started its operations as a trans-fer pricing boutique in 2010. It was launched by theformer EY transfer pricing specialist Hannu-TapaniLeppänen, who has extensive past experience inbusiness model optimisation. He was subsequentlyjoined by two of his former colleagues at EY, ReimaLinnanvirta and Henri Becker. The last year saw fur-ther highly transformative growth, as the practiceworked to expand its tax capacity beyond a narrowfocus on transfer pricing.

Finland


Transfer pricing remains at the heart of the prac-tice’s tax work, however, and their most characteris-tic engagement continues to be a fully-fledged trans-fer pricing planning project, encompassing planning,evaluation, and documentation. All of the practice’sthree partners and nine fee earners contribute in oneway or another to these transfer pricing projects.

A good specific example of the practice’s transferpricing expertise, a project completed in May 2013,involved designing a new transfer pricing model fora listed Finnish group with a €3 billion ($4 billion)annual turnover. Elsewhere, for a listed companywith operations on three continents and an annualturnover of approximately € 4.5 billion, the practicealso designed a state-of-the-art transfer pricing man-agement tool for budgeting and monitoring servicecosts in the context of intra-group services and finan-cial transactions.

Transfer Pricing is central to Borenius’s practice,and has been among their most dynamic sectorsover the past year. It is led by Jouni Honkaaho, atransfer pricing specialist who has handled the firm’sTP work for a number of years.

This year Borenius recruited Jarno Mäkelä from theFinnish tax administration, where he worked as headof the tax audit group. Mäkelä brings with him expe-rience with the Big 4, but it is his preceding role thatis most valuable in the Finnish context, where trans-fer pricing is a big issue and the tax administration isvery active on audits and evaluations. Mäkelä marksa significant addition to Borenius’s TP practice, spe-

cialising in financial transactions and IPR (intellectualproperty rights). Honkaaho has a more general scopeacross the firm’s transfer pricing work, which spanstax planning, tax audits and tax litigation.

Last year, both advisers worked together to defenda stone wool insulation producer in litigation pro-ceedings concerning tax years 2006-8, a significanttransfer pricing audit case within the Finnish jurisdic-tion. A larger team also assisted the global brandbusiness group in a mutual agreement procedure inits corresponding adjustment between Finland andCanada.

Tier 3Roschier’s transfer pricing work is limited, and onlyrarely involves APA negotiation, TP documentation, orproject management. Rather, there is a focus on dis-putes and defending clients against tax authorityclaims, and occasional collaboration with tier 1 pro-file law firms on general business model planning.

Most of the firm’s work this year has been under-taken by Mika Ohnoten, the practice’s overall head,in partnership with Journi Weckström, tax counsel atthe firm. Together, they advised a multinational cor-poration in a Finnish tax audit process. The auditcovered a number of years of direct taxation andinvolved controversial compensation given on thetermination of certain trademarks and technologies.They also represented two private equity portfoliocompanies in a tax audit process concerning thearm’s-length nature of their financing structure.

Finland

www.TPWeek.com66


Jarno MäkeläSenior Associate, M.Sc. (Econ.)

ATTORNEYS AT LAW BORENIUSLTDYrjönkatu 13 A, FI-00120 Helsinki,Finland Direct tel. +358 9 6153 3224Mobile +358 40 536 2615Fax +358 9 6153 [email protected]

Taxand Finland www.taxand.com

Member of Borenius Groupwww.boreniusgroup.com

Quality tax advice,

globally

Finland



http://www.borenius.com

http://www.taxand.com

http://www.boreniusgroup.com

LEADING FIRMS

1 CMS Bureau Francis LefebvreEYKPMGTaj (Deloitte)

2 Arsene – TaxandBaker & McKenzieFreshfields Bruckhaus DeringerLandwell et Associés (PwC)

3 August & DebouzyFidal Direction InternationaleLexCaseMayer BrownTP Associates

In France, statutory rules on transfer pricing adopt thearm’s-length principle for cross-border related partytransactions. Increased resources have been allocat-ed to the tax authorities so that they might improvetheir ability to deal with transfer pricing issues moreeffectively. More court cases are dealing with transferpricing issues, which aid the interpretation and appli-cation of the relevant legislation.

Although most tax auditors are not particularlyexperienced in the area of transfer pricing, there is anexpert team within the tax authority where thesecases are transferred. This is a positive thing, saidLaurent Borey of Mayer Brown, because transfer pric-ing disputes are properly handled, engendering pre-dictability to the outcomes of such assessments.

Transfer pricing rules have been upgraded inFrance to match those of foreign regulators. This hasmeant a lowering of the financial threshold at which

a company is compelled to have transfer pricing doc-umentation.

Between 1999 and 2004, only bilateral APAs wereaccepted by the French tax authorities. In 2004, theFinance Bill was rectified extending the scope ofAPAs to unilateral APAs. Additionally, an APA proce-dure that requests only very limited documentationis now available to small- and medium- sized enter-prises.

Eric Meier, head of tax audit and litigation at Baker& McKenzie in Paris, explained that rapid reforms tothe tax system have been coupled with a “trendfrom the tax authority...to launch very aggressive taxaudits”. These audits can result in severe financialpenalties. This situation has engendered feelings ofinsecurity for clients in the jurisdiction, somethingexacerbated by the tax authority’s unwillingness tosettle on disputes. Gianmarco Monsellato of Taj(Deloitte) contended that the state of the French taxenvironment is “aggressive but not insecure”. Heexplained that despite the aggression of the Frenchtax authorities, at least one can be sure this is howthe authorities will be.

Tax and transfer pricing is presently trapped in theoppressive heat of the belligerent media spotlightwhich has resulted in a great deal of “tax bashing”.Big multinationals have frequently been the targetsof such assaults despite their tax planning schemesbeing technically legal. It is the civil immorality of themultinationals’ actions that the media, and subse-quently the public, take great exception to.

Sonia Bonnabry, partner of Lexcom explained thatthe tax authorities have had instructions to be moreaggressive with regards to their approach to tax dis-putes and auditing. The tax authority’s new proactivestance has culminated in dramatic dawn raids such

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FranceTax authoritiesMinistry of Economics and Finance (tax section) – Direction générale des Impôts DGI139 Rue de Bercy, 75012 ParisTel: +33 140 04 04 04 Fax: +33 1 53 18 95 00 Website: www.economie.gouv.fr

http://www.economie.gouv.fr


as that on the Microsoft offices in July 2013. Nearlyall cases are being transferred to the courts and insome cases it is taking up to seven years for thecase to be heard. One partner described how hisclients were simply building up their capital reservesand then waiting to see the extent of their tax billunder the new regime.

Insecurity has meant that individuals and compa-nies have continued to approach their advisers todiscuss the feasibility and efficacy of leaving the taxjurisdiction in search of a more favourable regime.Philippe Drouillot of LexCase explained that migrationto avoid Hollande’s punitive tax measures had beena taboo subject in France until very recently as indi-viduals and companies began to seriously considerit. It must be noted that for companies located sole-ly within, and with the majority of their dealings inFrance, migration is difficult, if not to say near impos-sible to achieve. However, for individuals with little

equity and real estate, migrating is a much easierprocess. Nevertheless, it is expected that individualsand companies will continue to consider migratingover the coming year.

Foreign entities and start-ups are two groups thathave been cited as leaving or thinking about doing so.

It has been suggested the OECD studies and pro-posals concerning the combating of tax avoidanceare only likely to have an effect if they are backedby the US. It has also been suggested that beforethe global tax havens can be effectively tackled,some of the local regimes must first be examined.For example, Ireland, Luxembourg, Belgium, and –outside of the EU – Switzerland. Public opinionremains solidly in favour of the prosecution of indi-viduals and companies. However, as the emphasison tax fraud is heightened; the likelihood is that thenumber of criminal proceedings based on tax fraudwill increase. As a result, firms with criminal law

France



Corporate income tax 33%Capital gains 33%Branch tax 30% (a)

Withholding taxDividends 0% to 30% (b)Interest 0%Royalties from patents

and licences 0% to 33.33% (c)Branch remittance tax N/A

Net operating losses (Years)Carryback 1 (d)Carryforwards Unrestricted (e)

a) This rate may be reduced under applicable taxtreaty. It may also be increased up to 75% ifthe profit is deemed to be distributed to anentity located in non-cooperative state orterritory.

b) Dividends paid to a non-resident company aretaxable at a rate of 30% withholding tax,

unless reduced under a tax treaty or thedividends are paid to a qualifying companyunder the EU Parent-Subsidiary Directive.

c) Royalties paid to a non-resident company areusually taxed at 33.33% unless the rate isreduced under an applicable tax treaty orpayment is made to an associated companyunder the EU Interest and Royalties Directive.This rate may also be increased up to 75% ifthe royalty is paid to an entity located in anon-cooperative State or territory.

d) One year carryback applies for sales of up to€1 million, there is no allowable carryback forsums above this.

e) Tax losses carried forward are only available tooffset €1 million plus 50% of the currenttaxable income exceeding that amount. The taxlosses that cannot be offset in a given year canbe carried forward and offset against futureprofits with no time limit.

Source: Tax advisers from Arsene Taxand

departments as well as tax specific departments arelikely to become increasingly useful.

Tier 1 The transfer pricing team at CMS Bureau FrancisLefebvre is led by Bruno Gilbert. The team aims tocombine transfer pricing-related tax expertise –coordinated by Xavier Daluzeau, Pierre-JeanDouvier, Stéphane Gelin, and Bruno Gibert – witheconomic expertise under Arnaud Le Boulanger’sresponsibility.

The practice provides holistic advice on a globalscale to French groups (groups of theCAC40/Fortune 500) and on a European scale toforeign groups, in particular, North-American ones.

During the last 12 months, the team has assist-ed several French groups in their transfer pricingpolicy, in terms of securing the business. It has pre-pared numerous transfer pricing documentationsfor either the French tax authority or foreign taxauthorities (in particular, documentations for theChinese subsidiaries of two major groups of theCAC40).

The team has also taken part in entering intoaround twenty advance pricing agreements (thefirm has advised two multilateral procedures, onefor a French group and the other one for a foreigngroup).

Finally, the team have been actively involved inthe negotiation of settlements. For two Frenchgroups, the negotiation of settlements followedtransfer pricing adjustments for several hundred ofmillion euros). The firm has also been involved intax audits/mutual agreement procedures.

The tax team at EY in France counts among itsclients 36 companies from the CAC 40; the Frenchbenchmark stock market index. The transfer pricingteam is led by economist, Jan Martins, who joinedthe practice a year and a half ago from KPMG. Theteam consists of 33 transfer pricing experts someof whom come from the French tax authorities(with at least one from an advance pricing agree-ment background). Some of the team are dedicat-ed lawyers and others, economists.

The team is frequently engaged in tax effectivesupply chain management analyses leading to thedesign of transfer pricing policy; tax audit defence,mutual agreement procedures and advanced pric-ing agreements.

The practice works with clients from a range ofindustries but is particularly active in the areas ofreal estate, consumer products, telecoms and gov-ernment bodies.

The transfer pricing team at KPMG France offersa full range of transfer pricing services includingdocumentation, economic analyses, implementa-tion of service fee systems, tax efficient intra-grouppricing policies, intra-group agreements, transferpricing audits, and transfer pricing seminars. Taj, Société d’Avocats is a member-firm of the

global Deloitte Touche Tohmatsu Limited law firm.The practice employs both tax experts and econo-mists enabling them to offer a full range of trans-fer pricing services including transfer pricing plan-ning and documentation, examination defenceand mutual agreement procedure, business modeloptimisation, financial services and debt pricing.

Taj serves a number of high profile clients includ-ing 80% of the companies listed on the CAC40(benchmark French stock market index) and 94%of French groups quoted in the Global Fortune 500(world’s biggest companies compiled by CNNMoney).

Tier 2The transfer pricing team at Arsene – Taxand is ledby Antoine Glaize and consists of both economistsand tax specialists. The team offers the full rangeof transfer pricing services including design, docu-mentation, and implementation. Transfer pricing ispresently a key focus for the practice as it becomesmore central to the activity of the French taxadministration.

The team also offers its clients tax audit assis-tance and is able to negotiate with the authoritiesfor advanced pricing agreements. They have theexpertise necessary to defend their clients’ transferpricing policies against the authorities.

France

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The transfer pricing department of Baker &McKenzie in France is led by the extensively expe-rienced Caroline Silberztein. Silberztein worked atthe OECD for 10 years, working on the TransferPricing Guidelines where she would “interact withover 50 governments on a daily basis”. She hasrepresented the OECD at the EU Joint TransferPricing Forum, the UN Committee of ExpertsSubgroup on Transfer Pricing and many others.

Silberztein clarified that although Baker &McKenzie may not have the manpower of the “Big4” tax firms, because of a combination of herexperience and the other five associates at thefirm, Baker & McKenzie is able to offer intelligent“strategic thinking, planning, and defence againstlitigation”.

The transfer pricing team at Freshfields BruckhausDeringer promotes a combination of law and eco-nomics in transfer pricing to enable the team to han-dle a wide range of issues. At the centralised eco-nomics department in London, the firm has the fullsuite of databases and research staff with which todetermine arm’s=length prices and to prepare trans-fer pricing documentation.

Freshfields France takes advantage of its globalnetwork of firms across 28 countries. This capacitywas utilised in the past year as the practice carriedout work for a worldwide transport group in thecontext of the acquisition of a majority stake in aFrench based logistic group located in 12 countries,and redefined the transfer pricing policies withinthe target group and the seller. Landwell et Associés (PwC) offer transfer pricing

work as part of the business taxation services itoffers. One client commended the firm for its trans-fer pricing work, explaining that it is”good withoverall TP advice and planning – especially withinthe US”.

Tier 3The transfer pricing team at August & Debouzy con-sists of two partners and six other professionals.

The practice has worked on a number of dealsover the past year where it was required to draft

transfer pricing documentation for their clients. The practice deals with a number of notable

clients including office supplies giant, Staples, andIpsos, a global market research company.

The transfer pricing team at FIDAL DirectionInternationale works in a multi-disciplinary contextand comprises lawyers that specialise in interna-tional tax, intellectual property, and transfer pricing.

The practice offers services across all aspects oftransfer pricing including assistance with auditsand litigation, audits of transfer pricing policies,assistance in determining transfer pricing policies,documentation, and assistance in negotiatingadvanced pricing agreements.

FIDAL’s international tax department has a coop-eration agreement with the KPMG tax network.Philippe Drouillot is the partner in charge of

French Law Firm LexCase’s tax department. Drouillot is in charge of all transfer pricing work

and is well-versed in the area having worked onmany transfer pricing projects in the six years heworked at Ernst & Young. Recently, Drouillot hasworked with a number of big clients including, twomajor international news agencies and an influen-tial international games publisher.

Drouillot described the firm as “boutique”, butwas keen to clarify that the kind of work LexCasedoes is comparable to that of many of the muchbigger tax firms in France. The boutique status ofLexCase allows them more flexibility than some ofthe bigger tax firms, according to Drouillot.

The transfer pricing department of Mayer Brownis centralised and located in the US. As such, theFrench practice is able to offer a full range of trans-fer pricing services by utilising this resource.

Clients said the transfer pricing team at MayerBrown is “excellent at assisting with transfer pric-ing controversy issues”. Partner, Astrid Pieron washailed as being “outstanding” in her efforts as anadviser on transfer pricing work. Laurent Borey heads Mayer Brown France and is

also one of five firm practice leaders heading thefirm’s worldwide tax practice. As a member of theParis Bar since 1995, Borey has worked extensively

France


for private equity clients in the area of acquisitions,and for European and US corporations in domesticand cross-border transactions.

The practice has a huge profile of corporateclients such as Morgan Stanley, Charterhouse, andCinven. TP Associates has five main aims when it advis-

es its clients. These are to: reduce costs, optimise

supply chain operations in a tax efficient manner;simplify transfer pricing processes, mitigate risks incross-border transactions, and to represent theirclients in the case of transfer pricing disputes.

The practice has extensive industry experience withthe automotive, chemicals, financial services, FMCG,luxury & apparel, mining, oil & gas, pharmaceutical,and technology, media, and communications.

France

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Taj – Société d’avocats Member of Deloitte Touche TohmatsuLimited

181 avenue Charles de Gaulle 92524 Neuilly-sur-Seine CedexFrance

Tel.: +33 1 40 88 22 50Fax.: +33 1 40 88 22 17Email: [email protected]: www.taj.fr

Contact: Sylvain Chevrier Email: [email protected] Tel/Direct: +33 1 55 61 40 56Mobile: +33 7 86 01 71 47

Firm profile:Taj professionals, with Deloitte globally-managed transfer pricing network, helpcompanies reduce risks by aligning practi-cal transfer pricing solutions with theiroverall global business operations andobjectives, assist with strategic documen-tation to support their transfer pricingpractices, and resolve disputes efficiently.Taj has a well-earned reputation for qual-ity and delivering results. Our servicesinclude:• Transfer pricing planning and documen-

tation – Taj provides practical solutionssuch as strategically approaching trans-fer pricing documentation require-ments, which enable global businessesto achieve operational and internation-al tax planning objectives.

• Dispute avoidance: Advance pricing

agreements (APA) – APAs allow tax-payers to proactively achieve greatercertainty via advance agreements ontheir transfer pricing methods with oneor more tax authorities. Taj’s experi-ence with the APA process spans theentire history of the French nationalAPA program. Our historical knowl-edge of how to achieve successfulresults helps companies manage theirtransfer pricing issues – particularly therisk of double taxation – on a prospec-tive basis.

• Dispute resolution: Examinationdefence and mutual agreement proce-dure/competent authority (MAP/CA) –Taj takes an integrated approach toresolving transfer pricing disputes inthe MAP/CA process. Our teamsinclude transfer pricing MAP/CA spe-cialists from both countries teamedwith professionals who specialize inlocal country requirements for indirecttaxes, taxes imposed by local orstate/provincial jurisdictions, interna-tional tax and interest calculations forlate payment that invariably affect theoutcome.

• Business model optimization (BMO) –The global economic environment ischaracterized by continuous improve-ments in technology, urgency to adoptand implement best practices andprocesses. Assessing a multinational’sglobal business model is no longer anoptional exercise. Business ModelOptimization (BMO) is the process ofbalancing the demands of operationsand tax law and integrating them intothe business model. This helps ensuretax planning does not curtail the bot-tom line and that the business modeldoes not surrender some or all of thevalue it creates. Taj provides high quality,

France



http://www.taj.fr


customized tax and BMO services thatfocus on helping multinationals inte-grate operational and tax planning in ascalable and sustainable way in order toenable business leaders to make moreeffective decisions on an after-tax basis.

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1. How does the tax authority selecttransfer pricing cases to audit?Cases can be selected by two means: First, casesare automatically pre-selected because of attrib-utes such as size (sales, amount of wages,etcetera) or because they have been audited inthe past already. These pre-selected cases arethen high level reviewed by the responsible taxaudit department. The department decides,after the desktop review, whether the case looksrelevant given the audit resources. Second,cases can be nominated by the tax office incharge for tax assessments. The audit triggercan be any observation (for example variation inprofits, media coverage on business restructur-ings). These suggestions are then also reviewedby the audit department. A tax audit can also beinitiated when MAP or APA procedures areapplied for by the taxpayer or a foreign counter-part. In summary, the likelihood of a tax audit in

Germany is high for domestic and foreigngroups of companies. Usually, a tax audit coversa three to four year period on a continuousbasis.

2. How will a company find out it is beingaudited? What is the official notification?The taxpayer will receive a written noticeabout being audited in advance (normally

more than two months in advance) includinginformation about periods and taxes beingsubject to audit, and the beginning of theaudit.

3. When a company has been notified ofaudit, what is the first thing it should do?The taxpayer should collect all documents forthe audit periods (tax returns, documenta-tion) and test whether electronic data accesscan be granted to the tax audit (restricted forthe years and companies under audit) uponrequest.

4. Is there any legislation for generalprocedure for a taxpayer under audit? Ifnot, what is the recommended practice?The tax audit is regulated under the FiscalCode, the taxpayer is informed about itsrights and obligations together with the taxaudit notice. The German tax authorities havealso issued several circulars on transfer pricingand procedural issues, known as theAdministration Principles, which provide non-binding guidance for taxpayers.

5. How does Germany differ in itsapproach to TP audit to other countries?Tax auditors usually work at the taxpayer’spremises and have several audits in parallel.


An audit guide by Oliver Wehnert of EY.

Germany

Tax authoritiesBundesministerium der Finanzen –Ministry of FinanceWilhelmstraße 97, 10117 BerlinPostanschrift: 11016 BerlinTel: +49 3 018 682 0Fax: +49 3 018 682 32 60Website: www.bundesfinanzministerium.de

Deutsche Steuer-GewerkschaftFriedrichstrasse 169-17010117 BerlinTel: +49 302 0625 6600Fax: +49 3020625 6601Website: www.dstg.de

http://www.bundesfinanzministerium.de

http://www.dstg.de

Thus, tax auditors interrupt their audit oftenfor several weeks/months and then return.This can make the audit process last severalyears.

6. How does the tax authority compile itsinformation on a taxpayer for an audit?Tax auditors start with a desktop review of thedocuments available within the tax adminis-tration, this is supplemented with internetresearch and then draft a hot topic list is com-piled. Once the audit procedure has begun,tax auditors also have the right to gatheraccess to all tax relevant documents electron-ically available with the taxpayer, either byrequesting the taxpayer to collect certain doc-uments or by using the authorities’ own accessto ERP and other systems.

7. What are the most likely instances thatprovoke an audit from the authorities?Tax audit triggers may include a huge variationin profits over a number of years, a continua-tion of no reported profits, a significantincrease in the profit/loss cost positions, achange of ownership, or business restructur-ings (as reported in the media).

8. What documents are required by thetaxpayer during transfer pricing audit?The tax audit can request all written or elec-tronic documents relevant for tax purposes. Inthe context of transfer pricing, usually thestatutory documentation and supporting doc-uments such as contracts, financial data (seg-regated profit/loss, budgets), organisationalcharts are requested. The tax audit also hasaccess to documents/meeting minutes relatedto board meetings and other documents notoriginated by the tax department, but opera-tional departments.Since 2002, tax auditors have had the right

to access the taxpayers’ computer systemswithin the scope of tax audits, to electronical-

ly audit the accounting records, which havebeen created with the help of the data pro-cessing system. The scope, which has beendrawn up with regard to data access, is verycomprehensive. The auditor can choosebetween direct access, indirect access, or datatransfer on machine readable data medium.According to the latter, the taxpayer is obligedto provide the original, digitally-created andtax-relevant data with the correspondinghardware and software without delay in amachine readable format.

9. Are there any restrictions on acompany’s business during audit?No.

10. Are there any restrictions on thetaxpayers advisers during audit?No.

11. How long does an audit last?A tax audit can last up to several years, espe-cially if a specialist transfer pricing auditor isconsulted. This is not unusual and alsodepends on the number of cases a tax auditoris working on at the same time. However,timely responses and a professional tax auditmanagement can help to minimise tax auditduration.

12. What happens after an audit hasbeen completed?After the tax audit closing meeting, a writtentax audit report is prepared. This documentcan be reviewed by the taxpayer before beingfinalised. Any audit adjustments included inthe tax audit report are then transferred intoamended tax assessment notices. The taxpay-er can subsequently file an appeal or requestcompetent authority.

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13. Tips on negotiating with theauthorities.German tax authorities usually start with unre-alistic high proposed adjustments in transferpricing topics. The aim is to increase the taxbasis by a portion of the original proposedadjustment, only, but without any follow-upwork. Thus, a tax audit settlement is often com-bined with a waiver of any subsequent compe-tent authority proceeding. Taxpayers should beaware that often two, three or even more settle-ment discussion can take place. Tax auditors andtheir requests should be taken serious, timelyresponses are much appreciated and could helpto create a good working environment.

14. How can a company manage its auditrisk?A thorough preparation of tax audits is key,including creating awareness about weak points inargumentation. Transfer pricing documentationshould not be considered a commodity forGerman purposes, it is an important defense ele-ment in tax audits and consequently shouldaddress the key argumentation straight. Taxpayersshould also, in the very beginning of an audit, ver-ify to what extent relief from potential doubletaxation can be granted, for example, using MAP.However, for this, counterparty country-specificformal requirements should be analysed (forexample, statute of limitation).

Germany


LEADING FIRMS

1 DeloitteEYFlick Gocke Schaumburg

2 Baker & McKenzieKPMGLuther TaxandPwCVoegele Partner – NERA

3 DentonsFreshfields Bruckhaus DeringerOppenhoff & PartnerWTS

In general the past year was a fairly quiet one for taxlegislation in Germany. With elections on the horizon,the country‘s political parties have been tactically cir-cumspect about their intentions regarding tax.Despite this, in the context of transfer pricing, thetrend of recent years continued, and the sector hasseen more tweaking of its rules and regulations thanin any other area of tax.

“In the last ten years in Germany the German for-eign tax code was amended regarding transfer pric-ing issues at least four or five times,” said Xaver Ditzof Flick Gocke Schaumburg. “And in addition, thedocumentation requirements have been madestricter and stricter.”

The aim of these changes is encapsulated in a sig-nificant 2008 change to exit taxation, mentioned bynumerous transfer pricing practitioners in Germany.This introduced the taxation of the shift of businessfunctions to foreign-affiliated companies. It is nowmaking itself felt, and, according to one adviser, “is avery new and a very active area for the tax auditors”.

In the last year another change to transfer pricinglegislation was introduced, in the form of a significantamendment to section 1 of the German foreign tax actregarding the formation of partnerships. This intro-duced the authorised OECD approach with regards tothe application of the arm’s-length principle.

As this trend suggests, advisers are finding transferpricing to be a busy and demanding sector of tax work.

“In tax audits for German-afffiliated multinationalsand stocklisted German multinationals, as well assmall and medium sized German companies, trans-fer pricing issues are becoming more and more inthe focus of the German tax authorities,” said XaverDitz. “One main business of our transfer pricing prac-tice is therefore assisting multinationals in tax audits.If the case can’t be solved in tax audits, then weassist them in the courts.”

Things are expected to get even busier after the elec-tions. Tax advisers anticipate a deluge of legislative andregulatory attention, and they expect this to take theform of more anti-avoidance rules. These rules are like-ly to have particular focus on transfer pricing.

“The tax authorities have been reacting to aggres-sive tax planning with a lot of anti-avoidance rules,and there are more and more to come,” said MichaelBest at P+P Pöllath. “They want to protect the tax rev-enue, to reduce planning and structures which are

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Corporate income tax 15% (a) Capital gains 25%Branch tax 15%

Withholding tax (b) Dividends 25%Interest 0%Royalties 15% Branch remittance tax

Net operating losses Carryback 1Carryforwards indefinitely

a) 5.5% solidarity surcharge also levied oncorporate income tax. Local corporation tax of12-18%. Effective corporation tax rate of 30-33%.

b) Payments to European companies that qualifyunder EU directive may be exempt


not good for a substance perspective.” Consequently,in the words of another adviser: “We’re seeing manyavenues for tax work being closed down.”

Even as this happens, however, new avenues areopening up, as firms increasingly turn to tax adviso-ry firms for new forms of advice. Certain aspects ofthese new functions more closely resemble modernPR than they do the traditional law and accountancyprofessions.

“Tax has become a topic that is much more pres-ent in the public consciousness,” said ChristianSeidenabel at Hengeler Mueller. “This affects thework of tax advisers, because clients don’t justexpect technical advice about whether something isin line with tax laws; we see increasing interest inour views and experiences of how certain structuresare perceived by the public and the government.”

A number of global and economic forces are coa-lescing to make transfer pricing the most dynamicand unpredictable area of tax work. In Germany, thistrend will only intensify as we move into 2014.

Tier 1 Deloitte’s transfer pricing team in Germany is led byAchim Roeder, who works alongside five partnersand a further 60 fee earners. This team includeseconomists and attorneys, has a network of eighthubs around Germany, and is part of a globalDeloitte network of over 1500 transfer pricingexperts, enabling it to draw on local expertise in anyjurisdiction that becomes a part of a multinational’sstructure. The practice has also established specificcentres of excellence in a number of industries: thefinancial services, transportation and shipping, auto-motive, chemical and pharmaceutical industries.

It offers full-service transfer pricing advice rangingacross planning, defence and documentation. Specificexamples of projects in the past year include a glob-al transfer pricing documentation project covering 26countries and 44 entities to be documented for threeyears, for a leading German automotive supplier com-pany. The practice also conducted a company-widetransfer pricing planning project for transferring allexisting IP owned by various operational German legal

entities of a DAX 30 company to a German IP holdingcompany to back-license the IP to the operationalentities in five business segments for the next decade.EY's German transfer pricing practice is led by Oliver

Wehnert, who has been with the firm since 1998. TheGerman transfer pricing practice is one of the strongesttransfer pricing practices within EY, already the largestwithin the country, and projected to continue its growthsignificantly in the coming years. It currently consists ofabout 150 dedicated transfer pricing professionals frommore than 15 nations, reflecting the diverse nature ofthe clients served. EY’s German transfer pricing practiceconsists of highly experienced certified German taxadvisers, lawyers, economists and industry experts.This diversified team works closely together to developintegrated and comprehensive solutions for globallyoperating clients. The services provided by the GermanErnst & Young transfer pricing team comprise all areasof transfer pricing including transfer pricing documenta-tion, planning, controversy and tax effective supplychain management. EY Germany differentiates itself bytaking a holistic approach that focuses on meetingclients’ needs from start to finish, from concept/solutiondevelopment, documentation and implementation, todefense and dispute resolution.

Amid its international tax team, Flick GockeSchaumburg have a compact and integrated groupof professionals who devote a substantial proportionof their time to transfer pricing matters. Four partnersand ten other fee earners work on transfer pricingplanning, documentation, APA, audits, and litigation,alongside other sectors of tax work.

Transfer pricing work has expanded consistently atthe firm over the past decade, as the topic hasbecome increasingly central to the focus of theGerman tax authorities and their auditing procedures.Three new fee earners were taken on through 2012to 2013 with substantial expertise in transfer pricingmatters. One partner, Michael Puls, also left the firm;an internal promotion is anticipated to fill his role.

The adviser most engaged with transfer pricingwork is Xaver Ditz, a partner in the practice since2005 whose specialism in transfer pricing fits nicelywith corresponding expertise in international tax law

Germany


and tax audits. Throughout 2012, Ditz led a projecthandling the tax audit of a German subsidiary of aUS multinational; this concerned the taxation of atransfer of the firm’s main business functions to anaffiliated Swiss company. Worth $600 million, it wasa challenging and difficult case that lasted 18months, finally concluding in May 2013.

Tier 2Baker & McKenzie offer strong transfer pricing serv-ices in Germany, evidenced by the fact they won the2012 Transfer Pricing Firm of the Year award from theInternational Tax Review. Incorporating their vastglobal network, the practice can work across marketsand borders to formulate well-woven solutions tothe most significant transfer pricing issues, includingthe design, implementation and management oftransfer pricing structures, the integration of transferpricing methods with regional, national or global taxstrategies, the negotiation of APAs, and global andlocal documentation.

Transfer pricing is led by Stephan Schnorberger,who is also head of the tax practice as a whole inGermany. Schnorberger advised on the first multilater-al transfer pricing APA involving Germany, and interna-tional planning and valuations for business restructur-ing have become increasingly central to his practice.He also combines industry experience in the automo-tive, pharmaceutical, telecommunication, software,financial services and consumer products industries.Dr Matthias Kaut leads transfer pricing at KPMG,

overseeing a practice of 10 partners and 77 furtherpractitioners. This team was boosted in the course of2013 with the lateral hire of Axel Nientimp fromDeloitte, a partner with a great deal of experience indefending multinational enterprises in transfer pricingtax audits and Competent Authority procedures.

KPMG were involved in several significant transferpricing projects through 2012 to 2013. Towards theend of 2012, the practice advised a multinationalsteel company on the development of a transfer pric-ing approach for the remuneration of sourcing enti-ties engaged in the procurement of commodities.And, for a German headquartered financial institute,

the practice advised on the first transfer pricing dis-pute resulting from the financial crisis; a loss splittaking into account the new authorised OECDapproach.Luther – Taxand offers a broad range of transfer pric-

ing assistance, including litigation and controversy serv-ices, tax audit assistance, APA negotiation, tax efficientsupply chain optimisation, and documentation. It is ledby Christoph Kromer, whose strength in the litigationfield is well known and can be seen in the work itself.In 2012, Luther helped several clients defend multipleadjustments proposed or fixed by the Federal andLand Tax Auditors for Transfer Pricing. In all the cases inwhich Kromer was involved, the tax adjustments,totalling €160 million, were brought down to zero.

Luther – Taxand has also developed a web-basedsoftware solution aimed to help global clients estab-lish, manage and monitor their transfer pricing docu-mentation in a standardised manner. This softwaresolution can also coordinate the cross-border trans-fer pricing documentation activities of all TAXANDfirms involved. In 2012, this software was imple-mented by a global client for its European activitiesand helped to identify transfer pricing documentationrequirements for more than 100 transfers and formore than 100 entities in six countries.

The practice also expanded its capabilities with therecruitment of Michael Puls from Flick GockeSchaumburg, a move that was remarked upon withadmiration by others in the German market.PwC Germany provides transfer pricing advice

based on a good understanding of the sector and ofcross-border value-added processes. It is also carefulto back up its structures with immaculate documen-tation of these cross-border transactions, ensuringthey are consistent and logical so as to avoid thesignificant financial penalties that can otherwiseoccur. Their German transfer pricing practice is well-respected but, advisers suggested, “definitely weak-er” than either Deloitte’s or EY’s.

Transfer pricing at PwC Germany is led by LorenzBernhardt, who has over a decade’s experience intax consulting, in particular in planning, implementa-tion and defence of transfer pricing systems as well

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as in international tax structuring. He advises largeinternational clients, both those headquartered inGermany and abroad.NERA is a niche firm working on sophisticated trans-

fer pricing issues, intellectual property, and financial val-uations. It is led by the partner Alexander Voegele,who is assisted by a team of seven fee earners. Theirwork over the past few years has ranged from writingreports for thin capitalisation cases against theSwedish government, calculating insurance premiumsfor various funds, brand migration, and brand valuation,including calculating the value of fuel brands such asShell, Exxon and BP. They have also been involved insignificant tax audit defences.

Alexander Voegele brings transfer pricing expertiseto the firm, and, accordingly, handles all such caseshimself. In the spring of 2013, he guided the tax freemigration of valuable and well-known intellectualproperty for a client.

Tier 3Transfer pricing work at Dentons is conducted by twopartners, forming a significant section of their overallinternational tax work. Michael Helm, a partner withDentons since 2006 and a partner at Haarmans forfive years before that, works from the Berlin office.However, the majority of foreign investors route theirwork through Frankfurt rather than Berlin, and Dentonshad only a very limited tax team in their Frankfurt lawoffice, consisting of a counsel and an associate whoengaged in a little tax work. Consequently, in May2013, they hired Michael Graf from Haarmans, whotook the role of partner and spearheads the firm’sinternational tax work from its Frankfurt office.

Dentons transfer pricing work involves planning,disputes, and some documentation work; however,as they can’t compete with KPMG on price for morestraightforward report writing, they only becomeinvolved in documentation if the allocation of risksand rewards is legally complicated.

A representative case from the last year stemmedfrom the sale of a family owned business to a USinvestor. The German fiscal authorities argued thatthe transfer pricing process, conducted between the

German firm and their Chinese subsidiary during thesale, left the purchasers liable for a large amount oftaxes. Dentons are defending the transfer pricingwork done by the sellers through an administrativeappeal and mutual agreement proceedings. Taxcosts of around €3 million are involved.

The Freshfields Bruckhaus Deringer German trans-fer pricing team has less scope than its competitorlaw firm Flick Gocke Schaumburg’s, but it neverthe-less has highly respected lawyers providing the serv-ices it does offer. This includes tax-efficient corporaterestructuring as well as the determination and allo-cation of profits to specific locations; assistance withtransfer pricing dispute resolution; and advisingclients on compliance, including the drafting ofagreements, documentation, and benchmarking.Oppenhoff & Partner is an M&A-based tax practice

and transfer pricing is at the heart of their work. Theirwhole team, consisting of two partners and three feeearners, is able to contribute to transfer pricing cases.The firm has particular expertise in the US market, along-standing specialism first forged during WorldWar 2 when Walter Oppenhoff, the law firm’sfounder, helped keep Coca-Cola trading in Germanythrough the conflict.

In 2012, Axel Bödefeld advised a leading companyin the sweets industry in a dispute over royalty rates.The Swiss parent of this company receives a royaltyrate from its subsidiaries which was challenged byGerman tax auditors. Bödefeld advised the firmthrough the final stage of the tax audit, focusing onwhich strategy to use in light of the amendment ofthe Swiss-German tax treaty, which now provides formandatory last-best-offer arbitration.

Another 2012 transfer pricing case was handled bythe tax practice’s second partner, Gunnar Knorr. Headvised a large automotive supplier on a revision ofits European IP strategy and IP allocation, involving aparticularly challenging structure because part of thebusiness is held in a joint-venture that restrictedwhat could be allocated to which entity.WTS’s transfer pricing practice has had a paradox-

ical year: it has grown significantly, gaining two part-ners and more than 20 fee earners, and is now by

Germany


far the biggest TP practice in Germany behind thoseof the big four. But it also likely to disappear – atleast as a distinct entity within the firm.

The service has expanded to encompass thewhole range of TP services, and has advised 10 ofthe biggest 30 German DAX corporations in the pastyear. But Karsten Gnuschke, the company’s CEO,explains that they no longer consider TP as a sepa-rate area, but rather consider it to be an entirely inte-grated part of their broader strategy.

“It is not seen on an isolated basis but has a veryclose linkage to both the indirect and direct taxgroups,” he says. This joined-up approach has beendriven by tax authorities’ desire for greater revenue,and the heightened level of public scrutiny of com-pany’s tax work, Gnuschke continues. For example,for the German Dax 30 Corporation, WTS helpedtransform the existing TP system into a new globalsystem that took into account related topics such asIP, withholding taxes, VAT and customs.

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Ernst & Young GmbHWirtschaftsprüfungsgesellschaftGraf-Adolf-Platz 1540213 Düsseldorf, Germany

Düsseldorf:Oliver WehnertPhone +49 211 9352 [email protected]

Dr. Thomas BorstellPhone +49 211 9352 [email protected]

Dr. Dirk BrüninghausPhone +49 211 9352 [email protected]

Michael DworaczekPhone +49 211 9352 [email protected]

Stefan WaldensPhone +49 211 9352 [email protected]

Cornelia WolffPhone +27 11 772 [email protected]

Cologne:Dr. Ralph BodenmüllerPhone +49 221 2779 [email protected]

Thomas EbertzPhone +49 221 2779 [email protected]

Frankfurt:Stephan MarxPhone +49 6196 996 [email protected]

Annette SchrickelPhone +49 6196 996 [email protected]

Munich:Dr. Christian ScholzPhone +49 89 14331 [email protected]

Hamburg:Ralf PaustianPhone +49 40 36132 [email protected]

Thomas HülsterPhone +49 40 36132 [email protected]

Stuttgart:Dr. Andreas SinzPhone +49 711 9881 [email protected]

Germany
















NERA Economic Consulting GmbHMesseturm60308 Frankfurt am MainTel. +49 710 447 500www.nera.com

Firm profile:NERA Economic Consulting is a globalfirm of worldclass economists providingexpert valuation reports. In the context ofinternational tax, NERA is the perfectcomplementer to in-house tax depart-ments and law firms for economic advice:

• Field tax audits• Mutual Agreement Procedures• Advance Pricing Agreements• Intellectual Property

NERA has over 50 years of Experience,and its Experts are also renowned fortheir standard setting books and articles.

Your contacts:

Philip de HomontConsultantTel: +49 710 447 [email protected]

Alexander VoegeleChairman of the Advisory BoardTel: +49 710 447 [email protected]

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http://www.nera.com




LEADING FIRMS

1 EYDeloitteKPMGPwC

2 Zepos & Yannopoulos – Taxand

3 Dryllerakis & Associates

As of January 2013, the Greek Parliament passedincome tax law amendments that include changesto the transfer pricing provisions. The changes meanthat transfer pricing rules now apply to all intercom-pany transactions; such transactions must all be doc-umented, not just those cross-border as was previ-ously the case. Documentation must be submitted tothe authorities within 30 days of it being requestedand one new provision allows companies to negoti-ate advanced pricing agreements (APA) related to aspecific future transaction with related companies(this will begin in January 2014). These changes wereapplied retroactively to any transfer consummated in2012.

Greek APAs are not permitted to exceed two yearsin length; however, the APA can be renewed for acomparable period, extending the APA’s validity tofour years.

Previous to these changes being implemented,Greek taxpayers had to deal with two separateauthorities, each having its own set of transfer pric-ing rules – one of these was the Ministry of

Development. The new rules should improve thisscenario but it is likely that both authorities willremain active in this field over the next couple ofyears.

The political situation in Greece is relatively stable,with a government in place comprised of three differ-ent parties; the first of its kind in Greece. Problemsmight arise as a result of the two parties on the left,the PanHellenic Socialist Movement (Pasok) and theDemocratic Left, being in favour of much harsher taxesin contrast to the more liberal position of the centre-right New Democracy party. Yerassimos Yannopoulos,partner of Zepos & Yannopoulos, called this situationa “fragile equilibrium”. He hoped that the governmentmight find a way of uniting to topple the despotic cri-sis that plagues the Greek economy.

The Greek state and therefore tax authorities areunder a great deal of pressure from the IMF and theEU following the implementation of a budget consol-idation plan designed to reduce the Greek publicdebt. The IMF recently asserted that the Greek stateneeds to reduce its public debt further and toachieve this, another bailout will be needed. If this isnot done within the next few months then there isa serious risk that the Greek economy will collapsein nine months time. Whether or not the bailout hap-pens depends largely on the commitment ofGermany. A German general election is planned forOctober 2013 butfor either of the warring parties tocommit to such a deal at this point would be politi-cal suicide. Greece must therefore wait with baitedbreath until the outcome of the German generalelection before their future can be determined.


GreeceTax authoritiesMinistry of Finance5-7 Niki str, 10180 AthensTel: +30 210 3375000Fax: +30 210 33 32 608Email: [email protected]: www.minfin.gr


http://www.minfin.gr

There has been a “great extent of arbitrary behav-iour from the Greek tax authorities” in recent times,explained John Dryllerakis, head partner at Dryllerakis& Associates. This has meant that when dealing withthe authorities he is a proponent of the approach: “Ahand you cannot cut, you have to kiss”.

Yerassimos Yannopoulos, partner of Zepos &Yannopoulos, explained that he felt more optimisticabout the Greek tax authorities. They are in theprocess of hiring 500 young tax advisers of goodacademic breeding. The presence of better trainedindividuals will be that “audits will be fairer, morejust, and based on the substantive application oflegal texts”, said Yannopoulos.

Tier 1 The transfer pricing team at EY Greece consists ofone partner and 15 other fee earners. The team hasprovided advice to the Ministry of Finance on pro-posed reforms to transfer pricing legislation.

The Greek EY transfer pricing practice has beenestablished as a “centre of excellence” within EY’sCentral and South East region. This involves themproviding technical support and training to EasternEuropean nations such as Bulgaria, Romania,Albania, and the Republic of Macedonia.

In the past year the transfer pricing team at EY hasbeen involved in a variety of transfer pricing work. Forexample, they advised clients on restructuring theirinter-company funding. They have also providedtransfer pricing planning services to clients, includingthose in telecommunications, food & beverage andindustrial sectors. The team is also involved in amajor bilateral APA application in the energy sector.

The transfer pricing team at Deloitte Greece is led byEftichia Piligou. The team, comprised of one partnerand 10 other professionals, expanded significantlyover the past year, taking on four new transfer pricingprofessionals including Roukalis Alexandros from PwC.

Deloitte Greece was named 2013 “NationalTransfer Pricing Firm of the Year for Greece” at theInternational Tax Review’s European Tax Awards.

The practice has developed substantial expertise inthe financial services industry and in intellectual

property transactions. The team boasts a number ofnotable clients including major Greek banks, insur-ance companies and investment funds, as well ascompanies operating in oil and energy, automotive,heavy industry and technology.

The practice recently performed a major transferpricing documentation exercise for a significant pri-vate equity investment fund, with respect to invest-ment advisory fees paid to a related entity. This wasa cross border project which involved entities regis-tered in foreign countries and required the involve-ment of international member-firms of Deloitte.

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Corporate income tax 26% (a)Capital gainsBranch tax 20%

Withholding taxDividends 0% to 25% (b)Interest 5% to 40% (c)Royalties from patents

and licences 5% to 25% (c)Branch remittance tax N/A

Net operating losses (Years)Carryback N/ACarryforward 5 years

a) A surtax of 3% is levied on gross rentalincome, but the surtax cannot exceed thecorporate income tax due.

b) After January 2014, the rate for distributions(including distributions between domesticcompanies) will be 10%. If the conditions forapplication of the EU parent-subdiary directiveare satisfied, no withholding tax applies.

c) The higher rate applies unless reduced underan applicable tax treaty or the dividendsqualify for an exemption under the EU parent-subsidiary directive

Source: Deloitte (2013) International Taxation: Greece Highlights2013.


The transfer pricing team regularly organise sem-inars for their clients. For example, in 2013, for thesecond consecutive year, the firm’s transfer pricingseminar’ was organised and delivered by Piligou.The seminar was attended by several prestigiousclients, including approximately 30 CFOs andaccounting managers, and was rated highly by par-ticipants.

The transfer pricing team of KPMG Greece consistsof a range of transfer pricing professionals includingeconomists, tax practitioners, and financial analysts.The practice is led by Effie Adamidou.

KPMG Greece offers a range of transfer pricing serv-ices to its clients, including advice on how to con-struct an effective transfer pricing structure that is effi-cient in both a domestic and global context. Thepractice aims to produce strategies that are commer-cially viable, generate tax efficiencies and mitigatethe risk of tax authority challenge.

The transfer pricing practice of PwC Greece offers arange of transfer pricing services. These includeadvice on transfer pricing documentation, prepara-tion of files, planning, advice on transfer pricingaudits, and the compilation of benchmarking reports.

Tier 2Having advised clients for the past 120 years, Zepos& Yannopoulos – Taxand is one of the oldest taxpractices in Greece. The transfer pricing team doesnot consist of any economists and, as such, the firmis unable to perform benchmark analyses. The firmcan however work on documentation projects and isnow expanding into the planning part of the work.The firm is able to carry out benchmarking throughits connection to Taxand.

Clients praised the firm highly for their transfer pric-ing work, especially Yerrassimos Yannopoulos whois always available, quick to respond and has aprodigious knowledge of the law.

The practice is a member of a number of differentindependent tax firm networks including Taxand; anetwork with a presence in 48 countries worldwide.

In 2012 Zepos & Yannopoulos – Taxand wasentrusted with the conduct of the first two transferpricing disputes initiated in Greece in the context ofa new specialised transfer pricing reporting and doc-umentation legal regimes. The practice was requiredto draw upon its extensive experience in this area toparry the blows levelled by this entirely new legalregime.

The practice was also instrumental in a recent dealwhere it assisted the technology multinational,Hewlett Packard. The practice was also required toassist in a transfer pricing audit worth €45 million($60.2 million).

Tier 3The transfer pricing practice at Dryllerakis &Associates is headed by John Dryllerakis, the ex-vicepresident of the International Fiscal Association. Theteam is made up of one partner and two other pro-fessionals. The firm employs no economists and ispurely a legal firm. For this reason, the firm is pre-dominantly concerned with preparing the legal trans-fer pricing documentation.

Dryllerakis & Associates is the Greek associateoffice for tax for the global, US-owned Baker &McKenzie law firm. The relationship has existed forthe past two decades and the practice gets a lot ofwork from Baker & McKenzie as a result.

An example of this working relationship in actioncan be found in a recent deal where the practicerecently prepared a Greek file transfer pricing reportfor Nalco, a water treatment and process improve-ment company for a deal worth €4.9 million ($6.33million). The practice worked closely with Baker &McKenzie on this deal who prepared the parent filetransfer pricing report.

Greece


Deloitte3a Fragoklissias & Granikou str. GR151 25 Maroussi Athens

Country Tax Leader Maria Trakadi + 30 210 6781 260 [email protected]

Transfer Pricing Leader Eftichia Piligou + 30 210 6781 294 [email protected]

Firm profile The Greek transfer pricing practice com-bines a multidisciplinary and practicalapproach in all phases of the project, fromgathering facts, examining all availableeconomic data up to making strategicdecisions and implementing solutions.The transfer pricing team of Deloitte canprovide you with different types of trans-fer pricing services including transferpricing documentation, audit defense andplanning.

Greece

www.TPWeek.com88




LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzieDLA PiperQuantera

Hong Kong’s Asia’s leading business hub for multina-tionals and transfer pricing has become a real issuebecause of the increasing number cross bordertransactions between Hong Kong and China, as wellas a broader treaty network. “Transfer pricing is likean octopus that has tentacles that reach every-where,” said Sarah Chin from Deloitte.As a low tax jurisdiction, the city has enjoyed the

benefit of being a popular investment destination fordecades. Yet the situation has changed after thefinancial meltdown in Europe. “Tax authorities over-seas often challenge why subsidiaries can make somuch profit in Hong Kong while their parent compa-nies are losing money in home countries,” Tracy Hofrom EY said.In response, the Inland Revenue Department (IRD)

is scrutinising transfer pricing issues more closely.Comprehensive transfer pricing guidelines werereleased in December 2009 with potential retroactiveeffect, indicating that the guidelines are consistentwith the OECD guidelines and international practice.

The IRD will apply the arm’s-length principle to deter-mine an appropriate pricing model. “Hong Kong doesnot want to be regarded as a tax haven,” said DavidKan from PwC.In March 2012, the IRD issued guidance establish-

ing an advance pricing agreement (APA) programmein Hong Kong. Generally, bilateral and multilateralAPAs are available with jurisdictions that have a dou-ble tax agreement (DTA) with Hong Kong. UnilateralAPAs will also be passed in special cases. “Althoughnot many APAs have been done, it will cut downuncertainty for corporate taxpayers,” observes Ho. However, since the topic of transfer pricing is in the

teething stage in the IRD’s agenda, administrationproblems can still be seen. For instance, the IRD hasa dedicated team for transfer pricing investigations.“The Hong Kong tax authority is far too conservativeand slow in implementing new things,” a sourcesaid. Practitioners believe the IRD is gradually learning

and has created specific resources to push its APAprogramme. In addition, it also sends out its officialsoverseas for training and continues to participate ininternational transfer pricing seminars for technicalknowledge sharing.

Tier 1 Deloitte has an experienced team led by the region-al transfer pricing leader of southern China, PatrickCheung. The practice takes pride of being multidisci-plinary in its talent as employs a large group of PhDeconomists, former senior transfer pricing officialsand industry specialists. Cheung has extensive expe-


Hong KongTax authoritiesInland Revenue DepartmentRevenue Tower, 5 Gloucester Road, Wan Chai, Hong KongTel: +852 2187 8088Fax: +852 2519 9316Email: [email protected]: www.ird.gov.hk


http://www.ird.gov.hk

rience in banking, insurance and securities. PhilipWong specialises in tax planning and businessmodel optimisation for multinationals. The practicealso has lively interaction between funds and banksand insurance companies and provides consistentsupport with its specialty in financial service industry.The practice is determined to help companies

reduce risks by aligning practical transfer pricing solu-tions with their overall business operations andobjectives. Because Hong Kong has introduced anAPA programme, the team is actively guiding moreclients to enter the scheme for dispute avoidance.Meanwhile, it never stops contributing to the taxauthority with professional and industry insights,guiding the officials on how the transfer pricingregime and the APA scheme should look. Wong and Petrina Chang were approached by a

non-profit association in the metal industry to pro-vide business model optimisation services to reachan effective transfer pricing structure and havedesigned a model that is both practical to imple-ment and administer as well as flexible in allowing

for future changes in the client’s business opera-tions.The past 12 months saw EY’s fully-fledged transfer

pricing team in Hong Kong nearly double in sizeunder the new leadership of Martin Richter, follow-ing the ramping up of interest by multinationalsstructuring their operations in Hong Kong. Richter has13 years transfer pricing experience and is wellversed in planning, implementation, compliance anddispute resolution.The team has been busy supporting Hong Kong

taxpayers’ residual royalties and services paymentsto foreign parents, as more investigations are con-ducted by the tax authority. Another area of servicegrowth has been the reorganisation for multination-als’ presence in Hong Kong. Although there have yetbeen many advance pricing arrangements (APA) con-cluded in Hong Kong, the team still provides supportto clients who are keen to enter this programme formore tax certainty.As part of the firm’s great China presence, the team

works closely with its colleagues in China. It has

Hong Kong

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Corporate income 16.5% (a)Capital gains 0%Branch tax 16.5%

Withholding taxDividends 0%Interest 0%Royalties (b)Noncorporate 4.95%Corporation 16.5%

Technical service fees 0%Branch remittance tax 0%

Net operating lossesCarryback 0Carryforwards Indefinitely

a) Profits tax is levied at a rate of 16.5%, and 15%for unincorporated businesses, where the

company is carrying on business in Hong Kongand the relevant income is earned in or derivedfrom Hong Kong.

b) Royalty payments made to nonresidents aredeemed to be taxable in Hong Kong if for theuse of or a right to use intangibles in HongKong or outside Hong Kong where the royaltypayments are deductible for profits taxpurposes. The amount deemed taxable is 30%of the gross amount of royalties paid, resultingin an effective rate of 4.95% (16.5% x 30%) (oran effective rate of 4.5% for a noncorporateperson (15% x 30%)). If the royalty is paid to anaffiliated nonresident for the use of intangiblesthat were previously owned by a personcarrying on business in Hong Kong, 100% ofthe royalty is deemed to be taxable, resulting inan effective rate of 16.5% (15% for anoncorporate person).


advised a number of clients with share transfer val-uation in a group restructuring context and intellec-tual property valuation on disposal.Based in Hong Kong, Kari Pahlman is the Asia

Pacific leader in KPMG’s transfer pricing practice. Wellversed in transfer pricing related economic advisoryassignments, tax effective supply chain managementand valuations, Pahlman serves clients from a widebase including consumer markets, energy, financialservices, transportation and information and commu-nications. In the middle of 2013, Pahlman advised aglobal luxury brand in redesigning and implementinga tax effective supply chain model.Karman Yeung is also based in Hong Kong to cover

transfer pricing issues both in the jurisdiction and insouth China.The financial services industry is a focused and

strong area of the firm’s practice, particularly in bank-ing, insurance and funds. John Kondos leads thefinancial services transfer pricing team in Hong Kongand also wider Asia Pacific region. He has extensiveexperience in completing regional APAs, auditdefence and documentation with leading financialinstitutions. Late 2012, Kondos undertook a complexrestructuring and risk management project for a lead-ing player in the financial services industry. The proj-ect required a multi-layered profit split approach tosmooth out the restructuring impact. Kondos eventu-ally came out and implemented a practical and effi-cient solution for the client.The transfer pricing team of PwC in Hong Kong

deals with issues in China and Hong Kong. The Chinatransfer pricing leader, Spencer Chong, oversees theteam in Hong Kong, with Cecilia Lee supporting himas leader in Hong Kong. The practice has seen a sta-ble expansion over the past 12 months and nowemploys three partners and over 30 full time staff.Although the APA programme is still at its teething

stage in Hong Kong, PwC is pioneering in helpingclients to enter this scheme and secure certainty intheir future business. Rhett Liu advised on the firsttwo bilateral APAs in Hong Kong, with one of themthe only formally accepted cases by the InlandRevenue Department.

The team also inherits the firm’s long time dedica-tion on financial services. Phillip Mak, the financialservices transfer pricing leader, and his team, contin-ues to provide robust support to national and inter-national banks, insurers and fund managers withplanning, documentation and audit defence. The practice maintains a good relationship with the

Hong Kong tax authority and frequently contributesto transfer pricing regime developments in this juris-diction.

Tier 2Baker & McKenzie in Hong Kong has a transferpricing team that comprises two partners and threespecialists. The team covers all facets of transferpricing services including planning, economicanalysis and dispute resolution. It is considered bysources as a good alternative to Big 4 firmsbecause it is able to provide more legal insightsinto transfer pricing issues. Structuring has been agrowth area not only to the team but to the firm’stax department as well.Richard Weisman is the leader of the team and

has extensive experience in international taxationwith an emphasis on Asias and US issues. Herecently advised a leading Hong Kong-based multi-national corporation on its international transfer pric-ing structure. The project requires a practitioner todesign varying approaches to structuring distribution.In the meantime, advance pricing arrangement (APA)and related custom duty planning is also involved inthe $2 billion valued project. Competitors also applaud its solid litigation capa-

bility. In 2012, tax leader Michael Olesnicky litigatedan important case for a leading electronic productsmanufacturer on profit tax disputes. The caseinvolves complex transfer pricing for related partytransactions between the clients’ operations in Chinaand around the world.The transfer pricing team of DLA Piper in Hong

Kong is highly integrated with its presence in China,overseen by Daniel Chan who is also the head of itstax practice in Asia. The team is proud of its integrat-ed transfer pricing service that combines with its cor-

Hong Kong


porate and legal advisory provisions. Clients whoseek solutions from DLA not only get standaloneanswers in terms of the area in which they are ask-ing, but also have their problems reviewed from awell-rounded perspectives. Hong Kong tax leader Patrice Marceau is also capa-

ble in transfer pricing. He recently advised a leadingelectronic component manufacturer with its tax audit.The Inland Revenue Department challenged theclient’s operation structure alleging tax avoidance.Marceau introduced the idea of transfer pricing intothe case seeking conviction from the tax authority.

Quantera is an independent transfer pricing serv-ice provider. Leveraging a network of experienced

transfer pricing specialists in Europe, North Americaand Asia, the team in Hong Kong is able to adviseboth inbound and outbound transactions andinvestment flows between continents. StevenCarey is the senior partner who gained his 12years full time transfer pricing experience fromworking in a global transfer pricing firm, a Big 4firm in Singapore and the Australian tax authorities.Carey is well-suited to managing large scale trans-fer pricing system designs, intangible property val-uation and APA negotiation. He has a remarkableand diverse portfolio of 200 successful transferpricing assignments across great China, Asia Pacificand Europe.

Hong Kong

www.TPWeek.com92


Deloitte Touche Tohmatsu CertifiedPublic Accountants LLP30/F Bund Center222 Yan An Road EastShanghai 200002, PRCTel: + 86 21 6141 8888Fax: + 86 21 6335 0003Deloitte Touche Tohmatsu35/F One Pacific Place88 QueenswayHong KongTel: +852 2852 1600Fax: +852 2541 1911Website: www.deloitte.com/cn

Contact: Eunice KuoEmail: [email protected]

Hong Kong


http://www.deloitte.com/cn


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 MazarsTaxperience Tandax Hungary

3 DLA Piper Horváth & Partners Law FirmJalsovszky Law FirmWTS Klient

Hungary adopted transfer pricing legislation in 1992in their corporate tax act. This legislation aligned therules in the jurisdiction with the OECD guidelines,acknowledging the arm’s-length principle as theinternational transfer pricing standard. In June 2013, Hungary’s Ministry of Finance issued

new guidance to clarify transfer pricing rules in thejurisdiction. The intention of this new guidance wasto diminish the administrative burden on theHungarian taxpayer. One example of how this wasattempted is that taxpayers need not prepare trans-fer pricing documentation for transactions where thevalue does not exceed HUR 50 million ($219, 000) inthe tax year.Otherwise, Hungarian transfer pricing legislation

requires taxpayers, except small enterprises, to doc-ument each inter-company agreement during eachtax year. It is possible to negotiate with the authorities for

an advanced pricing agreement (APA) with regards toyour future inert-company transactions.As a result of the range of reformatory tax meas-

ures introduced in Hungary, the tax environment hasbeen described by a top tax adviser in the jurisdic-tion as “becoming stable”. This stability is attributedto the success of the recent tax reforms and the taxreform project has been described as being in agood position.The Hungarian tax litigation system does not take

case law into consideration. For this reason, someadvisers have mentioned that their clients are waryof entering into tax disputes. The only investment in the Hungarian economy is

from foreign multinationals, explained Tamás Knébel.He said this is because foreign investors are able toavoid the majority of new taxes that have been intro-duced by the Hungarian government in recent years.

Tier 1 The transfer pricing team at Deloitte Hungary offersthe full range of transfer pricing services including thepreparation of transfer pricing planning and docu-mentation, dispute avoidance, APAs, dispute resolu-tion, and business model optimisation. The practice works internationally with other

Deloitte member-firms to help companies reducerisks by aligning practical transfer pricing solutionswith their overall global business operations andobjectives.EY Hungary offer transfer pricing and tax effective

supply chain management to its clients. The servicesit offers include transfer pricing planning, documen-

www.TPWeek.com94

HungaryTax authoritiesNational Tax and Customs AdministrationLarge Tax Payers' Directorate1077 Budapest, Dob utca 75-81Tel: +36 1 428 5100Fax: +36 1 322 19 85Website: www.nav.gov.hu

http://www.nav.gov.hu


tation, transfer pricing controversy, work for the finan-cial services and customs services. The two transfer pricing contacts at the firm are

Zoltan Liptak and Balazs Szolgyemy.The main service lines of the transfer pricing team

at KPMG Hungary are transfer pricing review, thepreparation of documentation, development of trans-fer pricing policy, representation during transfer pric-ing disputes, and benchmarking. The team also offers tailor-made training sessions

for their clients in the form of lectures and / or sem-inars where they can learn documentation compila-tion techniques and how to coordinate intra-compa-ny transfer pricesClients explained that the transfer pricing team at

KPMG “has good initiatives for supporting theirclients”.The transfer pricing team at PwC Hungary offer

services in four main areas: documentation, APAs,dispute resolution, and planning. The team is led bypartner Zaid Sethi.The documentation work the practice offers

includes a review of existing transfer pricing docu-mentation from a Hungarian perspective, the locali-sation of centrally prepared group documentationfrom a Hungarian perspective, and general assis-tance with the preparation of transfer pricing docu-mentation.The practice helps clients with APAs; both the

application and the negotiation process.

Tier 2The transfer pricing senior manager at MazarsHungary is Gabriella Nagy. The team offers servicesin the area of planning, including the mapping andplanning of transfer pricing risk; preparation of trans-fer pricing documentation, including benchmarking;APAs; and settlement of transfer pricing disputes bothin and outside of the courts.Taxperience Tandax was established in

November 2012 by Tamás Knébel, the founder,head, and only member of the practice. Knébel’sfirm, Tandax, joined the Taxperience network at thebeginning of June 2013. Membership of this firm

means that the practice is able to easily cooperatewith the other Taxperience practices when workingon cross-border deals.Knébel has extensive tax experience and previous-

ly worked for various “Big 4” firms for over the last10years. Just before establishing Tandax, Knébel was adirector at Deloitte Hungary where he headed theindirect tax service line. Upon establishing the newpractice, a number of Knébel’s clients followed.Knébel is actively marketing the practice to newclients because the boutique is still in its start-upphase of development. Knébel also possesses alarge informal network of friends in the industry whohe is also able to work with, as and when theirexpertise is required. Knébel has worked on transfer pricing issues for

more than 10 years and has worked with theHungarian Ministry of Economy to draft the transferpricing rules for the jurisdiction. As such, he has anextensive knowledge of transfer pricing in Hungary.

Tier 3The tax professionals at DLA Piper Horváth &Partners Law Firm are generalists and offer a widerange of tax services in the fields of tax litigation,transactional, and compliance services. The practicealso offers the full range of transfer pricing services. Akos Becher, the head partner at the practice,

helps in this respect because he has an economicbackground and is able to perform the financialaspects of transfer pricing work such as benchmarkanalyses. The practice also boasts a strong transferpricing litigation team.The tax practice is particularly experienced in deal-

ing with the real estate and financial services indus-tries, working with both domestic and internationalclients.Pál Jalsovszky leads the transfer pricing team of

Jalsovszky Law Firm which consists of one partnerand two other fee earners. The practice’s workload comprises predominantly

of transfer pricing defence cases against the taxauthorities. They also work on APAs, which is becom-ing more routine for the practice.

Hungary


In the past year, the team prepared the transferpricing documentation regarding intra-group loansreceived and provided by Hungarian intermediateholding companies of a US-based paper and pack-aging material manufacturing group. Transfer pricingexpert István Csővári led on this project.

WTS Klient was formerly known as HLB Klient. Thename change was necessitated by the practice’sinternational tax firm network shift, from HLB to theWTS Alliance. Tamas Gyanyi, partner of the firm,explained that the amount of transfer pricing hasincreased markedly over the past two years. The firmis able to advise on the compliance side of transferpricing and, although they do not employ any dedi-cated economists, the advisers have a workableknowledge of the area. The firm is actively involved in discussions about

how to improve the Hungarian tax system. Over thepast three months, Zoltan Lambert, a partner of thefirm, has visited the German headquarters of morethan 30 multinational companies to ascertain howthey perceive the Hungarian tax system.

Hungary

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Corporate income tax 10% to 19% (a)Capital gainsBranch tax 10% to 19%

Withholding taxDividends 0% (b)Interest 0% (c)Royalties from patents and licences 0% (d)Branch remittance tax N/A

Net operating losses (Years)Carryback N/ACarryforwards Carried on indefinitely

a) A 19% rate applies to a tax base above HUF500 million, the 10% rate applies on tax basebelow this figure. A surtax is levied at varyingrates on financial institutions, as well as onenergy, retail and telecommunicationcompanies, and as from 2013, on financialtransactions.

b) Withholding tax is not levied on dividends paidto a non resident company. Dividends paid toa non-resident individual may be subject to awithholding tax at 16%, unless the tax rate isreduced under an applicable tax treaty.

c) Withholding tax is not levied on interest paidto a non resident company. Interest paid to anon-resident individual may be subject to awithholding tax at 16%, unless the tax rate isreduced under an applicable tax treaty.

d) Withholding tax is not levied on royalties paidto a non resident company. Royalties paid to anon-resident individual may be subject to awithholding tax at 16%, unless the tax rate isreduced under an applicable tax treaty.

Source: Deloitte (2013) International Tax: Hungary Highlights 2013


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 BMR Advisors – TaxandGrant ThorntonSudit K ParekhTP Ostwal & Associates

3 ELP Advocates & SolicitorsGM Kapadia & CoK C Mehta & CoKhaitan & CoLuthra & LuthraMZSK & AssociatesNangia & Co

Other firms to noteMajmudar & Partners

Over the past year, transfer pricing has been amaterial issue that outweighs others in Indian taxmarket, and there is a growing administrativeemphasis on this subject according to several prac-titioners.

The tax authority has expanded its transfer pricingaudit team and coordinated an all-India transfer pric-ing approach. A recent round of transfer pricingaudits has made adjustments to the tune of $9.5 bil-lion which equals the amount accumulated in last

six rounds of audits, according to Rohan Shah fromELP Advocates & Solicitors.

“The tax authority is becoming increasingly aggres-sive in transfer pricing audits and targeting taxpayerswho constantly reports losses or low profits,” saidKarishma Phatarphekar from Grant Thornton.

Transfer pricing audits are often triggered in dealswith high royalty or technical fee payouts, highadvertising and marketing expenses, cost allocationsand loans. Moreover, the restructuring of transactionsis also under close scrutiny from the tax authority.Practitioners predict companies in financial services,automobile, IT, pharmaceuticals and chemicals sec-tors are more likely to expect adjustments.

Milin Mehta from K C Mehta & Co sees such atrend as a local duplication of global practice: “The[revenue] department is learning and trying to bemore rational in using transfer pricing to increase rev-enue.” Although India is not an OECD member coun-try, its transfer pricing guidelines generally adopt theinternational principle.

Litigation, however, has long been a real headachefor both taxpayers and practitioners. One experi-enced tax litigator calls India a “factory of litigation”since 70% of the world annual tax litigations derivefrom the country. “Once you come into a litigationissue, you’ll go for at least six or seven years. That’snot only very time consuming, but wastes a lot ofmoney as well,” said Suraj Nangia from Nagia & Co.

The introduction of an advance pricing agreement(APA) regime in the Financial Act 2012 is a positivesign to taxpayers who seek certainty in transactions.Although it is yet to know the actual impact, the mar-


IndiaTax authoritiesDepartment of Revenue, Ministry of FinanceRoom No 46, North BlockNew Delhi, 110001, IndiaTel: +91 11 2309 4595Email: [email protected]: dor.gov.in


ket generally feels optimistic to this approachbecause it gives taxpayers hope for a fair and posi-tive outcome.

Tier 1 One client reflected that he had the “best experiencewith Deloitte in delivering transfer pricing advisory,very proficient”. Sameer Gandhi leads the practiceand is singled out for his expertise in TP dispute res-olution. The team employs eight partners andapproximately 250 staff specialists. Its proficiency

has been enhanced after four directors and onemanager joined the practice in the past 12 months.The team boasts a variety of experience and skills,including economists, tax practitioners, legal expertsand former tax authority officials. Together they workon dynamic TP issues surrounding the cross-bordertransfer of intangibles, goods and services by provid-ing documentation, planning and controversy assis-tance.

The team has been actively helping clients withadvance pricing agreements (APA) under the chang-

India

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Corporate income 30%-40% (a)Capital gains 10%-20% (b)Branch tax 40%

Withholding tax (c)Dividends 0% (d)Interest 5% - 20% (e)Royalties 10% - 20% Technical service fees 10% - 20%Branch remittance tax 0%

Net operating lossesCarryback 0Carryforwards 8 years (f)

a) Corporate income tax rate is 30% for domesticcompanies and 40% for foreign companies andbranches of foreign companies. Taking intoaccount surtax and cess, the highest rate is32.445% for domestic companies and 42.024%for foreign companies.

b) As from financial year 2012-2013, the applicabletax rate on long-term capital gains derived by anonresident from the sale of unlisted securities is10%. Gains on other long-term assets are taxedat 20% (with benefit of an inflation adjustment).Short-term gains on listed shares and specifiedsecurities, which are subject to the STT, are taxedat 15%, and gains from other short-term assetsare taxed at the normal tax rates.

c) If the nonresident does not have a PermanentAccount Number (PAN), i.e. a tax registrationnumber, tax must be withheld at theapplicable rate or 20%, whichever is higher.

d) Dividends are not subject to withholding tax.Dividends paid by a domestic company aresubject to the Dividend Distribution Tax (DDT)at an effective rate of 16.22%.

e) As from 1 July, 2012, interest paid to anonresident on debt incurred under a loanagreement or by way of the issue of long-term infrastructure bonds by an Indiancompany in foreign currency is subject to a5% withholding tax, plus the applicablesurcharge and cess, if the loan agreement isapproved by the central government and thefunds are borrowed between 1 July 2012 and30 June 2015.

f) Business losses and capital losses may becarried forward for eight years, with short-termlosses offsetting capital gains on both longand short-term assets, and long term lossesoffsetting only long-term gains. Other thanunabsorbed depreciation (which may becarried forward indefinitely), losses may becarried forward only if the tax return is filedby the due date. Unabsorbed depreciationmay be offset against any income whereasbusiness losses may be offset only againstbusiness profits.


ing tax and TP landscape. The team gets the creditfor the first APA pre-filing in India. It assisted the clientwith the whole APA application process as itreviewed the nature of the transaction and initiatedthe idea of APA.

In January 2013, Gandhi and Mehul Shah success-fully defended one of the largest conglomerates ona dispute in relation to brand income received by theparent company. The client’s benchmarkingapproach and brand fee were challenged by the taxdepartment as not being in line with the arm’s-length principle (ALP). The client then underwentarguments and submissions about the rationale forthe low brand fee, and finally convinced the taxauthority.EY’s transfer pricing work is widely appreciated in

the market place. One client reflected: “Each Big 4firm has its strength in a different region. EY definite-ly has the best people in India.” Vijay Iyer leads the multidisciplinary team with

other ten partners. Professionals help to review, doc-ument, manage and defend clients’ policies andprocesses, aligning them with the business strategy.Core services include TP planning, documentation,controversy and risk management. The firm alsoboasts a dedicated financial services TP team.

In May 2013, Iyer, Ashima Gupta and TarunBindlish assisted LG Electronics India on a disputewith the tax authority about advertising cost alloca-tion. The team has gone through several rounds ofanalysis and argument by applying technical knowl-edge as well as information in the public domain. Asa result, the final and second level appellate author-ities ruled the case in favour of the client. The disal-lowance amounted $2.47 million.KPMG’s transfer pricing practice in India has a ded-

icated team of more than 200 professionals spread-ing across seven locations. Rohan Phatarphekarleads the practice and is supported by five otherpartners and six directors. Phatarphekar has beenadvising multinationals on TP issues since 1997 andspecialises on compliance and litigation. The diverseteam encompasses talents such as charted account-ants, lawyers, economists and financial analysts who

offer both local knowledge and a global framework.In addition, the team also has two former high-rank-ing TP regulators on board, which enhances its serv-ice provision by injecting a tax authority perspective.

The firm is proficient in all areas of TP, yet its provi-sion in the advance pricing agreement (APA) negoti-ation is distinct. Since the introduction of an APAregime, KPMG has assisted its clients to file over 40applications while the total amount of applicationfiled is about 140.

In February 2013, Rajan Sachdev and VinodMangotra successfully obtained a favourable rulingfrom the first level appellate authority on the widelydebated issue of marketing intangibles for a promi-nent online travel agency in Indian. The case, involv-ing $20 million, was the first of its kind and hasbrought out a unique business model that the clientmay adopt for future activities.

The transfer pricing practice at PwC determines toprovide a range of TP services with multidisciplinaryprofessionals. Rahul Mitra is the national leader ofthe TP team in India and is recognised for his expert-ise in TP documentation management. Mitra hasover 18 years of experience in this profession andspecialises in inbound and outbound planningassignments, repatriation planning, supply chainmanagement projects and profit attribution to per-manent establishments. He was instrumental inobtaining the first regulatory approval in India on anindustrial franchise model, based on TP methods.

Under Mitra’s leadership, the team is equipped todevelop TP documentation and defence files coordi-nating across territories. To mitigate business uncer-tainties, it also guides clients through the process ofrequesting advance pricing agreements (APAs). Thepractice is capable of representing clients in front oftax officials and different court levels in controversialsituations. Sanjay Tolia is a recognisable TP special-ist for dispute resolution.

Tier 2BMR Advisors – Taxand has a high quality transferpricing service under the leadership of MukeshButani who is lauded by fellow professionals for his

India


expertise in TP dispute resolution and advance pric-ing arrangement (APA) negotiation. Butani is support-ed by Amod Khare in Mumbai and Sanjiv Malhotrain Delhi. In response to the global focus on TP, thepractice keeps building up its versatility through theyears and now employs three partners and 32 otherfee earners. Manish Sabharwal has worked in threeout of four Big 4 firms in the domain of TP and joinedthe team in March 2013 as a director.

The practice is often exposed to high-profile TPmatters and showcases it capability in dealing withstrategic documentation, restructuring, litigation, APAsand mutual agreement procedures (MAPs). It retainsbig international and local names in its clientele list.

In January 2013, Butani and his team wereapproached to represent a significant TP disputematter before the Indian revenue and the state court,involving an adjustment to price among an Indiancompany and its offshore parent. The tax authoritymade an adjustment to the capital account of thetaxpayer, which involved $3 billion. Also complex innature, the case has received extensive attentionfrom the media and from policy makers.Grant Thornton’s transfer pricing practice in India

employs a team of four partners and 50 staff mem-bers, under the leadership of KarishmaPhatarphekar. Having over ten years of experienceand having worked in a Big 4 firm’s TP team sinceits inception, Phatarphekar specialises in advisingclients in the pharmaceutical and information tech-nology (IT) industry. Anshu Khanna arrived at thepractice in Hyderabad in May 2013, bringing over her16-year field experience and sector expertise inmanufacturing, IT, infrastructure, pharmaceutical andfinancial services.

The practice structures its service provision into sixlines: planning and restructuring, domestic TP, docu-mentation studies, litigation, advance pricing agree-ments (APA) and mutual agreement procedure (MAP).Answering to the market demand, it has beenaggressive in pushing the APA initiative and has asizable team to assist APA applications. It has suc-cessfully filed a number of APA applications with APAauthorities over the past year.

Phararphekar and Shefali Shah successfullydefended Sanofi India in front of the DisputeResolution Panel in 2012 and got a full relief of thecase despite negative precedents in the tribunallevel.

As one of the oldest transfer pricing practitioners inthe industry, Sudit K Parekh is known for its strongability in defending transfer pricing assessments. Thetransfer pricing team is led by Maulik Doshi, with twopartners and 23 fee earners. In the past year, theteam assisted the India branch of a well-knownmultinational cosmetic company to justify and saveone third of its brand intangible expense before theIndian transfer pricing officer (TPO). Sudit K Parekhalso focuses on advanced pricing arrangements(APA) applications, given its expertise in TP litigation.TP Ostwal & Associates is a notable presence in

Indian transfer pricing market with the renowned T POstwal at the helm. Fellow practitioners recognisehim as a “very knowledgeable and notable” practi-tioner in this area. Ostwal is member of the sub-committee on TP of the UN Committee of Experts onInternational Cooperation in Tax Matters. Heauthored two chapters of the UN Manual on TP fordeveloping countries which was issued in May 2013.

A variety of TP services are provided by the teamincluding planning, transaction structuring, litigationassistance, advance pricing arrangement (APA) aswell as documentation services.

Tier 3ELP Advocates & Solicitors has experienced a yearof upheaval over the past 12 months. After two man-ager-level professionals left the team to go to Big 4firms, it only consists of one partner and three asso-ciates and trainees. Renowned Rohan Shah man-ages the practice with his profound experience inadvising clients on practical and effective TP policies.70% of its clients have a multinational corporatebackground and the firm saw a large demand fromthe telecommunication side during the past year. Ithas also engaged in reviewing the TP positionreports provided by Big 4 firms. In the meantime, thepractice is catching the market trend by dealing with

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a number of cases involving marketing intangiblesand advance pricing agreement (APA) applications.

In May 2013, Shah, Ajit Tolani and Darshi Shahassisted an Indian company to evaluate the chal-lenges and implications of changing the currentintellectual property model. The team also providedinsights to its TP model by advising on the strategiesfor reducing ongoing litigation.GM Kapadia & Co has been providing transfer pric-

ing services since the introduction of TP provisions inthe Income Tax Act in 1961. Harsh Shah leads the TPgroup which consists of three partners and two otherTP specialists. The team actively assists clients withTP studies and benchmarking, documentation man-agement, TP model planning and representationbefore the tax authorities. Thanks to the long operat-ing history of the firm, it retains a wide client-ship;some of whom have been with the firm for five gen-erations. Following the updates in TP, the firm alsooffer advice to domestic clients in relation to thenewly-introduced domestic TP rules.

Shah and Hitesh Trivedi recently designed a TPmodel for a Fortune500 company’s wholly Indian-owned subsidiary. The client underwent thoroughstudies to determine the most appropriate methodand arm’s-length price (ALP) acceptable in both juris-dictions.

In the meantime, the team is also seeing increas-ing work in litigation and assessment in regard toforeign equity funds.K C Mehta & Co is a key player of transfer pricing

practice in west India. The team has experienced astrategic expansion and doubled in its size since lastyear. Now Milin Mehta leads the team of six.Backed-up with a vast international database, theteam is able to offer a range of TP services includingthe preparation of global TP policy, documentation,compliance and controversy and litigation. It serveslarge multinational clients such as Schaeffeler,Heubach, Panasonic, Collabera, as well as big localcorporations.

In December 2012, Mehta, Arpit Jain and two otherTP professionals assisted an Indian medical equip-ment developer and manufacturer with its global TP

policy. The client operates more than 12 entitiesacross the world, thus the team was required toundertake comprehensive studies making sure thefinal model is in line with the TP requirements of dif-ferent jurisdictions. Khaitan & Co has a transfer pricing team that

focuses on advising high-end TP controversies. Theteam is dedicated to identifying and developingeffective and legally sound strategies to potentialand existing TP issues. With resourceful research andlegal knowledge, the team often provides legalanalysis on benchmarking reports for clients.

In 2012, Sanjay Sanghvi advised GMMCO Group,India’s biggest dealer of Caterpillar machines andengines, to set up an appropriate legal structure inSingapore. The project involved various TP and per-manent establishment implications in both countries.Sanghvi gave insights to the TP model that containsarm’s-length pricing (ALP) for the benchmarking ofrelated party transactions.Luthra & Luthra Law Offices has a transfer pricing

team of two partners and five fee earners, with VikasSrivastava taking the lead. Practitioners in the grouphold diverse professional backgrounds to injectinsights from accounting, finance and economics aswell as a legal point of view. As a legal practice, theteam’s TP service mainly involves TP proceedings. InMarch 2013, Srivastava and his team successfullydefended an Indian business process outsourcingcompany in appeals filed by the Indian tax depart-ment before the Delhi High Court on TP issues.Meanwhile, the team also represented clients from awide range of industries in front of the tax authori-ties for dispute resolutions.

In April 2013, MZSK & Associates became amember of the BDO International network and wasrequired to increase its practice size as well as serv-ices. The practice also welcomed three new talents.Milind Kothari leads the team of two partners and15 tax specialists. Kothari has 30 years of experi-ence in this profession and is renowned for theirinternational tax, transfer pricing and outboundinvestment strategies. With over ten years fieldexperience, Jiger Saiya specialises in formulating

India


global transfer pricing policies and supportingclients in TP litigations.

Kothari and Gaurav Shah teamed up to assist anIndian advertising company to develop its interna-tional business with a new Singapore subsidiaryentity. The firm formulated the strategy whileaddressing TP risks behind this $485.4 million deal.With their support, the client had the restructuring inline with international TP guidelines.Nangia & Co provides transfer pricing services with

its team of 12 specialists. Neeraj Sharma leads theteam consisting of people from diverse disciplinessuch as economics, financial management, account-ing and law. The practice is able to provide soundtransfer pricing documentation studies to clients.Relying on its researching power, it has numeroussuccessful cases of determining the appropriate TPmargins for new businesses. With the firm’s 30-yearpresence in India, the TP practice welcomes clientsfrom a wide range of industries including oil and gas,

e-commerce, hospitality, technology, media andmanufacturing.

Other firms to noteMajmudar & Partners’s transfer pricing is relativelyyoung compared to its other service lines. Currently,most of the work done is on an advisory nature.Maintaining a good working relationship with Big 4firms, the firm also vets and advises TP analysis doneby them.

Managing partner Akil Hirani look over the practice,together with Ravishankar Raghavan. Both are wellversed in corporate and international tax advice. In theend of 2012, the duo advised a Japanese client andits Indian subsidiary in respect of TP regulations. Theclient was required by the Indian tax authority to sub-mit for TP documentation even though it does nothave a permanent establishment in India. The duosupported the client to comply with the authority’snotice but avoiding disclosing irrelevant information.

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BMR’s Transfer Pricing practice has consis-tently been regarded as amongst the best inthe country. We enhance value for clientsby focusing on solutions that are innovative,yet practical for implementation. Our ver-satility comes from the fact that the mat-ters range from strategic documentation torestructuring to litigation and now APAsand MAPs. We take pride in being associat-ed with some of the most high profiletransfer pricing matters in India as on date. BMR’s core team comprise of a uniqueblend of lawyers, accountants, MBAs andeconomists to cover all aspect of transferpricing solutions. Our senior professionalsare thought-leaders in the area of transferpricing and have been part of numerous in-country and global initiatives.

Key contacts:Mukesh Butani [email protected] [email protected] Khare [email protected] Sanjiv [email protected]

BMR Advisors is, exclusively, TaxandIndia.

Deloitte IndiaIndiabulls Finance CentreTower 3, 28th Floor,Elphinstone Mill CompoundSenapati Bapat Marg, Elphinstone (W),Mumbai – 400013IndiaTel: +91 22 6185 4160Fax: +91 22 6185 4101Website: www.deloitte.com

Contact: Samir GandhiEmail: [email protected]

Deloitte India’s transfer pricing practicecomprises over 250 professionals and hasa presence in all key locations in Indiaincluding Ahmedabad, Bangalore,Chennai, Delhi, Hyderabad, Kolkata,Mumbai and Pune. Professionals are frommulti-disciplinary backgrounds includingtax practitioners, economists, account-ants, MBAs, legal experts and ex-revenueofficials.

The Deloitte India transfer pricing prac-tice provides a wide range of servicesincluding compliance and documentation,planning and implementation, controversymanagement, global documentation,Mutual Agreement Procedure (MAP),advance pricing agreement (APA), finan-cial transactions, intangibles and valuation.In addition, there is a litigation supportteam handling transfer pricing disputes.

Other areas of focus include outboundservices, financial services and BusinessModel Optimization.

Quality tax advice,

globally

India






http://www.bmradvisors.com

http://www.deloitte.com


TP practice nominated as the best TPteam in India for 2013 by FinanceMonthly Global Awards UK.

OfficeL 41, Connaught Circus, New Delhi 110 001, India Phone (+91 11) 4278 7070Fax: (+91 11) 4278 [email protected]@[email protected] www.grantthornton.in

Suite – 4A, Plaza M-6, Jasola, New Delhi-110 025. INDIA.Ph.: +91-11-4737 1000, Fax: +91-11-4737 1010Email: [email protected]: www.nangia.com

A boutique professional firm, offering awide range of services, specialises in pro-viding expert transfer pricing services.The firm has a presence in more than 50countries through own offices andthrough strategic alliances.

Our transfer pricing division assists Indianand Multinational Corporations to devel-op and implement economically justifi-able transfer pricing policies, develop sus-tainable transfer pricing documentationand provide litigation solutions.

The team of experts drawn from variousdisciplines – comprising of CharteredAccountants, Management Graduates,Certified Financial Analyst, Economists,Legal Experts and Financial Analystsfocus on delivering quality work andsound transfer pricing solutions to a widerange of industries including oil and gas,e-commerce, hospitality, technology,media and communications, industrialsand manufacturing etc.

In terms of competency, we offer the fol-lowing services in the transfer pricingarena:

• Transfer Pricing Advisory• Transfer Pricing Structuring• Transfer Pricing Compliance

India

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http://www.grantthornton.in


http://www.nangia.com


• Litigation Support• Audit Defence• Advance Pricing Agreement• Mutual Agreement Procedure

Sudit K. Parekh & Co., founded in 1962and headquartered in Mumbai, has evolvedfrom being an audit and tax practice into acomplete solution-providing partner formultinational companies and Indian corpo-rate houses from diverse industries. Withover five decades of experience, it hasgrown into a multi-location, diversifiedorganisation, offering customised solutionsto businesses across the world. The firmprovides a complete suite of advisory,assurance, tax, and transfer pricing servic-es, encompassing planning, compliance,and representation, from a domestic aswell as international perspective. The firmworks with a sense of ownership and careto assist clients’ businesses right from con-ceptualisation to implementation. Sudit K.Parekh & Co. is regarded as a leading taxfirm in India. With substantial experienceand expertise in transfer pricing, the firmhelps clients with all elements of transferpricing, not only for India but also forcountries in the Asia-Pacific region andacross the world. The firm serves morethan 150 multinational companies acrossvarious industries annually for their trans-fer pricing requirements in India.

Contact details:Maulik DoshiPartner – Transfer Pricing ServicesSudit K Parekh & Co.Ballard House, Adi Marzban Path, BallardPier, Mumbai 400 001. India.Ph: +91 22 6617 8000, M: +91 9820540027Email: [email protected]

India



LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Danny DarussalamHadiputranto Hadinoto & PartnersMUC Consulting

3 PB TaxandSF Consulting

Other firms of noteVDB Loi

The Indonesian transfer pricing market has seen sig-nificant changes over the past couple of years sincethe Indonesian Tax Office (ITO) introduced andenforced a number of TP related regulations.

“They [the tax authority] keep changing regulations,which has increased the cost of reporting,” WahyuNuryanto from MUC Consulting said. “Once the tax-payers understand the regulation, it has beenchanged again.”

In July 2013, the government updated the transferpricing audit guidelines, which entered into force forcurrent and future audits. Detailed steps of TP auditare prescribed, which are abreast with Indonesian TPregulations, the OECD guidelines and the UN TPmanual.

“The tax authority becomes more internationaland starts to understand the use of treaty and com-plex of business model, which is something wel-come by practitioners,” Roy Kiantiong of Deloitte said.

However, Romi Irawan from Danny Darussalamsaid: “There are still some grey areas in the internalguidance.”

No business would be excluded from the taxauthority’s scrutiny, according to several marketobservers. Moreover, new law has granted the taxauthority the right to levy business on deemed prof-it if the corporate taxpayer cannot establish levels ofactual profit arising inland. Kiantiong said oil and gascompanies will face more pressure under this princi-ple. International marine or aviation companies andforeign representative offices are also warned to bemore cautious.

Generally, unilateral and bilateral advance pricingagreements (APAs) are available for application since2011. However, no APA case has been concluded yet.

Over the next financial year, the market expects tosee more sophisticated regulations issued with rela-tion to APA. In addition, practitioners believe the taxauthority will intensify TP audits in the coming yearand more disputes will arise as a result.

Tier 1Deloitte’s transfer pricing has seen a manifoldgrowth over the past few years and now comprisestwo partners and 26 specialists. Roy Kiantiong leadsthe practice supported by the experienced CarloNavarro, who joined from EY. The interdisciplinary

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IndonesiaTax authoritiesDirectorate General of Taxes Jalan Gatot Subroto, Kavling 40-42, Jakarta 12190 PO Box 124 Tel: +62 21 5250208, +62 21 5251509 Fax: +62 21 584792Email: [email protected]: www.pajak.go.id


http://www.pajak.go.id


team of MBAs, economists and accountants is ableto provide clients with comprehensive and cost-effi-cient TP solutions. It regularly handles TP planning,advance pricing agreement (APA) and controversymatters for leading multinational corporations. As apart of Deloitte Southeast Asia, the Indonesian teamretains a seamless working relationship with otherfirms in the region, and provides valuable regionaloutlooks to clients.

The practice has a strong portfolio of various TP mat-ters. For example, it has successfully negotiated thefirst advance pricing agreement (APA) in Indonesia. Itassisted a leading consumer electronics company toreduce a proposed TP adjustment from $55.74 millionto $3.72 million regarding the nature of the client’slocal entity. Another achievement for the team wasreversing all proposed TP related assessments for oneof the world’s leading consumer companies.

Indonesia



Corporate income 25% (a)- Corporate Income >IDR 4.8 billion per annumCapital gains 25%Branch tax 25%

Withholding tax Dividends 10%/20% (b)- Individual - Corporate (with share

ownership of <25%) 15%/20%Interest 15%/20% (c) Royalties 15%/20% (d)Technical service fees 2%/20% (e)Branch remittance tax 20%

Net operating losses (Years)Carryback 0Carryforwards 5

a) Resident corporate taxpayers with grossrevenue up to IDR50 billion receive a 50%reduction in the corporate tax rate imposed ontaxable income with annual gross revenue ofup to IDR4.8 billion.Individual taxpayers and companies that arenot yet operating commercially whose grossturnover is more than IDR4.8 billion areimposed with the regular tax rates (5%-35% forindividual taxpayers and 25% for corporate).

b) The dividend paid by a domestic corporatetaxpayer to a nonresident taxpayer is subjectto a 20% withholding tax (which is considered

a final tax) unless the rate is reduced under atax treaty. A 10% withholding tax is imposedon dividends paid to a resident individualtaxpayer; the withholding tax is final.

c) The interest paid to a nonresident taxpayer issubject to a 20% withholding tax, unless therate is reduced under the tax treaty. The interestpaid by a domestic taxpayer to a residenttaxpayer is subject to a 15% withholding tax,which represents an advance payment of taxliability.

d) A 20% withholding tax is imposed on royaltiesremitted abroad, unless the rate is reducedunder a tax treaty. For tax purposes, royaltiesrefer to any charge for the use of property orknow-how in Indonesia, as well as the transferof a right to use a property or know-how inIndonesia. Royalties paid by a domestictaxpayer to a resident taxpayer are subject to a15% withholding tax, with the paymentrepresenting an advance payment of tax liability.

e) A 2% withholding tax applies on grosspayments made by a domestic taxpayer to aresident taxpayer for technical, managementand consulting services and rentals (except forland and building rentals). Under domestic taxlaw, a 20% withholding tax is imposed ontechnical service fees remitted abroad. The ratemay be reduced or exempted under a taxtreaty, subject to standard rules.

Source: Tax advisers from PB Taxand

The departure of former transfer pricing head CarloNavarro might be a blow to the TP team at EY, yet itremains a sizeable team of 27 people and continuesto provide assistance range of services to local andglobal clients. Jonathon Mccarthy was promoted tothe partnership in June 2013. Mccarthy has beenpracticing transfer pricing and international tax formore than 13 years and retains wide internationalexperience, since he used to work in Australia,Canada, China and Singapore before he joined theteam in Indonesia, in early 2013.

The firm has a close alliance with the tax authori-ty for various transfer pricing issues as a member tothe American Chamber of Commerce and JapanJakarta Club. Such a connection allows the firm tomove quickly on hot topics such as advance pricingagreements (APA) and mutual agreement procedures(MAP).

The transfer pricing team at KPMG in Indonesia isoverseen by Iwan Hoo. Hoo started his tax career in1995 and became a transfer pricing specialist in2006. He leads the 14 strong team, which has beenstrengthened by the arrival of Danial Khalid fromSingapore. Bennefitting from a global network, thispractice is able to gain updated transfer pricing infor-mation from its counterparties internationally andprovides multinational clients with a seamless serv-ice including documentation, planning, dispute reso-lution and supply chain restructuring. The practice’sservice provision covers a wide scope of industries,ranging from consumer goods to industrial activities.In addition, the firm’s long-time industry specialty inenergy and resources and financial services alsobrings the TP team extra proficiency.

The team has developed a TP documentation com-pliance product called “TP Light”. This product pro-vides the taxpayers with the security of complyingbecause it contains a compliance report upon docu-mentation requirement. It ensures that clients do notprovide unnecessary, and business sensitive, informa-tion in the compliance procedure. Additionally, theteam has also accomplished a mutual agreementprocedure (MAP), which is the only successful caserecently in the Indonesian market.

Transfer pricing is one of the key serving areas atPwC Indonesia with about 30 professionals. Taxservice leader Ay-Tjhing Phan oversees the practice,supported by Ravi Gupta. The firm’s service offeringencompasses documentation, risk assessment andplanning, which helps clients to manage relatedparty transactions. It is generally agreed in theIndonesian market that the firm is among the toptransfer pricing service providers.

Tier 2Danny Darussalam is an independent tax consultantfirm with multidisciplinary transfer pricing specialists.Led by Romi Irawan, the team comprises two part-ners and 15 specialists who are able to supportclients’ demand with accounting, economics, tax lawand financial management knowledge.

With solid research and analysis capability, theteam provides documentation to over 60 companiesfrom industries such as automobile, oil and gas andfinancial. One of its competitive capabilities is analy-sis on inter-company loans. In 2012, the teamapplied the comparable uncontrolled price (CUP)method to analyse interest rate benchmarking for aclient by utilising the dealScan database to find aneffective comparable. In addition, it is also active inhelping clients to enter advance pricing agreements(APAs).

Besides, the team is capable of defending clientsby dispute resolution and negotiation. From 2012,six professionals from the firm have been helpinga client from chemical industry with its TP disputes.With thorough studies and outsourcing lawyers,the team was able to justify the client’s businessactivity.Hadiputranto, Hadinoto & Partners is the local

affiliate of Baker & McKenzie in Indonesia. With a taxteam of 12 people including three partners and nineassociates, the firm is proficient in providing premiertransfer pricing services to Indonesian and foreigncompanies. TP specialists in the firm are well versedhandling TP litigation and dispute resolution, as wellas documentation. One value-adding aspect of itstransfer pricing service is the combination of tax and

Indonesia

www.TPWeek.com108


economic analyses as well as seamless legal imple-mentation. It also helps to implement unilateral,bilateral and multilateral advance pricing agreementsfor numerous corporations. The firm receives clientsfrom a wide industry basis including naturalresources, pharmaceutical, manufacturing, tradingand services.Wimbanu Widyatmoko heads the tax practice, and

has experience handling a broad range of interna-tional tax planning issues. Widyatmoko and two sen-ior associates are representing and assisting a multi-national engineering and electronics company in itscivil review in relation to TP issues.

With an accounting background, Ponti Partogi isable to provide comprehensive transfer pricingadvice both from a legal and an accounting perspec-tive. Mochamad Fachri is a specialist on trade relat-ed tax issues.

Transfer pricing has been a core practice at MUCConsulting which employs an eleven-person team.Wahyu Nuryanto re-joined, after an absence withanother firm, to lead the team in January 2013.Nuryanto has over 20 years of experience in this pro-fession with 18 years on the tax authority side. Sixtransfer pricing professionals in the team haveobtained certification from the Charted Institute ofTaxation (CIOT) in the UK, which endorses the team’scapability in transfer pricing planning, documenta-tion, audit assistance and controversy resolutions. Inaddition, the team is also supported by a lecturerfrom the University of Indonesia.

Nuryanto and Sugianto successfully managed thetax audit process on a matter for a leading electronicparts manufacturer as the team helped to reduce thetax adjustment amount from $38 million to $337,047.

Tier 3The transfer pricing service line at PB Taxand wasestablished in 2009 and is led by Permana Adi

Saputra who is recognisable in the market for hisexpertise in documentation. The team now includesone partner and 23 professionals. Supported by theTaxand global network, the firm’s TP team is able toget access to important database, professional train-ing and other resources from the organisation’smembers in 50 countries.

The team provides strategic and practical advice onbusiness structuring in terms of related party transac-tions, in accordance with the Indonesian tax regula-tions and transfer pricing guidelines. It also assiststhe whole process of unilateral and bilateral APAs,starting from the preparation of supporting docu-ments to obtaining approval from tax authorities.

Even though SF Consulting only established itstransfer pricing service line in 2010, it has developedinto a 13 person team. All three partners of the firm’stax practice are capable in this field, with SriWahyuni Sujono taking the lead. Being a member ofMGI International, its team frequently shares experi-ences and knowledge within the global network.The firm’s legal background has endorsed the prac-tice to have proficiency in TP dispute resolution atthe tax court level.

In April 2013, Sri Wahyuni and her group conduct-ed a case for a Nike shoe toll manufacturer. The taxauthority challenged its reported loss over the pastyear. The group assisted the client to find solid justi-fication and convinced the tax official.

Other firms of noteVDB Loi is a new practice in Indonesia yet itemploys an experienced tax specialist, GrahamGarven, as leader. Having 20 years of experience,Garven used to work as a transfer pricing partner inKPMG and also established the TP practice in thatfirm. Augusta Putra followed Garven from KPMG.The team has three people working in transfer pric-ing services.

Indonesia


1. How does the tax authority selectTPCR / audit cases?Revenue uses a random selection process forTPCR and guidance provides that the initialfocus will be on “a number of cases selectedacross the range of large companies”. Audits can be risk-selected or random.

REAP (risk evaluation analysis and profiling)is Revenue’s risk analysis system and isdesigned to analyse a vast amount of data thatRevenue has on tax and duty cases and toattribute scores based on the level of risk theypose. It prioritises cases based on risk andfocuses on a taxpayer’s track record ratherthan just single returns. Revenue also periodi-cally examines cases from specific economicsectors.

2. How will a company find out it hasbeen selected for TPCR? What is the officialnotification?Where a company is chosen for a TPCR, it willreceive a letter from an authorised officer ofRevenue requesting that the company/groupundertake a self-review of their transfer pricingcompliance. The letter of notification will relateto a specific accounting period and a copy of the

letter will also be issued to the company’s taxagent.

3. When a company has been notified of aTPCR, what is the first thing it should do?On receipt of a notification letter, the companyhas a period of three months within which toconduct the self review of its transfer pricingcompliance and to provide a report to Revenue.

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While Ireland has a Code of Practice for Revenue Audit, it does not yet have anyspecific legislation or guidance to deal with transfer pricing audits. However, inNovember 2012, Revenue announced details of a new Transfer Pricing ComplianceReview (TPCR) programme, under which Revenue will monitor the degree of compliancewith Ireland’s new transfer pricing rules (introduced in 2010). A TPCR is not a Revenueaudit or investigation. By Martin Phelan and Aoife Garry of William Fry Taxand.

Ireland

Tax authoritiesCollector-General's DivisionSarsfield House, Francis Street, LimerickInternational callers: +353 61 488000Email: [email protected]: www.revenue.ie

Tax rates at a glance (As of June 2013)

Corporate income tax 12.5%/25%Capital gains 33%Branch tax 12.5%/25%

Withholding taxDividends 20%Interest 20%Royalties 20%Branch remittance tax

Net operating losses (years)Carryback 1Carryforwards indefinitely

Source: Tax advisers from William Fry – Taxand


http://www.revenue.ie


Therefore, if the company does not alreadyhave a transfer pricing report or study, it shouldcontact its tax adviser as soon as possible toarrange for the work to be completed.

4. Is there any legislation for generalprocedure for a taxpayer subject to aTPCR / audit? If not, what is therecommended practice?There is no legislation in relation to the procedurefor a taxpayer to follow on its selection for TPCR.According to Revenue guidance, the informationwhich should be contained in the report providedto Revenue in response to a TPCR is as follows:• The group structure;• Details of related party transactions enteredinto by the Irish entity, specifying the type ofthe transaction(s) and the associated compa-nies involved;

• The pricing policy and the transfer pricingmethodology for each type of related partydealing;

• The functions, assets and risks of the partiesto the transactions;

• A listing of the documentation available andreviewed in the context of the self review;and

• The basis for establishing that the arm’s-length standard has been satisfied.

5. How does Ireland differ in its approachto TP audit to other countries?Ireland differs from other countries by virtue ofthe fact that it adopted an incremental approachto transfer pricing compliance consisting of aninitial self-review with escalation to full audit orinvestigation (which is generally costly and time-consuming) only where necessary.

6. How does the tax authority compile itsinformation on a taxpayer for a TPCR /audit?Revenue gathers intelligence from a number ofsources including the REAP system, results

from other enquiries and audits in a specificsector, and through screening corporate taxreturns.

7. What are the most likely instances thatprovoke a TPCR / audit from theauthorities?Items in corporate tax returns which might pro-voke a TPCR / audit include managementcharges, licence fees and business restructur-ings.

8. What documents are required by thetaxpayer during TPCR / audit?Companies that come within the scope of theIrish transfer pricing legislation are required tohave “such documentation available as may rea-sonably be required to demonstrate compliancewith the legislation”. Although not intended tobe a prescriptive list of the documentationrequired to show compliance, Revenue guid-ance states that the minimum documentationshould clearly identify:• Associated persons for the purposes of thelegislation;

• The nature and terms of transactions withinthe scope of the legislation;

• The method or methods by which the pricingof transactions was arrived at, including anybenchmarking study of comparable data andany functional analysis performed;

• How that method has resulted in arm’s-length pricing or, where it has not, whatadjustments were made and how the adjust-ment has been calculated;

• Any budgets, forecasts or other papers con-taining information relied on in arriving atarm’s-length terms etcetera or in calculatingany adjustment; and

• The terms of relevant transactions with boththird parties and associates.The actual documentation required will be

dictated by the facts and circumstances of thetransaction and Revenue accepts that the man-

Ireland


ner of meeting the requirement for documenta-tion may take account of the cost and adminis-trative burden involved. Revenue will acceptdocumentation that has been prepared in accor-dance with either the OECD Transfer PricingGuidelines or the code of conduct adopted bythe European Council under the title EUTransfer Pricing Documentation. Revenue willalso accept documentation prepared in anotherjurisdiction which supports the Irish arrange-ment provided such documentation is inEnglish.

9. Are there any restrictions on acompany’s business during TPCR / audit?No.

10. Are there any restrictions on the taxpayers advisers during TPCR / audit?No.

11. How long does a TPCR / audit last?A company has three months from the date ofa TPCR notification to conduct its self-reviewand provide the report to Revenue. Revenue hasnot stated a time within which companiesshould expect to receive the post-review letter(see below). If the matter is escalated to audit,it could run for several months, depending onthe extent of the audit and the capacity levelwithin Revenue.

12. What happens after a TPCR has beencompleted?Once the TPCR report has been submitted toRevenue, a post review letter will issue fromRevenue to the company. This letter will either:• State that Revenue has no further enquirieson the self review performed; or

• List issues for consideration or discussionthat will also be addressed within the TPCRprocess.In some instances other options may be con-

sidered, including a transfer pricing audit.Where a case escalates from TPCR to a transferpricing audit, an authorised officer will issue anaudit notification letter. As the TPCR does notconstitute a Revenue audit or investigation, thecompany/group has the opportunity to make anUnprompted Qualifying Disclosure at any timeduring the TPCR process and before the issueof an audit notification letter.

13. How can a company manage its auditrisk?To avoid detection under the REAP system,companies should ensure they are fully compli-ant, file tax returns within the prescribed timelimits and pay tax on time. Companies shouldalso review their transfer pricing policies andmonitor certain key indices such as industrymargin profiles on an on-going basis.Martin Phelan ([email protected]) andAoife Garry ([email protected])

Ireland

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LEADING FIRMS

1 DeloitteKPMGPwC

2 EYMathesonWilliam Fry – Taxand

3 Grant ThorntonMason Hayes & Curran

The Finance Bill of 2010 first introduced a full frame-work of transfer pricing legislation into the country,ushering in a new epoch of transfer pricing rules andregulations. Consequently, outside of the Big Four,transfer pricing expertise remains relatively nascent.“I would say that in terms of service lines thestrongest performers have been transfer pricing, R&Dtax credits and global employer services,” saidPadraig Cronin of Deloitte. “Transfer pricing is definite-ly a growing area,” concurred EY’s Kevin McLoughlin.This process has been accelerated by a couple ofchanges made by the Irish authorities through 2012 to2013. An indication of the future direction of travelemerged in May, when the Irish Revenue Commissionposted advertisements for staff and database compa-nies to pitch services enabling them to evaluate com-panies’ transfer pricing more effectively. This requestaccompanied an increase in the Revenue’s number oftransfer pricing professionals last year. Alongside this tooling-up on the part of the Irishauthorities, there were further developments to theFATCA legislation. FATCA (Foreign Account TaxCompliance Act) was enacted in 2010 with the inten-tion of combating the US government’s sense thatUS individuals were not reporting all of their incomeearned outside the US. In 2012, the US and Irelandbuilt on this original act by signing an inter-govern-mental agreement, the US-Ireland IGA, which updat-ed the previous legislation. As a result, Irish laws andregulations now have precedence in governingFATCA compliance for Irish entities. “FATCA has kept

us busy trying to keep up, and then keeping ourclients updated on it. The changes are quite signifi-cant,” said Petrina Smyth of Walker’s Ireland.FATCA is especially significant for companies whosetransfer pricing structures incorporate Ireland,because it is the key to understanding the relation-ship between the Irish and US tax authorities. The USSenate Committee has shown some scepticismabout the use of Ireland by multinationals such asGoogle and Apple, most vocally during the USSenate Permanent Subcommittee on Investigationshearing on offshore profit that took place in May2013. US multinationals operating in Ireland willtherefore want to keep a particularly close eye ondevelopments involving FATCA.Alongside these international pressures, the Irishgovernment itself announced an initiative at the endof 2012, which will require certain Irish taxpayers toperform a self-review of their compliance with Irishtransfer pricing rules. This indicates a certain tighten-ing of the Irish Revenue Commission’s approach,although these compliance reviews will not be for-mal audits, and there is the potential for no penal-ties should an adjustment be agreed during theprocess. In a way, it is actually indicative of the IrishRevenue’s general willingness to engage with tax-payers to discuss their policies.This fits with the perspective of a number of Irishadvisers’ on the attitude of the Irish authorities overthe past twelve months.“There’s been no knee-jerk reaction from our gov-ernment, which has been staunch in the defence ofour regime,” said Petrina Smyth of Walker’s Global.Other advisers concurred. “There hasn’t been thesame level of interest in the media locally,” saidCronin.

Tier 1 Paul Reck leads Deloitte’s transfer pricing practiceout of its offices in Dublin, drawing on twenty yearsof experience in international tax and financial serv-ices. He heads a team of five other fee earners,including two directors and, as of mid-2012, an ex-Irish Revenue senior officer with over thirty years’

Ireland


experience in tax, who was involved in drafting theIrish transfer pricing legislation in 2010. While the Irish practice is limited in terms of specif-ic economics expertise, Deloitte’s larger networkenables the practice to leverage these skills fromelsewhere. This includes utilising the resources of theGlobal Transfer Pricing Centre (GTPC) in India and theGlobal Economics Network (GEN), which includes themost senior economists in Deloitte’s global transferpricing practices.Paul Reck worked on a range of significant transferpricing cases through 2012 to 2013. He led the provi-sion of EMEA transfer pricing master files for 2010 and2011 for a captive leasing client of a large IT groupwith EMEA leasing operations centralised out ofIreland. This project became necessary followingchanges in transfer pricing documentation require-ments in certain operating jurisdictions. Reck also undertook a review of the operations ofa US investment manager with portfolio managers inthe US and the UK, and mutual funds established inIreland, with distribution mainly conducted throughoperations in the UK. Reck’s work aimed to reach anappropriate pricing methodology, appropriate not onlyin terms of the fees allocated to investment manage-ment versus distribution and other functions, but alsoin terms of the appropriate matrix allocation of invest-ment management fees to the UK and the US.

KPMG’s transfer pricing practice in Ireland is led byEoghan Quigley, who combines his transfer pricingexpertise with his previous experience leading KPMGIreland’s M&A tax team. This allows him to bring aspecialism in the tax aspects of M&A transactionstogether with his planning and structuring expertisewhen advising a wide range of multinational corpo-rate and private equity clients across a range ofindustries, including software, communications,healthcare, retail and distribution. Quigley and his team provide advice on all aspectsof transfer pricing, including the design and imple-mentation of transfer pricing policies, compliance anddocumentation, and dispute resolution. The practiceis also part of a worldwide network of global transferpricing services (GTPS) professionals from KPMG

member firms around the world, allowing it to drawon a broad framework of transfer pricing experiencethat combines local and global expertise.Partner, Gavan Ryle, heads transfer pricing practiceat PwC Ireland, advising multi-national companies ontransfer pricing planning as an element of managingtheir effective tax rate. He focuses on structuring theirinternational related party transactions to optimisethe availability of Ireland’s 12.5% corporation tax rate.Assisting him in this aim is Barbara Dooley, a directorwho, before joining PwC in 2009, spent 12 yearsworking in various sectors including banking, technol-ogy, and the consumer goods industries. Barbara alsobrings strong international experience to the practice,having worked in jurisdictions across the UK, US,Europe, Asia and South America. Together, Ryle andDooley lead a team that continues to develop rapid-ly following the enactment of the 2010 Finance Bill,which introduced a new era of regulation andenforcement of transfer pricing in Ireland.

Tier 2Transfer pricing is a growth area within EY, and thetax practice has taken on a number of new associ-ates in recent years to manage the swelling demand.The key transfer pricing practitioner within the practiceis Dan McSwiney, who has been with the firm forthree years and has international transfer pricingexperience stretching back far beyond that date.Transfer pricing works closely with the internationaland cross-border focus of the practice, and so otherexperienced practitioners within the firm frequentlyassist McSwiney on large transfer pricing projects. Thepractice is also able to draw on EY’s large internation-al network of expertise, encompassing economistsand vast reservoirs of data, to offer market-leadingtransfer pricing advice. This advice covers all serviceareas, from interest rate benchmarking to supplychain optimisation projects and royalty flow manage-ment.Ireland is among a handful of European countries inwhich transfer pricing has only become a relevantarea of tax work in the very recent past. Matheson’sinvolvement in the sector first grew not in the green

Ireland

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grass of Ireland, but across the oceans in Japan,where it had a number of clients who faced transferpricing issues with some regularity. Even now,Matheson’s transfer pricing clients have tended tocome under scrutiny in another country; these casesare rarely initiated in Ireland.As a result, Matheson has an unusually large trans-fer pricing team in the Irish context, despite this con-sisting of five partners, only one of whom is a part-ner. This is Joe Duffy, who leads the transfer pricingdepartment, frequently working alongside the seniorassociate Catherine O’Meara. As an example of their work, they highlight theirrole in advising a number of leading US multination-als in connection with the well-known judgment ofthe US Ninth Circuit Court of Appeal in the Xilink case.This case is famous for the highly unusual incidenceof the court deciding to reverse its own decision.

William Fry – Taxand offers a full-range of transferpricing services, combining both the more legalaspects – such as the drafting of documentation andthe negotiation of APAs – with the more economicaspects – such as benchmark analysis and supplychain reorganisation – within one practice. This practice has in-house economics expertise, ledby the consultant Aoife Garry. But it can also draw onthe broader Taxand network for economic analysis. Inparticular, William Fry has a close relationship with itsUK Taxand equivalent, Alvarez & Marshal. WilliamFry’s transfer pricing team frequently works with theteam at Alvarez & Marshal, especially when a projectrequires more detailed economic analysis or accessto benchmarking software. A number of the practice’s tax partners also devotepart of their time to transfer pricing challenges.Martin Phelan, the overall head of the tax practice,divides his time between corporate and M&A taxwork and transfer pricing. Brian Duffy and SonyaManzor are also partners who devote part of theirtime to transfer pricing. In the past year, the teamadvised Digitel through a reorganisation of their IPstructure, shifting the location of the IP from theNetherlands to Singapore, a structure which alsoincorporated Ireland.

Tier 3Grant Thornton’s transfer pricing work in Ireland isled by Peter Vale, who handles much of the firm’scross-border tax work. He has four fee earners work-ing with him. The practice has only limited transferpricing capabilities in its own right, however, lackinginternal economics expertise. But for more challeng-ing transfer pricing matters they draw on the expert-ise of Grant Thornton’s London office, which has aneconomics practice, and so enables them to take onmore in-depth transfer pricing projects. Furthermore,the head of Grant Thornton’s Irish practice FrankWalsh said the firm plans to expand its transfer pric-ing practice over the next few years.One transfer pricing project running through 2013saw Peter Vale provide advice to an offshore groupcompany in relation to the payment of sums. Itinvolved Vale, with the assistance of Grant Thorntontax manager Sarah Meredith, structuring these pay-ments within the Irish transfer pricing rules, as wellas managing tax issues under the various other taxheads.Vale and Meredith also dispensed transfer pricingadvice to another international group, this time inthe gaming industry. The advice concerned royalties,guiding the group on IP location and the transferpricing considerations stemming from this.

Mason Hayes & Curran’s transfer pricing practiceis still fairly nascent. Nonetheless, John Gulliver,Robert Henson, Amelia O’Beirne and Maura Dineenregularly provide transfer pricing input on manycross-border transactions and provide comment andreview on APA’s and other transfer pricing, especial-ly in M&A transactions.In the past year, the team assisted a major inter-national law firm on Irish elements of worldwidetransfer pricing review. A team led by John Gulliverensured that transfer pricing in respect of Irelandwas appropriately documented to ensure eligibilityfor Irish grandfathering rules. A second projectinvolved assisting a major multinational IT groupwith a reorganisation of its IP and licensing regime,working with US, Dutch and Hong Kong counsel todo so.

Ireland


Quality tax advice, globally

Taxand provides high quality, integratedtax advice globally. Our tax professionalsgrasp both the fine points of tax and thebroader strategic implications, helpingyou mitigate risk, manage your tax burdenand drive the performance of your busi-ness.

William Fry Tax Advisors is, exclusively,Taxand Ireland. William Fry is one ofIreland’s “Top 5” law firms. The firm wasawarded Irish Tax Firm of the Year at theInternational Tax Review European TaxAwards 2009 and is consistently ranked asone of Ireland’s leading tax firms.

Taxand Ireland brings together taxlawyers, accountants and consultants inone highly innovative team, providing aconflict free seamless solution to ourinternational clients who require transferpricing services.

Our transfer pricing teams works in con-junction with our global Taxand col-leagues to provide high quality transferpricing advice to our clients.

Our transfer pricing services include:

• Transfer pricing design and planning• Transfer pricing reviews and documen-tation

• Mutual Agreement Procedures• Transfer pricing audit defence

Taxand Ireland:

• Dedicated to tax• Local knowledge, global view• Partner led from start to finish• Complex problems, customised advice• Conflict free & un-bureaucratic• Passionate about working together

For further details of our Transfer Pricingtax services contact:

Martin PhelanE: [email protected]

Sonya ManzorE: [email protected]

Aoife GarryE: [email protected]

www.williamfry.ie/practice-area/tax.aspxTel: +353 1 63 95 000

Quality tax advice,

globally

Ireland

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http://www.williamfry.ie/practice-area/tax.aspx


LEADING FIRMS

1 DeloitteKost Forer Gabbay & KasiererPwC

2 Bar Zvi & Ben DovBDO IsraelFahn Kanne & CoKPMG

Transfer pricing is a developing area of tax law inIsrael, with the introduction of formal transfer pricingregulation at the end of 2006. However, practitionersbelieve the Israeli transfer pricing market has “themost potential to grow”.

“The Israeli tax authority has started to treat [trans-fer pricing] more seriously over the past years, mak-ing it a substance issue, though they won’t be asaggressive as their counterparty in India,” said ZviFriedman of Deloitte.

The regulations require companies to list all cross-border transactions on the corporate tax return formunless it is of a onetime nature and get priorapproval from the tax assessor. Corporations are alsorequired to declare the transactions were conductedaccording to “market conditions”.

Further, there is a recent trend, observed by Israelitransfer pricing specialists, for the tax authority to

scrutinise more closely business restructuring andintellectual property (IP) migration. “As an R&D centre,there’s much pre-acquisition in the high-tech andsoftware industry going on. IP becomes a key issueas it tends to retain high profit,” explained Amit Shalitfrom BDO Israel.

Another critical challenge for TP practitioners inIsrael is the lack of any case law under. “Everybodywaits for the court decisions to give future directions.Before that, there will be no actual progress,” saidWilly Elizarov from EY.

Tier 1 Deloitte’s transfer pricing service in Israel is underthe leadership of Jacob Houlie. Houlie has exten-sive experience handling intellectual property (IP)cross-border planning and authored the first trans-fer pricing book in Hebrew. Nine professionals inthe group provide sophisticated transfer pricingservices to over 100 international businesses fromvarious industries. The clientele ranges from start-ups to the largest Israeli based multinationals. Thegroup not only completes comprehensive docu-mentations for corporate clients, but representsthem before the tax authority for dispute resolutionand advance pricing agreement (APA) negotiationsas well. In addition, the team is skilled to plan andimplement IP migration while taking into consider-ation the possible tax incentives and exposure inthe respective jurisdictions.


IsraelTax authoritiesThe Custom and VAT Authority5 Bank of Israel St,The New Government Complex,Jerusalem, Israel 91002Tel: +972 2 666 4000Fax: +972 2 666 4011

Email: [email protected]: taxes.gov.il

Income Tax Commission5 Kanfei Nesharim Street,Jerusalem, IsraelTel: +972 2 655 9559Fax: +972 2 652 5327


Houlie is negotiating with the Israeli tax authorityfor the first mutual agreement procedure (MAP). Inthe meantime, his team is also engaged in severalbusiness model optimisation projects involving IPissues.

Kost Forer Gabbay & Kasierer is EY’s local affiliatein Israel, whose transfer pricing practice is integratedinto the international tax practice. Such a modelhelps to provide a comprehensive outlook on trans-fer pricing issues. Established in 2000, practitionersregard the team a pioneer in the transfer pricing mar-ket especially in terms of planning and APA. Theteam provides a full-scale service including planning,documentation and controversy assistance withrespect to international transfer pricing regulations aswell as local requirements.

Now the group has a headcount of 25 profession-als and is one of the largest in Israel. It is the onlyfirm in the country that provides transfer pricing serv-ices from two offices. Willy Elizarov who practicedtransfer pricing valuation in the US has led the groupsince 2003. He is extremely experienced in globaldocumentation work and once led a large-scaleinternational documentation project.

Over the past year, the firm has handled a numberof cases in relation to intangible assets. Maintaininga close relationship with tax authority, the firm oftenadvises officials on new legislation. The group has aspecialty in solving issues for financial institutionssuch as banks and insurance companies. It has suc-cessfully designed a number of advanced invest-ment models and hedge models to optimise clients’business in the sense of TP.

Tier 2Bar Zvi & Ben Dov is an Israeli associate of TransferPricing Associates (TPA), the independent global net-work of TP firms. As a law firm, it specialises in assist-ing international companies such as Berlitz, Crocsand Forex, in the preparation of required TP studies.The firm has a remarkable track record of a 100%success rate in transfer pricing audits worldwide.Moreover, not one of the hundreds of studies filed bythe firm has been adjusted or rejected by any taxauthority. In addition, it is also capable of providingvaluations and APA support.Yariv Ben Dov leads the practice of two partners

and three staff specialists. Sivan Henik and Dana

Israel

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Corporate income 0% - 25% (a)Capital gains 25% (b)Branch tax 25%

Withholding tax Dividends 25%/30% (c)Interest 15%/20%/25% (d)Royalties 25%Branch remittance tax 0%

Net operating lossesCarryback 0Carryforwards Indefinitely

a) Israeli companies classified as approvedindustrial enterprises are entitled to reducedtax rates (0% - 25%), with the period of

benefits depending on the location of theplant and whether certain conditions aresatisfied.

b) The capital gains tax rate depends on thepurchase date and the nature of the asset.

c) Dividends paid to a non controlling foreignresident are subject to a 25% withholding tax;otherwise, the rate is 30%. Dividends paid to aresident individual are subject to a 25%withholding tax, although individuals classifiedas “significant shareholders” is subject to a30% withholding tax rate on dividends.

d) The withholding tax levied on interest isdependent on the type of loan (whether or notlinked to the index) and whether the recipientof the interest income is an individual or a“body of persons”.


Harel joined the team from two local law practicesafter Dan Zaidman left for EY. The two new talentshave supported Ben Dov in various transfer pricingassignments from studies and valuations to negoti-ations. Their clients are from number of industriesincluding construction, high-tech and transportation.Amit Shalit established the transfer pricing depart-

ment at BDO Israel in 2007. Shalit has over 13 yearsof experience in international taxation matters andwas actively involved in drafting the Israeli transferpricing regulations during 2006. He has a solid legaland accounting background, and leads the team ofthree economists. This multidisciplinary team is skilledto inject comprehensive TP insights to clients from dif-ferent perspectives. Over the past year, it has handlednumerous cases involving international funding trans-actions and represented before tax authorities world-wide. It attracts clients from a wide range of industrybackgrounds, including banking, telecommunications,pharmaceutical, energy and logistics.

Grant Thornton’s Israeli practice is Fahn Kanne &Co. Its transfer pricing team employs four people

with Yigal Rofhe at the helm. Benjamin Gandzjoined the group from EY in May 2013 as a special-ist. Staff members in the team hold extensive expe-rience in fields of accounting, tax, law and econom-ics with local insights and a global outlook. The firmoffers a broad range of services from developing TPpolicy, preparing studies and supporting APAs.

Gandz and Shay Moyal are assisting a public con-struction company with issues involving $30 millionintercompany loans from Israel to India. The assign-ment is complex in nature since there is no availablebenchmark for this subject in India.

KPMG has an eight-people team in Israel for trans-fer pricing. David Ravia leads the practice with hisexpertise in international tax issues and financialrelated matters. Competitors endorse Ravia, who iswell versed in all areas of transfer pricing includingdocumentation project management, APA negotia-tion and TP dispute resolution. The team servesinternational clients with its multidisciplinary back-ground in assignments such as documentation,planning and controversy resolution.

Israel


1. How does the tax authority selecttransfer pricing cases to audit?Italian Revenue Agency (IRA) issues, each year,public guidelines aimed to disclose goals/strate-gy and actions to monitor tax compliance andchallenge aggressive tax behaviour.The selection of the target companies to be

audited is based on the taxpayer’s risk profile, akey internal valuation of each taxpayer aimed toclassify each taxpayer as low, medium, or highrisk profile.The main parameters, or key areas, which

should influence such ranking (and thereby thelikelihood of being audited) are:• aggressive tax planning schemes addressed bythe OECD report;

• low profitability in past years (or tax lossessituation);

• tax base erosion schemes as addressed byOECD;

• transactions with black list countries; and • elusive structures characterised by deemedPE and deemed tax residence of foreign enti-ties.The above taxpayer’s risk profile record is

updated for each large business taxpayer (LBT)with a turnover higher than €100 million ($1.30million). Also medium business taxpayers(MBT), with a turnover higher than €25 million,being consolidated by multinational groups, aresubject to such preliminary selecting scrutiny.

With regard to transfer pricing, it has beenoutlined that taxpayers that have fully com-plied with the Italian transfer pricing protec-tion penalties regime (i.e. that they haveflagged the tax return box which attests thatdocumentation is fully consistent and avail-able according to the tax authority guidelines)should be qualified as a cooperative taxpayer:thereby it upgrades the ranking, reducing therisk of being audited (although it cannot beexcluded).

2. How will a company find out it isbeing audited? What is the officialnotification?There can be two different scenarios:• External audit/inspection (at the premiseof the taxpayer): this audit usually is neverpreliminary notified. The Italian RevenueAuthority (IRA), and even the Italian taxpolice, are authorised to start audit activi-ties, by a physical access to the taxpayers’premises (official notification is handed bythe tax authorities),

• In-house audit (at the IRA premise): taxquestionnaires are delivered to the taxpay-er, which is expected to return specifictransfer pricing documentation: followingthe in-house examination of the docu-ments, IRA will decide whether to formallystart a tax assessment procedure.

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An audit guide by Domenico Fava of Fava & Partners.

Italy

Tax authoritiesAgenzia EntrateCristoforo Colombo n. 426 C/D, 00145 RomeTel: +3906-96668933Email: [email protected]: www.agenziaentrate.gov.itWebsite in English: www1.agenziaentrate.it/inglese/


http://www.agenziaentrate.gov.it


3. When a company has been notified ofaudit, what is the first thing it should do?It is recommended to request the immediateinvolvement of tax advisers, for proper assis-tance in the course of the tax audit. Usually the assistance of the tax adviser

might help to address any request of IRA and toprotect the taxpayers’ position.

4. Is there any legislation for generalprocedure for a taxpayer under audit? Ifnot, what is the recommended practice?The taxpayer’s rights Statute establishes thegeneral principles that shall be met during anytax audit.In addition, there is a set of provisions detail-

ing the rules/procedures to be met in thecourse of a tax audit.Tax advisers’ assistance should also be acquired

to raise any procedural issue in real time.

5. How does Italy differ in its approach totransfer pricing audit to other countries?As said at Q1, Italy has enforced a special(facultative) transfer pricing penalty protec-tion regime according to which , if the taxpay-er addresses transfer pricing documentationconsistently in line with detailed IRA guide-lines (and ticks the box in the tax returnaccordingly), in principle, any transfer pricingchallenge should not generate any relatedpenalty.This regime is aimed to reinforce the coop-

erative and transparent approach between tax-payer and IRA, by awarding it.The additional award, according to the very

recent guidelines issued in 2013 (Circular let-ter n. 25), should be that the risk of beingaudited should be lower than if the taxpayerhad not opted for such regime.Moreover, in Italy there are quite often

cross-audits on taxpayers’ clients, aimed toverify by interview whether the transfer pric-ing model is effectively consistent with the

facts : these cross-audits might raise deemedpermanent establishment (PE) issues of theforeign entity (principal). Deemed PE issue isthe (alternative) way IRA challenge aggressivetransfer pricing models (cost plus structure,agenct principal model).

6. How does the tax authority compile itsinformation on a taxpayer for audit?Please make reference to the above taxpayers’risk profile record (Q1)

7. What are the most likely instances thatprovoke an audit from the authorities?Please make reference to the above taxpayers’risk profile record (Q1)

8. What documents are required by thetaxpayer during TP audit?It’s highly recommended, although not com-pulsory, that taxpayers give evidence of trans-fer pricing documents, as recommended byOECD guidelines (master file, country file,benchmark analysis, etcetera). Should the taxpayer have voluntarily adopt-

ed the Italian transfer pricing penalty protec-tion regime, the whole set of transfer pricingdocumentation, fully compliant with thedetailed IRA guidelines, shall be promptlyavailable for the delivery.

9. Are there any restrictions on acompany’s business during audit?No: business should continue as usual.

10. Are there any restrictions on thetaxpayers advisers during audit?No.

11. How long does an audit last?It cannot last more than 30 working days,which might be doubled (up to 60 days over-all) in case of specific and extraordinary cir-cumstances.

Italy


In facts, 60 days is the standard period and incase the audit is complex the IRA strategycounts only the effective days run at the taxpay-ers’ premise, thus stretching the period.

12. What happens after an audit has beencompleted?The taxpayer has the right to draw-up and fileits defensive note in 60 days.The binding tax assessment might be issued

only after the above 6o days period is elapsed,to allow the taxpayer to better explain anddefend its position.

13. Tips on negotiating with theauthorities?It is key to have a cooperative approach.Transparency and disclosure attitudes are usu-

ally well rewarded in the context of an audit.These pre-requisites usually give proper

comfort to IRA.

It is important to maximise all the efforts,getting maximum cooperation both from thetax group department and the tax advisers. Ifthe tax audit is well managed, any challengecould be better faced in the course of a tax con-troversy. Conversely, a non-cooperativeapproach (for example, not delivering thetransfer pricing documentation) might jeopar-dise a future tax litigation outcome.

14. How can a company manage its auditrisk?A transfer pricing model should be properlyfine-tuned and updated on a recurring basis.Functional analysis should be internally per-

formed to verify whether the group-selectedtransfer pricing model is still consistent.Consistency of the transfer pricing policy

inside the group, although it is a value, shouldnot prevent potential change/fine-tuning atlocal level.

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LEADING FIRMS

1 Studio Legale e Tributario (EY)KStudio Associato (KPMG)Maisto e AssociatiStudio Tributario e Societario (Deloitte)Valente Associati GEB Partners

2 Belluzzo & PartnersBernoni Grant ThorntonBonelli Erede PappalardoFantozzi e Associati – TaxandHager & Partners

3 Allen & OveryChiomenti Studio LegaleDLA PiperLegance Studio Legale AssociatoMcDermott, Will & EmeryStudio MusselliStudio Professionale Associato a (Baker & McKenzie)Transfer Pricing AssociatesValdani Vicari & Associati

Other firms to noteFava & PartnersDi Tanno e Associati

The amount of litigation related to transfer pricing hasincreased dramatically recently in Italy. The authoritieshave perceived that transfer pricing audits are a goodway to bring in large amounts of capital. Advisers inthe jurisdiction predict that this is an area in whichthe amount of work is likely to increase exponential-ly over the next 10 years.

Now taxpayers in Italy appreciate the potentialfinancial exposure of transfer pricing issues, advisersin the jurisdiction have begun to secure moreadvanced pricing agreements.

The Italian tax courts are simply not ready to han-dle transfer pricing cases, argued Domenico Fava ofFava & Partners. He explained that the judiciary arenot knowledgeable enough of the principles of trans-fer pricing to handle cases in a fair way.

In the past few years the tax authorities havebecome increasingly focused on cross-border inter-company transactions. As such, the demand for trans-fer pricing advice among Italian businesses and for-eign entities with Italian operations has increased.

An adviser from STS Deloitte predicted that, in thefuture, the focus of transfer pricing advisory work willbe on defence from tax audits and tax assessments,as well as on the tools enabling taxpayers to avoiddouble taxation (bilateral mutual agreement proce-

Italy



Corporate income tax 27.5% (a)Capital gains 0% to 27.5%Branch tax 27.5%

Withholding taxDividends 0% to 20% (b)Interest 0% to 12.5% to 20% (c)Royalties from patents and licences 0% to

22.5% to 30% (d)

Branch remittance tax N/A

Net operating losses (years)Carryback N/ACarryforwards

a) In addition to this rate, a 3.9% regional tax isapplicable on productive activities (IRAP).

b) Dividends paid to a non-resident corporationare subject to a 20% withholding tax, unlessthe rate is reduced under a tax treaty ordividends qualify for exemption under the EUparent-subsidiary directive.

c) Interest on loans is taxable at 20%. Non-exempt interest on current accounts andbonds is subject to the 20% rate. The ratesmay be reduced under an applicable tax treaty.

d) The rate may be reduced under an applicabletax treaty.

Source: Tax advisers from Fantozzi & Associati – Taxand

dures (MAP)) or to prevent transfer pricing disputes(typically APAs).

There is a 20-strong dedicated office within theItalian tax authorities that deals with transfer pricing.

Taxation is very high in Italy. Many advisers in thejurisdiction said clients are being much more conser-vative with investments in the jurisdiction. This situa-tion is set to continue as Italy tries to tackle its spend-ing to reduce its national debt. Francesco Bonichi ofAllen & Overy said the tax authorities in Italy havebeen passive for a number of years.

This passivity has abated said Bonichi, and theauthorities are now incisive and active. The taxauthorities have “upgraded their approach and theirskill” said Domenico Fava of Fava & Partners. The like-lihood of receiving a tax claim is therefore increased,resulting in more cases going to court. Advisers saidcontacting the tax authorities has actually becomeeasier now they are more active and focused. MarcoGraziani observed that the new, more skilled authori-ties are therefore more understanding of complexcases. Bonichi characterised these developments asindicative of the “growing up of the tax authorities inItaly”. One adviser said companies and individualsmust meticulously document their tax affairs in a veryformal manner to mitigate the potential for tax litiga-tion.

Tier 1The transfer pricing practice of EY Italy, led by DavideBergami, is one of the largest in Italy with 35 fully-dedicated professionals.

Clients explained that the transfer pricing team is“very good”, having had a good experience – veryuseful – with regards to TP”.

The practice does a large amount of advanced pric-ing agreement (APA) work and has built up good rela-tions with the transfer pricing authorities in Italy, saidBorzumato. Its relation with the APA office in Italy wasfurther bolstered when one of the founders of theoffice joined EY in Italy.

The transfer pricing at KStudio Associato (KPMG) isone of the larger practices in Italy. Head of tax, RichardMurphy explained that 75% of those working on

transfer pricing at the practice are economists so theyare able to do in-house benchmark analyses as wellas traditional transfer pricing documentation projects,dispute prevention and resolution, APA and MAP. Thepractice has been regularly involved with the taxauthorities when discussing APA. Because of the firm’sreputation, the authorities are happy to work withKStudio Associato in this way, clarified Murphy.

KPMG is lauded by clients as “very good and veryprofessional”. The team were commended for produc-ing “well done [transfer pricing] reports that coveredeverything required”.

Murphy said the practice often advises oil and gascompanies on new projects in what are, quite often,fairly obscure locations around the world. The exten-sive network of the KPMG firm means that even if thefirm does not have an office in that location, there isalmost always someone within the firm with the rele-vant detailed knowledge.

The tax practice at Maisto e Associati is comprisedof approximately nine partners and 45 other tax pro-fessionals. The team is led by Guglielmo Maisto, thefounding partner of the firm. Maisto has held theesteemed roles of consultant to the Ministry ofEuropean Community Affairs and is a member of theBoard of the American Chamber of Commerce in Italy.

The transfer pricing team advises major multination-als on transfer pricing policies and assists clients withthe negotiation and conclusion of APAs with the Italiantax authorities. The firm also assists large multination-al groups in drafting appropriate transfer pricing docu-mentation (both masterfile and country specific docu-mentation).STS Deloitte boasts a specialised transfer pricing

team which is particularly adept at dealing with APAs.The practice finalised the first ever APA in Italy in 2005.As well as APAs, the practice offers a full range oftransfer pricing services.

The practice also boasts specialist knowledge in anumber of industries. These include aviation, shipping,public oil energies, manufacturing, global financialservices industries, consumer business, tourism, hos-pitality & leisure, real estate, technologies, and media& telecommunications.

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STS Deloitte has tax offices located in Bologna,Florence, Genoa, Milan, Padua, Rome, and Turin.

The transfer pricing team at Valente Associati GEBPartners offers a full range of transfer pricing servic-es including the documentation, the determinationof transfer pricing policy, benchmark analyses andtransfer pricing controversy work, among others.

The head partner at the practice is PiergiorgioValente who is Chairman of the ConfédérationFiscale Européenne (CFE) Fiscal Committee, and theInternational Tax Committee of the InternationalAssociation of Financial Executives Institutes. He wasalso the Italian representative of the CFE FiscalCommittee throughout 2012. In addition, at thenational level, Valente is Chairman of the TaxCommittee of the Italian CFO association (ANDAF), amember of the International Fiscal Association, and anumber of other highly esteemed posts. Valente isself-evidently an extremely well respected voice inthe Italian tax market.

In December 2012, Valente Associati GEB Partnershired two leading transfer pricing specialists, RacheleBernardi and Elena Luzi, previously employed at EY.

Valente and a number of other partners and advis-ers at the practice publish tax and transfer pricing-related books and articles. The knowledge theyimpart in such work is indicative of the wealth of col-lective tax knowledge that is available to clients ofthe practice.

The transfer pricing team is committed to develop-ing its knowledge of transfer pricing and keeping atthe forefront of developments. To achieve this it reg-ularly partakes in conventions, seminars, and work-shops on transfer pricing.

Tier 2Belluzzo & Partners fashions itself as a boutiquewith an expertise in international tax, both direct andindirect. The transfer pricing team consists of experi-enced individuals capable of carrying out all aspectsof transfer pricing work.

The firm recently hired Alessandro Barzaghini andGiacomo Francioni, both experts in cross-border taxissues, particularly in relation to UK-Italy transactions

and investments. The practice’s transfer pricingdepartment has also been bolstered with the recenthiring of Ettore De Pace, a specialist in transfer pric-ing and international tax.

The practice’s ideal client are multinationalinvestors in Italy, said Luigi Belluzzo, head partner atthe practice. Belluzzo explained that the firm willoften be consulted by large family-owned compa-nies and, as such, prides itself on the service it isable to provide for these entities.

The transfer pricing team at Bernoni GrantThornton consists of one partner and seven others.Outside of the Big 4 firms, Bernoni Grant Thornton isthe only Italian tax practice performing in-housefinancial transfer pricing analyses independently. Thepractice recently advised the Italian headquarters ofa multinational commodity producer, with an annualturnover in 2011, of $780 million. They informed thecompany on evaluating, modelling and supportingnotional cash pooling.Giuseppe Bernoni is the managing partner of the

Bernoni Grant Thornton tax practice. Bernoni boastsan impressive CV including his former role as thePresident of the National Association of CharteredAccountants. Another notable partner at the firm isAlessandro Dragonetti; a member of the EuropeanTax Advisory Committee of Grant ThorntonInternational, which meets to discuss tax matters atboth a worldwide and regional level.

The transfer pricing team at Bonelli EredePappalardo offers a range of transfer pricing servicesincluding litigation (in a domestic context), APAs,transfer pricing policy design, compliance work, andthe preparation of documentation. The practice doesnot employ economists in house and instead usesexternal economists from Valdani Vicari & Associati;a firm with whom the practice has entered into astrategic alliance.

The practice also benefits from an alliance with theextensively experienced Graziano Gallo. Gallo is theformer head of the Italian Ruling Office of the Italiantax authorities, which is the department speacialisingin transfer pricing issues and in charge of negotiatingAPAs.

Italy


The practice’s clients include a number of multina-tionals listed in international stock exchange marketswith a particular focus on the consumer goods, fash-ion, and automotive industries.

The practice worked on a large number of APAsover the past year for significant clients such as theconsumer goods multinational, Unilever, tobaccomultinational, Philip Morris International, and worldrenowned fashion label, Prada.

The transfer pricing team at Fantozzi e Associati– Taxand is comprised of one partner and four feeearners and is jointly led by Alfredo Fossati andStefano Bognandi. The practice grew significantlyover the past year, hiring three new members ofstaff; two from EY – including Bognandi – and onefrom KPMG.

The team offers a broad range of transfer pricingservices including global design and value chainoptimisation services; dispute resolution services;documentation services; and tax optimised valua-tion services.

The practice advised Natixis a French corporateand investment bank, on the allocation of free cap-ital to the Italian subsidiary of a multinational bank.The deal was worth $60 million and was the firstsettlement in Italy of its kind.

The practice’s clients derive from a wide varietyof industries but the firm is particularly experiencedin working with those from the energy industry.

The transfer pricing department at Hager &Partners was established in 2011, and as such hasa relatively small dedicated team of professionals– two partners and four other professionals.Despite the small size of the firm, the practice cov-ers all areas of transfer pricing, including the prepa-ration of documentation at Italian and EU level;assessment of current transfer pricing policies;implementation and design of new policies; assis-tance during audits and litigation; and much more.The firm plans to expand their practice in the nearfuture.

Hager & Partners in Italy prides itself on beingadept at dealing with cases in both domestic andinternational contexts. Heinz Peter Hager, the head

of the tax firm, clarified that over 50% of its clientbase is international. Since 2011, the firm has beena member of NEXIA International, a leading world-wide network of independent accounting and con-sulting firms located in 100 countries.

The firm is particularly well-suited for dealing withGerman firms as the majority of the professionals atthe firm are native German speakers.

An example of an ongoing cross-border deal thefirm is working on is a project involving the valuechain located in the Asia-Pacific region of an Italiangroup, Liu.Jo S. The firm is advising on the extensiverestructuring of the flows at intercompany level aswell as with third party suppliers.

Tier 3Allen & Overy in Italy deals specifically with thelegal aspect of transfer pricing, namely restructur-ing, reviewing and redrafting intercompany transferpricing agreements. The practice recently did workfor the well-established Italian banking group,Banca Sistema. The practice successfully advisedthe bank in starting up a subsidiary in the UKinvolving their skills in tax planning and transferpricing.

Allen & Overy has been prolifically involved in avariety of discussions with official authorities regard-ing a number of recent tax issues in Portugal.Although the practice does not wish to be seen as alobbying firm, they take part in debates regarding theimplementation and implications of specific taxmeasures in Italy.

The advantage of this sort of work for the practice’sclients is that the partners have gained the trust andrespect of the tax authorities in Italy. Chiomenti Studio Legale boasts a specialist trans-

fer pricing unit in its tax team. The team aims toassist clients looking to establish a new transfer pric-ing strategy.

The majority of the work this firm does is transferpricing litigation and negotiations with the authoritiesto procure APAs. Most of their clients are Italian multi-nationals with operations abroad or foreign multina-tionals with a presence in Italy.

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The transfer pricing practice at DLA Piper Italy is ledby Maricla Pennesi and consists of one partner andtwo other fee earners.

The majority of the work that the team offers is inrelation to transfer pricing documentation. Over thepast year they did a lot of this type of work for clientssuch as Cambrex Profarmaco, an innovative life sci-ences company and Inalca, a significant food com-pany. Legance Studio Legale Associato is a completely

independent tax practice that covers a broad rangeof tax matters and the practice prides itself in havingadvisers well-versed in a broad range of specialities.For this reason, the practice is not divided into sub-departments. The practice deals mainly with thetransactional side of tax and possesses a specialknowledge of finance and transactions.

The transfer pricing work the firm has increased inrecently because the tax authorities have focusedmore heavily on it. The practice has bolstered itstransfer pricing acumen with the hiring of an ex-sen-ior official working within the transfer pricing teamwithin the Italian tax authorities. As such, the practicehas “direct access to knowledge and personal con-tacts”, explained Marco Graziani, partner at the firm.

The transfer pricing team is able to give adviceabout the negotiation of APAs, MAPs, arbitration andother related TP issues (including, among others, thereview of the existing documentation, the support indrafting new sets of documents, the evaluation ofexisting policies and of information available for dis-closure, as well as of the potential consequences incase of audits and/or subsequent litigation).McDermott, Will & Emery has extensive experi-

ence in the drafting of cost sharing agreements,commissionaire agreements and IP licensing agree-ments with the view to supporting transfer pricingstrategies. The firm assists clients with transfer pric-ing projects aimed at reviewing intercompany pricesand at seeking ruling/APA clearance. It also regularlyassists on transfer pricing controversies, at all stagesfrom tax audit to litigation, which includes domesticremedies (including settlements) and internationalremedies (competent authority procedures).

Carlo Maria Paolella, head partner of the practice,said the firm prides itself on its boutique approach totransfer pricing advice. This approach means that,unlike other firms, the partners will personally spendtime advising their clients.Studio Musselli is a tax, legal, and economic advi-

sory firm. They offer planning, national and interna-tional, in particular transfer pricing planning andcompliance.Studio Professionale Associato a (Baker &McKenzie) has offices in Milan and Rome and servesthe largest Italian and multinational corporations in awide range of industries such as energy, luxurygoods, machinery, financial services, informationtechnology and pharmaceuticals.

The firm offers transfer pricing services to its clientsas a part of its global transfer pricing team.Transfer Pricing Associates has five main aims

when it advises its clients; these are to: reduce costs,optimise supply chain operations in a tax efficientmanner, simplify transfer pricing processes, mitigaterisks in cross-border transactions, and to representtheir clients in the case of transfer pricing disputes.

The practice has extensive industry experience withthe automotive, chemicals, financial services, FMCG,luxury & apparel, mining, oil & gas, pharmaceutical,and technology, media, and communications.

Clients described the practice’s service as “good”.They were particularly complementary aboutCaterina Colling, the head of the practice, who wasdescribed as “very nice – she understands theprocess and provides a good service”. Valdani Vicari & Associati is a European company

with an international team. We work across a varietyof fields, from business consulting and marketresearch to transfer pricing to economic and marketstudies on EU policy.

Other firms of noteThe transfer pricing team at Fava & Partners is led byDomenico Fava and is comprised of one partner andthree others. Although the firm is not able to designnew international transfer pricing policy for their clientsin house, Fava has established contacts within KPMG

Italy


and PwC who work with the firm in this regard. Theteam offer support in transfer pricing litigation.

The practice recently successfully represented anInternational Carrier on a tax settlement deed for aprice-earnings and transfer pricing matter. This result-ed in a full deduction of foreign costs and recogni-tion of analytical net profit computation. The poten-tial exposure of this deal could have been more than€200 million (US$153 million).Di Tanno e Associati offers advice on transfer pric-

ing issues, ensuring that the tax aspects of transferpricing have been complied with. The firm can alsoassist their clients on transfer pricing audits and liti-

gation. They do not employ economists and aretherefore unable to do benchmark analyses anddatabase work.

The firm recently advised Apax Partners LLP on thetransfer pricing activity between the companiesheadquarter in the UK and its Italian subsidiary. Tommaso Di Tanno, head partner and founder of

the firm, is widely regarded as an expert in econom-ic and fiscal policy. Fabio Brunelli, a partner at thefirm, is the former chairman of the European PrivateEquity and Venture Capital Association (EVCA) tax andlegal committee and has been recently re-elected onthe committee.

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ITALY Milan via Cordusio 2 tel. +39 02 36569657Verona stradone San Fermo 14 tel. +39 045 8005353UKLondon 38 Craven Street tel. +44 (0)20 7004 2660www.belluzzo.net

Contacts:Luigi Belluzzo Managing Partner, Milan,[email protected] De Pace Partner / Transfer PricingSpecialist, Milan,[email protected]

Hager & PartnersVia Borgogna 2 20122 Milan (Italy)Tel: + 039 02-7780711Fax: + 039 02-778071233Email: [email protected]: www.hager-partners.it

Contact:Heinz Peter Hager Managing PartnerEmail:[email protected] Fuxa Transfer Pricing ManagerEmail: [email protected]

Firm profile:Hager & Partners, founded in 1995, is anindependent Italian business advisory andtax consulting firm, with 90 ca. profes-

sionals with own offices in Bolzano, Milanand Rome and coverage in over 100 coun-tries around the world thanks to themembership of NEXIA International net-work.

The transfer pricing practice provideshigh quality transfer pricing services andassistance to large multinational groups aswell as to small medium-sized enterprisesin industries such as real estate, banking,leasing, financial, insurance, fashion, auto-motive, food & beverage. The firm alsohas a strong reputation in the energyindustry.

Most of the professionals of the transferpricing practice come from the transferpricing departments of large accountingfirms and boutique consulting firms. Allof them are qualified to offer and to pro-vide client-tailored services, which com-bine the needs of both Italian and foreignclients.

The approach of Hager & Partners inassisting multinational groups with theirtransfer pricing matters is aimed at align-ing the transfer pricing policy to the valuechain, tax/accounting, and legal variables.The team focuses on quality and believesthat quality consists in a day-by-day andon-time delivery. The business model isstrived to find new, effective and feasiblesolutions in a rapidly changing nationaland international context.

The main transfer pricing services provid-ed by Hager & Partners are:

• Transfer pricing design and planning• Tax effective supply chain management• Transfer pricing documentation• Transfer pricing in financial services

Italy


http://www.belluzzo.net




http://www.hager-partners.it



• Strategic audit defence• Dispute avoidance and resolution.

KStudio AssociatoConsulenza legale e tributariaHead office:Via Vittor Pisani, 2720124 Milan (MI) ItalyTel: +39 02 676441Fax: +39 02 67644758Email: [email protected]: www.kstudioassociato.it

Contact: Gianni De RobertisEmail:[email protected]

Head Office:Viale Bianca Maria, 45 20122 MilanoTel: +39 02 7626131Fax: +39 02 76001091Email: [email protected]: www.gebpartners.it

Partners:Piergiorgio Valente([email protected])Ivo CaraccioliAlessandro CottoGianpaolo ValenteMaurizio Meoli

Salvatore MattiaAntonella Della RoverePietro SchipaniCaterina Alagna

Of Counsel:Raffaele RizzardiEmanuela Fusa

Italy

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http://www.kstudioassociato.it



http://www.gebpartners.it



LEADING FIRMS

1 Deloitte Tohmatsu Tax CoEY Shinnihon TaxKPMGZeirishi-HoJin PwC

2 Baker & McKenzieWhite & Case

3 Grant ThorntonKojima Law – TaxandNagashima Ohno & TsunematsuTokyo Kyodo Accounting

“The economic landscape has changed: Yenbecomes cheaper, inbound investment hasincreased, and foreign expansion for Japanese enter-prise continues to flourish. All these things havemade transfer pricing a substantial issue,” said YoichiIshizuka from Grant Thornton.Japan’s transfer pricing landscape is “very sophisti-

cated and advanced compared to most countries inthe region”, according to Eric Roose from Morrison &Foerster. No significant change in the area of transferpricing has been included in recent tax reform.Over the past year, the market has seen more audit

cases on intangible and intra-group service transac-tions, with an emphasis on business activities with-in Asia. Kai Hielscher from EY Shinnihon Tax has alsonoticed that “examiners often make adjustment oncompanies’ donation money”. The tax authority mayapply the donation rules to deny the portion of anintercompany payment.

Japan is one of the first countries to introduce anadvance pricing agreement (APA) programme solelyfor transfer pricing purposes. “Japanese companieslike APA very much,” said Jun Tanaka from KPMG.“They have very good knowledge on APA with theUS, but not with China.” In recent years, the market has observed a great

appetite for bilateral APA with China and Korea. One challenge for Japanese transfer pricing practi-

tioners is the requirement of transaction information.“The NTA asks for a lot of information that taxpayersdon’t have. Sometimes, taxpayers feel it’s necessaryto keep certain information to themselves due tobusiness concerns, but they are still required by thetax authority to disclose,” explained Tanaka. Another hurdle barrier, seen by international corpo-

rations, is language. Only Japanese can be used infiling the documentation. “The NTA will typically resistthe use of ‘Asia-Pacific’ comparables but instead willfocus on Japanese comparables,” said Eiki Kawakamifrom Kojima Law – Taxand. “There is considerabledata on Japanese companies but much of it doesnot appear in international databases or in English.”

Tier 1 Michael Tabart oversees the transfer pricing practiceat Deloitte Tohmatsu Tax Co. The diverse team ismade up of eight partners and 68 transfer pricingprofessionals serving clients from Tokyo, Nagoya andOsaka. The team is keen to assist clients to evaluatetheir transfer pricing risks, develop sound policiesand prepare documentation. In addition, it also offerssupport in areas of audit defence, APA and mutualagreement procedures (MAP). For example, it has


JapanTax authoritiesNational Tax AgencyTokyo Regional Taxation Bureau1-3-3 Otemachi, Chiyoda, Tokyo, Japan 100-8102Tel: +81 3 3216 6811 / +81 3 3821 9070Website: www.nta.go.jp

http://www.nta.go.jp

recently concluded a sophisticated bilateral APAbetween Japan and Ireland.Because of the increasing business activities

between Japan and China in recent years, the teamhas also placed emphasis in dealing with transferpricing issues relating to China. The team wasinvolved in a tax adjustment refund case where nosuccessful precedent could be referred. Thanks to theteam’s effort, it has helped the client to gain therefund and subsequently saved the client half of itstax cost in the cross-border transaction.The widely praised Kai Hielscher is the transfer

pricing leader at EY Shinnihon Tax. Fellow practition-ers have endorsed Karl Gruendal as a recognisableAPA negotiator.

The team assembles a wealth of expertise in eco-nomics, government process know-how and supplychain management. Language is another benefit forclients opting to work with this team: in addition toJapanese and English (generally the norm in Japan) italso employs specialists speaking number of Asianand European language including Chinese, Korean,Thai, French and German. The team is extremelystrong in financial services, life science, automotiveand natural resources. Highlights in its service provision over the past year

include, but are not limited to, developing a strategyfor managing controversy for past transactions andnegotiating over 10 bilateral APAs.In Japan, KPMG has maintained a stable practice

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Corporate income 25.5% (a)Capital gains 25.5%Branch tax 25.5%

Withholding tax (b)Dividends 20%Interest 20%Royalties 20%Technical service fees 20%Branch remittance tax 0%

Net operating losses (years) (c) Carryback 2 Carryforward 9

a) The national standard corporation tax rate of25.5% (reduced from 30% for fiscal yearsbeginning on or after April 1 2012) applies toordinary corporations with share capital of morethan ¥100 million ($1.3 million). A 10% surtaxis levied for three years for fiscal yearsbeginning on or after April 1 2012. Therefore,the national corporate tax will be 28.05% forthe first three years, and 25.5% thereafter.Special tax rates are available for SMEs.

b) From January 1 2013, a 2.1% surtax willincrease the dividend, interest, royalty, technicalservice fees tax rate to 20.42%

c) For fiscal years starting on or after April 1 2012,only 80% of a company’s taxable income maybe offset by net operating losses (NOLs). Smalland medium size enterprises with share capitalof not more than ¥100 million, however, areexempt from the new NOL restrictions. NOLcarryforwards may be further restricted in certainsituations, including a change of ownership ofmore than 50% in connection with adiscontinuance of an old business andcommencement of a new business. The NOLcarryforward period is 9 years for NOLs incurredduring fiscal years ended on or after April 12008. (SMEs may carry back losses for one yearfor years ended on or after February 2009).Under special relief measures, companiessuffering losses from 2011 earthquake andtsunami may carry back disaster losses arising inthe period ending between March 11 2011 andMarch 10 2012 to fiscal years commencingwithin two years of the disaster year.

Source: Tax advisers from Kojima Law – Taxand


over the past year and holds one of the largest andstrongest transfer pricing teams. Jun Tanaka leadsthe practice of 10 partners and 64 transfer pricingspecialists spread across three offices. DaisukeHoriguchi is singled out for his specialty in transferpricing dispute resolution. Tomoko Wada is anothername often mentioned. The firm offers a wide rangeof services including planning, documentation, bilat-eral and multilateral APA negotiations, audit defenceand domestic appeal and litigation procedure. Itsclientele reaches a variety of industries such as man-ufacturing, pharmaceutical, software, trading, financeand natural resources. Over the past year, the teamhas predominantly focused on APA negotiation anddispute resolution. It has successfully assisted aclient to refund the entire adjustment amountthrough an appeal against the tax office.

PwC’s transfer pricing service is among the best inJapan according to several market observers. AkioMiyamoto leads the sizable practice of eight partnersand 60 specialists. Akio Miyamoto is lauded by com-petitors for expertise in transfer pricing disputes.The team provides a full suite of transfer pricing

services including documentation, APA support,mutual agreement procedure MAP advice and con-troversy. The service provision covers a wide range ofsectors, but one focus and strength is in financialservices. As TP usually involves multiple jurisdictions,international outlook has been essential for qualityservice. As an international practice, PwC welcomesprofessionals with diverse cultural backgrounds. Over the past year, the transfer pricing team has

been very busy helping clients with APA cases. As aleading APA negotiator in the country, the firm con-cluded an APA last year with another new country,which thickened its already remarkable portfolio.Moreover, the team also assisted on a number oftransfer pricing audit cases in response to the evermore aggressive tax office.

Tier 2The transfer pricing practice at Baker & McKenziehas remained stable over the past year, retaining ateam of two partners and seven fee earners. Ken

Okawara leads the practice. In spite of being a lawfirm, it assembles specialists not only with a legalbackground, who are capable of managing con-tentious transfer pricing matters, but also econo-mists, financial analysts and certified practicingaccountants. It has extensive experience in handlingtransfer pricing planning, audits and disputes involv-ing Japan, the US and other countries across a broadrange of industries.Okawara, Yukiko Komori, Satoko Nakamura and

Howard Weitzman are engaged in several caseswith documentation related matters. These projectsinvolve leading multinational players in industry andeach requires a unique approach to analyse thetransactions. Additionally, the team is assisting in anAPA renewal between Japan and Australia. In thearea of litigation, the practice has been advising aJapanese chemical manufacturing company on itsappeal to the National Tax Tribunal over a transferpricing assessment for ten years.

White & Case is recommended in the market as aprominent player in transfer pricing. “Not many firmsother than the Big Four are visible in the market, butWhite & Case makes its presence as an alternative,”said one competitor. The team employs seven peopleincluding three partners. Leader of the practice, GaryThomas has practiced in Japan for over 30 years. AkiraAkamatsu used to serve at the NTA as an internation-al examination section chief and is often involved inauthority consultations under tax treaties and APA.With its lawyers being skilled in dealing with mat-

ters in Japan, US and other foreign tax laws, it offersa good blend of legal transfer pricing advice. Thefirm’s practice encompasses developing transfer pric-ing methodologies, preparing documentation, pre-audit planning and representing clients in examina-tions, different court levels and unilateral and bilater-al APAs. One highlight of its service offering is thatformer transfer pricing examiners in the team alsoconduct mock examinations, helping clients to iden-tify potential issues and to prepare. Benefitting froman international network, the firm is capable of han-dling both inbound and outbound transaction issuesinvolving various countries.

Japan


Over the past year, the team has been busy engag-ing with a number of transfer pricing matters, such asassisting Japanese and European companies onbilateral APAs, helping foreign companies to obtaincustom tax refunds under retroactive import priceadjustments, and creating documentation for num-ber of US and European companies.

Tier 3Grant Thornton’s Japanese affiliate is under the lead-ership of Yoichi Ishizuka. The firm offers a wide rangeof services such as risk assessment, documentation,benchmarking, dispute supports and assistance forAPA and MAP. In a sophisticated and mature marketwhere the majority of the largest companies haveentered an APA programme already, the firm has itsown vision to focus on assisting small and mediumsized enterprises. Over the past year, the practice’sfocus has shifted from documentation to APA sup-port: it has concluded a number of APA assignments,mainly involving Japan and US.

Kojima Law – Taxand has a three person trans-fer pricing team, with Eiki Kawakami at the helm.Marl Campbell is also a notable partner in thepractice. The firm’s TP practice has over 20 years ofexperience in Japan, serving clients from the phar-maceutical, medical device, technology, fashion,financial, automotive, diary and chemical industry.Its service mainly involves developing and main-

taining documentation for Japanese multinationalsand foreign companies doing business in Japan.However, the firm also has 15 years of experiencefiling for unilateral and bilateral APAs with the NTAand tax authorities in the US, UK, Germany andSwitzerland.Yoko Miyazaki leads the practice at Nagashima

Ohno & Tsunematsu. Competitors endorse AtsushiFujieda, a remarkable practitioner in dispute resolu-tion. As a law firm, the practice is predominantlyinvolved in transfer pricing disputes and litigationsupport for clients, both domestic and international.It has successfully secured an audit resolution for aJapanese electrical products company, resulting in noamount of tax being assessed. The team has alsoacted for various taxpayers such as automobile man-ufactures and pharmaceutical companies in large-scale transfer pricing controversy cases.The transfer pricing practice at Tokyo Kyodo

Accounting is led by Ryutaro Uchiyama. The teamhas experiences steady growth over the past yearand now employs three partners and three staffmembers. This accounting boutique provides docu-mentation and APA support to clients from variousindustries such as entertainment and logistics. Theteam has worked on a number of multilateral andbilateral APAs in the past 12 months, and is engag-ing in a case of withholding tax refund by a transferpricing secondary adjustment.

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Kokusai Bldg. 9F 1-1 Marunouchi3-chome, Chiyoda-kuTokyo Japan 100-0005Tel: +81 (0)3-5219-8777Fax: +81 (0)3-5219-8778Email: [email protected] Website: www.tkao.com

Since 1993, Tokyo Kyodo AccountingOffice (TKAO) has provided top classaccounting and taxation services. Its high-ly trained certified accountants, licensedtax attorneys, consultants and expertsfrom a number of fields provide servicestailored to corporate and individual clientneeds. One area of our business that hasseen significant growth, in both demandand the expert resources made availableto meet that demand, is international tax-ation and transfer pricing.

TKAO provides a wide range of interna-tional trade related accounting and taxconsulting services. This includes but isnot limited to inbound and outboundinternational tax planning. TKAO alsoprovides specialized transfer pricing docu-mentation and APA services. Such servic-es, mandatory since the introduction ofthe 2010 Japanese tax reform, are alsoincreasingly being used to hedge taxationrisk.

Japan



http://www.tkao.com

LEADING FIRMS

1 DeloitteKPMGPwC

2 Atoz – TaxandEYLoyens & Loeff

3 NautaDutilh

It was only in 2011 that Luxembourg, in the wake ofincreasing international pressure for greater trans-parency, introduced a broad-based framework fortransfer pricing legislation. This took the form of twoCirculars, issued on 28 January 2011 and 8 April2011, which stated that the approach of theLuxembourg tax authorities will follow the OECDtransfer pricing approach.Since then, as in other jurisdictions in Europe,transfer pricing has grown rapidly as a sector. “Aslawyers we should invest even more in our transferpricing practice,” said Christophe Joosen of NautaDutilh. “There is definitely growth in it.”Certain aspects of the tax environment encouragethis. “One of the very attractive things for investorsgoing into Luxembourg is that you can meet with thetax authorities and get an advance clearance onyour tax position,” explained an adviser. Despite increasing amounts of pressure, multina-tionals based in Luxembourg seem to be still hold-ing onto these benefits. “They’re still as business-

friendly as they used to be,” said Joosen. “The atti-tude is still the same.”One particular area of growth is occurring in anarea still shrouded in a degree of uncertainty. Therules introduced in 2011 were specific to intra-groupfinance activities, and there is still a lot of demandout there for this form of tax planning. But accordingto one tax practitioner, this demand has “nowexpanded to other types of intercompany transac-tions even though the authorities do not have spe-cific rules in this area”. However, even as transfer pricing work spreadsinto new terrain, it is also feeling the greatestsqueeze from the broader international pressure ontax planning. As Joosen admits, “There is more strain

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LuxembourgTax authoritiesAdministration des Contributions Directes16, rue Eugène RuppertLuxembourg Gaasperech 00352Tel: +352 40 800-1Fax: +352 40 800-2022Website: www.impotsdirects.public.lu



Withholding taxDividends 15%Interest 0%Royalties 0%Branch remittance tax

Net operating losses (Years)CarrybackCarryforwards indefinitely

Source: Tax advisers from ATOZ – Taxand

http://www.impotsdirects.public.lu


on the tax planning that a lot of advisers do here inLuxembourg. This will oblige us to be more adaptiveand flexible. There will be an increased focus onsubstance and transfer pricing.”Some advisers feel this squeeze, currently onlylight, is an intimation of much more dramatic changeto come.“Crude tax planning will die out,” said Keith O’Donnellof Atoz. “Setting up companies and transferring rev-enue into it won’t survive long, the greater exchangeof information and transparency will wipe that out.There will be a relative decline in the number of trans-actions and an increase in the complexity of them.” Others, however, feel that these pressures maychannel even more tax planning and structuringwork through Luxembourg, which, under the freshlegislation, will create a great deal more transfer pric-ing work for the country’s tax practices.“Luxembourg has a good robust tax system,” saidAndré Pesche, head of tax at Baker & McKenzie. “It’snow about setting up robust structures, and I’d stillcall Luxembourg a very stable country.”“There is interest from BRIC countries to structureinvestments, especially Russia,” agreed Peter Moonsof Loyens & Loeff. “There is a lot of interest fromRussian and eastern European groups to migratesince the Cyprus troubles.”The future direction of travel is clearly uncertain.Luxembourg is in the middle of a crucial period oftransition, and tax advisers are observing the unfold-ing situation with great interest.

Tier 1 Deloitte can make an irrefutable claim to be a pio-neer in the Luxembourg transfer pricing market –they established the first such practice in 2009. Thispractice, led by Stephan Tilquin, now has two part-ners and 16 dedicated professionals, together form-ing a team that encompasses economists, tax andindustry specialists, and professionals with manyyears of international tax and business experience.Transfer pricing has also been the practice’s mostrapidly developing area, propelled by the sector’ssurging significance in the Luxembourg jurisdiction

as legislation comes in on both a national andEuropean level. The practice is particularly recognised for its busi-ness model optimisation work. In the last year itdesigned a transfer pricing approach for a financingstructure involving a Luxembourg entity, as well asdesigning complex transfer pricing models in thecontext of real estate.Philippe Neefs, who has been with KPMG for 18years, established the transfer pricing department in2011 and continues to lead it now. Neefs is both atax and transfer pricing partner, with the internation-al tax group he manages encompassing transferpricing within it. His team covers all transfer pricingwork except disputes, and its work is driven primari-ly by intra-group financing agreements – two charac-teristic attributes of transfer pricing work inLuxembourg. But the scope of the advance pricingagreements and TP studies prepared and filed byKPMG Luxembourg does not solely address intra-group financing activities but also service activities,intellectual property, business restructuring, andfinancial services.Neefs led his team through a series of significantprojects in 2012 to 2013. They performed an arm’s-length analysis of the margin to be realised from thecash pooling activity of the International AutomotiveComponents Group Europe. Another project, worth$900 million, involved creating a benchmark todetermine the remuneration of commercial paperwithout any comparable for Belfius FinancingCompany.

PwC’s transfer pricing team in Luxembourg is ledby Begga Sigurdardottir, a partner focusing ontransfer pricing and alternative investments.Sigurdardottir has many years of experience inadvising alternative investment managers andfunds, and has recently been involved in advisingon transfer pricing matters in connection with alter-native investments, taking into account recentLuxembourg transfer pricing rules. She leads a teamof transfer pricing specialists in Luxembourg, which,since the Luxembourg tax authorities incorporatedthe OECD approach to transfer pricing in 2011, has

Luxembourg


been providing advice and assistance with allaspects of intra-group pricing arrangements, includ-ing transfers of intellectual property or the use ofintellectual property, tangible property, services,loans and other financing transactions

Tier 2Transfer pricing remains an important part of ATOZ –Taxand’s work. With a broad emphasis on interna-tional corporate tax work, much of the firm’s case-load draws on transfer pricing expertise. KeithO’Donnell, the overall head of the practice, has beenheavily involved in transfer pricing work in the pastyear. O’Donnell is widely praised by his peers in themarket, highlighted as a “very good adviser” withexcellent communication skills and “very good atexplaining issues in easily understandable lan-guage”.O’Donnell worked with a number of real estateinvestment management firms through 2012. For LaSalle, O’Donnell produced transfer pricing analysisand implementation measures to comply with theLuxembourg transfer pricing circulars, preparing 13advance pricing agreements along with their respec-tive transfer pricing studies. He also guided Heitmanon the restructuring of their management fees,involving a complicated functional analysis and theextrapolation of comparables from analogous situa-tions in an industry database. Key practitioners in EY’s transfer pricing teaminclude Paul Leyder, a tax adviser with more than 16years of experience in national and international tax-ation, and Nicolas Gillet, a senior manager. Oneclient, employing the firm for transfer pricing services,said: “I personally decided EY and Deloitte were thetwo best on the local market. I made it clear that Iexpected them to come with ideas to me, to bringgood ideas, and they have both done so.” Transfer pricing is a growing part of the overall taxpractice in Loyens & Loeff, but it is also very new.The practice only began any meaningful transfer pric-ing work in 2011, when the Luxembourg tax author-ities introduced transfer pricing documentationrequirements. Peter Moons leads the majority of the

firm’s transfer pricing projects, negotiating APAs withtax authorities and considering what should beincluded in transfer pricing reports. He is assisted bythe promising senior associate, Anna Sergiel, withother partners engaging with projects when theirexpertise is needed.In 2012, Moons led a project assisting theLuxembourg financing company of HeidelbergCement, one of two market leaders in cement, intheir move from the Netherlands to Luxembourg.This required the production of a transfer pricingreport and careful negotiation with the Luxembourgtax authorities.Moons also coordinated work on a number oftransfer pricing reports for the many financing com-panies resident in Luxembourg, who, under ever-increasing pressure from the tax authorities, desirednew documentation for a range of their structures.

Tier 3NautaDutilh’s small transfer pricing department wasestablished in 2011, at the same time as the formalTP regulations were enacted in Luxembourg. It pri-marily focuses on the preparation of TP studies andAPAs in the field of intra-group financing and thedetermination of handling fees for administrativeservices. As it stands, the department does not per-form benchmark studies in relation to royalty ratedetermination or service contracts – although like allfirms in Luxembourg, they are primed for the transferpricing market to take off in the country.The department is led by senior associate Jean-

Nicolas Bourtembourg. This year Bourtembourgworked alongside the overall head of the tax depart-ment Christophe Joosen to negotiate an APA for aRussian multinational company establishing a princi-pal company in Luxembourg, a deal with a value of$2 billion. Anticipated growth in transfer pricing work inLuxembourg is reflected in NautaDutilh’s decision tobegin the process of growing their expertise in thearea. In April 2013 they hired Jacques-Yves Ligier, ayoung associate with two years of experience large-ly in the field of transfer pricing work.

Luxembourg

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KPMG Luxembourg Sàrl9 allée SchefferL-2520 LuxembourgTel: +352 22 51 51 1Email: [email protected]: www.kpmg.lu

Contact:Philippe NEEFS, Transfer Pricing LeaderTel: +352 22 51 51 – 5531Email: [email protected]

Luxembourg



http://www.kpmg.lu


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Shearn Delamore & CoTaxand Malaysia

3 Raja, Darryl & Loh

Transfer pricing is a key topic for the MalaysianInland Revenue Board (MIRB), and several develop-ments have been seen over the past year. TheMalaysian transfer pricing guidelines issued in 2003were revised in July 2012. It indicates that “the taxauthority is serious to push transfer pricing agendathrough”, according to Yee Wing Peng from Deloitte.The 2012 rules have retrospective effect from January

2009 and cover both cross-border and domestic trans-actions. The rules apply to the acquisition and supplyof both tangible and intangible goods and servicesbetween related party financing. “Since the rules haveno force of law, it would be interesting to see any chal-lenge raised by the taxpayers,” Adeline Wong of Wong& Partners pointed out. “Also there’s always argumentsabout the best methodology.”One clear trend observed in recent years is that

audits have been intensifying year on year. Commonaudit triggers include companies exhibiting consis-

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MalaysiaTax authoritiesRoyal Malaysian Customs DepartmentMinistry Of Finance Complex,No. 3 Persiaran Perdana,Precinct 2, 62596 PutrajayaTel: +603 8882 2100/2300/2500Website: www.customs.gov.my

Department of International TaxationHeadquarters Inland Revenue Board of Malaysia12th Floor Menara Hasil, Persiaran Rimba Permai,Cyber 8, 63000 Cyberjaya SelangorTel: +60 3 8313 8888Fax: +60 3 8313 7848 / +60 3 8313 7849Website: www.hasil.gov.my


Corporate income 25%Capital gains 15% (a)Branch tax 25%

Withholding taxDividends 0%Interest 15%Royalties 10%Technical service fees 10%Branch remittance tax 0%

Net operating lossesCarryback 0 (b)Carryforward Indefinitely

a) The 15% capital gains rate only applies togains derived from the disposal of real propertyor on the alienation of shares in a realproperty company which are made within 2years from the date of acquisition. If thedisposal is made between 2 to 5 years fromthe date of acquisition, the rate is 10%.Otherwise, capital gains are not taxed inMalaysia.

b) Was available for assessment in years 2009and 2010.

Source: Tax advisers from Taxand Malaysia

http://www.customs.gov.my

http://www.hasil.gov.my


tent losses, fluctuating profitability or reporting verylow profits. Companies with significant amounts ofrelated party transactions, especially payments forintra-group services and companies that underwentsupply chain or business restructurings are also like-ly to be selected for a tax audit. Royalty and trade-mark payments and marketing intangibles now areunder MIRB’s close scrutiny, according to severalmarket observers. Many taxpayers are now fighting an uphill battle

during audits due to the lack of documentation orevidence to support the arm’s-length nature of thecharges. “Taxpayers see great difficulty in preparingdocumentation as they always find they can’t satisfythe tax authority,” said Yee. “The tax authority exam-ines their transactions on a year on year basis, buttaxpayers have no benchmark to compare.”For more certainty on the transfer prices, taxpayers

are encouraged to apply for advance pricing agree-ments (APAs) rather than passively wait until beingaudited.

Tier 1 The transfer pricing service at Deloitte in Malaysia isunder the leadership of Theresa Goh. Goh is widelyrecognised in the marketplace for extensive experi-ence in successfully resolving transfer pricing dis-putes and APA negotiations. The joining in ofVenkataraman Ganesan and Hrishikesh Gogte fromIndia has further strengthened the team of 20. Thepractice has been actively engaged a great numberof documentation management projects and in bothlocal and regional TP planning works. Dispute resolution is the strength of the firm. Over

the past year, the team has achieved success for anumber of clients with transfer pricing audits andcontroversies. It has a mechanism to prevent pro-longed and painful litigation between taxpayers andthe tax administration. With such a perspective, thefirm often acts to push forward the APA process. Itwas the first team in Malaysia to conclude the APAassignment, and it keeps the flagship during theyears. Only in the first half of 2013, it has reached sixAPAs for different clients.

Sockalingam Murugesan leads the transfer pricingpractice at EY. With 23 dedicated staff members, it isone of the largest transfer pricing teams in Malaysia.Experienced professionals from a variety of disci-plines deliver a quality service to a significant num-ber of Fortune 500 companies, key multinational cor-porations and large Malaysian conglomerates. VinayNichani is recognised for his dispute resolution skills.The team’s service offerings also cover both out-bound and inbound business restructuring, supplychain planning, risk reviews, documentation, contro-versy management, APAs and mutual agreementprocedures (MAP).As a member firm within EY’s global and regional

network, the practice often handles large-scalecross-border cases with a seamless and consistentapproach while meeting local requirement. The glob-al and regional structure enhances the team’sstrength in financial services and in the oil and gasindustry.

KPMG has a tax practice that offers a wide rangeof transfer pricing services including documenta-tion management, planning and controversy settle-ment. Under the leadership of Bob Kee, the teamhas 14 dedicated professionals. It is the first firm inMalaysia to assist its client in a transfer pricing lit-igation at the Special Commissioners of IncomeTax and has been successful in defending varioustransfer pricing cases for its clients. The majority ofthe firm’s clients are in the top 20 companies list-ed on the Malaysian stock exchange as well astop MNCs. With an increasing market demand intransfer pricing, the firm is seeking to expand itsservice.SM Thannermalai leads the sizable transfer pricing

line at PwC that employs four dedicated partnersand 29 specialists. Jagdev Singh who is also theleader of the firm’s tax practice specialises in trans-fer pricing dispute resolution and APA negotiation.Two senior consultants were recruited from India lastyear to strengthen the team’s proficiency.One highlight of the firm’s service provision lies in

its sector specialisation: transfer pricing advice isdelivered and tailored to match different business

Malaysia


needs as professionals in the firm have a profoundknowledge in various industries including consumerand industrial products, services, financial, technolo-gy, energy and mining. The team is well known forits diversified portfolio of assignments ranging fromcomparability analyses to planning and advising onintellectual property migrations. Leveraging on thefirm’s good relationships with the tax authorities, theteam has assisted foreign multinationals in design-ing the transfer pricing strategies for their invest-ments in Malaysia.

Tier 2Longstanding Malaysian legal firm, Shearn Delamore& Co, is prepared to advise clients on key legalissues in transfer pricing. Led by Ka Im Goh, the teamof six is eligible for assisting clients in the prepara-tion for and response to transfer pricing enquiriesand audits. Whenever a dispute occurs, the firm’sexperienced lawyers are capable to represent clientsin their tax appeals and judicial review applicationsto the courts.In the first quarter of 2013, Anand Raj, Irene Yong

and Foong Pui Chi successfully challenged the rev-enue authority on the appropriate arm’s-length priceand selection of comparables on behalf of an inter-national shoes and sportswear company. With solidarguments provided by the team, the tax authorityagreed to reduce the super brand’s transfer pricingadjustments under the median level.Renowned APA negotiator and documentation

project manager Leow Mui Lee leads the transferpricing line at Taxand Malaysia. The dedicated serv-ice has two partners and four specialists. Bernice Tan

has extensive experience working with leading taxfirms in Malaysia and specialises in planning anddocumentation. The team has worked on a variety ofassignments utilising support from the Taxand glob-al transfer pricing resources in regional and cross-border assignments. In addition, the firm is seen asa thought leader in Malaysia because it was the firstto publish a transfer pricing guidebook explaining therules, planning and compliance strategies.Tan and Florence Hong advised a leading regional

bank on the structuring of intercompany charges fora regional core banking system. The duo ensured theusage of the system was charged under the arm’s-length principle and also complied with accountingrequirements.The firm also offers controversy resolution. Tan and

Manmit Kaur, for instance, have successfully arguedin favour of their client based on its limited function-ality and risk profile.

Tier 3Raja, Darryl & Loh’s transfer pricing service is sup-ported by financial consultants. Its lawyers help toreview transfer pricing positions and get globalclients prepared for future dispute matters. VijeyKrishnan leads the tax team of four people and han-dles contentious matters in relation to transfer pric-ing. Krishnan and Chang Ee Leen successfully nego-tiated a settlement to the tax appeal for one of theworld’s largest photographic and office automationequipment makers. The Inland Revenue Board wasconvinced to significantly lower a transfer pricingadjustment. The firm continuously receives referralsfrom the Big 4 firms.

Malaysia

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LEADING FIRMS

1 Baker & McKenzieDeloitteMancera (EY)PwC

2 BasefirmaKPMGSKATT International

President Enrique Peña Nieto’s latest efforts toincrease Mexico’s tax revenue, the lowest in theOECD, will likely boost demand for transfer pricingservices while hastening the end of the transferpricing boutique, in favour of the full service model.

“As part of the new Presidential administration,there will be some important changes in the TaxAdministration Service (SAT), specifically in thetransfer pricing department where Salvador Cruzwill be named this week as the new CentralAdministrator,” said Moises Curiel of Baker &McKenzie. “Meeting with the SAT’s general admin-istration of large taxpayers, he said very clearly thathis intention is to attack aggressive tax planningfor restructuring.” Curiel added that at a recent international tax

conference, Oscar Molina, head of SAT’s LargeTaxpayer Administration, said he will pay specialattention to approximately 270 companies thatrestructured themselves as maquilas – manufac-turing companies located in northern Mexico’s freetrade zone – to obtain tax incentives. “They are the

first targets for the Minister of Finance,” said Curiel.“They will go for those particular audits.”The Large Taxpayer Administration also plans to

launch a new unit that will be “more oriented towardattacking companies with aggressive tax planningrestructuring,” said Curiel. He also said that advancepricing agreements (APAs) will remain the best optionfor companies to obtain certainty in their relatedparty transactions. Also, in August 2013, the Mexican congress approved

a series of proposals that would impose a 5% royaltyon the net profits of mining companies. “Transfer pric-ing would have a significant impact on royalties, and anumber of foreign firms are likely to weigh in on thematter,” said Simon Somohano of Deloitte. The takeaway is that one cannot underestimate

the importance of sound and effective transfer pric-ing planning. “The tax systems in general are gettingmore mature and leaving fewer opportunities for taxplanning,” Somohano said. “So transfer pricing plan-ning has to be more sophisticated and more centralto tax planning.” Consequently, more of Mexico’s transfer pricing

practices are becoming one-stop shops for planning,documentation and audit defense services. “Whatwe have seen in the last several years has been animplosion of boutique firms,” said Jorge Castellon ofMancera, an EY member firm. “More and more firmsare bringing capabilities in-house. That leads to lesscompliance work for firms like us.”

Tier 1Baker & McKenzie’s transfer pricing practice compris-es three partners and 16 fee-earners in five practice


MexicoTax authoritiesServicio de Administración Tributaria (SAT)Av. Hidalgo 77, col. Guerrerocp 06300 Mexico, DFTel: +52 1 800 4636 728; +1 877 4488 728 (from US and Canada)Website: www.sat.gob.mx

http://www.sat.gob.mx

areas: documentation, consulting, litigation, advancepricing agreements (APAs) and valuations. Litigation,on both the administrative and judicial levels,accounts for most of the practice. Its clients includelarge domestic and foreign companies such as GE,Alstom, Herbalife and L&L Manufacturing. The practice is led by Moises Curiel Garcia, who

helped design and implement some of Mexico’stransfer pricing rules, and previously headed thetransfer pricing audits and resolution group at theMexican tax authority. Recent hires include UlisesCastilla, who previously was central litigation admin-istrator of large taxpayers for the tax administrationservice. During the past year, Baker & McKenzie successful-

ly negotiated the first bilateral APA between the USand Mexico. The APA covers the tax years 2001to2011 and is valued at $230 million. The practice also

assisted GE Mexico to document its intercompanytransactions in Mexico and advised the company onthin capitalisation APAs.

Deloitte’s transfer pricing practice is one of thelargest in Mexico, with 12 partners, 150 fee earnersand six offices across the country. The practice advis-es clients on transfer pricing planning and documen-tation, APAs and mutual agreement procedure. Thepractice is led by Simon Somohano, who is alsoleader of the transfer pricing practice for the networkof Deloitte member firms in Latin America and theCaribbean. The transfer pricing practice of Mancera, an EY

member firm, comprises more than 80 professionals,including eight partners, trained in transfer pricingeconomics and intercompany finance. Several part-ners, including practice leader Jorge Castellon,Enrique Gonzalez and Jaime Heredia, are widely

Mexico

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Corporate income tax rate 29% (a)Capital gains tax 29%Branch tax 29% (b)

Withholding taxDividends 0% (c)Interest 4.9% 10% 15% 30% (d)Royalties 25% 30% (e)Branch remittance tax 0%

Net operating losses (years)Carryback 0Carryforwards 10

a) The corporate income tax rate was increasedtemporarily from 28% to 30% for the years 2010-2012. The rate decreased to 29% in 2013 andwill revert back to 28% in 2014. The flat tax (IETU)of 17.5%, which applies from January 1 2008,taxes profits determined by excluding from themajor part of revenue most expenses and costs[excluding in most cases interest earned or paid,royalties paid or received to or from related

parties, and salaries (although a portion ofsalaries is subject to a tax credit)].

b) Branches are taxed at the same rates asdomestic companies. There is no branchremittance tax.

c) No withholding tax is levied on dividends paidout of the net tax profit account (CUFIN) to non-residents. If dividends are not paid out of CUFINS,an equalisation tax is imposed, equal to thegeneral corporate tax rate on the gross amount.

d) Various rates of withholding tax are imposed oninterest payments. A 4.9% or 10% rate applies tointerest paid to non-resident financial entities andbanks. A 15% rate applies to interest paid toreinsurance companies. The rate is 21% if theinterest is paid to foreign suppliers of machineryand equipment. In all other cases, thewithholding tax rate is 28%.

e) The 30% rate applies to royalties paid for the useof patents and trademarks; the 25% rate appliesto all other royalties and technical assistance.

Source: Tax advisers from Mijares, Angoitia, Cortes y Fuentes – Taxand


respected among their peers for their transfer pricingexpertise. The practice focuses on compliance, withdocumentation accounting for roughly half its work-load. It also negotiates advance pricing agreements(APAs) and represents clients in litigation. During the past year, Mancera concluded the first

transfer pricing case ruled in favour of a taxpayer(appealed by the government), and obtainedfavourable outcomes in several transfer pricingaudits. The practice also successfully negotiated sev-eral unique APAs, including the first for a Mexicanmining company, as well an APA for the energyindustry and an APA with a residual profit.

PwC has one of the largest transfer pricing teamsin Mexico, with more than 60 specialists in nineoffices. The team provides a wide range of services,including transfer pricing studies and documentation,corporate restructuring, valuations, value-chain man-agement and mutual agreement procedures andAPAs. It also has an active audit defense and disputeresolution practice. The team is led by Fred Barrett.

Tier 2BaseFirma’s transfer pricing practice provides a fullrange of services, including documentation manage-ment, dispute resolution and the negotiation of APAs.

Its clients include several large multinational corpo-rations doing business in Mexico, including AnixterInternational and Dow Chemical. The practice alsolends its expertise to regional clients, such as MeliaHotels International, one of the largest hoteliers inthe Spanish-speaking world. The practice is led byJuan Carlos Becerril, who specialises in intangibleasset valuation. In the past year, Becerril has takenon three new hires, including Victor Calvario, whobrings experience in the engineering sector to thefirm, and Stephania Pimentel, who specialises ininsurance and financial services. Last year also sawthe opening of a Guadalajara office, managed byClaudia Vallejo.Led by Maria Teresa Quinones, KPMG’s transfer

pricing practice provides assistance with a widerange of transfer pricing issues, including compli-ance, transfer pricing studies and documentation,transfer pricing planning, advance pricing agree-ments (APAs), audit support and dispute resolution,including competent authority relief. Led by Emilio Angeles, the transfer pricing practice of

SKATT International provides the full range of transferpricing services, including transfer pricing planning,documentation, advance pricing agreements (APAs), lit-igation and analysis of intangible assets.

Mexico


Galaz, Yamazaki, Ruiz Urquiza, S.C.Paseo de la Reforma 489 Piso 6 Colonia Cuauhtémoc México, D.F., C.P. 06500 Tel: +52 (55) 50806000 Fax: +52 (55) 50806001www.deloitte.com/mx

For contact:

Mexico CityRicardo González [email protected]

José Eduardo Campos [email protected]

David Cá[email protected]

Hernan [email protected]

Jorge [email protected]

Miguel Morales [email protected]

Arturo [email protected]

QueretaroGabriel Pereda [email protected]

MonterreyRenan Ramí[email protected]

GuadalajaraJorge Gonzá[email protected]

TijuanaSimón [email protected]

Firm Profile:The largest transfer pricing team inMexico by number of personnel, includ-ing specialists in economics, accounting,and finance. This experienced group ofprofessionals bring a powerful and holisticapproach to transfer pricing in all indus-tries with its expertise in the followingmain areas:• Elaboration of transfer pricing docu-mentation

• Development of transfer pricing poli-cies & planning strategies

• Valuation of intangible and tangibleproperty

• Optimization of supply chain and busi-ness models

• Assistance in tax controversy and dis-pute resolutions

• Negotiation of Advanced PriceAgreements and Mutual AgreementProcedures

Recognized as “2012 Transfer PricingFirm of the Year” by International TaxReview

Mexico

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http://www.deloitte.com/mx













LEADING FIRMS

1 Baker & McKenzieDeloitteEYKPMG MeijburgPwC

2 Abel AdvisoryAltus AllianceDLA Piper

3 BDOTaxperience

The Netherlands has experienced a number of signif-icant changes to its transfer pricing regime over thepast few years. As a result, advisers have reportedgrowth within their practices. “In general our tax prac-tice has been growing, and transfer pricing especiallyhas been at the front of that growth,” said AntonioRusso, head of transfer pricing at Baker & McKenzie.

Advisers remarked upon a market that has maturedexceptionally quickly, with clients swiftly becomingsophisticated and selective in the advisory servicesthey choose. “This is proven by the fact that docu-mentation is a commodity nowadays,” said Russo.

As well as clients, advisers said the tax authoritieshave also matured very swiftly in the context oftransfer pricing. Several remarked that the level ofexpertise and the skills the authorities possess haveimproved a great deal in a very short time.Consequently, the level of scrutiny is higher, deeper,and more complex.

Previously, as Russo said, “the people doing trans-fer pricing were tax professionals who skimmed onthe surface on the technical economic issues”. Now,however, a more mature market has made competi-tion much tougher, and tax practices without accessto economic expertise find it very hard to compete intransfer pricing.

Further propelling this trend, advisers anticipated asteadily increasing amount of litigation – alreadyincreasing sharply – which will force multinationalsto think closely about their transfer pricing strategyand so choose their advisory services carefully. They


NetherlandsTax authoritiesMinistry of FinanceKorte Voorhout 7, P.O. Box 20201, 2500 EE, The HagueTel: +31 70 342 8000Fax: +31 70342 7900Website: www.minfin.nl


Corporate income tax (a) 20/25%Capital gains 0% Branch tax 20/25%

Withholding tax (b) Dividends 15%Interest 0%Royalties 0% Branch remittance tax

Net operating losses (Years)Carryback 1Carryforwards 9

a) If taxable profits are less than €200,000, lowerrate applies

b) Payments to European companies that qualifyunder EU directives may be exempt or subjectto reduced rate

http://www.minfin.nl

also expect legislation to be passed with the aim ofsimplifying the market, noting an irritation from bothtax authorities and companies over the amount ofresources they have to spend on transfer pricing.

Russo also anticipates a further trend that willmake the transfer pricing market even tougher. Thistrend is catalysed by the international pressure ontax planning in general and the spotlight that hasbeen shone on the Netherlands in particular, withsome media labelling it a tax haven. The Dutch par-liament has responded with discussions about therole of intermediate finance structures as well asabout the number of tax structuring deals that gothrough the Netherlands. Some politicians, mediaand even tax professionals have been asking if theywant to handle so many of these kinds of deals.

“I do see a shake-up in services reliant on transferpricing,” said Russo. “That commodity type of workmight decrease so some of the players in the mar-ket may shrink in the future. There is a segment inthe market which might not be there in the shapewe know it today.”

Tier 1 Baker & Mckenzie’s transfer pricing practice is con-sistently praised and undoubtedly offers top tierquality within the Netherlands. “It’s a very strongpractice under the leadership of Antonio Russo, veryhighly valued in the market,” said one peer. “Baker &McKenzie is of course especially strong,” comment-ed another. “Russo combines very strong technicalskills with a commercially-orientated approach, andis also a pleasant person.”

The practice has been extremely active over thepast year, and has taken on two new recruits – aneconomist and a junior associate – to cope with theswelling demand. Alongside Russo, the second part-ner at the firm is Margreet Nijhof. Russo is fully ded-icated to transfer pricing, although he stresses thathis team combines economic and legal insight andis always ready to incorporate thinking beyond theusual scope of transfer pricing into any project. Hespecialises in transfer pricing design, implementationand valuation of companies and intangible assets,

supply chain restructuring and APA negotiations.Nijhof focuses on international tax planning formultinationals with an emphasis on corporate reor-ganisations and restructurings, particularly in thecontext of transfer pricing. Together they oversee ateam of ten professionals.

An example of the breadth of the practice’sapproach is the assistance they provided a client inrestructuring negotiations on exit fees. This com-bined technical transfer pricing expertise with carefuldiplomacy and Baker & McKenzie drew on theirgood relationship with the Dutch tax authorities toensure transparency and open lines of communica-tion in developing the project.

A second challenging analysis involved undertak-ing a sustainability exercise for a huge computingmultinational, identifying the company’s core busi-ness processes and functions and assessingwhether the existing organisational and legal struc-ture of the company was sustainable from a tax andtransfer pricing perspective.Deloitte’s transfer pricing practice, led by Thijs

Heijenrath, consists of two partners and 31 fee earn-ers. It is one of the largest transfer pricing specialistgroups in the Netherlands, with two partners, fivedirectors and a significant number of senior man-agers, the practice has a relatively large contingent ofvery experienced practitioners, many of whom havepreviously worked with the specialised APA unit atthe Dutch Tax Authorities or multinational corpora-tions. The practice leads a wide variety of projectsboth in the field of transfer pricing and businessmodel optimisation, and is particularly well-respect-ed for its extensive experience in the area of APAsand mutual agreement procedures.

In the past year, the practice provided transfer pric-ing and business model optimisation assistance forthe establishment of a new global model for one ofthe leading global players in mobile telecommunica-tions. It also provided strategic planning guidance forboth existing and new business areas within EMEAfor a leading Chinese telecom & ICT solutionsprovider. And it designed and implemented a newoperating model to include tax efficient and sustain-

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able procedures, for one of the world’s largest man-ufacturers of industrial and institutional cleaning,hygiene, and sanitation products. EY have a full-service transfer pricing practice in the

Netherlands, encompassing planning, documenta-tion and controversy. They have strong economistswithin the Netherlands offices, and are also able todraw on the firm’s strong international network bothfor economic expertise and for expertise relating torelevant local areas. A key practitioner is Moniquevan Herksen, leader of EY’s EMEIA international taxand transfer pricing controversy leader.KPMG Meijburg have a highly-recommended

transfer pricing practice in the Netherlands, with onepeer commenting “of the big four the one that isvery well-regarded in transfer pricing is KPMG.” Theyhave a team of five partners supported by 52 feeearners, and together this team has the necessaryexpertise to manage all intra-group transfer pricingissues. This encompasses documentation and riskmanagement, including operational transfer pricingand adequate software solutions; tax efficient sup-ply chain management; and controversy services. Itadvises many of the Netherlands’ top companies aswell as large foreign based multinationals both interms of transfer pricing as well as in the area ofsupply / value chain management. These compa-nies operate in all areas of industry, for examplefinancial services, chemicals, pharmaceuticals, hightech, electronics & telecoms, oil & gas, automotive,FMCG, retail, services.

In the past year, KPMG’s transfer pricing practicehas worked on diverse challenges. They assisted aclient – an MNE involved in trading parts in the agri-cultural industry – in obtaining a combined rulingregarding transfer pricing, informal capital and theinnovation box, with the Dutch tax authorities. For aDutch quoted MNE in the high-tech sector, they con-cluded a bi-lateral APA between the Netherlands andthe US. And the head of the transfer pricing practice,Loek Helderman, advised an MNE mining companythrough a review of the options for a principal struc-ture in the Netherlands or Switzerland. Heldermanhimself was highly praised by peers, one of whom

said he is “especially well-known for his expertise insupply chain solutions”.PwC have an excellent reputation for transfer pric-

ing in the Netherlands. A peer said: “PwC have a verystrong transfer pricing practice, perhaps the only oneof the big four to have grown. I’d consider them thestrongest of the Big 4.” Individual practitioners werealso praised, in particular the transfer pricing practi-tioner Michel van der Breggen. Der Breggen wasdescribed as “a very strong name in I/C financing” byone adviser. Another added: “He is recognised as aleading specialist in the area of transfer pricing.”

Tier 2In 2010, Frank Schwarte, then a transfer pricing spe-cialist at DLP, and Joost Lagerberg, a transfer pricingspecialist with KPMG, decided to break away fromtheir established employers and form their owntransfer pricing boutique, Abel Advisory. “We bothsaw opportunities to deal with transfer pricing in amore efficient and pragmatic way,” said Schwarte.“And the Big 4 firms aren’t growing; they’re shrinking,which affects your career perspective. In theNetherlands we’ve seen a whole range of boutiquesstarting and almost all these firms have been suc-cessful, so we saw a market for a transfer pricingboutique.”

They hired their first employee in the summer of2011 and now, three years since its launch, theyhave grown into a firm of seven professionals. A thirdpartner joined Schwarte and Lagerberg in February2013: Olaf Smits, formerly of VMW Taxand andHewlett Packer, who is the firm’s first equity partner.They offer the full range of transfer pricing services:design, documentation, implementation, auditdefence, intercompany financing, valuations, bench-marking, and so on.

Their clients fall into two main groups. On the onehand, they do a lot of work for tax law firms thatdon’t have transfer pricing specialists, particularlyDutch boutiques. On the other, they work with largebusiness clients including several Dutch multination-als. One client said: “Abel is a small firm, so lessexpensive but twice as good because of their per-

Netherlands


sonal involvement.” Another was even more enthu-siastic: “It’s been a fantastic experience. They deliveran outstanding quality of work for a good price com-pared with the Big 4.”

In the past year, they have designed global docu-mentation frameworks for a number of clients, aswell as developing software to help firms allocatevarious fees and expenses.

Altus International began building the Altus Alliancein 2010, a global alliance of independent transfer pric-ing, tax valuation and business restructuring experts.This organisation has 19 alliance members represent-ing 22 countries across all continents. In theNetherlands, they partner with many law firms, whorely on them instead of the Big 4 to assist in complextransfer pricing and tax valuation matters.

Over the past few years, the practice has advisedon some of the Netherlands’s largest deals. In 2011it advised on the post-merger integration of FrieslandFoods and Campina. Furthermore, in 2012, Altus wasresponsible for rendering tax valuation services inrelation to the legal restructuring of Prysmian afterPrysmian purchased its competitor Draka. Other proj-ects have included global benchmarking, financialmodeling, policy design and the implementation oftransfer pricing policies.DLA Piper has a small but very active transfer pric-

ing team of six fee earners, advising multinationalcompanies on European transfer pricing issues inM&A transactions, business restructuring, supplychain planning and merger integration. Much of theirwork comes from emerging economies, and mostprojects through the past year have had a large inputfrom Africa, Ukraine, CIS and Latin America.

Examples of projects from the past year includearranging intercompany financing intra-group forHugo Boss AG, a project that involved a number of

economically developing countries. The practice alsoadvised the Meltwater group on third party financingand intercompany reorganisation. And it also advisedPagani Automobili on various transfer pricing mattersand the international expansion tax.Agata Uceda, EMEA transfer pricing director in the

practice, coordinates much of the firm’s transfer pric-ing work. She was praised by peers in the market,one saying: “Agata is recognised as a singularly pro-fessional individual, competent and very responsive.”

Tier 3BDO has a full-service tax practice in theNetherlands, with 21 partners and around 300 otherfee earners providing advice across all specialities.The international tax practice is headed by HansNoordermeer, while the practice hired a transfer pric-ing partner, Sjoerd Haringman, in early 2013 to leadtransfer pricing in the practice.

Haringman worked with other international taxpartners to advise on a large supply chain restructur-ing for a pharmaceutical company. In real estate, thepractice advised on the tax structuring of the acqui-sition of an Italian shopping centre by a Dutch com-pany. Generally, the company has seen a shift in itsclient base with more interest from medium-sizedinternational companies, who are increasingly willingto look beyond the Big 4.Ruben van Aarle, overall head of tax atTaxperience, is experienced in transfer pricing mat-ters and so also handles the firm’s small transferpricing caseload himself. In the past year, this includ-ed setting up central sourcing including the determi-nation of an appropriate remuneration for one client.It also included setting up a transfer pricing policyconcerning a combination of internet sales and salesvia rep offices, for another client.

Netherlands

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LEADING FIRMS

1 Bell GullyDeloitteEYKPMGPwC

2 CeterisGrant Thornton

With concerns about base erosion and profit shifting(BEPS), the Inland Revenue has upped its game andsophistication in terms of transfer pricing enforce-ment, although its transfer pricing legislation andguidelines remain unchanged for more than 13years.New taxpayer targets and approaches to risk areasare announced annually in the compliance reviewprogramme. In 2013, both inbound and outboundrelated party transactions have been covered, andcompanies that have incurred constant losses oftentrigger audits or adjustments.“We see there are increased transfer pricing auditactivities in past years, because the Inland Revenueis seeking more real gains,” said Neil Russ fromBuddle Findlay. “The Inland Revenue has a focus onmultinationals, especially those famous globalbrands. Transfer pricing questionnaires are issued inall general income tax audits of multinationals in thelast five years.”

“New Zealand based operations with their head-quarters in the EU or US are more likely to ensurerobust transfer prices, because they receive moreinstructions from their parent companies,” WillySussman from Bell Gully observed.Graeme Olding from Chapman Tripp warns multina-tionals should “keep a watchful eye”, though he doesnot believe the New Zealand tax authority wouldbecome “a thirsty mover” in transfer pricing enforce-ment. “New Zealand always keeps a close relation-ship with Australia and looks towards the practice inEurope. Now that Australia is adopting some newrules, New Zealand is very likely to follow,” predictedOlding.There is also an increasing trend that more corpora-tions tend to use advance pricing agreements (APA) toresolve audit disputes. Unilateral APAs have become apopular and relatively cost effective resolution since itusually takes only six to 12 months to be resolved.

Tier 1Bell Gully has a transfer pricing service that oftennegotiates and documents transfer pricing arrange-ments for domestic and offshore clients. WillySussman leads a team of two partners and four spe-cialists that also negotiate disputes for clients with theNew Zealand Inland Revenue Department. The firmsometimes uses outsourced accountants and econo-mists, both in New Zealand and offshore, to handlecomplex planning works.Diana Maitland heads the transfer pricing team at

Deloitte and has been dedicated to this area since


New ZealandTax authoritiesInland Revenue DepartmentPO Box 39010Wellington Mail CentreLower Hutt 5045Tel: +64 4 978 0779Email: [email protected] (non-residents)Website: www.ird.govt.nz


http://www.ird.govt.nz

New Zealand first introduced the rules in 1996. She iswell known in the market place as an all-round trans-fer pricing professional. The group also include a spe-cialist who was once a member of the tax authority’stransfer pricing unit, which provides extra insights intothe government’s administration and operation. The team is heavily involved in negotiations withthe tax authority in regards to both unilateral andbilateral APAs. In addition, the group also activelyanalyses and reviews client’s pricing transactionsand plans the best pricing strategy. When audits ordisputes occur, it is eligible to defend clients’ transferpricing documentation and position in front of thetax authority. Financial services, retail and manufac-turing are just some of its industry specialisations. Mark Loveday leads one of the market’s largesttransfer pricing teams with 11 dedicated profes-sionals at EY. He sits on the Auckland bench with23 years’ experience covering planning and com-pliance assistance. Loveday has particular expert-ise within the automotive, pharmaceutical, soft-ware, financial services and insurance sectors.Alejandro Ces joined the practice from Ceteris andcontributes to the team with his 20 years of expe-rience advising multinational companies with theirglobal transfer pricing planning, documentationand defence needs.The team’s service provision is both domestic andinternational. Its TP people have experience inEurope, Asia, Australia and South America. Benefittingfrom the global and regional network, the practiceoften receives new knowledge and information fromregional headquarters such as Australia andSingapore. The practice keeps excellent relationshipswith the tax authorities, and has been involved in asignificant number of successful APA negotiationseach year.

KPMG’s transfer pricing services, led by Kim Jarretthave been active in working with clients in respectof unilateral and bilateral pricing agreements, includ-ing advice on the importance of pre-emptive plan-ning and processes to ensure that sufficient andaccurate documentation is maintained. Kyle Finnertyand Kimberley Webb arrived from Canada and Hong

Kong this year, which bolstered the team to 12.Jarrett and Finnerty handled a case in January 2013involving transfer pricing and customs problems con-cerning the purchase price of goods for a NewZealand-based distributor, which significantlydecreased after their client had a restructuring. Theduo undertook careful negotiations government bod-ies and convinced them the change of price was notof a transfer pricing nature.

New Zealand

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Corporate income 28%Capital gains 0%Branch tax 28%

Withholding taxDividends 0%/15%/30% (a)Interest 15%Royalties 15%Technical Services fee 15%Branch remittance fee 0%

Net operating lossesCarryback 0Carryforwards Indefinitely (b)

a) Dividends paid to a nonresident are subject toa 30% nonresident withholding tax (NRWT) tothe extent not fully imputed. Fully imputeddividends are subject to a 0% NRWT ratewhere the nonresident has a 10% or morevoting interest in the company. In most othercases, the NRWT rate will be 15%. Rates maybe subject to further reduction under anapplicable tax treaty.

b) Losses may be carried forward indefinitely,subject to a 49% continuity of ultimate shareownership requirement. Losses also may beoffset against the profits of other groupcompanies, where the companies are at least66% commonly owned at all relevant times. Itis generally possible to carry forward part-yearlosses.


Peers endorse PwC has one of the strongest trans-fer pricing practices in New Zealand. The teamemphasises advice regarding business transforma-tion planning, compliance and document manage-ment, and audit defence strategies including APAnegotiations. Erin Venter is the director who overseesthe transfer pricing department.

Tier 2Mathew McKay at Ceteris, and two associates,advised a global financial institution on the estab-lishment and maintenance of its New Zealandbranch structure and its local income tax conse-quences, which proactively help the client to avoidfuture risk.Ceteris is an independent transfer pricing andvaluation firm in New Zealand that usually pro-vides support to leading multinational clients.Leslie Prescott Haar is the managing director who

leads the team of four. Haar has about 23 years ofexperience practicing in the US, Australia and NewZealand and specialises in international anddomestic transfer pricing. Peers confirm her profi-ciency as an APA negotiator. Being a boutique firm,the team’s service offerings have a concentrationon the more complex aspects such as financialdealings and intangible property transactions. Yetits specialists are eligible for all traditional TP serv-ice like litigation support, audit defence, APA andnegotiations. Greg Thompson leads the transfer pricing serviceline at Grant Thornton in New Zealand. After seniormanager Elizabeth Burrows returned to the team inearly 2013, the dedicated team retains a workforceof three. Although there have not been many highprofile transfer pricing cases to keep the team busy,it firm maintains its integrity as part of Grant Thorntonglobal TP network.

New Zealand


LEADING FIRMS

1 DeloitteEYPwC

2 BA-HRKPMG

3 Arntzen de BescheWiersholm

For a country of its size and economic character,Norway generates a large quantity of transfer pricingwork. This primarily stems from its oil and gas indus-tries and the vast quantities of natural resources con-tained within its distinctive physical terrain. The interna-tional size and scale of the companies and operationsinvolved in the energy industry, and in oil specifically,give rise to a disproportionately large amount of trans-fer pricing work. Consequently, even some of the lawfirms have fairly advanced transfer pricing practices.New, overarching transfer pricing rules were last

introduced in 2008, and over the past year theauthorities have become much harsher in imposingthem and in their expectations of compliance. “The tax authorities have really been saying no,

transfer pricing has existed for such a long time thatwe expect that the companies have organised theirbusiness according to those new rules,” said HansMartin Jorgensen, head of transfer pricing at Deloitte.“Because of that the tax authorities have been muchmore aggressive around transfer pricing, and havesaid that they will be in the future, both in documen-tation and planning but especially, I think, in docu-mentation.”

Several advisers echoed this description of a particu-larly active and aggressive tax authority in the contextof transfer pricing. One gave the example of the oil tax-ation office, which has been looking hard at transferpricing within the petroleum industry. “The authoritieshave centralised their operations and become moreefficient,” said Joachim Bjerke at BA-HR. “The generalattitudes to tax planning have had an impact too.” Finally, a special oil tax act regulating how to tax

oil companies has introduced changes specificallyrelated to transfer pricing. “It provides very technicalinstructions on how to calculate what proportion ofyour intercompany debt is deductible,” said HansMartin Jorgensen of Deloitte. “The bad thing about itis that it will have a huge impact on the profitabilityof some of Norway’s big oil fields.”

Tier 1 In a jurisdiction with few practitioners devoted to trans-fer pricing work alone, Deloitte sets the pace with twoexperienced partners dedicated exclusively to the sec-tor. The department is led by Hans Martin Jorgensen,who works primarily with transfer pricing optimisation andplanning as well as with audit defence and documenta-tion. His colleague, partner Petter Grünner, is also dedicat-ed full-time to transfer pricing; he has extensive experi-ence advising both Norwegian multinational corporationson outbound investments, and non-Norwegian multina-tional corporations on inbound investments into Norway.Grünner also has wide-ranging experience in transfer pric-ing issues that occur in Norway’s vital petroleum sector. As in many other jurisdictions, increasingly active

tax authorities have boosted the amount of tax auditwork that transfer pricing practitioners take on. Thishas moved the practice’s focus from M&A-style, workheavy on documentation, and towards reviews and

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Tax authoritiesMinistry of FinancePO Box 8008 Dep, NO - 0030 - OsloTel: +47 22 24 90 90 Email: [email protected] Website: www.regjeringen.no/en/dep/fin.html?id=216

Norway


http://www.regjeringen.no/en/dep/fin.html?id=216


analyses of the structures as they actually work froma transfer pricing perspective. In this context, dataanalysis skills have grown greatly in importance.Another product of such increased tax authority activ-

ity is more litigation work. The partner who takes on mostof this work in the context of transfer pricing is Finn Eide. Examples of the kind of complex work that the team

has taken on in the past year include a multi-country proj-ect involving the restructuring and redesign of the transferpricing policy of a major consumer goods company. Thisincluded IP-planning as well as designing a new modelfor their distribution company, and also necessitated VAT.

EY’s transfer pricing practice comprises businessstructuring and restructuring, transactional analysis, con-troversy work, MAP, operational transfer pricing servicesand the drafting of intercompany agreements, as wellas the limited quantity of APA work that the Norwegianenvironment enables. Its team of 18 professionalsincludes leading experts in the shipping, financial serv-ices, consumer goods, parmeceuticals and telecommu-nications industries. Unsurprisingly, it is the biggest andmost active transfer pricing practice in its jurisdiction.The department is headed by Mareus Leivestad,

the one partner among its 18 professionals. It is work-ing on the establishment of a worldwide CCA for oneof Norway’s biggest oil companies, which has a verycomplex legal and operational structure and invests

huge amounts in R&D, launching approxiamtely 400new projects each year. EY are therefore working tocreate a very flexible and scalable CCA framework. Morten Beck leads transfer pricing at PwC in Norway,

overseeing a team of five partners and 14 fee earners.PwC has perhaps a market-leading transfer pricingpractice in Norway: it is the only Norwegian practicewith dedicated transfer pricing professionals in morethan one office location (Oslo, Bergen and Stavanger),and Beck is among the most experienced and recog-nised transfer pricing professionals in Norway. The practice assists clients in the development of tax-

efficient structures that help increase compliance withlegal requirements, prepare for rapid audit response,resolve transfer pricing disputes and decrease transferpricing exposure in future periods. In the past year, spe-cific projects have included assisting a multinationalenergy corporation – a big player in the European Energymarket – in preparing pan-European transfer pricing doc-umentation, covering more than 100 legal entities andencompassing more than 90 internal transaction groups.Another project involved advising a foreign multi-

national corporation through a global business restruc-turing process, specifically providing advice on the pos-sibility of transferring intellectual property from Norwayto a foreign jurisdiction. And the practice also assistednumerous clients through comprehensive tax audits.

Norway



Corporate income tax 28% (a)Capital gains 28%Branch tax 28%

Withholding tax (b)Dividends 0/25%Interest 0%Royalties 0%Branch remittance tax Not applicable

Net operating losses (Years)Carryback Two years provided the

business ceases to existCarryforwards – no limit

a) The government has proposed to reduce thecorporate income tax rate to 27% effective fromJanuary 1 2014. Companies engaged inexploration, production and pipelinetransportation of petroleum pay special nationalincome tax at 50% in addition to the ordinarycorporate tax of 28%, that is a marginal tax rateof 78%. The marginal tax rate for oil companiesis not proposed to be reduced.

b) No tax withheld on dividends to corporateshareholders resident in the EuropeanEconomic Area if the shareholder fulfils certainsubstance requirements.

Source: Tax advisers from Selmer – Taxand

Tier 2BA-HR has a significant transfer pricing practice, led bythe firm’s overall head of tax, Joachim Bjerke, alongwith the partner and energy market expert Jan BJansen. While accounting firms in Norway handle mostof the compliance work, including documentation, it islaw firms such as BA-HR that lead the litigation work.In Norway, this litigation work primarily comes from

the petroleum tax system, due to the dual influencesof the country’s hyperactive oil industry and the sector’s78% tax rate. Jansen is an acknowledged leadingauthority on disputes in the context of energy tax.Jansen has been very busy in this area this year. He hasbeen working with several oil companies on the extentof the deductibility of R&D costs when these oil com-panies have contributed financially to such projectsorganised by the government or research institutions. TheNorwegian Oil Taxation Office accepts that these costsare relevant, but alleges that the participating Norwegiancompanies should invoice its related companies in otherjurisdictions as they may benefit from the same research. Elsewhere, Jansen has also been representing sev-

eral companies on the position of their interest mar-gins when they have been challenged by the taxauthorities, as well as fighting cases to do with insur-ance premiums and the pricing of gas deliveries.

KPMG is the third largest provider of audit, tax andadvisory services in Norway. It has a large tax team whichdraws on its excellent international network, investing thepractice with outstanding international tax expertise. Inthe context of the oil and gas industries, the practice isstrong in all relevant aspects of transfer pricing. Much ofthe practice’s oil and gas work is led by Jan Samuelson,who has a background as a tax manager in Exxon.

Tier 3For decades one of Norway’s leading law firms,Arntzen de Besche’s tax practice has grown immenselyboth in quantity and quality since Anders Heieren left PwCto head the department in 2011. This evolution continuedapace through 2012 to 2013, with the practice growing toa total of 13 professionals. Among these, the practice hastwo partners and four fee earners involved in transfer pric-ing work; the highly experienced Anders Heieren keeps

an eye on this sector of tax work at the firm, too. In thepast year, the practice added Synnøve Vedde-Fjærestad,formerly with the Ministry of Finance, to its team.Projects in the past year have included advising on

the group internal financing of a client’s Norwegianactivity: determining an arm’s-length pricing methodand verifying the margin level, and performing similaradvisory services for the client’s guarantee fees andcash management fees. Another similar projectinvolved advising on the determination of a pricingmethod for group internal financing, this time with a par-ticular focus on how to allocate various bank fees. Anda slightly different challenge involved working on a trans-fer pricing conflict over royalty charges to Norway froma centralised product development and R&D company.Arntzen de Besche is still fairly new as a firm in this

area of tax law, but their tax lawyers are generallywell trained and are equipped for transfer pricing aswell as more general tax work, and so they are nowfocusing more of their skills on this area.

Wiersholm have a well-established tax practiceprimarily focused on two sectors of tax work: energyand private equity. Arvid Skaar is the senior tax part-ner engaged with oil and electricity companies, andthe practice as a whole has a great deal of experi-ence advising oil service companies as well as firmsin the shipping industry. Partner, Harald Willumsen,spearheads the firm’s work in private equity. Concomitant with these sectors, the practice also has a

strong line in transfer pricing advisory services in the ener-gy industry. Skaar leads this alongside the young part-ner Andreas Bullen. Skaar and Bullen work across trans-fer pricing advice and disputes, including documentationand setting up intra-group agreements that will satisfy thetax authorities. They usually outsource the benchmark-ing components of extended transfer pricing projects.In the past year, the firm has been busy advising

oil service companies moving out of Norway anddealing with the attendant tax issues such as exittaxes. They have also worked with companies thathave intra-group service costs which to need to bedistributed to all subsidiaries, with Wiersholm advis-ing on how to figure out the amount of costs thatshould be taken on by each subsidiary.

Norway

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LEADING FIRMS

1 DeloitteEstudio OlaecheaEYKPMGPwC

2 Muniz, Ramirez, Perez – Taiman & OlayaRodrigo, Elias & Medrano

Peru’s transfer pricing professionals expect the mar-ket for their services will continue to grow this year,as disclosures and adjustments are both expectedto increase. The tax authority made several amendments to

the transfer pricing rules in the past year, toincrease disclosure requirements and to eliminateuncertainty about the scope of the application ofthe rules. The amendments went into effect inJanuary 2013. As amended, the transfer pricing rules now apply

to related party transactions and also to transactionswith entities located in “tax haven” jurisdictions. The amended rules also require taxpayers, sub-

ject to the country’s transfer pricing rules, to file anannual transfer pricing study to the tax authority,and retain all supporting documentation. Thisrequirement only applies to transactions that affectthe calculation of income tax in Peru. “The market is changing because of these new

rules, so that companies need more complete plan-ning reports and analysis,” said Gloria Guevara, of

Deloitte. The first transfer pricing studies are due inOctober 2013.The amended rules also clarify the rules on transfer

pricing adjustments, which originally stated that thetax authority could only make an adjustment to atransaction that produced “tax damage”, for exampletaxable income or deductible costs and expenses. The amended text, however, makes it clear that

the tax authority can make an adjustment evenwhen there is no tax damage, if the transaction willaffect the taxpayer’s tax calculations. Naturally, trans-fer pricing professionals expect controversy willincrease as a result.They also see the rule amendments as proof that

their transfer pricing practices are about to growbeyond planning and documentation services. “There is no controversy work yet, because transfer

pricing has just started in Peru,” said Roberto Cores, ofEY. “The tax authority has created a specific division tohandle international taxation and transfer pricing.Audits are expected to increase in the next few years.”However, other transfer pricing professionals believe

controversy is just around the corner. “Recently, therehave been audits by the tax authority related to bothtax and transfer pricing issues, meaning that in thenear future, it is possible the strongest line of businessmight be the controversy practice,” said FernandoCastro, of Muniz, Ramirez Perez – Taiman & Olaya.

Tier 1With nearly 40 professionals devoted to transfer pric-ing, Deloitte’s transfer pricing practice is one of Peru’slargest. It is also one of most experienced, havingexecuted the country’s first transfer pricing strategy.


PeruTax authoritiesSuperintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT)Av. Garcilaso de la Vega 1472LimaTel: +511 315 3303Website: www.sunat.gob.pe

http://www.sunat.gob.pe

Its core businesses are planning and documentation,although it also advises on advance pricing agree-ments (APAs). Clients include Peruvian and foreigncompanies in a variety of business sectors, includingmining, pharmaceuticals, financial services, retail andtelecommunications. The practice is led by RogelioGutierrez and Gloria Guevara.Led by Gustavo Lazo, Estudio Olaechea’s transfer

pricing group specialises in transfer pricing advisoryand consulting services for foreign companies withoperations in Peru. The practice analyses transfer pric-ing reports, and recommends modifications as neces-sary. Clients include leading logistics, oil and gas andlife science companies.

EY’s transfer pricing practice advises some of Peru’smost prominent companies on transfer pricing studiesand documentation. The practice is led by MarcialGarcia, who is known for his deep knowledge of trans-

fer pricing matters specific to the mining and oil andgas industries. Led by Juan Carlos Vidal, KPMG’s transfer pricing

group serves companies in a number of key sectors,including mining, telecommunications, banking, insur-ance, energy, infrastructure and technology. The groupassists with transfer pricing planning and related partydocumentation, and represents clients before the taxauthority and in court.

PwC’s transfer pricing practice advises clients on anumber of matters, including transfer pricing studiesand supporting documentation, transfer pricing plan-ning, transfer pricing in corporate restructuring andaudit defense. The practice is led by Fernando Becerra.

Tier 2Muniz, Ramirez, Perez – Taiman & Olaya providesservices related to transfer pricing planning and

Peru

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Corporate income tax rate 30% (a)Capital gains tax 30%Branch tax 30% 4.1% (b)

Withholding taxDividends 4%Interest 4.99% 30% (c)Royalties 30%Branch remittance tax 4%

Net operating losses (years)Carryback 0Carryforwards 4/Unlimited (d)

a) Resident enterprises engaged in manufacturing,extractive or trading activities may opt for aspecial regime if income does not exceed aspecified amount -- the tax rate is 2.5% ofmonthly net receipts. For non-resident legalentities and branches, agencies or other PEs inPeru (although the latter are considered residentlegal entities), tax is imposed only on Peru-sourced income.

b) Branches are subject to the normal corporateincome tax. Additionally, dividends and otherprofit distributions, as well as branchremittances of net profits abroad, are subject toa 4.1% withholding tax when paid to residentand non-resident individuals, and to non-resident entities.

c) The 4.99% rate applies to certain cash loansbetween unrelated parties, and where theinterest rate, commissions, costs and bonusesis up to LIBOR+7 for US and European loans;in the case of other sources, the taxauthorities will determine the applicable ratebased on the documentation provided by theborrower and the technical informationreported by the Peruvian Central Bank ofReserve. Any excess is subject to awithholding tax of 30%.

d) A taxpayer has the option to carry forward allnet operating losses for four years or carry thelosses forward indefinitely, but only up to 50%of the taxpayer’s taxable income of eachsubsequent year.


studies. Fernando Castro Khan leads the firm’stransfer pricing practice.The transfer pricing practice of Rodrigo, Elias &

Medrano supports clients in legal matters related to

transfer pricing, including both administrative andjudicial litigation. The practice is led by Silvia Munoz,who designed some of Peru’s first transfer pricingregulations.

Peru


LEADING FIRMS

1 Isla Lipana & CoSyCip Gorres Velayo & Co

2 Manabat Sanagustin & CoDu-Baladad and Associates – WTS

After almost seven years of amendment, theSecretary of Finance of the Philippines issuedRevenue Regulation No. 2-2013, or the new transferpricing guidelines, in January 2013. That has puttransfer pricing at the top of the tax office’s agendathis year.The new regulations provides guidance in applying

the arm’s-length principle to related party transac-tions, both on a domestic and a cross-border basis.The law is also in line with the OECD Transfer PricingGuidelines. “The tax office is becoming more under-standing to the international rules since a lot ofmultinational corporations are opening operationshere,” Dennis Dimagiba from Quisumbing Torrescommented.Practitioners welcome the issuance of the new reg-

ulation. “It gives clear guidepost to clients, so thattaxpayers know how to avoid transfer pricing risksunder proper requirement,” said Emmanuel Alcantarafrom SyCip Gorres Velayo & Co. Yet, no specific method is preferred by the Bureau

of Internal Revenue (BIR) to measure an arm’s-lengthprice. “It is crucial for companies get quality docu-mentation ready and prove the comparability ofindependent transactions,” advised Benedicta Du-

Baladad from Du-Baladad and Associates. Under thenew guidelines, taxpayers are required to maintainand keep adequate and specific transfer pricing doc-umentation. More importantly, the documentationmust be contemporaneous.The BIR activities are expected to intensify as a result

of new regulation. Multinationals that generate lowtax payments are most likely to be the BIR’s review orcompliance targets because they normally come intointercompany transactions, according to Du-Baladad.Moreover, transactions that take advantages of taxincentives are also warned to pay extra attention.For the coming year, practitioners hope the BIR

would issue circulars to further clarify the regulationsissued this year or provide guidelines on the imple-mentation.

Tier 1 Isla Lipana & Co is the member firm of PwC andoffers a recognisable transfer pricing service withCarlos Carado II as the leading partner. The practicereceives clients from both domestic and internation-al origins and provides them with comprehensivetransfer pricing planning by reviewing their risk,opportunity, assessment and benchmarking. Beauseof the new transfer pricing regulations, more clientshave started to realise the need of proper documen-tation management. The team has been active toassist documentation studies as well as appropriatevalue chain exercises in the past year. Moreover, it also supports clients with good solu-

tions when investigations occur. One of its clientsrecently faced a severe assessment from the BIRworth $45.7 million. The client approached the firm

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PhilippinesTax authoritiesBureau of Internal RevenueBIR National Office Bldg, BIR Road, Diliman, Quezon City, PhilippinesTel: +63 929 7676 / +63 927 2511Email: [email protected]: www.bir.gov.ph


http://www.bir.gov.ph


for its strong dispute resolution skills because it didnot want the case to go into full litigation in thecourts. The team had a strategy to not only convincethe BIR, with solid technical arguments, but also edu-cate the officials with up-to-date international prac-tices by inviting them to seminars held by OECD spe-cialists. In the end, the BIR agreed to close theassessment at a very low cost.

SyCip Gorres Velayo & Co is known as the localaffiliate of EY in the Philippines and pioneers in trans-fer pricing service provisions after starting it localtransfer pricing practice in 2001. Over the past 12months, the group has grown from 14 members totwo partners, two senior managers, five managersand 10 senior associates. Widely recognised Romulo

Danao, Jr is founder and country leader of the prac-tice and started his profession handling local transferpricing assignments in the semi-conductor andbanana industry. Reynante Marcelo has profoundknowledge in international with experience in han-dling both local and regional transfer pricing issues. Over the past year, the transfer pricing group con-

ducted a number of documentation studies for bigmultinational companies engaged in different indus-tries. It has also led a global transfer pricing studyengagement for local companies to review and eval-uate the client’s pricing policies.With regard to audit and controversies, the team

has assisted a big multinational agricultural produc-tion company with respect to a huge multi-million-

Philippines



Corporate income 30%Capital gains 30% (b)Branch tax 30% (a)(d)

Withholding taxDividends 15%/30% (e)Interest 20%Royalties 20%/30% (f)Technical services fee 30%Branch remittance fee 15%

Net operating lossesCarryback 0Carryforward 3 years (c)

a) Philippine corporations are taxed on worldwideincome; nonresident companies are taxed onlyon Philippine-sourced income. A foreigncorporation with a branch in the Philippines istaxed on Philippine-sourced income.

b) Capital gains are generally taxed as income.However, gains on the sale of shares not tradedon the stock exchange are subject to a 5%withholding tax on the first PHP 100,000 and10% thereafter. Gains on the sale of shares listedand traded on the stock exchange are taxed at

one-half of 1% of the gross selling price. Gainsderived from the sale of real property not used ina business are subject to a 6% final withholdingtax based on the sales price or fair market value,whichever is higher.

c) Losses may be carried forward for 3 years unlessthe taxpayer benefits from a tax incentive orexemption. Losses may not be carried forwardwhere the business undergoes a substantialchange in ownership.

d) The corporate income tax rate for regionaloperating headquarters is 10%.

e) Dividends distributed by a Philippine company toa nonresident are taxed at 15%, provided thecountry of the nonresident foreign corporationallows a tax credit of 15%. Otherwise, thedividends are taxed at 30%.

f) Royalty payments made to a nonresident aresubject to a 30% withholding tax, unless the rateis reduced under a tax treaty, subject to aconfirmatory ruling from the BIR. A 20% finalwithholding tax is levied on royalty paymentsmade to a domestic or resident foreigncorporation.

Source: Tax advisers from Salvador & Associates – Taxand

dollar tax assessment against a client, based onalleged transfer pricing mechanisms. It prepared andsubmitted a position paper to contest the assess-ment. In the end, the team was able to convince theBIR examiners to close the audit assessment.

Tier 2KPMG’s local presence in the Philippines appears asManabat Sanagustin & Co. Following the issuanceof transfer pricing rules in January 2013, a new serv-ice line has been opened in response to the marketneeds. Glenn Raymond Paradela joined the firm inJanuary as the supervisor. As part of the KPMG net-work, the practice often provides global transfer pric-ing services, together with sister firms in other juris-dictions. During one recent case, disputed allocationcharges arose among different manufacturing enti-ties in Asia Pacific. The team, working closely withcounterparties in the region, reviewed cases from the

Philippine perspective. Under the new rules, theteam has also assisted several studies in differentindustries and provided business certainty to clients.The team has also helped a number of Japaneseclients with their investment in the Philippines.Although the transfer pricing practice is still in its

infancy in the Philippines, Du-Baladad andAssociates – WTS is prepared to offer transfer pric-ing studies and defence to clients from a domesticand international basis. Tax partner Benedicta Du-Baladad leads the dedicated practice of five, includ-ing two partners. The firm is a member of World TaxService Alliance and the Transfer Pricing Analysts. Theteam can help clients through risk assessment, plan-ning and benchmark analysis, methodology, and APAnegotiations. In addition, the team also assistsclients to obtain advance rulings from the tax author-ity given that there are very few public precedentsavailable in the growing market.

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Crido – TaxandDLA PiperMDDPTaxonityTaxplan

3 DentonsDomanski Zakrzewski Palinka sp.

Poland is a member of the OECD and therefore thetransfer pricing legislation in the jurisdiction isaligned with the OECD guidelines. In February 2013,the Ministry of Finance released the details of a draftdecree in which they proposed to revise the hierar-chy of transfer pricing methods, define comparabilityanalysis, implement rules concerning businessrestructurings, to identify elements of low value-adding services, define shareholder costs, allow forthe possibility of trilateral procedures, and to alignthe Polish regulations with global standards. Themajority of these changes aimed to achieve adher-ence with the 2010 OECD Transfer Pricing Guidelinesfor Multinational Enterprises and Tax Administrations. Polish taxpayers are able to apply for advanced

pricing agreements (APA) that cover transactionsbetween parties and relations between a permanentestablishment and its head office. Polish APAs are

valid for up to five years at which point the agree-ment can be extended with the caveat that the cri-teria used to evaluate such an agreement have notchanged and that the application is made six


PolandTax authoritiesMinistry of Finance12 Swietokrzyska St, 00-916 Warsaw, PolandTel: (+48 22) 694 55 55Email: [email protected]: www.mofnet.gov.pl


Corporate income tax 19%Capital gains (taxable according togeneral CIT rules) 19%Branch tax 19%

Withholding taxDividends 0% to 19% (a)Interest 20% (b)Royalties from patents and licences 20% (b)Branch remittance tax N/A

Net operating losses (years)Carryback n/aCarryforwards 5

a) Dividends paid by a Polish company to a non-resident company are taxable at 19% unlessreduced under a tax treaty. Full exemptionunder EU Parent-Subsidiary Directive available.

b) The EU Interest and Royalties Directiveauthorised Poland to levy a 5% withholdingtax on interest paid to a qualifying EUcompany until June 30 2013. A full exemptionbased on this Directive became applicablefrom July 1 2013.

Source: Tax advisers from Crido Taxand


http://www.mofnet.gov.pl

months before the APA is due to expire. New lawsare expected with regard to transfer pricing and theMinistry of Finance has expressed an interest inupdating APA regulations.Advisers explained that the basic tax system in

Poland is relatively simple to understand. However, inthe past few years, this simplicity has been washedaway in a deluge of new taxes implemented by thePolish state in an attempt to counteract the econom-ic downturn. Another torrential downpour of taxes isexpected at the start of 2014. These are likely toflood the market with the need for the rethinking ofany international tax and transfer pricing optimisa-tion structures.These changes will mean that taxpayers in the

jurisdiction need to be more proactive with their taxpreparation in avoid being stung by the authoritiesfor not complying with the increasingly demandinglegislation. This tightening of the tax system has been coupled

with the Polish tax authorities becoming moredemanding over the last year, said Sławomir Borucof Baker & McKenzie, and many of these taxchanges have granted the tax authorities morepower. Boruc said his tax practice has been busyover the last year and is indicative of the increasedactivity of the tax authorities in Poland. MatthewO’Shaughnessy, head partner at Taxplan –Taxperience, explained that the tax authorities arenot intense with regards to the frequency of theirassessments but once they have begun, they havea tendency to become quite ruthless. However, one adviser clarified that although the

approach of the tax authorities has become moreaggressive in comparison to how they were in thepast; they are still much less combative than manyother authorities in the EU and indeed, the rest of theworld.

Tier 1Iwona Georgijew leads the transfer pricing team ofDeloitte Poland. The practice comprises one partnerand 29 other dedicated transfer pricing professionals.The group represent clients in advanced pricing

agreements (APA) negotiations with the Ministry ofFinance. The team boasts a 100% success rate withregards to their completion of APAs for their clients.The practice negotiates APAs for clients from a vari-

ety of industries including electronics, pharmaceuti-cals, automotive, packaging, finance, IT, industrialequipment, media and entertainment, and fast-mov-ing consumer goods.The transfer pricing team of EY Poland offers a

range of services and in 2012 was able to success-fully conclude two APAs – one with the Netherlands,the other with Luxembourg – and one mutual agree-ment procedure (MAP) with Germany.The transfer pricing team benefits from the pooled

knowledge from a variety of other service lines at thepractice to work on M&A, pharmaceutical, guaran-tees and intangible valuation, and international proj-ects. The transfer pricing team particularly works in rela-

tion to the valuation of intangibles, taking intoaccount the new OECD developments. This involvesthe valuation of intangibles using non-standardmethods; the allocation of costs in relation to thedevelopment of intangibles; engagement with theMinistry of Finance on the impact of local operationson the development of intangibles and their influ-ence on transfer pricing; and the preparation of tax-payers to defend the assumptions behind intangiblevaluations.The transfer pricing practice of KPMG Poland is

headed by partner, Jacek Bajger. The team offers awide variety of transfer pricing services including theanalysis of risks, APAs, documentation, benchmarkingstudies, policy planning and intra-group settlements,allocation of profits, assistance during tax audits, andthe implementation of procedures aimed at eliminat-ing double taxation. The partner in charge of the transfer pricing depart-

ment of PwC Poland is Mike Ahern. The practiceoffers a range of services including transfer pricingplanning and optimisation, providing recommenda-tions on product flows and intangible assets, risk,documentation, assistance during audits, defence ofdocumentation, and APAs.

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The team is also capable of helping clients plantheir transfer pricing affairs reviewing inter-companyagreements, benchmarking studies and documenta-tion.Clients were positive about their experience of thetransfer pricing practice, describing their experienceas “very good”.

Tier 2Crido – Taxand, formally known as Accreo – Taxand,changed its name in March 2013 after two partnersleft the firm. Although these partners took a selectionof loyal clients with them, the firm reported increasedrevenues in the first part of 2013, suggesting that theloss has not affected their client’s faith in their ability.The transfer pricing team at Crido – Taxand offers afull range of transfer pricing services includingrestructuring for transfer pricing optimisation,methodology, and economic analyses. The team recently completed work for the Polishsubsidiary of EDF for a deal worth $20 million. Theywere required to determine the transfer pricingmethod to be applied in the joint transaction opera-tion focused on the trade of coal and energybetween the Polish and foreign entities of the group. The transfer team of DLA Piper in Poland consistsof both lawyers and economists. The practice there-fore offers the full range of transfer pricing services totheir clients.The tax practice is particularly specialised in the oiland gas industry and provides ongoing advice to thethree largest companies in Poland (oil and gas), PGE(energy), and PGNiG (natural gas), as well as a num-ber of other large multinational companies such asNike (sports retailer) and Shell (energy and petro-chemicals).The practice was shortlisted for “Best Polish TaxFirm” and “Best Transfer Pricing Firm” at theInternational Tax Review European Tax Awards 2013. Arkadiusz Żurawicki is the head of the transferpricing team at MDDP. Since 2010, Tomasz Michalik,the head of the tax practice, has been holding theprestigious position of Chairman of the NationalCouncil of Tax Advisors.

The professionals at the practice are divided upinto specialised sub-practices dealing with indirecttax, direct tax, payroll and ex-pat taxes, litigation andtransfer pricing. The majority of the transfer pricingteam are economists and as such, MDDP offers thefull range of transfer pricing services.The practice has clients from a range of industriesincluding pharmaceuticals, financial services,telecommunications, automotive and real estate.The transfer pricing team recently advised on oneof the largest international hypermarket chains on amutual agreement procedure in a deal worth $5 mil-lion per year. This deal was complex and involvedthe Polish tax authorities attempting to carry out twoseparate procedures at the same time. MDDP suc-cessfully convinced the authorities that they wereunable to do this.

Taxonity is a transfer pricing specialist with a focuson both domestic and international transfer pricingissues. Taxonity designs the transfer pricing policy for prop-er reconciliation of transactions to be performedbetween related companies. The practice indicatesthe method of determining the transfer price as wellas through the comparative analysis (benchmark)they are able to determine the price level that shouldbe used in the transaction.The practice also offers services related to customsvaluation, preparation of documentation along withthe transfer pricing documentation to provide protec-tion for the customs valuation. The team has thecapacity to defend its clients in relation to transferpricing disputes and litigation.

Taxplan is an independent advisory firm thatoffers a full range of service tax and legal advice aswell as the outsourcing of accounting work. Thefirm is a member of the international network oftax-boutique firms, Taxperience International. Asidefrom Taxplan, Taxperience has offices in Germany,Russia, Czech Republic, Hungary, and Switzerland.As such, Taxplan benefits from strong ties withthese jurisdictions.Taxplan is relatively modest in scale with two part-ners and nine other fee earners. Although the practice

Poland


lost Marcin Romańczuk, a partner at the practice, theygained Aleksandra Kalinowska, a partner from WTSSAJA, and Joanna Deutryk from KPMG. Although the practice offers a wide range of serv-ices, they are particularly strong in the areas of inter-national tax and transfer pricing; especially in thesphere of benchmarking. The practice possesses allthe necessary components to offer a full range oftransfer pricing services.The tax practice advised a number of significantPolish companies over the past year including a largecar contract manufacturer which forms part of aninternational group. Taxplan advised on the tax treat-ment of fees for intragroup transactions involvingprice and currency risk.

Tier 3Karina Furga-Dąbrowska leads the transfer pricingteam of Dentons Poland which comprises of twopartners and one other transfer pricing professional.The majority of the work that the practice does isconcerned with the preparation of statutory transferpricing documentation.

Other work the practice is capable of includes thestructuring of intra-group transactions, including thedrafting of transaction documentation and bench-marking studies aimed at determining the arm’s-length consideration. The transfer pricing team was commended byclients who “highly recommend this company – thedocumentation they prepared was excellent.”. Thepractice was praised for always being up to datewith changes in TP documentation rules.Although transfer pricing is not considered an areain which the tax team at Domanski ZakrzewskiPalinka specialises, if a client requests this kind ofwork then the practice is more than capable of oblig-ing. DZP employs economists as well as legal advis-ers and is thus able to offer the full range of transferpricing services. The pharmaceuticals team at DZP is the biggest inPoland. They recently advised Hasco-Lek, a Polish phar-maceuticals company, analysing transactions conclud-ed by a manufacturer of pharmaceutical products. Theyalso drafted the transfer pricing policy documentationfor intra-group sales of products and service.

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Garrigues – TaxandGrant ThorntonTransfer Pricing Associates GlobalUría Menéndez – Proença de Carvalho

3 Abreu AdvogadosBaker Tilly PortugalRicardo da Palma Borges & Associados, Sociedade de Advogados, R.L.Vieira de Almeida & Associados

Portugal is a member of the OECD and as such, itstransfer pricing legislation is aligned with the mostrecent guidelines. Taxpayers with net sales and otherincome in the previous fiscal year which is less than€3 million are obliged to set up and maintain a taxdocumentation file that justifies their transfer pricingpolicy and that supports the comparability analysiscarried out.

Since 2008 detailed advanced pricing agreements(APA) have been in place in Portugal. These state thatan APA request or proposal should be submitted to theauthorities up to 180 days to commencement of thefirst fiscal year covered by the agreement. The maxi-mum length of an APA is 300 days for unilateral and480 bilateral. The APA is then valid for three years max-imum at which point it can be considered for renewal.

VAT issues are now covered by transfer pricing leg-islation.

At present, no specific transfer pricing penaltieshave been defined by the Portuguese law.

The Portuguese tax environment is tempestuous.“The tsunami has passed but there will be after-shocks,” proclaimed a senior associate at Garrigues -Taxand in reference to the tax environment inPortugal. “We are at the peak of the EU tax reforms,”he said. “This means that it will take some time forthese changes to affect the tax landscape.”

The tax authorities were described by a numberof partners as more aggressive, specifically towardstax disputes. As a result, some advisers in the juris-diction reported that their clients had becomemuch more cautious with investments. One partnerargued that some of the assessments being car-ried out by the authorities are both “illegal” and“unconstitutional”.

The Portuguese government is treating the financialservices industry as a cash cow of prodigious mass.Individual taxpayers have been squeezed endlesslyby the recent changes to the tax system in Portugaland now the focus is shifting to the large corpora-tions. Clients are therefore not presently viewingPortugal as a good place to invest.

Tier 1 Deloitte Portugal’s transfer pricing team is headed byPatricia Matos. The team consists of experts in eco-nomics, tax and law allowing them to analyse theirclients’ transfer pricing needs from all three perspec-tives.


PortugalTax authoritiesDirectorate General for TaxationRui da Prata 10 2nd Floor, 1149-027 LisbonTel: +351 21 882 3093Fax: +351 21 881 2938Email: [email protected]: www.portaldasfinancas.gov.pt


http://www.portaldasfinancas.gov.pt

The practice worked closely with the Portuguesetax authorities’ transfer pricing team on a number oftechnical issues and has been involved in the criticalanalysis of updates made to the Portuguese transferpricing legislation. The team has assisted in settingup the only two APAs to have been structured andapproved in Portugal.

The team offers a range of services including doc-umentation, tax litigation, mutual agreement proce-dures, arbitration, planning and structuring.

Since 2001, the EY Portugal transfer pricing practicehas been a big player in the Portuguese transfer pric-ing market. The transfer pricing services offered by

the practice include documentation, planning, con-troversy, APA assistance, and tax effective supplychain management.KPMG Portugal’s tax team is led by Luís Magalhães

and one of the services it offers is global transferpricing.

The partner in charge of the transfer pricing practiceof PwC Portugal is Jaime Carvalho Esteves. The practiceis capable of a broad range of transfer pricing servicesincluding design and implementation of tax-efficientstrategies, risk management, documentation, perform-ing functional and risk analysis, supporting arm’s-length principle, monitoring tax audits, and APAs.

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Corporate income tax – standard rate 25% (a)Corporate income tax –municipal surcharge 1.5% (b)Corporate income tax – state surcharge3% / 5% (c) Capital gains 25%Branch tax 25% (a) (b) (c)

Withholding taxDividends 0% to 35% (d)Interest 0% to 35% (e)Royalties from patents and licences 0% to 35% (f)Branch remittance tax N/A

Net operating losses (years)Carryback 0Carryforwards 5 (g)

a) Corporate income tax (CIT) applies to residentcompanies and non-resident companies withpermanent establishments in Portugal.

b) A municipal surcharge of 1.5% is generallyimposed on the taxable profit determined forCIT purposes. Certain municipalities do not levythe surcharge.

c) A state surcharge of 3% is imposed on thetaxable profit determined for CIT purposesbetween €1.5 million ($1.9 million) and €7.5

million. If the taxable profit for CIT purposesexceeds €7.5 million, the state surcharge islevied at a rate of 5% on the excess.

d) As from January 1 2012, dividends paid to non-resident companies taxed at 25%. The rate of35% applies if dividends are paid to a residentof a listed tax haven. The rate may be reducedunder a tax treaty or exempt under the EUParent-Subsidiary Directive.

e) As from January 1 2012, the rate for interest paidby companies is 25%. The rate of 35% applies ifinterest is paid to a listed tax haven. The ratemay be reduced under a tax treaty or exemptunder the EU Interest & Royalties Directive.

f) Royalties paid to a non-resident are taxed at25%. The rate of 35% applies if royalties arepaid to a listed tax haven. The rate may bereduced under a tax treaty or exempt under theEU Interest & Royalties Directive.

g) For tax losses computed before 2010, the priorsix-year carry-forward period applies. For taxlosses computed in 2010, a four-year carry-forward period applies. For tax losses usedfrom January 1 2012, the amount deductibleeach year is capped by 75% of the taxableprofit for the year.

Source: Tax advisers from Garrigues – Taxand


Tier 2Although Garrigues – Taxand the firm does not pos-sess the multidisciplinary transfer pricing personnelthat the Big4 have, they have the expertise to dealwith the structuring and documentation aspects oftransfer pricing.

The firm recently carried out transfer pricing assis-tance for the prominent tobacco group, ImperialTobacco, where they devised the most efficient busi-ness model to be implemented in Portugal, fromboth tax and operational perspectives.

The lead associate at the practice explained thatthey aimed to transpose the model of the Big4 taxfirms into the context of a firm with many less per-sonnel. This means that they work closely on boththe day-to-day tax issues and also the much morecomplex aspects of tax.

The firm also benefits from close ties with the taxauthorities in the jurisdiction and is one of a selectfew firms with whom the Spanish government con-sults when it is drafting new tax legislation. The prac-tice also boasts impressive alumni with one previouspartner now in a senior position within the taxauthorities.

The transfer pricing department at Grant ThorntonConsultores, a member-firm of the global tax firmGrant Thornton International, consists of a three-strongteam of tax advisers led by Joaquim Mendes with thesupport of Pedro Santos. Joaquim Mendes, the leadpartner at Grant Thornton in Portugal, has worked asa tax adviser for over twenty years at a number of wellrespected firms. The firm recently advised a local sub-sidiary of Eutelsat – a major player in the telecom/satellite industry worldwide – preparing a compre-hensive transfer pricing study. The telecom / satelliteindustry exists in a state of perpetual evolution andchange so the team at Grant Thornton Consultoreswere required to diagnose and forecast in a way thataccommodated the nature of the industry.

Grant Thornton in Portugal describes itself as “fast-growing” and has clarified that this growth will con-tinue so long as the work continues to do the same. Transfer Pricing Associates Global is a dedicated

transfer pricing firm and as such, offers a very broad

range of services. These include transfer pricing sys-tem design, control frameworks, global benchmark-ing, year-end adjustment, controversy management,and risk management.

The firm does transfer pricing work for clients froma range of industry sectors including automotive,chemicals, financial services, fast-moving consumergoods, luxury and apparel, mining, oil & gas, phar-maceuticals, technology, media, and communica-tions. Uría Menéndez – Proença de Carvalho is a mem-

ber of the international Uría Menéndez law firmwhich has 15 offices located in Europe, the Americasand Asia. Filipe Romão, head partner at the firm,explained that the firm is also connected institution-ally with other “best friend” firms in France (BredinPrat), Germany (Hengler Mueller), Italy (Bonelli EredePappalardo), the Netherlands (De Brauw BlackstoneWestbroek), and the UK (Slaughter and May). Assuch, the practice is very well placed to handle cross-border work.

The practice has seen the amount of transfer pricingwork it does increase over the last year. This workconsists predominantly of transfer pricing planningand structuring (aimed at creating transfer pricing com-pliant business models and transactions), transfer pric-ing litigation, and preparation of documentation.

The practice recently worked on a transfer pricingdispute related to the attribution of free capital to apermanent establishment of União de CréditosImobiliários, a credit institution specialised in mort-gage loans operating in Spain and Portugal. This wasone of the first attributions of its kind and as suchrequired extensive comparative law research toresolve.

Tier 3The transfer pricing team at Abreu Advogados con-sists of one dedicated partner and three other pro-fessionals. The main transfer pricing service that theyoffer is assisting their clients in the preparation andreviewing of their transfer pricing files.

The transfer pricing team recently participated in aprocess that led to the approval by the Portuguese

Portugal


Government of a law that allows the execution ofAPAs. As such the team is well versed in this area oftransfer pricing.

The team specialise in advising medium-sizedbusinesses that already have their benchmarkinganalyses complete, and require assistance in alignedtheir transfer pricing documentation with thePortuguese rules.

The practice does a large amount of work with thefinancial services industry – this involves work for anumber of private banks.

The transfer pricing team at Baker Tilly Portugalconsists of a dedicated team of six transfer pricingprofessionals.

The practice works on a wide range of transfer pric-ing projects and has recently completed deals wherethey have performed benchmarking studies andhave defined intra-group arm’s-length guarantees.

For example, the firm recently completed work forBe Artis, a subsidiary of the Sonaecom Group; anentrepreneurial growth company. They assisted thegroup in performing a benchmarking study concern-ing the debt-to-equity structure of Be Artis, relating itsintra-group loans.

The transfer pricing team does not assist on com-pliance and the preparation of transfer pricing files.

The firm received positive feedback from clientswho described their transfer pricing services as“excellent”.

Ricardo da Palma Borges & Associados,Sociedade de Advogados (RPBA) is a Portuguese taxlaw boutique, led by the eponymous Ricardo daPalma Borges, an ex-academic turned tax adviser.

Borges leads on transfer pricing matters, andalthough the firm does not have a dedicated trans-fer pricing team, Borges is capable of carrying outsuch work for his clients.

For example, the firm recently carried out work thatinvolved the drafting of several tax opinions regard-ing the possibility of application of transfer pricingrules, or presumptive taxation regimes, to non-remu-nerated shareholders’ loans granted by individuals tothe companies of which they are quota and share-holders. This complex work was done for severalclients including a PSI-20 listed holding company. Vieira de Almeida & Associados (VdA) is a mem-

ber of a number of international tax firm networksand as such has contacts in Latin America and closeties in Brazil. The firm is increasingly being asked foradvice by companies investing internationally inareas such as Angola, Mozambique, Timor, Brazil,and other African and European countries.

The transfer pricing team at VdA offer the full rangeof transfer pricing services including compliance andfinancial work.

The practice is run by Tiago Marreiros Moreira. Thepractice does a large amount of work for thePharmaceuticals and Telecoms industries.

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 MazarsTaxhouse – TaxandTPA Horwath

3 BDO ConsultingTransfer Pricing ServicesViboal FindEx

There are a number of transfer pricing related penal-ties in Romania. When the transfer prices used bythe Romanian taxpayer are not deemed to be com-pliant with the arm’s-length principle the tax author-ities are able to alter the revenues and expenses ofthe taxpayer to reflect their market value as they seeit. Any adjustment made is then subject to a profittax of 16%.

Taxpayers are required to prepare and presenttransfer pricing documentation as and when theauthorities request it. This file is meant to contain atthe very least, a master file and a country specific file.Failure to provide this documentation upon requestmay possibly result in fines between approximately€2900 ($3850) and €3500.

Romanian taxpayers are able to apply foradvanced pricing agreements (APA) which is bothbinding and enforceable against the authorities.

Agreements can be issued for up to five years; inexceptional cases this may be extended.

The Romanian government recently receivedanother loan of €100 billion ($132.8 billion) to boostits ailing economy. In a report issued by the WorldBank, it transpired that the Romanian tax authoritieshave been spectacularly poor at collecting tax inrecent years. This bailout has consequently resultedin pressure being put on Romania to improve bothits tax authorities and the tax system hence theplethora of rapid changes enacted recently.

Tax advisers have certainly noticed a more aggres-sive stance from the authorities. One adviser said theauthorities are targeting easy income sources.

Advisers in the jurisdiction complained that thecourt system in Romania is too viscous. Access tothe courts is difficult and the legal process can takeup to six years to resolve. Even after this long courtprocedure, there is, of course, no guarantee that thecomplainant will win.

Foreign investment in the jurisdiction is still low.Angela Rosca of Taxhouse (Taxand) explained this ispartially because of the instability caused on thelead up to the elections last year. Now that a newgovernment has been instated, Rosca predicted thatforeign investors might be less wary.

One industry that appears to be thriving inRomania is the software production industry andthere is investment still occurring in this area.

Tier 1 Ciprian Gavriliu leads the transfer pricing team ofDeloitte Romania. The team offers transfer pricing


RomaniaTax authoritiesThe Ministry of Public FinanceStrada Apolodor nr. 17, sector 5, Bucharest 050741Tel: +40 21 3199759Fax: +40 21 3122509Email: presa.mfp@mfinante. gov.roWebsite: www.mfinante.ro

http://www.mfinante.ro

services in relation to planning and documentation,APAs, dispute resolution and business model optimi-sation.

The practice consists of one partner and 12 otherdedicated transfer pricing professionals. The teamgrew over the past year, hiring four new profession-als.

The transfer pricing team at EY in Romania consistsof one partner and 12 other professionals. The prac-tice employs both transfer pricing tax specialists andeconomists to carry out their transfer pricing workand is therefore able to offer the full range services.

Following a variety of tax changes with ramifica-tions for the banking sector, the tax team at EYestablished what the exact tax implications were for

the banks. They then worked closely with the banksand lobbied the Ministry of Finance, informing themof the ramifications of their fiscal changes. The taxteam are therefore very knowledgeable about theperpetually changing tax landscape in Romania.

The practice’s clients come from a variety of indus-tries including real estate, energy (oil & gas and util-ities) and mining & metals. KPMG Romania’s transfer pricing team is led by tax

director, Teodora Alecu. The practice is multidiscipli-nary with a mixture of economists, tax practitioners,and financial analysts making up the team.

The practice offers a range of transfer pricing serv-ices including the design and implementation ofviable prices, document policies and outcomes, and

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Tax rates at a glance (As of July 31 2013 – ref. legislation applicable as of January 1 2014)

Corporate income tax rate 16%Capital gains tax rate 16% (a)Branch tax rate 16%

Withholding taxDividends 0%/16% (b)Interest 0%/16% (c)Royalties from patents and licences 0%/16% (c)Branch remittance tax Nil

Net operating losses (years)Carryback Not allowedCarryforwards 7 years (d)

a) Capital gains obtained by corporate entities areincluded in their regular profits subject tocorporate income tax at 16%; capital gainsobtained by individuals are taxed at 16% asinvestment income irrespective of the holdingperiod and type of securities traded.

b) The 0% rate applies for payments qualifyingunder the conditions of the EC Parent-SubsidiaryDirective for EU, EFTA (Norway, Lichtenstein,Iceland) and Romanian tax resident legalentities; 0% also applies to dividends paidunder the Agreement between the European

Community and the Swiss Confederation toSwiss tax resident parent companies holding atleast 25% of the share capital of the Romaniandividend payer for a minimum two-year periodat the time of dividend payment; else 16%applies to dividends paid to all other non-residents and resident legal entities orindividuals (unless a more beneficial rateapplicable under a double tax treaty).

c) The 0% rate applies starting January 1 2011 forpayments qualifying under the EC Interest &Royalties Directive to beneficial owners beingEU and EFTA (Norway, Lichtenstein, Iceland) taxresident legal entities holding at least 25% ofthe payer for a minimum two-year period atthe time of payment; 0% also applies topayments made under the agreement betweenthe European Community and the SwissConfederation to Swiss tax resident companiesqualifying under specified conditions.

d) The seven-year period applies starting with theloss related to fiscal year 2009 (losses incurredbefore 2009 can only be carried forward for fiveyears).

Source: Tax advisers from TaxHouse – Taxand


representation of their clients in disputes with theauthorities. PwC Romania offers a wide variety of transfer pric-

ing services including the preparation of documenta-tion, audit preparation, APAs, transfer pricing policy,analysis of supply chain and identification of optimi-sation opportunities, and the analysis of inter-com-pany agreements to identify and address transferpricing issues.

Clients described their experience of PwC’s transferpricing team as “very good”, describing their “goodtransfer pricing work”.

Tier 2Mazars Romania offer a range of transfer pricingservices including general information aboutRomanian transfer pricing regulation, preparation andreview of documentation, assessment of tax risks oftransfer prices: a customised “transfer pricing diagno-sis”, assistance during tax inspections, APA, and cus-tomised trainings. Taxhouse – Taxand is the Romanian member-firm

of the international Taxand network. The practice isled by Angela Rosca, who has worked in tax for thepast 18 years and boasts extensive experience ofboth local and international tax. The practice has adedicated, transfer pricing team which is populatedby economists. This means the practice is capable ofperforming a full range of transfer pricing servicesincluding benchmark analyses.

The practice recently updated the local transferpricing documentation and additional related workfor the Romanian subsidiary of an international tiremanufacturer; a deal worth €500 million ($669 mil-lion).Claudia Stanciu-Stanciulescu is the partner in

charge of the transfer pricing practice of TPA

Horwath. The team is capable of a range of trans-fer pricing services including functional analyses,market analyses, design of a transfer pricing model,preparation of documentation (master file, localfiles), benchmarking using the Amadeus businessdatabase, defence of transfer prices in tax audits,and APAs.

Tier 3The majority of the transfer pricing work at BDOConsulting is the preparation of transfer pricing doc-umentation.Transfer Pricing Services is a Romanian independ-

ent advisory firm that offers highly specialised trans-fer pricing consultancy.

The core transfer pricing services that the firm offersare the review of inter-company transactions, prepa-ration of country specific documentation, bench-marking studies of related party transactions, policydevelopment and implementation, APAs, and assis-tance during inspections and in disputes with theauthorities.

Viboal expanded in June 2012 as it merged withanother tax practice, FindEx, to become ViboalFindEx.

The transfer pricing team at Viboal FindEx consistsof two partners and three other professionals. Thepractice is able to deal with transfer pricing docu-mentation, transfer pricing audit defence duringtransfer pricing audits, transfer pricing audit defenceduring administrative appeal or court proceedings,review of transfer pricing policy or global transferpricing documentation.

The practice recently worked on a transfer pricingaudit worth $15 million. This involved transfer pricingaudit assistance in relation to cross-border transac-tions between Italian and Romanian countries.

Romania


LEADING FIRMS

1 DeloitteEYKPMGPepeliaev Group – TaxandPwC

2 CMS RussiaGoltsblat BLP

3 Taxperience

Transfer pricing has been included in Russian legisla-tion since 1991, although the original regulationswere crude and ineffectual. Although the rest ofEurope has focused on transfer pricing for a fewyears now, the updated Russian transfer pricing leg-islation only came into force in 2012. The new transfer pricing legislation is much more

complex and the first submission is yet to be filed. It islikely therefore that the first transfer pricing disputes willoccur in the latter part of 2014. Lyudmila Batalova, headpartner at Sameta Tax & Consulting predicted that thevolume of transfer pricing disputes is set to rise dramat-ically over the coming two years as a result of the trans-fer pricing legislation and drive against intra-group loans.Authorities can now request transfer pricing docu-

mentation during a tax audit. The format of the doc-umentation is not rigidly set but there must be infor-mation included about the controlled transaction, afunctional analysis, the transfer pricing methodologyused, a description of the comparables, and a finan-cial analysis.

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RussiaTax authoritiesFederal Tax Service23 Nerlinnaya Street, Moscow, 127381Tel: +7 495 913 00 09Fax: +7 495 913 00 05Website: www.nalog.ru


Corporate income tax 20% (a)Capital gainsBranch tax 20%

Withholding taxDividends 9 to 15% (b)Interest 20% (c)Royalties from patents and licences 20% (c)Branch remittance tax N/A

Net operating losses (Years)CarrybackCarryforwards 10 years.

a) The corporate tax rate combines a federaland regional rate; 2% is payable to thefederal budget and 18% to the regionalbudget. The regional rate may be reduced bythe authorities by a maximum of 4.5%.

b) Dividends paid to another Russian entity orto a Russian resident individual are subject towithholding tax at a rate of 9%. Dividendspaid to non-resident companies are subjectto a 15% final withholding tax unless therate is reduced under an applicable taxtreaty.

c) This rate applies unless reduced under anapplicable tax treaty

Source: Deloitte (2013) International Taxation: Russia Highlights2013.

http://www.nalog.ru


At present, only the very largest taxpayers are ableto apply for advanced pricing agreements (APA). TheAPA cannot exceed three years but the taxpayer hasthe opportunity to extend it by two years provided aset of terms and conditions are met.The transfer pricing authorities and legislation in

Russia has become very strict with regards to intra-group loans. This focus will necessitate contempla-tion on the part of the big multinationals operatingin Russia as to how their intra-group loans are con-ducted. Unlike other jurisdictions, the tax authorities have

not been cited as being unduly aggressive in theirapproach to auditing and assessments – althoughthis is confined primarily to the authorities inMoscow. The regional tax authorities in Russia varywildly, explained one adviser. With over 100,000employees, there is no guarantee that the officialstaxpayers deal with are as sophisticated as those inMoscow. This can result in unpredictable behaviourfrom the authorities. Problems with the tax authorities arise when their

assault on the tax affairs of a company or individualare politically motivated, explained Batalova. In thesecases, the authorities will improvise their tactics end-lessly to extract the taxation they want from their tar-get. However, it must be stressed that this type ofbehaviour from the tax authorities is rare and in themajority of cases their actions are honestly founded.The courts quite often seem to be ruling in favour

of the taxpayer. The environment is therefore gener-ally a pretty positive one explained Graham Povey ofKPMG. Indeed, Batalova said there is a good traditionof tax dispute success for taxpayers in Russia.Dispute resolutions have also improved recently witha number of advisers explaining how they are nowable to close cases before entering the courts.

Tier 1 The transfer pricing team of Deloitte Russia is led bypartner, Dmitry Kulakov. The team offers a range oftransfer pricing services including transfer pricingplanning and documentation, APAs, dispute resolu-tion, and business model optimisation.

The transfer pricing team at EY Russia is relativelylarge, consisting of 3 partners and 32 other profes-sionals. The practice expanded significantly over thepast year hiring five new transfer pricing profession-als, including Konstantin Yurchenko who previouslyworked as a partner at KPMG. The team offers a full range of transfer pricing serv-

ices. The practice has significant experience in thearea of transfer pricing documentation projects, thedesign and implementation of complex transfer pric-ing models, advising on operational aspects of trans-fer pricing, and TESCM projects.The team were recently involved in APA discus-

sions for a number of leading companies in thechemical, pipes, oil, gas and metals industries. The transfer pricing team at KPMG Russia offers the

full range of transfer pricing services. This includesfinancial aspects, transfer pricing agreements, and lit-igation work. Since 2006, KPMG has performed morethan 200 benchmarking studies for companies in awide variety of industries. The team has a particular expertise in the energy

industry (specifically oil and gas), and consumerproducts industry. The transfer pricing practice was commended by

clients for its high quality of service and “high expert-ise in pharmaceutical industry matters”. In addition,Natalia Valkovskaya was recommended for hertransfer pricing work.Sergey Pepeliaev is the head of the tax team at the

Pepeliaev Group – Taxand which consists of 11partners and 70 other fee earners. The team grewover the past year, hiring four tax professionals.The transfer pricing team at the practice offers a

full range of transfer pricing services includingbenchmarking, compliance, documentation, andrisk analyses. They recently advised a bank and its Russian sub-

sidiary on how to reduce transfer pricing risks asso-ciated with adaptation of international bank experi-ence to the activities of the Russian bank, whenacquiring services from parent foreign bank. Thisinvolved analysis of the possible customs and taxconsequences of the application of transfer pricing.

Russia


The practice serves a number of high profile clientsincluding FIFA, the international governing body ofassociation football; Johnson & Johnson, the phar-maceutical and packaged consumer goods manu-facturer; and British American Tobacco, the interna-tional tobacco group.

PwC Russia offers a wide variety of transfer pricingservices to its clients. These include supply chaintransformation projects, justifying pricing methodolo-gy, structuring of inter-company transactions, advis-ing foreign multinationals on transfer pricing inRussia, documentation, dispute support and resolu-tion. The practice has advised clients on a number of

major transfer pricing projects in the energy, miningand metals, retail and consumer, pharmaceutical,technology and telecom, and financial sectors.Clients praised the practice for their “good transfer

pricing services”.

Tier 2Dominique Tissot is the head of the transfer pricingpractice of CMS Russia. Tissot has worked as a taxspecialist for 14 years and has a wide range of expe-rience in energy and resources work. The transfer pricing team offers a range of services

including the preparation of local and global docu-mentation, financial and economic studies, transferpricing policies, support during audits and litigation,and APAs. The transfer pricing team at Goltsblat BLP offer the

full range of transfer pricing services including trans-fer pricing analysis of Russian companies; study andpreparation of transfer pricing documentation, ensur-ing compliance with Russian requirements; andcomplex structuring advice with regards to the trans-fer pricing affairs of a company. They also offer eco-nomic analyses; this includes conducting benchmarkanalyses to be included in transfer pricing documen-tation where required. The practice’s client list includes a number of sig-

nificant multinationals and large Russian companies

in the consumer goods (food, beverage, luxury, andother personal household goods), real estate, auto-motive, pharmaceuticals, and oil & gas industries.Clients include Danone, Shell, Mitsubishi MotorsCorporation, Volkswagen, and a number of othernotable companies. The practice recently worked on behalf of a

Russian operating entity of the global family-owned confectionary group which has a globalturnover exceeding $10.2 billion. They prepared atransfer pricing report to support export pricingfluctuations in response to claims raised under atax audit. The case represented a potential expo-sure of up to $10 million. The practice was suc-cessful in eventually facilitating the overruling ofthe tax claims.Evgueny Timofeev was recommended by clients

“for professionalism and proactive attitude”; as wasAnna Zelenskaya, “for professionalism, scrupulous-ness, high availability”. The overall feedback fromclients about the transfer pricing services offered bythe practice was positive.

Tier 3Taxperience is a specialised tax law firm with onepartner and three other fee earners. The firm catersto a very niche sector of the transfer pricing market,focusing mainly on aligning the transfer pricing poli-cies of global firms with the Russian rules. Taxperience Russia forms part of the international

Taxperience network which, aside from Russia, hasoffices in Germany, Czech Republic, Poland, Hungary,and Switzerland. Following the recent introduction of a new set of

transfer pricing rules in Hungary, Taxperience Russiaaligned the global transfer pricing policy of a compa-ny with the Russian standards and requirements.This deal was worth deal worth $10,000.The firm works with a number of notable technol-

ogy, media and telecommunications companiesincluding Dolby – the global sound technologycompany.

Russia

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LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzie.Wong & Leow

3 Velten Partners

Despite being a low tax jurisdiction, Singapore is see-ing an increasing focus on transfer pricing issues.“Singapore is the Asia Pacific regional hub, there aremany regional activities going on. Although it is not anOECD member country, it has to follow the internation-al game rules,” Luis Coronado from EY explained. Although the market does not witness any signifi-cant transfer pricing litigation cases within the territo-ry, practitioners warn that multinational businessesbased in the economy still face serious problemsoutbound. “The lower income tax rate encouragespeople to put more income in than out. That makesSingaporean entities more likely to be attacked incross-border transactions,” said Edmund Leow fromBaker & McKenzie.Wong & Leow. Leong Kwong Wingfrom KhattarWong – Taxand agreed as he hasobserved in recent years many cases in Japan andIndonesia where Singaporean corporations are chal-lenged.After the transfer pricing guidelines were first issuedin 2006, the Inland Revenue Authority of Singapore(IRAS) has consistently increased the enforcement ofthe transfer pricing compliance. IRAS stated that it

would cast an extra focus on related party transactionsand allocation of development cost. An additional sec-tion 34D has been enacted recently in the SingaporeIncome Tax Act (SITA) endorsing that related party trans-actions should come under the arm’s-length price. Inaddition, IRAS continues to issue transfer pricing ques-tionnaires to companies, which then leads to full trans-fer pricing audits.“No one would have Singapore seen as a taxhaven,” said See Jee Chang from Deloitte about therecent efforts of the IRAS. “It would be harmful to someextent, for the investment climate, but something musthave to be done.”

Tier 1 See Jee Chang leads the transfer pricing practice atDeloitte. Two partners and director level professionals,together with eleven other staff members form thetransfer pricing department. Specialists in the teamhave strong international tax skills and economicknowledge. In addition, they speak various languagesand keep sound contact in the government, whichensures the proficiency in the service offering. Theteam serves clients in designing and implementingeffective TP planning strategies, reviewing and puttingin place adequate documentation, providing supportduring tax audits and also assisting in advance pricingagreement (APA) and mutual agreement procedure(MAP) processes. Serving as a regional headquarter, thefirm has the privilege to work for big multinational busi-nesses in response to their regional TP needs. Its clientbase includes manufacturing, oil and gas, transporta-tion, property, financial services and consumer productscompanies.


SingaporeTax authoritiesInland Revenue Authority55 Newton Road, Revenue House, Singapore 307987Tel: +65 6356 8233Fax: +65 6351 2131Website: www.iras.gov.sg

http://www.iras.gov.sg

Over the past year, the team has built a diverseportfolio of work, including advice intellectual proper-ty (IP) and R&D as well as obtaining competentauthority agreements. One recent assignment is tonegotiate with the tax authority on behalf of a clientin the hotel and tourism sector in relation to royaltydeduction. Complicated IP matters and questionablecost sharing arrangements arose in the clients’ busi-ness restructuring, which faces severe challengefrom the tax authority.Luis Coronado, EY’s Asia Pacific head of transferpricing leads the strong Singapore practice, withMatthew Andrew supporting. In addition to provid-ing transfer pricing advice to clients based inSingapore, the practice has played an importantrole in delivering transfer pricing services in thebroader Asia Pacific region. Professionals in theteam come from 10 diverse culture backgrounds

and have extensive practice experience in multiplejurisdictions. During the past 12 months, the team has kept astrategic expansion by adding six new talents. StephenBruce joined from UBS as a partner specialising in thefinancial services industry. The arrival of Stephen Lamand Molvin Yiu has further enhanced the team’s capa-bility in serving clients involved in China. The firm alsohas a specialist who used to work in Saudi Arabia andAustralia on board. In addition, Henry Syrett has beenpromoted to partner.The team is currently working on the very first bilat-eral APA project that the Indonesian tax authority is dis-cussing with Singapore and other jurisdictions such asLuxembourg. Its bilateral APA portfolio also includescases with Australia, Germany, Japan, Korea,Netherlands, Thailand and UK. Japan also continues tobe a growing source of clients.

Singapore

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Corporate income 17% (a) (b)Capital gains 0%Branch tax 17%

Withholding taxDividends 0%Interest 15%Royalties 10%Technical Services fee 17% (c)Branch remittance fee 0% (d)

Net operating lossesCarryback 0 (e)Carryforwards Indefinitely (f)

a) The 17% corporate income tax rate is subjectto exemptions. 75% of the first SGD10,000(($7,900) of chargeable income and 50% of thenext SGD290,000 of chargeable income areexempt.

b) For years of assessment (YAs) 2013 - 2015,companies will receive a 30% corporate taxrebate up to SGD30,000 per YA.

c) The technical services fee rate applies to non-residents (other than individuals) in respect offees for the rendering of assistance or servicesin connection with the application or use ofscientific, technical, industrial or commercialknowledge or information, or for themanagement or assistance in the managementof any trade, business or profession. TechnicalService Fee paid to non-residents is withheld at20% on gross payment if he elects to be taxedon net income.

d) Provided that the income has been taxed inthe foreign country from where it is receivedand where the headline tax rate is at least15%.

e) Losses may be carried back for one year,subject to a cap of SGD100,000 andcompliance with the shareholders’ and samebusiness tests.

f) Subject to shareholders’ and continuity ofbusiness tests.

Source: Tax advisers from Khattarwong – Taxand


There are 20 dedicated transfer pricing staff membersunder the leadership of Geoffrey Soh at KPMG. Soh hasbeen working in the tax profession for 20 years, includ-ing 15 years of advising clients for transfer pricing mat-ters. He is familiar with handling competent authorityproceedings with tax authorities from Singapore, China,Canada, US, Sweden, Italy and Japan. In addition, Sohalso led the TP work streams in a number of tax effi-cient supply chain restructuring projects. Being one of the largest transfer pricing practices inSingapore, the team often assists Fortune 500 clientswith their compliance, planning, audit defence and dis-pute resolution. It has strength in advising the financialservices sector. It also advises on the implications ofcross-border supply chain restructuring as well as APAand MAP applications.

PwC has a transfer pricing team that covers all com-pliance, planning and disputes as well as APA matters.Rivals consider this practice as “very competitive”. Thefirm deals with big names in a wide range of industriessuch as consumer products, technology companies, oiland gas and chemical companies. Nicole Fung hasbeen the leader for nine years. With over 23 years oftax experience in Singapore and Canada, Fung hasbeen working in transfer pricing since 2003. Sheadvised on the first bilateral APAs between Singaporeand Japan, China, Taiwan, Australia, UK and Korea. Shealso has experience in dispute resolution to settle sev-eral MAPs between Singapore and Japan, as well asIndonesia. Sui Fun Chai, who used to work as an assistantcommissioner at the Inland Revenue Authority ofSingapore, joined the team in July 2013 bringing overher instrumental insights from the authority side. She iswell known in the market as she once represented theSingapore government in tax treaty negotiations andother international tax matters and in negotiation andimplementation of BAPAs and MAPs. Since 2007, Chairesolved more than 40 APAs and double taxationcases, providing great tax certainty for multinationals.

Tier 2Baker & McKenzie.Wong & Leow is led by EdmundLeow with a team of four partners and eight profes-

sionals. Keeping a close working relationship withskilled transfer pricing lawyers, economists andfinancial analysts within the Baker & McKenzie glob-al network, the team is able to provide all kinds ofrobust solutions to transfer pricing issues, with anemphasis on cross-border analyses. The law firm background has differentiated thepractice from other accounting and consultancyfirms in the market because it holds a strong litiga-tion force. It is the only international law firm thatcan argue before the Singapore Supreme Court. Thefirm often works on behalf of leading market play-ers in a wide range of industries and Fortune 500companies. Over the past year, the team has suc-cessfully assisted a number of clients on big-tickettax refunds and has sought certainty in its globaltransfer pricing policies. Leow, Allen Tan, Peter Tanand James Choo are currently working out an appro-priate solution to seek a tax refund from theSingapore tax authority without a relevant tax treatyin force. The assignment has a high requirement ofinternational tax and transfer pricing capability aswell as sound connections with the tax authorityand other government bodies.

Tier 3Penelope Velten is the sole partner at VeltenPartners, an independent and dedicated transferpricing boutique in Singapore. Velten has more than12 years experience in this profession working in anumber of jurisdictions and Big 4 firms. Being amember of Altus Alliance, an international networkof leading transfer pricing professionals, the firmoffers tailored solutions to multinational clients’operations in Asia. It not only designs and imple-ments transfer pricing policies with proper docu-mentation management, but also offers proactive TPaudit supports as well as controversy resolutions. Inaddition, the firm is determined to help corporateclients to establish a longstanding TP strategy withtheir in-house teams. Velten is often seconded intocompanies to work on the maintenance of transferpricing systems including the development of per-manent in-house capabilities.

Singapore


LEADING FIRMS

1 DeloitteEYKPMGPwC

2 ENS – Taxand

3 Bowman GilfillanDLA Cliffe Dekker HofmeyrWebber Wentzel

The tax legislation surrounding transfer pricing workin South Africa changed significantly in 2013, placingmuch greater onus on proactive taxpayer compli-ance. Previously, taxpayers described necessarytransfer pricing adjustments to the revenue service,which was then expected to make the changes.Now, however, taxpayers are required to make theadjustments themselves. This has led to a growth inrestructuring and due diligence caseloads for taxadvisory firms, as companies begin to take transferpricing more seriously in South Africa.“We find clients are taking transfer pricing much

more seriously,” said Billy Joubert of Deloitte. “Thenature of the work hasn’t changed but people arebecoming more diligent about transfer pricing andabout the implementation of documentation, andwe are doing a lot more due diligence reviews.”In addition, the South African Revenue Service

(SARS) has had its powers significantly strengthenedby the Tax Administration Act. The changes placed all

the tax authority’s powers into a separate act, andinvested SARS with a great deal more force to carryout their function, such as creating more severepenalties and search and seizure provisions. “Everyone’s quite anxious about this new act and

what it means for taxpayers,” said one adviser. “Wecan see a lot of growth in the service offering aroundit and we foresee that dispute resolution is going tobe a real growth area. It’s the single biggest devel-opment of last year.”A more active and empowered SARS has triggered

a growth in the amount of dispute resolution workpractices are engaged in, a trend that advisersexpected to continue.Beyond these changes to the powers of the tax

authorities, similar forces, as in previous years, havepropelled transfer pricing work in South Africa. In par-

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South AfricaTax authoritiesSouth African Revenue ServiceLehae La SARS, 299 Bronkhorst Street, Nieuw Muckleneuk, 0181 Pretoria (physical address)Private Bag X923, Pretoria 0001 (postal address)Tel: (012) 422 4000Fax: (012) 422 6820Website: www.sars.gov.za


Corporate income tax 28% Capital gains 18.6% Branch tax 28%

Withholding tax Dividends 15%Interest 0%Royalties from patents and licences 12%Branch remittance tax


http://www.sars.gov.za


ticular, the country’s position as a gateway to invest-ment in the African continent generates many of thejurisdiction’s transfer pricing challenges. “The biggest trend for us is financial services –

major banks and insurance companies – expandinginto Africa,” said Joubert. “We advise a lot of firms onimplementing transfer pricing policies in the Africancontinent.”

Tier 1 Deloitte offers a full range of transfer pricing serviceswithin the South African jurisdiction, encompassingdocumentation, dispute resolution and other negoti-ations with the revenue services, planning, and sup-ply chain optimisation. The department is led by BillyJoubert, who is assisted by three associate directors,a senior manager and five further staff members.An empowered revenue service has generated a

significant increase in the amount of dispute workthe practice is involved in. In financial services, thetransfer pricing team has worked with a number ofbig South African banks, insurance companies andmultinationals expanding into Africa, who requiredhelp with implementing their transfer pricing policiesin the African continent. South Africa also has a substantial motor vehicle

manufacturing industry, and the department hasworked on two substantial projects in the motorindustry in the past year, advising a number of com-panies from Europe and the Far East on the transferpricing aspects of their manufacturing operations inSouth Africa.EY’s transfer pricing practice in South Africa has

two partners supported by a large team of dedicat-ed transfer pricing experts. Among the team are for-mer members of SARS. The advice comprises trans-fer pricing compliance, planning and controversy forall types of intercompany transactions: tangible,intangible, service and financing. EY’s practice employs experienced experts in tax

efficient supply chain management in South Africa,assisting African-headquartered clients in structuringcentralised business models (for example, a globalor regional procurement function) and in integrating

the client’s African operations in regional or globalstructures (for example, a centralised procurement ora principal structure). The South Africa transfer pricingteam also hosts a African transfer pricing supportcentre for other EY offices in Africa, providing a stronglink with tax jurisdictions throughout the African con-tinent.KPMG has a significant transfer pricing practice in

South Africa. It is led by Natasha Vaidanis, whoworks alongside one further partner and fifteen feeearners. The firm’s strength across the region is seenin the size and complexity of the work KPMG’s trans-fer pricing team has undertaken in the past year. Fora multinational pharmaceutical company, the prac-tice assisted in setting up a supply pipeline into anumber of different economies. This involved creat-ing more centrally-coordinated supply chain man-agement processes; managing the international taximpact that resulted from operation changes madein the supply chain, such as the flow of goods andthe location of assets; reducing the effective directtax rate on income derived from the supply chain;and optimising the effect of indirect taxes triggeredwithin the supply chain, including VAT and customduties.A second project involved advising a second multi-

national pharmaceutical company on the implemen-tation of a central stock ownership model for itsmanufacturing division. This model needed to incor-porate full tolling, with the entire production invento-ry purchased and owned by a central trading partner.In conducting this reorganisation, KPMG’s team hada number of stated aims to fulfil. These included:converting the contract manufacturing arrangementsto toll manufacturing arrangements; changing thethird party supply contracts of raw materials andother products used in the manufacturing processfrom the local company sites to the trading principal;moving third party contract manufacturers and thirdparty tollers from local sites to the principal; andimplementing one single purchase and sales com-pany for two divisions of the multinational.

David Lermer, an international corporate tax part-ner in PwC, spearheads much of the firm’s transfer

South Africa


pricing practice in South Africa. Lermer has experi-ence working on numerous reorganisations of multi-national groups and mergers and acquisitions, andhas also worked with the government on legislativechanges, forging a close relationship that he drawson in negotiations and disputes related to transferpricing. The practice as a whole advises on the fullspectrum of transfer pricing issues, from businesstransformation and transfer pricing planning to doc-umentation, audit defence strategies and pre-emp-tive guidance on tax authority moves. It can alsodraw on an extensive network throughout theAfrican continent to advise multinationals expandinginto the region.

Tier 2ENS – Taxand offers a full-service tax practice withby far the largest tax team of any law firm in SouthAfrica. The practice is strong across the board with aparticular concentration of expertise in M&A and cor-porate tax.In particular, ENS is far ahead of any of its competi-

tor law firms in transfer pricing, with two specialistexecutives dedicated to the sector, Jens Brodbeckand Okkie Kellerman. As well as working in disputesalong with most law firms, the practice also hasstrong economic capabilities including the softwareto do comparables analysis and further economicsstudies. It frequently draws on this capacity to adviseclients on supply-chain restructuring. Projects in the past year have involved advising on

employment structures and reviewing a firm’s cus-toms valuation to ensure they comply with currentcustoms legislation. The transfer pricing departmentis also heavily engaged with the accelerating trendof South African firms expanding into other parts ofthe continent, advising one company on challengesthat arose in the course of enacting its policy ofaggressive expansion into various parts of Africa.

Tier 3Bowman Gilfillan has a small transfer pricing prac-tice which advises on complex issues arising frommajor transactions that have a transfer pricing ele-ment to them, as well as on contentious issues. Thepractice doesn’t do supply chain optimisation, mod-elling, benchmarking or comparables analysis, but itwill advise groups of companies on structuringissues related to transfer pricing. Willy Horak, a well-recognised expert in international and cross-bordertax, is also known for his work at the top end oftransfer pricing. He is assisted by associate, SimoneEsch.DLA Cliffe Dekker Hofmeyr’s tax practice has two

directors involved in transfer pricing, both of whomfocus on dispute resolution alongside negotiatingadvanced pricing agreements with the tax authori-ties. Emil Brincker heads the tax practice overall andalso undertakes many of its transfer pricing litigationcases. He is assisted in doing so by Ruaan vanEeden, a specialist in cross-border tax matters morebroadly, a specialism that he occasionally applies totransfer pricing controversy matters.Transfer pricing at Webber Wentzel is led by

Michael Honiball, who was previously head of trans-fer pricing at KPMG in South Africa. Honiball is assist-ed by Thabiso Montsho, an associate and rising starwithin the practice. Through its alliance with Linklaters, Webber

Wentzel has access to a strong international net-work. They are also one of the few law firms inSouth Africa to have access to the various transferpricing databases needed to offer advisory servicesin the sector. As a result, they offer a full range oftransfer pricing services, including assistance withlegally privileged transfer pricing opinions, prepara-tion of transfer pricing compliance, defence, andbusiness restructuring documentation, and the con-ducting of comparables searches.

South Africa

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KPMG Services (Proprietary) Limited85 Empire RoadParktownSouth Africa2193

Natasha VaidanisPartner, Transfer Pricing+27 (0)82 458 [email protected]

Deborah TicklePartner, International Tax and TransferPricing+27 (0)82 492 [email protected]

KPMG has a dedicated and powerfultransfer pricing team. Our professionalsthink and act nationally and globally,ensuring a commercial approach is takento the theoretical concepts. They are wellqualified, experienced and equipped toserve our clients’ transfer pricing needs –identifying opportunities whilst minimis-ing risk.

KPMG’s representation stretches across43 African countries. We have an integrat-ed African Transfer pricing team, who areable to “hit the ground” running with anapproach which will accelerate the deliv-ery of tangible results for our clients.

South Africa




1. How does the tax authority selecttransfer pricing cases to audit?General tax audit is conducted every four tofive years with frequency determined by aprogramme using certain algorithms. TP issuesare generally reviewed during the general taxaudit and are infrequently reviewed separate-ly.

2. How will a company find out it isbeing audited? What is the officialnotification?The taxpayer will receive a tax audit notice inwriting by the National Tax Service. In rarecases involving possible destruction of evi-dence, NTS may elect to arrive without priornotice to confiscate the required evidence.

3. When a company has been notified ofaudit, what is the first thing it should do?The taxpayer should gather and submit theinformation requested by the tax authoritiesand arrange for professional assistance.

4. Is there any legislation for generalprocedure for a taxpayer under audit? Ifnot, what is the recommended practice?Tax audit is conducted in accordance with theprocedures prescribed in the legislation.

5. How does Korea differ in its approach toTP audit compared other countries?The approach is similar to other OECD nationsas the TP legislation closely mirrors the OECDtransfer pricing guideline.

6. How does the tax authority compile itsinformation on a taxpayer for an audit?The information is first compiled through TaxIntegrated System, a database complied by theNTS on all taxpayer information, and throughfield audit.

7. What are the most likely instances thatprovoke an audit from the authorities?History of tax/TP compliance issues

8. What documents are required by thetaxpayer during TP audit?Information that may be requested by the NTS:A. Sale transfer agreement(s)B. Price of the goodsC. Cost of goods soldD. Related and non-related party transaction

details by goodsE. In case of service transactions, information

that represent items A ~ DF. Organisation charts and business descrip-

tionsG. Foreign sales pricing informationH. Global policy on related party transactionsI. Accounting policy on reviewed transactions

www.TPWeek.com184

An audit guide by Gil Won Kang of KPMG.

South Korea

Tax authoritiesNational Tax ServiceCheonggindong-gil 44, Jongro-gu, Seoul, 110-705 KoreaTel: +82 2397 1200Email: [email protected]: www.nts.go.kr


http://www.nts.go.kr


J. Responsibilities of the parties to thereviewed transactions

K. Loans, advances, investments and similaramounts of related parties

L. Any information omitted from corporate taxreturn filing

M. Following information on service transactionsrequired by Ministry of Strategy and Finance:i. Service agreementii. Group level organisation chart iii. Entity level organisation chartsiv. Details of cost incurred in providing the

serviceN. Following information on shared costs

required by Ministry of Strategy and Financei. Intra-group agreement specifying name of

parties, details of assets contributed andthe rights of each party

ii. Revised agreement reflecting “A” aboveiii. Valuation of assets contributed and related

accounting policiesiv. Benefits expectedv. Actual benefits realisedvi. Explanation of differences between

expected and realised benefitsO. Any other documents as requested

9. Are there any restrictions on a company’sbusiness during audit?No

10. Are there any restrictions on thetaxpayer’s advisers during audit?No

11. How long does an audit last? The tax audit period is determined based onthe size and the complexity of the taxpayer’sbusiness operations. Having said that, taxaudit period for taxpayer with revenues lessthan KRW 100 million ($90,000), the taxaudit period is to be less than 20 days. In caseswhere the taxpayer is unable to produce therequested information, causing delay, the taxmay be suspended until the information ismade available.

12. What happens after an audit hasbeen completed?If the taxpayer disagrees with the auditresults, the taxpayer has the option to makean appeal through domestic appeals procedureor to take the appeals to the competentauthorities through Mutual AgreementProcedure.

13. Tips on negotiating with theauthorities.Engage tax advisers from the onset of theaudit as the TP issues are one of the hot top-ics on taxpayers involving cross-border inter-company transactions.

14. How can a company manage its auditrisk?Basic TP risks can be addressed through con-temporaneous TP documentation and APAsGil Won Kang ([email protected])

South Korea



LEADING FIRMS

1 Deloitte AnjinKim & ChangSamil PwCSamjong KPMG

2 EYYulchon

3 Lee & KoShin & Kim

Practitioners in South Korea feel increasing pressurein the transfer pricing market because of intensifiedgovernance and a change of regulation. “Transferpricing practice is very difficult, especially in a smallmarket like Korea,” said Jay Shim of Lee & Ko.

Although the most recent amendment of theKorean transfer pricing regulations took place in late2010, the effect of the revision continues to be seenin the market. In line with the OECD guidelines, theregulations expect more transparency and accounta-bility from taxpayers when managing their pricingpolicies and documentations. “Not a lot has changedin the law. Restrictions are more through penalty andthe selection of methodology,” Shim said.

In 2012, the National Tax Service (NTS) imposedtaxes on intra-group guarantee transactions by cal-culating the guarantee fee using the guarantee feecalculation model developed by the NTS. Four newmodels were enacted in February 2013 to clarify thecalculation of arm’s-length guarantee fees for intra-group guarantee transactions.

“As with other jurisdictions, transfer pricing is alsoan important area of tax audit and therefore a bigarea of dispute,” said Yun Sai Ree of Yulchon.

In the past year, the market has observed anincreasing number of transfer pricing audits and thetax authorities have closely scrutinised intra-compa-ny transactions with overseas subsidiaries.Withholding tax and companies’ entertainmentexpenses are two other areas that draw great atten-tion from the tax authority.

“Transfer pricing audits are a significant issue,which subsequently drive a lot of advance pricingagreement (APA) requests because the taxpayerswant to go for more certainty,” said Henry An fromSamil PwC. An also said that treaty shopping isanother by-product of the increasing scrutiny.

However, one problem deriving from the crowdedAPA market is that the negotiation procedurebecomes longer, because related resources in thetax authorities are limited. Practitioners said therehave been less unilateral APAs concluded and sometaxpayers then turned to unilateral studies instead.

Tier 1 Deloitte Anjin has a leading transfer pricing servicein Korea that optimises local and global clients’ TPneeds. Taehyung Kim leads the service line of twopartners and 23 fee earners. Kim holds a PhD degreein economics and has more than 17 years of expe-rience in transfer pricing. Yongchan Lee used to takecharge of APA and mutual agreement procedure(MAP) issues in the Korean tax authority before hejoined as a practice’s partner.

The practice has strength in providing seamlessglobal tax audit defence by designing and imple-menting practical and tailored transfer pricing poli-cies. With good understanding of regulations in mul-tiple jurisdictions as well as industry knowledge, theteam is able to minimise double taxation issueswhile meeting local transfer pricing requirements.The team is also good at APA and MAP negotiationswith various countries’ tax offices. The team employsa former Korean tax officer, meaning it can leveragesubstantial experience and knowledge in negotiatingwith tax officials.

Taehyung Kim and Taijoon Kim teamed up withDeloitte Japan for a cross-review of some intercom-pany transactions between a Japanese parent entityand its Korean subsidiary. The joint force analysedthe transaction under both countries’ regulations andset up a new transfer pricing position that meetsboth side’s requirements.

Despite being a law firm, Kim & Chang’s transferpricing service is comparable if not better in compar-

South Korea

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ison to the Big 4 accounting firms. One adviser froma rival firm said: “Kim & Chang has a dominant posi-tion in the Korean transfer pricing market.” DongjunYeo is qualified both as a tax attorney and anaccountant and heads the transfer pricing practice ofmore than 40 professionals. Yeo has extensive expe-rience advising transfer pricing issues in the US andKorea, working with a wide range of industries suchas automotive, pharmaceutical, consumer goods andsoftware. He is not only experienced in transfer pric-ing planning and implementation but also representsclients in audits and disputes as well as APA appli-cations.

Professionals from the firm have a deep knowl-edge in all areas of transfer pricing, providing serviceto companies from the US, Europe, Japan, China andIndia. As issues often involve matters such as cus-toms, fair trade and even criminal law, the transferpricing team works closely with other practice groups

within the firm to offer comprehensive advice to par-ticular matters. The practice’s key services includeestablishment of transfer pricing policy, documenta-tion and audit defence, APA and MAP negotiation, aswell as appeal and litigation. The firm holds a diverseassignment portfolio, assisting the world’s largestcompanies.

Under the leadership of Soohwan Park, Samil PwChas the largest transfer pricing group in Korea. Fourpartners and 60 dedicated professionals form themultidisciplinary team of specialists in accounting,tax, finance, economics and law. The practice’s trans-fer pricing advisory experience includes documenta-tion preparation, planning, policy development andimplementation, pre-audit services, audit defence,appeals and litigation support, and APA negotiations.By far, the group has been a market leader in APAand has handled over 100 cases of this subject.Additionally, the firm has specialised teams responsi-

South Korea



Corporate income 22% (a)Capital gains 22% (b)Branch tax 22% / 5% - 15% (c)

Withholding taxDividends 0% / 20% (d)Interest 15.4% / 20% (e)Royalties 20%Technical Services fee 20%Branch remittance fee 0%

Net operating lossesCarryback 0 / 1 year (d)Carryforwards 10 years

a) The tax rate is 10% on the first KRW 200million of taxable income, 20% on taxableincome above KRW 200 million up to KRW 20billion and 22% of taxable income above KRW20 billion.

b) Capital gains or losses are usually reflected innormal taxable income subject to corporate

income tax. Capital gains derived by anonresident from Korean sources are taxed atthe lesser of 11% of the sales proceedsreceived or 22% of the gains realised.

c) A branch tax, ranging from 5% to 15% of after-tax profits less deemed reinvested capital maybe levied if a tax treaty between Korea andthe country in which the branch’s head officeis resident allows Korea to impose the branchtax.

d) There is no withholding tax on dividends paidto a domestic company. Dividends paid to anonresident company or individual are subjectto a 20% withholding tax, plus the localsurtax.

e) Interest on a regular loan paid to a nonresidentcompany or individual is subject to a 20%withholding tax, plus the local surtax. Intereston bonds is subject to a 15.4% withholdingtax.

f) Only small and medium-sized enterprises maybe allowed to carry back losses for 1 year.

ble for handling financial services transfer pricingissues and Japanese multinationals.Heuitae Lee and Youngjoo Kim worked together

with two of the firm’s customs specialists to assist aclient obtaining both a bilateral APA between Koreaand a European country and an advanced customsvaluation arrangement from the Korea CustomsService. Such a result was very rare because the taxand customs services often hold contradictory viewsupon the pricing. Thanks to the firm’s efforts, theclient was able to manage its transfer pricing andcustoms risk at the same time based on a consistentprice.

In Korea, Samjong KPMG operates a global trans-fer pricing service line which consists of four partnersand over 30 professionals. The team is activelyengaged with developing and implementing transferpricing plans, negotiating unilateral APAs and bilater-al APAs and audit defence. Following the marketdevelopment, the team sees more work advisingoutbound businesses by Korean multinationals.

The team has a multidisciplinary background withstaff members as accountants, lawyers, economistsand other business and industry specialists. GilWong Kang arrived from Kim & Chang in 2012 andtook the leadership of the transfer pricing team,together with the head of tax practice Jeong WookChoi. Kang also has experience working with theNational Tax Services and is well versed with advis-ing multinationals’ transfer pricing planning. Sang UkLee and Don Kwan Kim are recruited this year bring-ing their industry and administration experience. Thatenables the team to not only offer real time solu-tions, but also to design tailored and sustainablemodels to corporate clients.

The team is the transfer pricing adviser to Korea’sleading carmakers and their global subsidiaries andco-operative entities. It has a sub-line in financialtransfer pricing which tackles issues such as financialguarantees, intra-group charges and revenue splits.Kang successfully defended a complicated tax auditcase for a finance company involving intra-groupmanagement fee payment. Because of significantdemands from Japanese clients, KPMG has a sepa-

rate transfer pricing team to offer advanced servicesto Japanese multinationals.

Tier 2EY’s transfer pricing practice has been enhancedover the past year because of the arrival of KPMG’sformer TP head Sangmin Ahn. Six other professionalmanager level professionals subsequently followedAhn to EY. Ahn and Unghwan Choi co-head the prac-tice of 32 staff members. The firm advises on issuesrelating to inbound investment and financial servic-es. The additional manpower has brought some jobopportunities from outbound projects.

In March 2013, Ahn assisted on a transfer pricingaudit, targeting outbound deemed royalty issues,which is very rare in Korea. The tax authority initiallyproposed an adjustment of about $60 million. Ahnsuccessfully argued the case and no adjustment wasmade as a result. In addition, Choi led a transfer pric-ing planning case involving a guarantee transactionamong foreign related parties. He also concluded a$100 million bilateral APA between Korea and China.

Yulchon’s transfer pricing practice has experiencein providing service in various forms including stud-ies, pre-audit health checks and audit defence,appeals to tax tribunal or court, APA and outboundpayment guarantees. The team’s service provisionreaches not only Asian countries such as China,Vietnam, India, Malaysia, and Japan, but also Europeand the US. In addition, the firm has establishedgood working relationships with international andlocal law firms in China, Japan, and India for complexproblem solving.

Led by Kyung Geun Lee and two other partners,the nine-people force holds a deep understandingon domestic or international tax guideline. The teamhas experience in carrying out legislation supportingservices for Ministry of Strategy and Finance’s TP reg-ulations and participation in preparation of the UNTransfer Pricing Manual. Currently, it is providing con-sulting services to the National Tax Service in Koreaon transfer pricing in South East Asian countries. Overthe past year, the firm has successfully represented anumber of world’s top companies on their unprece-

South Korea

www.TPWeek.com188


dented transfer pricing cases before the tax tribunal,which involved multi-million dollars. The team alsoassisted on a number of APAs between Korea andChina.

Tier 3Lee & Ko continues to build up its transfer pricingteam to meet the increasing market demand. Thefirm employs professionals with a diverse back-ground including lawyers, accountants and formertransfer pricing officials. Jun Suk Kim joined the teamlast September, with more than 20 years experienceworking in the tax office and the Big 4. He alsoauthored several books introducing this subject. Thefirm also welcomes Ted Kim and Jong Yul Lee; bothof them are well suited in international tax and trans-fer pricing.

The practice often advises local conglomerate suchas Hyundai Heavy Industries on transfer pricingmethods and implementation, and represents clientsin APA or MAP application. Where transfer pricing isan issue in a tax investigation, the lawyers offerclients support in the case.

The transfer pricing team at Shin & Kim includes fourspecialists. Partner In-Hwa Chung is the leader of theteam who is a certified public accountant. Chung hasbeen providing a range of transfer pricing services forover 15 years. Duck-Yeul Jang holds a PhD degree ineconomics and has more than 30 years of experienceworking in the National Tax Service in the internation-al tax field including transfer pricing before he joinedthe team. Over the past year, the firm has been busywith transfer pricing studies for clients’ business activi-ties between Korea and China.

South Korea


Deloitte Anjin LLC 5 Fl., One IFC, 23, Yoido-dong, Youngdeungpo-gu, Seoul, Korea

Dr. Tae Hyung KimPartner/National LeaderGlobal Transfer Pricing GroupTel: +82 2 6676 2410Email: [email protected]

Deloitte provides audit, tax, consulting,and financial advisory services to publicand private clients spanning multipleindustries. With a globally connected net-work of member firms in 150 countries,Deloitte brings world-class capabilitiesand deep local expertise to help clientssucceed wherever they operate. The shared values of the people ofDeloitte bind us together and promotetrust among the partners and profession-als of our member firms, allowing us toenhance the confidence of the capitalmarkets. These values join us togetheracross different cultures, customs, andlanguages and are the foundation for col-lective success.Our Global Transfer Pricing Group hasbeen increasingly recognized as a toptransfer pricing services firm in Korea byKorean and foreign multinational corpora-tions, the National Tax Service, and trans-fer pricing practitioners in Korea.

South Korea

www.TPWeek.com190



LEADING FIRMS

1 DeloitteEYGarrigues – TaxandKPMGLandwell (PwC)

2 Baker & McKenzieCuatrecasas, Gonçalves PereiraFreshfields Bruckhaus DeringerGrant ThorntonGTA Villamagna

3 AshurstBDOMazars

The transfer pricing authorities in Spain have beencited as much more reasonable than the general taxauthorities. Despite this, tax revenue is critical inSpain as the nation attempts to reduce its financialdeficit. As a result, transfer pricing is likely to becomean area where tax revenue can be raised.

One adviser said in cases where the tax inspector isnot well-read in the area of transfer pricing, they willoften conduct their audits on a different area of tax.

However, this is set to change as a recent recruit-ment of a tranche of young, well-trained individualsto the authorities promises a better informed andeasier to deal with tax authority in the future. This iscertainly the case in Madrid but outside of the capi-tal the transfer pricing authorities still sometimes lacksophistication.

When taxpayers’ transfer pricing affairs are auditedthe authorities can request their transfer pricing doc-umentation which must be supplied to them withina minimum of 10 days. Aside from a few exemp-tions, a transfer pricing study must be produced forall related party transactions. Since 2009, transferpricing rules have dictated that it is absolutely essen-tial for companies to have their transfer pricing doc-umentation in order, as the penalties for the contra-vention of these rules can be severe.

The enforcement of transfer pricing penalties islikely to increase in the near future as related-partytransactions become a focus for the authorities, look-ing to increase revenue.

Spanish taxpayers are able to apply for unilateral,bilateral, and multilateral advanced pricing agree-ments. There is no filing fee and the authorities donot publish APA data in any public forum.

Tier 1 Deloitte’s transfer pricing practice is multidisciplinary.The team consists of two partners who lead about50 other dedicated transfer pricing professionals. Thisincludes work in the financial services industry, theinfrastructure sector, the consumer business sector,the healthcare industry, and the services industry.The practice employs economists as well as tax andlegal specialists and so is able to offer the full rangeof transfer pricing services.

The practice has carried out transfer pricing workrecently for a number of high profile clients includingthe large Spanish bank, Banco Santander,

Brian Leonard, partner of the practice in Spain clar-ified that not only does Deloitte Abogados boast vast


SpainTax authoritiesTaxation Agency37 Infanta Mercedes Street, 28020 MadridTel: +34 91 583 89 97Fax: +34 91 583 70 05Website: www.agenciatributaria.es

http://www.agenciatributaria.es

specialist tax teams, but also teams that specialise inspecific areas of business. The practice is one of thelargest in Spain, employing 27 partners and 250other tax experts.

The EY Spain transfer pricing team consists of 40dedicated professionals including three partners.

In conjunction with the transfer pricing team, EYhas a strong, dedicated tax controversy team capa-ble of working on both domestic rulings and cross-border litigation, particularly in relation to transferpricing.

The transfer pricing team offers a wide range ofservices including the design of sophisticated sup-

ply chain models and sophisticated intangibleplanning projects and many more.

The practice has a variety of clients on their port-folio including a number of the most relevant for-eign multinationals in Spain. The practice workswith a plethora of different industries but is partic-ularly experienced in working with the energyindustry, infrastructure, and the financial servicesindustry.

One client explained that they had used EY’sservices when they needed a master file complet-ed very quickly. The practice delivered and theclient described the service as “high quality and

Spain

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Corporate income tax 30%Capital gains 0% to 21%Branch tax 30%/21%

Withholding taxDividends 0% to 21%Interest 0% to 21%Royalties from patents and licences 0% to 24.75%Branch remittance tax 0% to 21%

Net operating losses (Years)Carryback Not permittedCarryforwards 18

a) For small and medium-sized companies (aslegally defined), the corporate income tax rate is25%, applicable to the first €300,000 ($397,000)of taxable income; any taxable income morethan that amount is taxed at 30%. Formicroenterprises (as legally defined and certainrequirements are met), the corporate income taxrate is 20% applicable also to the first €300,000of taxable income; any taxable income morethan that amount is taxed at 25%.

b) There is no special capital gains tax ratealthough, if some requirements are fulfilled, itmay apply a 12% tax credit for reinvestment ofextraordinary income.

c) The higher rate applies unless reduced under atax treaty or exempt under the EU interest androyalties directive.

d) 30% is the general branch tax rate applicableto non-residents with a permanentestablishment (PE) in Spain (are taxed at samerate as domestic companies). In addition, a21% branch profit tax is imposed on after-taxprofits remitted to a foreign head office. Thebranch profit tax does not apply to branches ofEU entities or entities based in a country thathas signed a tax treaty with Spain.

e) Intercompany payments to residents of otherEU member states are subject to an exemptionif the foreign parent company has continuouslyheld a minimum of 10% of the share capital ofthe Spanish company for one year before thedividends are declared.

f) As is July1 , 2011, royalty payments toassociated entities or PEs residing in the EU arenot subject to withholding tax under certaincircumstances. Royalties paid to a non-residentcompany outside the EU are subject to thehigher rate unless the rate is reduced under atax treaty.

Source: Tax advisers from Garrigues – Taxand


very flexible”. Another client commended the firmfor their good service, explaining that they wereassisted by “a very good associate with excellenttransfer pricing skills”.

The transfer pricing team at Garrigues – Taxand,co-headed by Ángel Calleja and Mario OrtegaCalle, consists of more than 40 transfer pricingpractitioners including five partners.

The transfer pricing team offers a wide range ofservices including documentation, policy work,planning, litigation, APAs, MAPs, and benchmarking.

One of the key deals the team worked on overthe past year was for entities associated with theGas Natural Fenosa Group; a leading multinationalin the gas and power sector present in more than25 countries. This involved them performing an indepth analysis of the transfer pricing implicationsof the business.

The practice provides ongoing advice to a num-ber of Ibex35 index companies, comprised ofsome of the largest quoted companies in Spain.The practice is particularly active in Latin Americaninvestments of different multinationals, especiallyover the past few years in response to the currenteconomic development in this area. As such, it wasrecently announced that Garrigues are to openthree new offices in Columbia, Mexico and Peruthis year (2013).

Garrigues participates actively in bothInternational and Spanish Forums in connectionwith all kind of technical issues relating to theapplication of existing transfer pricing rules, includ-ing the International Fiscal Association, theInternational Bar Association, the OECD BusinessRestructuring working group, the EU Transfer PricingForum, the Spanish Association of Tax Advisers(AEDAF), and the Spanish Institute of Fiscal Studies(Instituto de Estudios Fiscales).KPMG’s transfer pricing practice consists of three

partners and two managing directors who lead ateam of over 45 professionals. At the core of itsbusiness model is an innovative approach, thatgoverns the portfolio of products and services thatKPMG is offering to the market. This innovative

value proposition is forged by the combination ofa business and economic approach, a constantsearch for synergies for clients in the domestic andinternational tax planning fields, and the leverageon the use of technology. The practice has a vari-ety of clients in the energy, infrastructure and bank-ing industries, with a market penetration exceeding50% in Spanish blue chips, and is particularlyexperienced in delivering high value-added proj-ects in the field of international tax planning, taxvaluations for transfer pricing purposes (withemphasis on intangibles and financial instruments)and value chain management in a timely manner.The practice has recently hired Carolina del Campo,a senior tax official coming from the Spanish TaxAgency (AEAT) specialised in international taxationand transfer pricing, who worked as the head ofinternational taxation team since July 2012 andwas also the delegate in the AEAT for OECD meet-ings (WP6, WP10, Global Forum and CFA). The prac-tice is experienced in advising clients on APA pro-cedures and dispute resolution.Landwell Spain is associated with PwC. The firm

is divided into specialised departments, one ofwhich is the transfer pricing team. It offers a rangeof transfer pricing services including the designand implementation of transfer pricing policies,economic and functional analyses, advice andpreparation of documentation, and assistance onthe negotiation of APAs with the authorities.

Tier 2Baker & McKenzie offers a variety of transfer pric-ing services to their clients. They try to avoid rou-tine work such as the preparation of documenta-tion, and instead focus on the complex, high-valueaspects such as transfer pricing optimisation struc-tures. Cuatrecasas, Gonçalves Pereira is first and fore-

most a law firm employing 60 partners and 250lawyers in total. 80% of the professionals at the taxpractice have Masters Degrees in relevant subjectsand 50% of the professionals are trained lawyersand economists.

Spain


The transfer pricing team is able to offer a range oftransfer pricing services including APAs and litigation.The tax practice has registered a 14% increase in itsturnover in the past year and they are charging 25%more for their services. This increase has resultedfrom a shift in the kind of work that the tax practiceis taking on; they now predominantly do extremelysophisticated tax work.

The team has extensive international experienceand as such boasts large multinational clients suchas L’Oréal, Louis Vuitton, Qatar Holding, DeutscheBank, Liberty, Zurich, British American Tobacco,Pirelli, Banque Chaabi, Petrobras, CSN, Credit Suisse,Media Markt, Petrobras and Beiersdorf, among oth-ers

The Spanish practice of Freshfields BruckhausDeringer boasts one of the few in-house dedicat-ed transfer pricing teams in Spain. The team ismade up of transfer pricing specialists who areparticularly concerned with transfer pricing issuesinvolving Latin America and the Caribbean. Thepractice is able to offer the full range of transferpricing services including the financial aspectsbecause they employ economists capable of doingthis.

The transfer pricing team at Grant Thornton isled by Gabriel Yakimovsky, a member of GrantThornton International’s EMEA global transfer pric-ing leadership team where he advises on transferpricing planning, supply chain optimisation, busi-ness restructuring and documentation. Aside fromthe work he does for the transfer pricing team inSpain, Yakimovsky is also actively involved in train-ing staff of the other member-firms of GrantThornton International.

The transfer pricing team is able to offer the fullrange of services and employs a number of dedi-cated economists including Yakimovsky. The teamis able to work with other teams at Grant Thorntonin Spain when advising on transfer pricing issues;these include the international tax, VAT, and valua-tions specialists.

The practice was recently involved in a projectwhere they established a tax efficient global fran-

chise royalty structure for a group engaged in theactivity of gold and jewels retailing in Spain andPortugal. The team’s efforts secured several millionEuros of savings for the group.GTA Villamagna Abogados offers advisory servic-

es on tax litigation, general taxation, and wealthmanagement / private banking. The firm is particu-larly strong in tax litigation and benefits from theextensive experience of Filipe Alonso, head part-ner at the practice.

“The solutions are always tailor made” explainedAlonso, and the partners are always directlyinvolved with the tax work.

The practice offers the full range of transfer pric-ing services and recently employed a transfer pric-ing expert, trained in both the legal and the eco-nomic side of transfer pricing. The departmentboasts extensive experience in transfer pricing pol-icy design and validation; planning and documen-tation for major multinational companies; andcomplex tax valuation exercises, negotiation ofadvance pricing agreements with the Spanish taxadministration.

The transfer pricing team recently advised on thedesign and implementation of transfer pricing pol-icy to aid the restructuring of a well-known groupof companies in the insurance industry in a dealworth approximately $1.6 billion. This involvedextremely complex transfer pricing policies due tothe type of transactions under analysis.

The practice prides itself in maintaining absoluteconfidentiality for their clients. They are able toachieve this as a result of their small size andmethodology whereby only the partners are awareof the identities of the clients – the rest of thepractice works only with a reference number.

Tier 3The professionals at Ashurst are generalists withsome degree of speciality, explained EduardoGracia, head partner at the practice. The practicehas recently advised on a variety of tax mattersincluding debt and corporate restructurings; inter-national taxation and transfer pricing; and in

Spain

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defence of a number of clients before the admin-istrative and judicial courts.

The transfer pricing team is able to advise ontransactions and negotiations in different transferpricing cases. Their particular focus is APAs whichthey have extensive knowledge and experience of.

Gracia has recently been re-elected for the fourthtime as the Spanish private sector representative atthe Joint Forum on Transfer Pricing of the EuropeanUnion. Gracia explained that this position hasimbued him with an enormous amount of transferpricing experience and also personal contacts withmany senior transfer pricing officials.

The practice recently advised on the functionalrestructuring of the reorganisation of the Procter &Gamble group (American multinational consumergoods company) in Spain following the acquisition

of Arbora (leading Spanish child and femininehygiene manufacturer).

Clients praised Ashurst’s transfer pricing servicesas “excellent”.BDO’s transfer pricing team offers a range of

services including the implementation, review anddefence of the transfer pricing policyfor bothSpanish companies investing abroad and Spanishsubsidiaries of multinational groups.

The practice is also capable of the analysis oftransfer pricing policy, the valuation for tax purpos-es of habitual group transactions, compliance anddocumentation, and advice on APAs.Mazars offers its clients services that consist of

defence strategies, negotiations with the revenueauthorities, and planning for the minimisation ofthe global tax rate.

Spain


LEADING FIRMS

1 EYPwC

2 DeloitteGrant ThorntonKPMG

3 Skeppsbronn Skatt – Taxand

It has been a challenging year for transfer pricing inSweden. A slow economy, an energetic tax authorityand legislative changes have combined to place alot of pressure on multinational companies’ transferpricing structures.

“The market for tax services has been quite toughduring the past year,” said Tina Zetterlund of KPMG.“The recession and the economic environment havebeen tough for our clients and many companieshave had some problems. We also see that the com-petition for tax services has increased.”

Advisers said international clients have been badlyaffected by the crisis in Europe. Bigger deals involv-ing large multinationals were conspicuous by theirabsence, as clients became more careful with theirbudgets and took longer to make decisions, withmany focusing on cost-cutting projects.

Legislative change has also made tax planning, byway of interest deductions, more difficult. SinceJanuary 1 2013 the regulation around thin capitalisa-tion has been tightened, decreasing the maximumamount of debt on which deductible interest pay-

ments are available. Although similar rule changeshave been imposed in many European jurisdictionsrecently, they were felt especially strongly in Sweden.

“Historically, we’ve had generous thin capitalisationrules, and that has created quite a lot of work nation-ally,” said Mac Berlin at Skeppsbronn Skatt – Taxand.“This has been a huge drain on the Swedish taxbase, especially with interest going to foreign entitieswith no withholding tax or thin capitalisation gettingfull use of leverage, which has been kind of unique.The government has tightened the whole thing up –there were these light rules on interest deductionbefore and they’re putting more fierce rules in place.”

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SwedenTax authoritiesMinistry of FinanceJakobsgatan 24SE-103 33 StockholmTel: +46 8 405 10 00Fax: +46 8 21 73 86Website: www.sweden.gov.se/sb/d/2062

Swedish Tax AgencyPostal Address: 171 94 SolnaVisiting Address: Solna strand road 10Tel: 0771-567 567(in Sweden);

+ 46 8 564 851 60 (abroad)Email: [email protected]


Corporate income tax 22%Capital gains 22% Branch tax 22%

Withholding tax (a) Dividends 0/30%Interest 0%Royalties from patents and licences 0/26.3% Branch remittance tax


a) Payments to European companies that qualifyunder EU directives may be exempt or subjectto reduced withholding tax rate

http://www.sweden.gov.se/sb/d/2062



Other advisers agreed that the rule changes havehad a big impact.

“The interest reduction rules have had a significantimpact on our clients especially those working in aninternational environment,” said Tina Zetturland atKPMG. “All financing structures used by our clientshave since become more difficult as the scope fortax reductions is narrowed.”

Swedish tax practices also remarked upon theimpact of the political climate surrounding transferpricing. This has been an inflammatory topic in theSwedish media, and advisers said that the taxauthorities have been very active in the past year.

“The tax agency has been very active,” said AnnikaLindström at KPMG. “The number of tax audits relat-ing to transfer pricing are definitely increasing, I’mbeginning to compare it to Denmark where the taxauthorities are always much more aggressive andwork a lot with tax audits.”

Magnus Larsson at Deloitte agreed: “It has beentough times in Sweden. It is exceptionally difficult tomarket some schemes or set up hybrid instruments.Aggressive tax planning has gone for now.”

Zetterlund agreed that the shape of tax work inSweden has been changed quite radically by thepressure to be more transparent.

“Clients are more worried about their reputations,and this has changed the type of tax work that isavailable. Not many clients are now interested inaggressive tax planning,” she said. “Clients now wantto take more time to consider the impact on reputa-tion of tax planning activities. They are prepared tobe more transparent when it comes to taxes, boardmembers are suddenly changing the type of structur-ing so it’s less aggressive, and they are discussingpolicies in relation to reputation. This requires somenew skills from us.”

Tier 1 The Swedish transfer pricing team in EY is part ofEY’s Nordic transfer pricing group, an integratedtransfer pricing team within the Nordic region. TheNordic group enables EY to provide specialist servic-es in all the Nordic countries. EY’s Nordic transfer

pricing group is led by the transfer pricing specialistand partner Mikael Hall, who is based in Swedenand is one of the jurisdiction’s most experiencedtransfer pricing advisers, described as “very knowl-edgeable” by an adviser in a competitor firm.

EY has a leading reputation in Sweden for transferpricing, and its strong Nordic practice has been at theforefront of advisory work as transfer pricing hasbecome an increasingly crucial tax issues in theregion in recent years. The practice provides adviceon cross-border restructurings, advance pricingagreements, controversy-related issues, and financialtransfer pricing. The group was awarded InternationalTax Review’s Swedish Transfer Pricing Firm of theyear in May 2013.

PwC’s transfer pricing practice is very highly regard-ed by peers in Sweden, one describing it as “verygood indeed”. The team comprises specialists ineconomics, accounting, project management and taxlaw, and is well-known for its innovative and creativeapproach to transfer pricing issues. These issuesencompass advance pricing agreements, value chaintransformation, documentation and planning, andcontroversy and dispute resolution.

Tier 2An important deal for Deloitte’s transfer pricing prac-tice over 2012 involved providing advice on risk mit-igation and other tactical challenges to an industrialgroup with an annual turnover of $13 billion. Thisadvice was given to the Board of Directors of aSwedish subsidiary of the larger group, following arestructuring of the company’s European operations.Deloitte analysed the local tax implications of a busi-ness restructuring entailing a substantial change inthe group’s transfer pricing model to assist localmanagement regarding potential risks.

This deal was led by Elvira Allvin, who alongsideMats Emanuelsson spearheads transfer pricing atDeloitte Sweden. Emanuelsson has particular experi-ence in audit defence and the banking sector; Allvinhas recently been focusing on expanding the practice’sexpertise in the south of Sweden and on building rela-tionships with the industrial clients based there.

Sweden


Allvin and Emanuelsson work with a diverse teamof practitioners, who have backgrounds in tax, eco-nomics, finance, and business, and experience fromworking in foreign jurisdictions, in industry, and forthe Swedish Tax Agency. This broad-based bunch ofprofessionals offers an equally broad range of serv-ices, including business model optimisation, restruc-turing planning and risk management, implementa-tion advice, all aspects of compliance, audit defence,valuations, and arbitration procedures.

The transfer pricing team works with a diversebase of key accounts comprising banking and pri-vate equity firms, as well as many of the largestindustrial multinationals, including AB Volvo, VolvoCars, Hexagon and Getinge.

Grant Thornton Sweden has a full-service transferpricing practice in Sweden. This department is led byPer Hedren, a senior manager and trained econo-mist. Documentation, disputes and supply chainoptimisation are all handled by the practice, which isalso able to draw on Grant Thornton’s practice inother countries on large-scale transfer pricing proj-ects.

It’s been an eventful year for the transfer pricingpractice within KPMG. Its head, Annika Lindström,who has been with the firm since 1994 and has ledits transfer pricing work since 2005, was promoted tothe position of partner, boosting the transfer pricingteam’s profile.

Documentation work has begun to give way tomore planning and structuring projects alongside asharp rise in audits and litigation. To cover this, KPMGdrafted in extra expertise in the form of RasmusGannvik, who joined from the Swedish tax agency.

Elsewhere, geographically speaking, the practicethe firm established in Gothenberg two years agohas started to take off. Lisa Wåhlin, who covers allforms of transfer pricing work, was hired fromElectrolux to oversee the transfer pricing team there.While there are many similarities between the work-load in the two cities, the Gothenburg team tends towork with mid-size firms in a less mature market,

while the Stockholm team has more of an interna-tional focus.

Key clients include Hexagon, Hoyer, and Electrolux;leading companies with worldwide operations in thefields of visualisation technologies, logistics, andappliance manufacturing respectively.

For Hexagon, Lindström helped develop a grouproyalty structure designed to maximise tax efficiencywhile supporting greater group cohesion. Therespected transfer pricing practitioner Nils von Kochsuccessfully appealed a Swedish Tax Agency deci-sion that the Swedish subsidiary of one of theworld’s largest corporations benefited from revenuesgenerated by a group company outside Sweden.And David Perrone, a highly-experienced profession-al who runs university courses on transfer pricing,worked with Lindström to develop a model for set-ting interest rates for intra-group loans to subsidiariesfor the Swedish manufacturer Thule.

Tier 3Skeppsbronn Skatt – Taxand has three partnersworking part-time on transfer pricing issues, and twoassociates dedicated full-time to the sector. Thisteam is led by Niklas Bång. It handles both disputeand advisory issues, and covers all areas of transferpricing work – documentation, planning and litiga-tion – except benchmarking analysis, which is out-sourced because there are no economists in thepractice.

In the past year, the practice advised on therestructuring of a supply chain for a global Swedish-headquartered company. This advice encompassedpricing models, transfer pricing documentation,implementation, economical evaluation, and safe-guarding exit tax and private equity issues.

The practice also acted for a multinational com-pany through a litigation concerning a substantialtransfer pricing reassessment. And it designed, doc-umented and implemented transfer pricing policyfor brand charges for a large Swedish-headquar-tered company.

Sweden

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ContactNiklas BångDeputy Managing DirectorTel: +46 40 10 71 92Mobile: +46 73 640 91 92Fax: +46 40 23 98 28Skeppsbron 5, SE-211 20 Malmö

www.skeppsbronskatt.se

Quality tax advice,

globally

Sweden


http://www.skeppsbronskatt.se

LEADING FIRMS

1 DeloitteEYKPMGPwC

2 TAX EXPERT International

Switzerland is a member of the OECD and has accept-ed the OECD transfer pricing guidelines. At present,there is no specific requirement concerning transferpricing documentation. However, for related-partytransactions, the taxpayer must be able to prove thatthe transfer prices used were based on coherent eco-nomic and commercial reasoning.

Transfer pricing audits are not covered by Swiss taxlaw and therefore any audits pertaining to transferpricing matters are undertaken in accordance with theexisting tax audit procedures. Non-cooperation withthe authorities when subject to such an audit willresult in the imposition of fines.

At present, there is no formal procedure for the pro-curement of advanced pricing agreements (APA).Bilateral APAs are carried out under the analogousmutual agreement provisions in the relevant doubletax treaty.

The Swiss tax environment has become more chal-lenging over the past year. The authorities havebecome increasingly difficult to deal with; they aremuch more offensive with their tax audits and havedeveloped a propensity to question every detail in taxsubmissions, explained one adviser.

The tax authorities in Switzerland are also becomingmore and more technical, explained Philip Robinson

of EY. The authorities are producing comprehensivelyresearched and constructed rulings as they look veryclosely at whether or not companies are structured inthe way they claim to be.

Tier 1 The tax practice of Deloitte Switzerland is structuredinto service lines; each line specialises in one particu-lar area of tax. The practice specialises in a broadrange of tax issues including international corporatetax, mergers and acquisitions, indirect tax, taxaccounting and management consulting, financialservice industry offerings, global employer services,and transfer pricing.

A large proportion of the transfer pricing team atDeloitte have strong economic backgrounds as well astax and legal backgrounds. The practice is thereforeable to offer the full range of transfer pricing services.Recently, this work has ranged from the preparation oftransfer pricing documentation to the elaboration andimplementation of cross-border trading models.

The practice also has specific knowledge of a vari-ety of industries which they are able to integrate intotheir tax advisory services. In particular, they work reg-ularly with companies within the life sciences, manu-facturing, oil and gas, and financial services industries.

The transfer pricing team at EY consists of a dedicat-ed 20-person strong team of transfer pricing special-ists. The practice offers a range of transfer pricing serv-ices including global transfer pricing documentation,transfer pricing policy design, audit defence, controver-sy, planning business reorganisation projects andimplementing them, advance pricing agreements,principal rulings, financial services related to transferpricing, intellectual property, and implementation oftax effective supply chain management.

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SwitzerlandTax authoritiesFederal Tax AdministrationEigerstrasse 65 CH-3003 BerneTel: +41 31 322 71 06 Fax: +41 31 322 73 49 Email: [email protected] Website: www.estv.admin.ch


http://www.estv.admin.ch


The team is led by Nicholas Ronan, who joined theSwiss team after 15 years in the Silicon Valley regionof the US.

Within the past year, EY Switzerland’s transfer pricingteam managed important business restructuring proj-ects and was part of a large tax effective supply chainmanagement (TESCM) project involving the realign-ment of operations in multiple jurisdictions. The Swisstransfer pricing team, and transfer pricing teams locat-ed in affected jurisdictions, along with experiencedindirect tax, human capital, advisory, legal, Swiss cor-porate tax professionals and client personnel allworked together to implement these projects.

Markus Wyss is the partner in charge of the glob-al transfer pricing team of KPMG Switzerland. Thepractice offers their clients status-quo analysis wherethey help evaluate and identify potential tax risksand areas to improve upon in relation to the transferpricing policy of a taxpayer.

The team will also help implement new transferpricing policies, prepare documentation, and man-age transfer pricing risks.

PwC Switzerland’s transfer pricing leader is NorbertRaschle.

The team devises transfer pricing solutions fortheir clients in the following areas: optimisation and

elimination of risks in business structures, docu-menting and defending transfer prices, reducingrisks, determination of arm’s-length transfer prices,setting up uniform and transparent value chains,tax-optimisation of global structures, documenta-tion, and creating the optimum basis for M&Arestructurings.

Clients praised the practice for its transfer pricingwork. In particular Benjamin Koch was recommend-ed for his “good knowledge and…practicalapproach.” The team was described as a “solidtransfer pricing practice”.

Tier 2Richard Wuermli heads the transfer pricing practiceat TAX EXPERT International which consists of twopartners and 11 other professionals. The majority ofwork that the practice did for their clients over thepast year was in relation to the implementation ofnew transfer pricing concepts.

The team is in the process of helping their clientSoda-Club and Sodastream Beverages achieve apossible saving of €13 million ($17 million) byadvising them on an intercompany transfer pricingadjustment between Germany and theNetherlands.

Switzerland


Tax rates at a glance (As of January 1 2013)

Corporate income tax rate (a) 11% - 24%Capital gains tax rate (a/b) 11% - 24%Branch tax rate (a) 11% - 24%

Personal income tax rate (c) 19% - 48%

Withholding taxDividends (d) 35%Interest (e) NilRoyalties from patents and licences NilBranch remittance tax Nil

Net operating losses (years)Carryback Not allowableCarryforwards 7 years

a) Combined federal/cantonal/municipal corporateincome tax rate on profit before tax, dependingon domicile, under reservation of privileged taxscheme (mixed companies 6%-10%).

b) Higher rates may apply to real estate capitalgains, depending on location of property.

c) Combined federal/cantonal/municipal personalmaximum income tax rate, depending ondomicile.

d) Under reservation of treaty tax reduction or fullexemption under domestic law.

e) Under reservation of interest paid by banks.

Source: Tax advisers from Tax Partner AG – Taxand

Deloitte AGGeneral Guisan-Quai 38P.O. Box 2232 8022 Zurich

Phone: +41 (0)58 279 60 00Fax: +41 (0)58 279 66 00www.deloitte.ch

Contact: Hans Rudolf HabermacherEmail: [email protected]

Firm profile:The Deloitte Transfer Pricing team inSwitzerland is led by Hans RudolfHabermacher and consists of innovativeand highly motivated specialists withwide ranging backgrounds in tax, law,economics, accounting, and business aswell as experience working in foreignjurisdictions, in industry, and for taxadministrations.

The Deloitte Transfer Pricing practice hasa presence both in Zurich and Geneva,but is acting as one team. This regionalstrategy has been instrumental in buildingand strengthening relationships with thegrowing client base across Switzerland.

The Swiss Transfer Pricing practice playsan instrumental role in the Deloitte glob-al TP network which won the EuropeanTransfer Pricing firm of the year ITRaward in 2013.

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http://www.deloitte.ch



LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Grant ThorntonLee and Li

3 Baker & McKenzie

Since transfer pricing rules came into effect in 2005,the Taiwanese tax authorities have graduallybecome more aggressive in the enforcement andhave intensified their approach to audit.“For the first few years of implementation, tax

authorities focused mainly on public awareness andeducation, gathering information, and only selective-ly audited unusual transactions,” said Sherry Changfrom KPMG. “In recent years, they became more strin-gent in their transfer pricing audits and expect high-er-standards of reports from corporations.”Besides general tax audits, Taiwan tax offices also

put together senior tax officials for special transferpricing audits with higher tax assessment goals.Such audits are usually more sophisticated andlonger than general ones. Practitioners find the tax officers often hold strong

opinions and are difficult to convince. “They usuallyhave different viewpoints about the companies’explanation and positions,” said Dennis Yu of Lee

and Li. “I think the tax authority is not familiar withthis subject and would need some more outsideassistance.”Some practitioners also observe a slow-down

growth rate in transfer pricing service demand,especially in advance pricing agreement (APA)application. “The market has been quiet, not muchAPAs over the past year. Quite a few companieseven withdraw their application,” said Al Changfrom Deloitte. “Partly because the tax authority isstill learning and it takes a long time to negotiatethe result. Some companies become inpatient inthe process, even when they are about the sign theagreement, but they decide to hold.”Because of the relaxed relationship between

Taiwan and China, a substantial amount of businessactivity is happening between the two. Further devel-opment of the transfer pricing regimes of both juris-dictions is something the market anxiously expects.“Corporations want to manage their risks to minimisethe possibility of Taiwan and China claiming taxingrights on their profit,” said Sherry Chang.

Tier 1 Deloitte, which dominates 40% of the market share inTaiwan, has a flagship transfer pricing service. Theteam comprises five partners and 70 fee earners. Theservice leader Mike Chang is a widely recognised pro-fessional and has more than 20 years of experienceconsulting and planning for foreign and local clientsunder international tax and transfer pricing. GlendyYuan is praised for appeal and dispute resolution.


TaiwanTax authoritiesTaipei National Tax AdministrationNo 2, Section 1,Jhonghua Road, Wanhua District,Taipei 10802, TaiwanTel: +886 2 2311 3711Fax: +866 2 2389 1052Website: www.ntbt.gov.tw/etwen/

Taxation Agency, Ministry of Finance, Republic ofChina2, Aiguo W Road,Taipei, 10066 TaiwanTel: +886 2 2322 8000Fax: +866 2 2396 9038Website: www.dot.gov.tw/en/

http://www.ntbt.gov.tw/etwen/

http://www.dot.gov.tw/en/

The practice offers a wide range of transfer pricingservices from compliance to defence. It has a focuson planning and consultation, assisting Taiwanesecompanies in handling their global risks. The teamprepares global transfer pricing documentation andensures effective pricing policies. Over the past year,the team has assisted a number of multinationalswith their transfer pricing model optimisation.Japanese companies are increasing their outbound

investment and they have a tradition to use Taiwanas a stepping-stone into China. The firm has noticedthe trend and has formed a special Japan team tobetter serve Japanese clients with their transfer pric-ing needs.

EY’s transfer pricing service is one of the marketleaders in Taiwan. Under the leadership of GeorgeChou, the team has 30 dedicated staff members. Thefirm offers a full range of services and has an empha-sis on hot issues related to intangibles and royalties.It is proud of its combination of communication and

technical skills, which guarantees successful argu-ments before the tax authority.In April 2013, Chou and Winni Hsieh concluded a

landmark case for a Japanese client with significantreduction in withholding tax for service paymentsmade from Taiwan to foreign parties. The client hadfailed, over a number of years, to apply for reducedwithholding tax in accordance with Article 8 ofincome tax law before it approached EY for docu-mentation preparation. Because of EY’s sophisticatedcontribution analysis, the tax authority finallyapproved the tax exemption. The case marked amilestone in the alignment of the Taiwan income taxwith international tax.Being part of EY’s international network, the team

also works closely with its sister practices worldwidefor cases that include more than one jurisdiction. Chouand Angela Chang, for example, teamed up with EYUS to jointly assist a US company with its pricing pol-icy changes and intellectual property migration.

Taiwan

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Corporate income 17% Capital gains 17% (a)Branch tax 17%

Withholding taxDividends

Paid to a resident shareholder 0%Paid to a nonresident shareholder 20%

Interest (b)Paid to resident 10%Paid to nonresident 15%

RoyaltiesResident 10%Nonresident 20%

Technical Services fee 20%Branch remittance fee 0

Net operating lossesCarryback 0Carryforwards 10 years (c)

a) Gains derived from the sale of land and adomestic company’s securities currently areexempt.

b) The 15% withholding tax applies to interestpaid to a nonresident on short-term bills,interest on securitised certificates, interest oncorporate bonds, government bonds, orfinancial debentures, as well as interest derivedfrom repurchase transactions with the abovebonds or certificates. The rate in all other casesis 20%, unless rate is reduced under a taxtreaty.

c) Assessed tax losses of a business entity(including a corporation and branch of a foreigncompany) may be carried forward for 10 years,provided the entity keeps accounting books,files a “Blue Return” or an annual corporate taxreturn that has been examined and certified bya local CPA within the prescribed period in theyear the losses were incurred and in the yearthe losses are utilised.


Sherry Chang leads the transfer pricing practiceat KPMG in Taiwan of four partners and 40 profes-sionals. The team includes senior tax profession-als, financial analysts and economists that are ableto provide sophisticated advice. Being part of theKPMG’s global network, the firm maintains anactive multi-firm collaboration, and is especiallyclose with KPMG China, because of a ramping upinvestment from the other side the Strait. Moreover,the firm has a strong relationship with the taxauthority and has gained deep understanding intotax governance on transfer pricing.In December 2012, the team assisted a transfer

pricing audit for a leading publicly listed Taiwanesecompany. The tax authority challenged the compa-ny’s profit allocation, deemed unusually high in anAsian subsidiary. KPMG developed a profit splitmethod model for the client and convinced the taxauthority with the deductibility of the client’s R&Dexpenses. In the end, the client was able to signif-icantly reduce the adjustment amount.

PwC’s tax leader Howard Kuo heads the firm’stransfer pricing practice in Taiwan, and is namedfor his quality APA service. Ming-Chu Yang is wellknown for global documentation project manage-ment. The practice competes head to head withDeloitte and has more than 70 dedicated profes-sionals. The firm continues to undertake strategichiring as it welcomed two experienced seniormanagers from the Netherlands last year enhanc-ing its service provision to European clients. Theduo is actively assisting the second APA betweenTaiwan and the Netherlands.Preparing transfer pricing documentation for

compliance purposes makes up a large proportionof the team’s business because of increasingawareness in the marketplace. But the team alsoassists in a number of APA applications. The veryfirst bilateral APA in Taiwan was concluded by theteam and it claims to have worked on around halfof the APAs concluded in Taiwan so far. Although itdoes not have a separate dispute team, the prac-tice’s results for transfer pricing audit support havebeen good. Lily Hsu assisted a famous manufac-

turer with its audit during 2013. She successfullyconvinced the tax authority that the profit splitmethod is inappropriate to determine the arm’s-length price in the client’s case. The client, as aresult, was shielded from an additional tax expo-sure of $47 million.The practice has strength in advising companies

in the manufacturing and IT industry. It is now pos-ing more emphasis on value chain transformationfor future service development.

Tier 2Outside the Big 4 firms, Grant Thornton operatesan alternative for transfer pricing advice in Taiwanto serve both local and foreign businesses. Taxleader, Jay Lo, leads the service of seven special-ists, assisted by transfer pricing manager, CarrieChen. Team members hold diverse professionalbackgrounds in accounting, law and economics.The firm’s transfer pricing service comprises threeparts: documentation, planning and defence.Benefitting from the Grant Thornton internationalnetwork, professionals in Taiwan receive trainingand endorsement from the central office.Additionally, the firm will get cross-border assign-ment referred between sister firms worldwide. Thefirm uses the Standard & Poor’s database for com-parable searching, which is coherent with thedatabase used by the Ministry of Finance (MOF).Over the past year, Lo and Wella Lee have assist-

ed a number of clients with transfer pricing studiesand benchmarking services. They underwent acomprehensive review of clients’ documentationand provided sound advice to minimise their futurerisks.There are 16 professionals at Lee and Li, includ-

ing eight partners. Josephine Peng and Frank Linwho co-led the tax practice. Although Ko-JenHsiang left the team for a corporation at the endof last year, the practice maintains a solid APAapplication. With experienced and multi-discipli-nary specialists on board, the team is able to con-duct sophisticated analyses and reviews on clients’TP methods and documentation, to help avoid

Taiwan


future risks. In addition, the practice has strength innegotiating with the tax authority for dispute reso-lution. But the firm does not offer transfer pricingreport services.Earlier this year, Peng successfully concluded a

special transfer pricing audit, conducted by theMoF, on a Taiwan branch of an international bank.When the audit was first raised in 2010, the MoFplanned to make an adjustment of $120 million.Thanks to Peng’s professional support, no addition-al assessment would be made.

Tier 3Baker & McKenzie in Taiwan offers transfer pricingservices, though the service line is not handled by aseparate team of people. The head of the tax prac-tice, Michael Wong, takes charge of the service line.The team’s core transfer pricing service is consultingand planning, which includes designing and imple-menting structure as well as integrating methodolo-gy. The firm does not have documentation servicesas all the documentations in Taiwan is centralised inShanghai, China.

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1. How does the tax authority selecttransfer pricing cases to audit?• When a tax audit is conducted before a tax-payer, the transfer pricing (TP) issues detect-ed by the tax auditor could be considered inthe scope of market practice, and the taxinspections could be widend to whole sector.

• Tax audits could be initiated upon denounce-ment.

• Certain taxpayers are obliged to comply withTP documentation. Tax audits could be initi-ated upon the information derived from suchdocumentation.

• Taxpayers could be selected for the auditsdue to their characteristics (foreign owner-ship, overseas transactions)

• Tax audits could be initiated for taxpayerswho are selected by the central software sys-tem based on the information provided onthe financial statements.

2. How will a company find out it is beingaudited? What is the official notification?Taxpayers may understand that they are beingaudited by receiving the information requestletter (IRL) from the tax inspector. Whenrequested information and documents are pre-pared, the Tax Audit Commencement Minute(TACM), a copy of which is delivered to thetaxpayer, is signed and the tax audit officiallystarts pursuant to Article 140 of the Tax

Procedural Code (TPC). The signing date of theTACM is the commencement date of the taxaudit.

3. When a company has been notified ofaudit, what is the first thing it should do?Since the tax audit procedure should be wellmanaged, taxpayers should take advantage oftax professionals. The documents to be present-ed, the meetings to be held should be made incooperation with and under the assistance oftax professionals. Taxpayers should also pay special attention to

the TACM to ensure it includes all the neces-sary information, such as date, issuance place ofthe minute; title, tax identification number; andsignature of the taxpayer, etcetera.

4. Is there any legislation for generalprocedure for a taxpayer under audit? Ifnot, what is the recommended practice?The general procedure of the tax audit is regu-lated under Article 140 of the TPC, and theRegulation Regarding the Procedures and thePrincipals to be required during the Tax Audits.

5. How does Turkey differ in its approachto TP audit to other countries? TP is regulated under Article 13 of theCorporate Income Tax Code (CITC). SinceTurkey has adopted the OECD TP Guidelines


An audit guide by Fırat Yalcın and Onur Çeliker of Pekin & Pekin.

Turkey

Tax authoritiesRevenue Administration, Department of Taxpayer ServicesIlkadim Cad. 06450 Dikmen/Ankara, TurkeyTel: +90 312 415 29 00 Fax: +90 312 415 28 21 22Email: [email protected]: www.gib.gov.tr


http://www.gib.gov.tr

for Multinational Enterprises and TaxAdministrations, basic concepts, such as arm’s-length principle and TP methods are similar tothe those of other OECD member countries. On the other hand, the related party concept

is comprehensively defined in a way to covereven distributor relationships. Therefore, suchprovisions allow tax inspectors to criticise a verybroad range of transactions under the TP regu-lation. Also, despite the fact that the applicationof secret precedent has been forbidden underthe OECD Model Guidelines, secret precedentis used in tax audits in Turkey.

6. How does the tax authority compile itsinformation on a taxpayer for an audit?The tax authority compiles the informationfrom the below stated sources; • Tax assessment file of the taxpayer kept bythe related Tax Office, including the taxreturns, TP report etcetera;

• Commercial books of the taxpayer;• Data compiled through the cross audits;and

• Information requested from the taxpayersand public institutions.

7. What are the most likely instances thatprovoke an audit from the authorities?The following issues would trigger tax auditsif the taxpayers:• have related party transactions with the for-eign group companies;

• charge high-rate interests to its related par-ties; and

• do not prepare, or annually update, the TPreport.

8. What documents are required by thetaxpayer during TP audit?The documents, examples of which are pro-vided below, regarding the determination ofthe arm’s-length prices shall be kept to sub-stantiate the TP application of the taxpayers.

• The list of product costs and prices in rela-tion to the relevant years.

• The invoices regarding the questionedtransactions.

• Agreements executed between related par-ties.

• Financial statements of the related parties.• Intragroup pricing policy. • The precedents and benchmarking analysis.

9. Are there any restrictions on acompany’s business during audit?There are no restrictions on a company’s busi-ness during a tax audit. The tax auditor will per-form the tax audit within the working hours ofthe taxpayer or after working hours with thepermission of the taxpayer. The tax auditorswill also take all precautions so as not to preventthe work-flow of the taxpayers.

10. Are there any restrictions on thetaxpayer’s advisers during audit?No

11. How long does an audit last?According to Article 140 of the TPC; full-scaleand limited tax audits should be completedwithin one year and six months respectively,from the beginning date of the tax audit. If a taxauditor is not able to complete a tax audit, hecan request additional time from the taxauthority at least 10 days before the completionof the tax audit. The tax authority may provideadditional time to the tax auditor of up to sixmonths.

12. What happens after an audit has beencompleted?The tax inspection report (report) is deliveredto the Evaluation Commission (Commission). Ifthe report is approved by the Commission, it issent to the relevant tax office. Then the rele-vant tax office will impose and notify the taxprincipal and tax loss penalty to the taxpayer

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through the tax/penalty notification. The tax-payer has a right to apply for a reconciliation orto file a lawsuit for the cancellation of the taxassessment before the tax court within 30 daysafter he received the tax/penalty notification.

13. Tips on negotiating with theauthorities.Taxpayers have the below options to negotiatethe TP issues with the tax authorities. • According to Article 13/5 of the CITC, tax-payers are allowed to make an AdvancedPrice Agreement (APA) with the tax author-ity, under which methods to be used for theprices of the goods or services that are pur-chased from, or sold to, the related partiescould be determined in the agreement withthe Ministry of Finance upon taxpayer’srequest. The term and conditions of suchmethod that would have been so decidedshall be final, not exceeding three years.

• Taxpayers could attend the meeting heldwith the Commission and try to convince theCommittee that its TP application is in accor-dance with the law.

• Taxpayers would have the application right tothe reconciliation procedure under which thetaxpayer and the tax authority reach a settle-ment by reducing the taxes and tax penaltiesassessed by the tax authority.

14. How can a company manage its auditrisk?Taxpayers shall place emphasis on complyingwith the TP regulation which would be thebest way to manage the audit risk. For exam-ple, the interest rates and payment periodsshould be within the range of market prices inaddition to the sale prices of the goods andservices. Fırat Yalcın ([email protected]) and Onur Çeliker([email protected]), Pekin & Pekin

Turkey




LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Mazars DengeWTS & Çelen

3 BDO DenetErdliker – TaxandPekin & PekinYükselKarkinKüçük

The Turkish transfer pricing regulations were intro-duced in 2007 and as a result the legislation is stillin its infancy. The legislation was updated again in2008 but remains a very simple, short excerpt of leg-islation. Abdulkadir Kahraman of KPMG said it isgoing to be another five years before the maturity ofthe Turkish transfer pricing environment reaches thatof the other European jurisdictions.

Transfer pricing assessments in Turkey are likely tobecome more frequent and more aggressive as thearea becomes one of focus for the authorities. Theiraim is to curb the expatriation of profits from thejurisdiction by big multinationals that re-route thiscapital either to their home jurisdiction or to more taxfavourable jurisdictions.

The authorities have established a specialised divi-sion within their ranks that has the sole purpose ofcarrying out transfer pricing audits.

Because transfer pricing is a relatively new phe-nomenon in Turkey, it is likely that courts will strug-gle with the complexities of dispute cases due totheir unfamiliarity with the concept. It is possible thatthis will cause problems for taxpayers disputing thejudgement of the authorities.

The penalty for wrongful transfer pricing is 100% ofthe additional tax accrued.

With regards to benchmarking, there is very littleinformation at present in Turkey that can be usedto carry out these analyses. Taxpayers are using

the Amadeus database but the samples are notsufficient.

There is a variety of documentation requirementsin Turkey. The first is an annual transfer pricingreport which must be prepared by all corporate tax-payers before the annual CIT deadline and it must

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Corporate income tax 20%Capital gainsBranch tax 20% (a)

Withholding taxDividends 15% (b)Interest 0% to 10% (c)Royalties from patents and licences 20% (d)Branch remittance tax 15% (e)

Net operating losses (Years)Carryback None, except where a

company is liquidatedCarryforwards 5 years

a) Branches of foreign companies are subject tothe same tax rate as domestic companies, anadditional 15% branch profits tax is imposedon after-tax profits remitted to a foreign headoffice.

b) Dividends paid to non-resident companies aretaxed at 15% unless reduced under anapplicable tax treaty.

c) The 10% rate applies to interest on loans fromnon-resident entities that classified as financialentities. Interest on loans paid to foreignstates, international institutions, or foreignbanks and foreign corporations that qualify asfinancial entities are exempt.

d) The rate of 20% applies unless reduced underan applicable tax treaty

e) A 15% tax rate is levied on after-tax branchprofits remitted to a headquarters.

Source: Deloitte (2013) International Taxation: Turkey Highlights2013.


be submitted to the tax authorities upon request.The second is a transfer pricing controlled foreigncorporations and thin capitalisation form whichmust be filled in by all corporate taxpayers.

Corporate income taxpayers are able to apply for uni-lateral, bilateral and multilateral APAs. Taxpayers areable to renew an existing APA only for one more peri-od under the same conditions, assumptions and trans-fer pricing method. The first unilateral APA was conclud-ed and signed between the taxpayer and tax authori-ties on July 15 2011. Only three APAs have been com-pleted in turkey over the past six years, explainedMetin Duran of Mazars Denge. The process is far tooslow but Duran is confident the situation will improveas the authorities become more familiar with the leg-islation.

Tier 1 Deloitte Turkey has two partners dedicated to transferpricing. These partners work alongside a dedicatedtransfer pricing team that is comprised of financial con-sultants, economists and analysts. The knowledge ofthe team spans audits, accounting, economics, inter-national tax, local tax, and practical US transfer pricingapplications.

The Deloitte Turkey transfer pricing team does notlimit itself to the alignment of non-Turkish transfer pric-ing templates but also provides a diverse spectrum oftransfer pricing services including pan-European mas-ter file preparations, audit defence, unique intangiblevaluations for transfer pricing purposes, HQ cost alloca-tion exercises, transfer pricing due diligence, structuringanalyses and risk analyses for transfer pricing purpos-es and support for preparation of applications foradvance pricing agreements, among others.

The functional leader of the practice, Ahmet Cangoz,used to work for a major Turkish construction compa-ny and is therefore very experienced in this area. Aswell as construction, the practice is also renowned forthe work it does in the energy sector.

The headquarters are in Istanbul, the financial capitalof Turkey, and also in Ankara, Izmir, and Bursa.

The transfer pricing practice at EY Turkey wasestablished in 2006, one year before the Turkish

transfer pricing regulations were implemented inthe jurisdiction. The practice foresaw the potentialissues in compliance, documentation and contro-versy, as well as advisory services for clients. It isnow one of largest practices in the country with 19dedicated transfer pricing professionals (gaining atotal of 11 professionals since 2011). The teamgrew over the past year, gaining four professionalsand losing just one.

All members of the transfer pricing team have aneconomics or business degree and as such are capa-ble of offering the full range of transfer pricing servicesincluding compliance, documentation, planning, andeffective supply chain management. They also offertransfer pricing litigation work as a part of their dedicat-ed tax controversy department, which is made upexclusively of lawyers. The team is able to work close-ly with other service lines at EY as and when the needarises.EY regularly retrains its employees on a broad range

of tax and transfer pricing topics to stay ahead of thedemands posed by the perpetually changing markets.In combination with this, the team meets monthly forseminars that incorporate knowledge sharing throughpresentations and case studies.

In 2008, the transfer pricing team of KPMG Turkeybegan completing documentation work for theirclients. Over the past two years they have begun towork on transfer pricing planning and dispute resolu-tion. They have also provided consultancy work to theirclients including advice on audits and amendments.PwC Turkey offers its clients a range of transfer pric-

ing services. These include transfer pricing diagnosticreviews, risk and opportunity analyses, tax inspectionadvice, representation against the authorities,European comparables searches, and due diligence.

Tier 2Mazars Denge’s transfer pricing team consists offive dedicated professionals, including one partner.The team is led by Metin Duran who explained thatthe majority of the work that the practice complet-ed over the past year has been the preparation ofdocumentation.

Turkey


However, the practice is also capable of offeringadvice in relation to transfer pricing audits, consultationand APAs.

The team works for clients from a range of industriesincluding the automotive, textiles, and services indus-tries.

The transfer pricing team at WTS & Çelen consists oftwo partners and three other professionals. The teamgrew over the past year, employing two new transferpricing partners.

The practice is able to deal with the full range oftransfer pricing services. Although the practice has noin-house facility to perform benchmark analyses, as amember of the WTS Alliance –a tax firm network locat-ed in approximately 100 countries worldwide – theyare able to draw upon this resource to perform suchanalyses for their clients.

The practice is a boutique headed by Arif Çelen.Aside from Çelen, there are two other partners and sixfee earners. The team expanded in the last year, hiringtwo near partners, Burcak Arhun and Veli Sakinc.

The firm received positive feedback from clients withone describing the services they received as “vital...if itwould not be for the advice and also the critical stanceof Arif Çelen vis-a-vis the opinion of other larger taxfirms, we would have gone a way which [would nothave been] good”.

Tier 3The tax and legal advisory department of BDO Denetoffers its clients transfer pricing advice as one of its taxconsultancy services.Erdikler – Taxand is a specialist consultancy firm

with a focus on tax. Saban Erdikler is the head of thefirm that consists of seven partners and 48 other taxpractitioners. One of the areas covered by the firm istransfer pricing.

The team has particular expertise working withclients across a range of industry sectors, includingfinance, real estate and fast-moving consumer goods.

The approach of Erdliker – Taxand was describedby clients as boutique. They were praised for havinga “good system and process” for carrying out taxadvice.

Ahmed Pekin is the head of Pekin & Pekin andboasts more than 15 years experience of workingwithin tax. He works with three other fee earners atthe practice; all are capable of working on a varietyof tax matters including transfer pricing.

The transfer pricing team does not consist of econ-omists in-house, nor does it do compliance and doc-umentation. Their main role with regards to transferpricing is to advise clients on their transfer pricing lia-bility and how to proceed with their affairs.

The practice provides regular support to interna-tional clients and works predominantly with clientsfrom the financial industries in the areas of bankingand finance, capital markets, project finance, andmergers and acquisitions.

For example, they recently advised on a rulingmade by the Turkish Revenue Administration whichalleged that JTI was transferring its profits through theroyalty payments made to a foreign group company,which is contrary to the arm’s-length price. The prac-tice was successful in this regard and this was oneof the first judgements of its kind decided in favourof the taxpayer by the Turkish Tax Court with respectto transfer pricing. The deal was worth $7.6 million. YükselKarkinKüçük is a member-firm of the glob-

al DLA Piper law firm that has offices located inAfrica, the Americas, the Asian Pacific, Europe, andthe Middle East. As such, the Turkish tax practicebenefits from the pooled experience of this globalnetwork.

The transfer pricing services offered byYükselKarkinKüçük are limited to consultancy servic-es regarding transfer pricing for clients interested ininvesting in the jurisdiction. This involves providinggeneral information on transfer pricing rules appliedin Turkey and some consideration of whether aclient’s structure and transactions comply with theserules.

The practice also offers follow-up litigation in rela-tion to transfer pricing conflicts that arise betweenclients and the tax authority.

Clients of the practice expressed their satisfactionwith the service they had received, describing it as“highly professional and experienced”.

Turkey

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PEKİN & PEKİN10 Lamartine CaddesiTaksim 34437 IstanbulTel: +90 212 313 35 00Fax: +90 212 313 35 35Website: www.pekin-pekin.com

ContactsFethi [email protected]

Fırat Yalcı[email protected]

WTS & ÇELEN SMMM Ltd. Sti.

Buyukdere Cad. Ferro Plaza No:155/9Zincirlikuyu – Istanbul TURKEY

Tel: +90.212.347 4125 (pbx)Fax: +90.212.347 4127Email: [email protected]: www.wts-turkey.com

Turkey


http://www.pekin-pekin.com




http://www.wts-turkey.com

LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Baker & McKenzieDLA PiperKM Partners

Transfer pricing in the Ukraine underwent a signifi-cant and, according to advisers, much-needed trans-formation in 2013.The previous transfer pricing rules, enshrined in the2010 Tax Code of Ukraine, were broadly criticised byadvisers.“That law has received a severe critique by the pro-fessional community and the business population,”said Vladimir Kotenko at EY. Generally, advisers agreed that the application oftransfer pricing rules, particularly between relatedparties and relating to primary documentationrequirements, was poorly regulated under the 2010tax code. This has led to transfer pricing being under-developed as a practice area in Ukraine.However, advisers expected this to change oncethe new rules came into effect from September2013. These new rules broadly follow OECD guide-lines on transfer pricing matters, and advisers hopethis will provide a greater degree of stability and cer-tainty.

“From September there will be proper transfer pric-ing rules in Ukraine,” said Svitlana Musienko at DLAPiper. “This means there will be mandates for trans-fer pricing documentation that should be filed byUkrainian taxpayers engaged in controlled transac-tions with the Ukrainian authorities. When a taxpay-er is requested to do some mandating or reportingthere will be a huge fine when that is not done cor-rectly so that guarantees it will be taken seriously.There will be special transfer pricing audits run byspecial groups organised by the authorities.” From September, Ukrainian companies will haveto do everything most firms in Europe are requiredto do.

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UkraineTax authoritiesState Tax AdministrationPostal address: 8 Lvivska Square, 04655, Kyiv – 53Tel: +38 (044) 272-44-02/+38 (044) 272-51-59/+38 (044) 272-08-41Fax: +38 (044) 272-08-41Email: [email protected]: www.sta.gov.ua


Corporate income tax 19% (a) Capital gains 19% Branch tax 19%

Withholding tax Dividends 15%Interest 15%Royalties from patents and licences 15% Branch remittance tax


a) Corporate income tax will drop to 16% from2014


http://www.sta.gov.ua


“The procedure in Ukraine will become identical tothat used in other countries, more or less,” saidMusienko. “There will be huge compliance onUkrainian companies.”Broadly, then, advisory firms have welcomed thenew tax code. However, some felt it may still take awhile before the jurisdiction is as stable as theywould like it to be. “On the face of it it’s a positive developmentbecause transfer pricing rules were practically absentbefore,” said Igor Davydenko at Dentons. “This newlaw provides mechanisms for the determination ofprices in related transactions and may be an effec-tive tool for the collection of taxes and for the estab-lishment of fair market prices on an arm’s-lengthbasis.”“But the current wording contains some difficultiesand uncertainties as to how this mechanism willwork. And because of Ukrainian realities the practicalaspects are important,” Davydenko added. “In prac-tice in Ukraine even fair provisions could be abusedby authorities, and there are many examples whenprovisions for tax rules have been used in arbitraryways and against the interests of taxpayers. So wemay expect that this could be the case with the newlaw as well.”

Tier 1 Deloitte’s Ukrainian practice is heavily engaged withclarifying the jurisdiction’s nascent transfer pricingrules, which, being new concepts to the Ukraine, areoften difficult to understand for Ukrainian taxpayers.In response to this, Deloitte has arranged a numberof meetings with taxpayers and state authorities, andit has also prepared a number of articles for financialand business magazines. The team is attempting to work closely with theindustry and tax authorities to support the elabora-tion of transfer pricing legislation in reliance on theglobal practices applied by Deloitte. It has also pro-vided Deloitte Moscow partners with the informationrelated to transfer pricing issues, and other foreignDeloitte offices have also been advised on the appli-cation of transfer pricing documentation in Ukraine

for their international clients. The practice is thereforewell-positioned to advise on transfer pricing work asit takes-off in the Ukraine over the next few years.

EY was the first of the Big 4 companies toannounce the launch of a transfer pricing practice inUkraine in 2009, and they have continued to devel-op since then, with a practice consisting of two part-ners headed by Vladimir Kotenko and 10 further feeearners. They advise on all forms of transfer pricingfrom general advice to complex supply chain man-agement challenges, and they also maintain a closerelationship with the Ukrainian tax authoritiesthrough such pro bono activities as cooperating withthe tax authorities and parliamentary representativesin the drafting of the new Transfer Pricing Law.Key deals in the past year have included designinga transfer pricing policy for the intercompany transac-tions of a local subsidiary of an international auto-motive company. They also included a high-profileand complex transfer pricing restructuring project fora company working in the health and beauty indus-try, which incorporated representing the client’sissues in front of the tax authorities, which ensureda competitive advantage for the company andproved the viability of the restructuring solution EYhad designed. Kotenko led the practice’s work inboth projects.

KPMG’s transfer pricing team helps clients structureintra-group transactions in the Ukraine and abroad,analyse tax risks related to the application of trans-fer prices and substantiate intra-group prices from atax perspective. It works closely with other tax pro-fessionals in the Ukrainian practice, and the overalltax head, Sergey Popov, also advises on transfer pric-ing issues, bringing his expertise in corporate andinternational tax to bear on client requirements. Thepractice also leverages KPMG’s global transfer pricingexperience, working together with colleagues inKPMG’s global transfer pricing practice. The expertiseoffered spans all areas of transfer pricing practice,including intra-group transfer pricing policies, prepa-ration of transfer pricing documentation, mitigation oftransfer pricing risks, benchmarking studies to definearm’s-length prices, and negotiations with tax

Ukraine


authorities in the singing of advanced pricing agree-ments.

Slava Vlasov was appointed a partner in PwC’sUkrainian tax practice in 2010, and as transfer pricinghas slowly and clumsily become a more significantissue in the jurisdiction, he has increasingly focusedon the sector. As one adviser in a competitor firmsaid: “PwC has firsthand experience of designingtransfer pricing laws in Ukraine.” Although the lawsthey advised on received a mixed response andhave been recently revamped to work more in linewith OECD guidelines, the practice remains well-respected for its intimate understanding of the nas-cent sector in Ukraine. The practice offers the fullspectrum of transfer pricing services and has a par-ticularly close relationship with the tax authorities.

Tier 2Baker & McKenzie’s practice, consisting of one part-ner and five fee earners, has taken on some chal-lenging transfer pricing projects in the past year. This team advised a leading provider of softwareand systems, enabling converged billing and activecustomer management, mobile internet, and value-added services in connection with the expansion of itsbusiness into the Ukraine. It advised a leading globalhealth care company on the valuation of certainassets held by its Ukrainian representative, as well ason applicable Ukrainian tax consequences. And itacted for a diversified global manufacturing and tech-nology company in court proceedings challenging atransfer pricing adjustment by the Tax Office.

The tax team of DLA Piper routinely advises nation-al and international clients on transfer pricing issues.This has encompassed cross-border tax and transferpricing advice to a client, involving group restructur-ings and IP issues. It has also involved advising aclient with sophisticated global transfer pricing poli-cies on their plans to enter the Ukrainian market. Thepractice also collaborates closely with DLA Piper’sEMEA transfer pricing team in the Netherlands,enabling it to stay fully informed on internationaltransfer pricing best practices, and advise on apply-ing them in the Ukraine. Transfer pricing work is ledby Svitlana Musienko, who also heads the tax prac-tice as a whole.

KM Partners has an extensive practice in thefield of transfer pricing regulation. The practiceadvises international companies in various sectorsof the Ukrainian economy ranging from agricultureto retail and from energy to IT. Two partners,including practice head, Alexander Minin, and fourfee earners all devote time to transfer pricing proj-ects.In the past year, these projects have includedperforming an elaboration of transfer pricing docu-mentation related to a transactional settlement toimprove tax efficiency and reduce risk for a groupof companies within a large multinational corpora-tion. It has also involved acting for clients in thecase of an administrative appeal against theassessment of additional VAT liabilities by the taxauthorities in connection with the application ofthe recently implemented transfer pricing rules.

Ukraine

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KM Partners

5 Pankivska str., fifth floor01033 Kyiv, UkraineTel.: +38 044 490 71 97Fax: +38 044 492 88 59www.km-partners.com

Key contacts:Alexander Minin, Senior Partner, tax &customs issues, tax [email protected]

Alexander Shemiatkin, Partner, tax &customs issues, tax [email protected]

Maxim Oleksiyuk, Partner, corporateand commercial law, real estate &[email protected]

Ukraine


http://www.km-partners.com




LEADING FIRMS

1 DeloitteEYGrant ThorntonKPMGPwC

2 Alvarez & Marsal Taxand UKBaker & McKenzieFreshfields Bruckhaus DeringerTransfer Pricing Solutions

3 Clifford ChanceMacfarlanesMcDermott Will & EmeryShearman & Sterling

Other firms to noteSlaughter and May

Transfer pricing has come under a great deal ofscrutiny in the UK over the past year, as Parliament,the press and activist groups each place increasingpressure on international tax planning. “Media and politicians have got hold of the notion

that big business is avoiding tax, which is the resultof the globalisation of business and massive cross-border intra-group transactions, whether they involvegoods or IP,” said David Howarth of Freshfields.“There are large amounts of money at stake whichtax authorities are expected to collect because thegovernment is short of money. The atmosphere canget very adversarial or litigious. There is a lot of pres-

sure on firms to both plan constructively and preparetheir defence for any audits or investigations thatcould occur.” The increasingly political climate surrounding trans-

fer pricing in particular has, in the UK, translated intospecific legislation. This legislation is aimed at taxavoidance in general but is likely to have a particu-larly strong impact on transfer pricing.“There has been a huge amount of legislative

change from FACTA to more bespoke anti-avoidancelegislation which means clients have to think verycarefully,” said David Harkness of Clifford Chance.Most notable among these changes is the introduc-

tion of general anti-avoidance rules (GAAR), whichcame into effect in July 2013. This legislation sets outwhat are, from the perspective of the UK tax authori-ty, tax arrangements considered to be abusive. It aimsto clarify the distinction between what constitutesaggressive tax avoidance and what constitutes legiti-mate tax planning. In so doing, it is intended tostrengthen HMRC’s ability to pursue and prosecutetax structures that it considers to be abusive.The new rules “will certainly have an impact on the

nature of advice we’ll be giving”, said Peter Jacksonof Taylor Wessing. “It will have a wide-rangingimpact, that will affect the necessity to consider allsteps when thinking about planning and whethersomething is at risk of being challenged. It willincrease the need for diligence and compliance.”Other pieces of legislation that have increased

compliance pressures include FACTA, a US Act tocombat tax evasion by US tax residents, whichimposes new and substantial burden on UK busi-nesses in identifying US taxpayers and reporting

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UKTax authoritiesHer Majesty’s Revenue and CustomsSomerset House, StrandLondon WC2R 1LBTel: +44 20 7438 6622Website: www.hmrc.gov.uk

http://www.hmrc.gov.uk


information to the US’s InternalRevenue Service (IRS). In September2012, an Inter-GovernmentalAgreement was signed between theUS and the UK to ease the imple-mentation of FACTA in the UK, whichrequired financial institutions to passinformation to HM Revenue &Customs (HMRC) who will then auto-matically exchange this informationwith the IRS. This reduces some ofthe administrative burden of comply-ing with the US regulations, althoughoverall, as advisers noted, FACTA isundoubtedly another move thatgreatly increases the risks connectedto aggressive tax planning. “We’ve done a lot of advisory and

explanatory work on GAAR andFACTA,” said Howard Murray ofHerbert Smith Freehills. Overall, the impact of these new

anti-avoidance measures on transferpricing work in the UK is clear. “Thereis less tax-driven structuring workand less appetite for tax planning,”said Howarth. “We’ve seen the endof the boom in the UK tax-structuredfinance market.”Not all the legislative changes

have constrained or threatenedtransfer pricing opportunities, how-ever. New controlled foreign compa-nies (CFCs) rules were introduced inJanuary 2013, and the changes inthis context diminish some of therisk involved in certain forms ofsophisticated transfer pricing plan-ning. The new rules will only taxprofits that have been artificiallydiverted from the UK, whereas theold rules would also catch profitsdiverted by a CFC from any othercountry.

UK


Tax rates at a glance As of January 1 2012 HMRC - As of April 1 2012

Corporate income tax 26% (a)(b) 24%Capital gains tax 26% (c) 24%Branch tax 26% (d) 24%

Withholding taxDividends 0% 0%Interest 20% (e) 20%Royalties from patents, know-how, etc. 20% (e) 20%

Branch remittance tax 0% 0%

Net Operating Losses (years)Carryback 1 (f) (g) 1Carryforwards Unlimited (g) Unlimited

a) The small profits rate of corporation tax is 20%. Effective fromApril 1 2012, the main rate of corporation tax will decrease to24%, while the small profits rate will remain at 20%. Theintention is that the main rate will decrease by 1% annually to22%, effective from April 1 2014. The main rate of corporationtax for ring-fence profits (that is, profits from oil extraction andoil rights in the UK and the UK continental shelf) is 30% (smallprofits rate of 19%). The rates for ring-fence profits will notchange on April 1 2012.

b) The small profits rate of 20% applies in certain circumstancesif taxable profits are below £300,000 ($460,000). This benefitis phased out for taxable profits from £300,000 to £1.5 million.These limits are reduced if associated companies exist.

c) Capital gains are subject to tax at the normal corporation taxrate.

d) Note branch tax is always taxed at the main rate of 26% (24%from April 1 2012).

e) Withholding tax on interest and royalties from patents, know-how etc. applies to payments to non-residents and non-corporate residents, unless reduced by a tax treaty or EUdirective.

f) Trading losses must be utilised in the current year prior to anycarry back.

g) Not applicable if there had been a major change in the natureor conduct of the trade in the previous 12 months.

Source: Tax advisers from Alvarez & Marsal Taxand UK

Sara Luder of Slaughter and May highlighted theCFC rule changes as particularly interesting. “They area pragmatic solution to the EU challenge of the oldregime; a government-sanctioned method of taxingUK business efficiently.” Unsurprisingly, these diverse changes have kept UK

transfer pricing departments very busy, explainingand advising firms on how to respond to the anti-avoidance rules, as well as advising concernedmultinationals on the potential for increased risk.Although certain forms of planning and intra-grouprestructuring may have been put on ice, theincreased compliance and advisory caseload hasmade transfer pricing a frenetic sector within the UKtax market over the past twelve months.

Tier 1 Deloitte has six partners and around 115 fee earn-ers working in transfer pricing in the UK, with astrength in economic and benchmarking capabilitiesthat is leveraged by Deloitte’s global transfer pricingcentre in India. The practice also advises on compli-ance, negotiates and manages relationships with theUK tax authorities, and advises on business modeloptimisation procedures. Key practitioners are JohnHenshall, who leads transfer pricing in the south ofthe UK as well as in intangibles, and Shaun Austin.In the past year, the practice worked with a large

and complex multinational to design and implementtransfer pricing policies around the world, resolve longrunning audits, address potential disputes, and assistthem in creating an internal transfer pricing team tomanage the ongoing requirements of the business. Italso helped a FTSE 100 company to reach a resolu-tion on a dispute of many years’ duration with HMRC. EY’s transfer pricing practice experienced significant

growth in the past year, taking on three new part-ners: Ben Regan who has a broad practice in trans-fer pricing advisory; Tom Tsiopolous, who focuses ontransfer pricing issues in the context of financial serv-ices; and Andy Martyn, who focuses on transfer pric-ing disputes. The practice provides advice and assistance across

all areas of transfer pricing. This encompasses advis-

ing on branch profits and the calculation of profitsattributable to a branch operating in a country otherthan the main body of the company; advising onintangibles and the pricing of transactions involvingintangible assets and the location of profits derivedfrom their exploitation; and advising companies inthe financial sector on the specific challenges theyface, such as the attribution and pricing of capitaland the regulatory environment. Alongside thesemore specific areas of expertise the practice also hasstrong economic capabilities as well as a well-regarded litigation team, and covers the full spectrumof transfer pricing services including documentation,planning, and disputes.Transfer pricing at Grant Thornton is led by Wendy

Nicholls. Under her leadership the practice hasreceived the International Tax Review UK TransferPricing firm of the year award for 2012 and 2013,demonstrating that they are formidable force in theUK market. Nicholls leads a team of 12 fee earners,encompassing economics expertise and conductingeconomic studies for various clients. This economicanalysis is usually led by director, Elizabeth Hughes,an economist by training.In 2012, Hughes led a complex project designing

and documenting a complex European wide transferpricing policy across the supply chain of a globalplastic manufacturing business. This involved pro-ducing three reports providing recommendations andcalculating various profit margins. Wendy Nicholls and the corporate tax specialist,

Nick Farr, also designed and implemented a globaltransfer pricing policy for a multinational group ofservice providers, which was facing commercial chal-lenges regarding expansion into fast growing mar-kets in Asia. KPMG has invested heavily in its UK transfer pric-

ing practice, and has a specialised and dedicatedteam, which incorporates knowledge of workingwithin the OECD, HMRC and in industry. It has alsoexpanded in the past year, bringing Matt Whipp, for-merly head of business risk and transfer pricing atDiageo, into the team as a transfer pricing director.There was also change at the head of the depart-

UK

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ment, as John Neighbour – head of the transfer pric-ing team since 2007 – left to become deputy leaderof KPMG’s global transfer pricing practice. StuartMcDougall, who joined KPMG in the UK from Procterand Gamble in 2006, has taken over leadership ofKPMG’s UK transfer pricing practice in the UK. Recentcases include assisting a leading Japanese consumerelectronics MNE in preparing a wide range of trans-fer pricing documentation across Europe, Asia-Pacificand the US. PwC’s UK transfer pricing practice is among the

strongest in the jurisdiction, consistently praised bypeers and clients alike, one of whom called it “out-standing.” It offers the full-range of transfer pricingservices across planning, documentation and dis-putes. In its cross-border structuring work, the prac-tice can draw on PwC’s dedicated teams across theworld, comprising professionals in economics,accounting, and tax law.The transfer pricing department is led by Ian Dykes,

whose primary experience is in consumer andindustrial products, IT and telecoms. Dykes has spe-cialised in transfer pricing for 13 years. He is assist-ed by partner, Annie Devoy, who has had a consis-tent career focus on international tax, spent time inPwC’s New York office, and has been fully dedicatedto transfer pricing for over 15 years.

Tier 2Alvarez & Marsal Taxand UK have expanded theirtransfer pricing capabilities over the past year. Thehead of transfer pricing is now Steve Labrum, whojoined from EY where he was the company’s headof global financial services. Labrum brings experi-ence, contacts, and expertise to Alvarez & MarsalTaxand UK’s transfer pricing work. Alongside Labrum,the firm has brought in a new director, Lisette LachReichle, and a new senior associate, Kieran Taylor,both from Deloitte. They now have three partnerswith expertise in transfer pricing, and six other feeearners supporting their work.Managing director, Shiv Mahalingham, led a 2012

project advising a multinational telecoms provider onpast and current values of its global brand, in light of

a potential disposal from its holding company. Thisstudy required an in-depth analysis of the value ofthe global brand at different points in time, split byregion to quantify local disposal costs for tax.Labrum led a project valuing intangibles for a FTSE

100 multinational. This valuation addressed bothtechnical and marketing intangibles in connectionwith a business restructuring. He also worked ontransfer pricing policy design and documentation forthe UK affiliate of a US multinational, in connectionwith recently acquired technical IP. Baker & McKenzie has a strong transfer pricing

practice in the UK, which draws on the expertise oftax lawyers, full-time economists and transfer pricingadvisers. The tax practice as a whole has a stronginternational focus and this accentuates the strengthof its transfer pricing work. The London tax practicehas particular experience in the coordination of taxadvice from many countries in multijurisdictionalprojects such as international group structuring andM&A.Four years ago Freshfields Bruckhaus Deringer

decided to develop in-depth transfer pricing expert-ise. This process was overseen by Murray Clayson, apartner with a broad corporate and international taxpractice. Clayson guided the recruitment of severaleconomists to provide capacity in economic analysis,in particular hiring Danny Beeton from GrantThornton. Beeton became Freshfields’s chief econo-mist; he is joined at the firm by several other PhD-level economists. Freshfields is therefore able to offernot just legal advice on transfer pricing issues, butcan also perform full quantitative analysis, a depth ofcapacity which is unusual for a law firm.Clayson and Beeton are both highly-respected by

peers in the market. Clayson was described by oneadviser as “among the strongest international taxpractitioners working in the UK”. They often worktogether on specific projects, combining their legaland economic expertise.One deal in which this was the case involved

assisting a North African extractive company to forma low risk Netherlands trading company to sell itsproducts into Brazil. Attendant challenges included

UK


the benchmarking of operating margins of normalrisk redistributors in its industry, and the constructionof an argument that this margin should only beearned on the company’s gross profit.

Beeton and Clayson have also worked together onthe cross-border transfer of the second half of amanufacturing process from Germany to China, for aleading textile machinery manufacturer. And theyhave advised on a large refinancing, through relatedparty funds, of a French leisure industry group. Transfer Pricing Solutions is an unusual, perhaps

unique firm in the UK tax market: a one-man trans-fer pricing boutique. It is run by Gareth Green, anaccountant by training who moved into tax work asa general tax specialist. Over time he has beenincreasingly drawn to transfer pricing; he was adirector in EY’s transfer pricing group before leavingto set up Transfer Pricing Solutions in January 2003.

Green works under a strict agreement of confiden-tiality with his clients and so only a broad outline ofhis work can be given. Many of his projects arebased around the client hiring him to study theirtransfer pricing strategy. There are then two broadoutcomes of this: either he confirms that their trans-fer pricing strategy is fine, or he concludes it is chal-lengeable and carries some degree of risk, recom-mending the firm switch to an alternative strategy.The next step is to design that alternative strategy,creating a structure that is more robust.

Transfer Pricing Solutions carries out work forclients from all across the business spectrum, rang-ing from FTSE 100 companies to small businesseswith fewer than ten employees. It is also often cho-sen by other professional firms to provide transferpricing assistance. It is active in all areas of transferpricing, encompassing documentation/compliance,design of appropriate transfer pricing policies, dis-putes, and APA negotiation.

Tier 3Clifford Chance’s transfer pricing practice benefitsfrom the firm’s global reach. Its team of four partnersand four fee earners offers clients a wide range oftransfer pricing services. It assists in the development

of transfer pricing policies and advises on the trans-fer pricing implications of complex cross-bordertransactions, especially in the fields of finance, cor-porate structuring and intellectual property. The teamalso undertakes negotiations with competentauthorities, defends firms through litigation, negoti-ates and drafts advance pricing agreements, andprepares documentation policies.

The firm’s global head of tax, David Harkness, isinvolved in some of the UK practice’s transfer pric-ing work. In 2012, he led a project to resolve atransfer pricing dispute with a foreign revenueauthority for a key UK institution, navigating throughthe dual dangers of double taxation and adversepublicity. Another significant project was led byDavid Saleh, a partner with expertise in real estateand indirect tax who is also involved in transferpricing. He negotiated the attribution of revenueand profits between European jurisdictions for anasset-owning structure.Macfarlanes has seriously expanded its transfer

pricing expertise over the past year. The practicehired Martin Zetter from EY, who brings economicsexpertise into the firm. Before joining EY’s transferpricing team, Zetter was head of transfer pricing atBNP Paribas. He now handles the economic aspectsof Macfarlanes’ growing transfer pricing caseload,while two recently hired junior associates managethe functional analysis work.

This small team covers a diverse range of transferpricing challenges, including advising on transferpricing for the law firm’s hedge fund practice andadvising on intangibles, IP pricing, and thin capitali-sation. It also negotiates advance pricing agreementsand advises large groups without internal expertiseon their transfer pricing policy.

More specifically in the past year, the transfer pric-ing team has worked on a range of projects. It pro-duced a transfer pricing report for a large hedge fundon the transfer pricing of its fees; it has negotiatedadvanced thin capitalisation agreements, withZetter’s analysis supporting the agreement withHMRC; and it has advised several corporate groupson IP transfer pricing issues.

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Internationally, McDermott Will & Emery hasalways given transfer pricing work a priority that israre within a law firm’s tax practice. They haveexpertise spanning economics, negotiations with taxauthorities, advisory and structuring work, and litiga-tion. While the London office has not always been atthe forefront of this work, it expanded its transferpricing operations significantly over the course of thelast year.

This was concomitant to developments in thefirm’s Houston office, which recruited a team oflawyers and economists led by Mark Martin and CymLowell with wide-ranging transfer pricing expertise.Back in London, Will & Emery’s practice is led by TomScott, and it works closely with the office in Houston.

This relationship is reflected in the amount of US-oriented work that the London team has undertaken,over the past year. They advised a US-based infor-mation services provider in connection with anHMRC transfer pricing enquiry, negotiating two APAsin the process. They also advised an MNE on cross-border transfer pricing issues in the US and Europerelating to a potential restructuring of the group’sbusiness model. Shearman & Sterling’s transfer pricing capacity

grew in 2013, as the practice brought in the formerhead of Weil, Gotshal & Mange’s corporate tax team,Sarah Priestley. Priestley is a recognised corporatetax lawyer and is dedicating part of her time to trans-fer pricing. In transfer pricing she works alongside IanScoon, the overall head of the tax practice, and threefurther associates.

A key deal this team worked on in the past yearinvolved advising InterContinental Exchange, on thetransfer pricing impact of the evolving market inwhich the firm operates, where the clearing services

it offers for financial trades may be viewed as addingdifferent value than, for instance, the exchanges itoperates, and on which exchanges such trades takeplace. This advice also encompassed the pricingimpact for the services provided by ICE, bearing inmind the opportunities for change as new platformsare added, such as FX clearing and when new cor-porate acquisitions are made, such as ICE’s acquisi-tion of NYSE Euronext.

Other firms of noteSlaughter and May does some limited transfer pric-ing work as part of its market-leading tax practice.This mainly involves providing advice and guidanceon transfer pricing issues, and does not usuallyencompass any serious economic analysis. They donot have a partner dedicated to or specialised intransfer pricing, but share the caseload across thefirm’s tax partners.

In the past year, a number of projects have includ-ed an element of transfer pricing. This largely relatesto advising firms on disputes or potential disputeswith HMRC. Recently, this has encompassed ques-tions of thin capitalisation, intellectual property, andprofit allocation.

For example, Slaughter & May advised a non-UKbank on the establishment of a presence in the UK,including negotiating with HMRC to agree profit allo-cations. This project was led by the overall head ofthe tax practice, Sara Luder. The practice alsoadvised a major US group in connection with its dis-pute with HMRC over the proper construction of theirthin capitalisation agreement. A team led by SteveEdge is advising a non-UK branch on the attributionof intellectual property related profits in the contextof the foreign branch exemption.

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The US has extensive statutory, regulatory, andadministrative, guidance governing the conductof transfer pricing audits. Transfer pricing auditsare part of the general overall audits of largecorporate taxpayers, but because of their com-plexity and magnitude they may become themajor focus of IRS audits.

1. How does the tax authority selecttransfer pricing audit cases?Audits can be risk-selected or random.Corporations are classified according to rev-enue, asset size, and other relevant factors. Thelargest corporations are generally under contin-uous audit by the IRS. Mid-size corporationscan be chosen for audit at random or after aninitial review indicates that certain issues arepresent warranting IRS review. The IRS alsoperiodically examines cases from specific eco-nomic sectors.

2. How will a company find out it hasbeen selected for audit? What is the officialnotification?The IRS notifies a taxpayer that it has beenselected for audit by sending out an opening let-ter. This letter will relate to a specific account-ing period and will be issued to the corporation.Generally, certain standard information docu-ment requests are attached to the letter. Afterthe letter is sent, the taxpayer and the IRS willestablish a date for the opening conference, at

which the IRS will explain the audit process. Atthis point, the IRS will also expect that the tax-payer will respond to the initial informationdocument requests, if it has not yet done so.

3. When a company has been notified ofan audit, what is the first thing it shoulddo?The company should review the standard initialinformation document requests and begin togather the requested information, whichincludes tax workpapers, trial balances, board ofdirector minutes, financial statements, etcetera.In addition, at the beginning of the audit, theIRS will request the taxpayer’s contemporane-ous transfer pricing documentation as requiredby the Internal Revenue Code. This documen-tation must be provided to the IRS within 30days of the request to ensure that the taxpayerreceives penalty protection afforded by the doc-umentation.

4. Is there any legislation for generalprocedure for a taxpayer subject to atransfer pricing audit? If not, what is therecommended practice?There is both legislative and regulatory guidancerelating to the procedure for a taxpayer to fol-low with respect to a transfer pricing audit. Atthe time the taxpayer files its tax return, thetaxpayer is required to assemble its documenta-tion to support its transfer pricing. This docu-

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An audit guide by Deloitte.

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Tax authoritiesInternal Revenue Service (IRS)77 K Street NEWashington DC 20002Tel: + 1 202 874 6748Website: www.irs.gov

http://www.irs.gov


mentation must be provided within 30 days ofthe IRS request if the taxpayer wishes to rely onthe documentation to obtain penalty protec-tion. The information that should be containedin the transfer pricing documentation is as fol-lows:• the group structure;• details of related party transactions entered

into by the Irish entity, specifying the type ofthe transaction(s) and the associated compa-nies involved;

• the pricing policy and the transfer pricingmethodology for each type of related partydealing;

• the functions, assets and risks of the partiesto the transactions;

• a listing of the documentation available andreviewed in the context of the self-review;and

• the basis for establishing that the arm’s-length standard has been satisfied.Once the audit begins, there are guidelines

that the IRS follows in auditing transfer pricingissues. All requests are generally made throughinformation document requests. The IRS gener-ally discusses the requests and timing ofresponses to the requests before issuing therequests. Generally, the IRS expects responseto its requests within 15 to 30 days. If the IRSdoes not receive responses, it can issue adminis-trative summonses, which can be enforcedthrough legal proceedings. In addition, the IRScan request interviews of company and non-company personnel.

5. How does the US differ in its approachto transfer pricing audit to other countries?The US approach to transfer pricing is similar toother countries. It continues to be a major areaof focus for the IRS. In addition, the IRS iscooperating with foreign jurisdictions toexchange tax information.

6. How does the tax authority compile itsinformation on a taxpayer for a transferpricing audit?The IRS gathers information from a number ofsources including tax returns, financial state-ments, the transfer pricing documentation,websites, and other public information. In addi-tion, the IRS will request additional documen-tation and information through the course ofthe transfer pricing audit.

7. What are the some of the more likelyissues that may trigger a transfer pricingaudit from tax authorities?Items in corporate tax returns that might triggera transfer pricing audit include cost sharingarrangements, licensing of intangibles, transfersof intangibles, business restructurings, and man-agement charges. Specifically, the IRS has stat-ed that is looking for transfers of intangiblesfrom high tax jurisdictions to low tax jurisdic-tions.

8. What documents are required by the taxpayer during a transfer pricing audit?The IRS may request documentation and infor-mation that may be relevant to an item on thetaxpayer’s tax return. The transfer pricing doc-umentation should address the following areas:• the nature and terms of transactions

addressed;• the method or methods by which the pricing

of transactions was arrived at, including anybenchmarking study of comparable data andany functional analysis performed and alter-native methods considered;

• how that method has resulted in arm’s-lengthpricing or, where it has not, what adjustmentswere made and how the adjustment has beencalculated;

• any budgets, forecasts or other papers con-taining information relied on in arriving atarm’s-length terms etcetera or in calculatingany adjustment;

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• the terms of relevant transactions with boththird parties and associates;

• an overview of the taxpayer’s business andorganisational structure;

• controlled transactions used and relevantanalysis of those transactions;

• data that the taxpayer obtains after the endof the tax year and before filing a taxreturn;

• A general index of the principal and back-ground documents and a description of therecordkeeping system used for cataloguingand accessing those documents; and

• All other relevant Section 482 regulationdocumentation requirements.The IRS can request any information relat-

ed to the facts and analysis contained in thedocumentation report. In addition, the actualinformation requested will be dictated by thefacts and circumstances of the transactionsbeing audited. The IRS may request contem-poraneous presentations concerning the trans-actions, notes of meetings about the transac-tions, and interviews of individuals involved inthe transactions. The IRS may also requestdocuments and interviews to perform a func-tional analysis with respect to the transac-tions. Finally, the IRS may request informa-tion and interviews from third parties.

9. Are there any restrictions on acompany’s business during a transferpricing audit?No. Publicly-traded companies may be subjectto disclosure requirements by the Securitiesand Exchange Commission.

10. Are there any restrictions on thetaxpayer’s advisers during a transferpricing audit?Taxpayers’ representatives are subject to certainrules governing their practice before the IRS, asset forth in IRS Circular 230.

11. How long does a transfer pricing auditlast?A transfer pricing audit can last from six monthsto four or more years. The length depends onthe scope of the issues and whether the taxpay-er extends the statute of limitations.

12. What happens after a TPCR has beencompleted?If the IRS agrees with the taxpayer’s position, itwill issue a no change letter and accept the tax-payer’s return as filed. If the IRS makes adjust-ments to which the taxpayer disagrees, the tax-payer may administratively appeal the adjust-ment. Such an appeal can take another 18months to three years. Ultimately, the taxpayermay be able to dispute the IRS’s adjustment inlitigation if necessary.

13. How can a company manage its auditrisk?To mitigate audit exposure, companies shouldconfirm they are fully compliant, file taxreturns within the prescribed time limits, pre-pare the required transfer pricing documenta-tion, pay tax on time, review their transfer pric-ing policies, and monitor certain key indicessuch as industry margin profiles on an on-goingbasis.

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LEADING FIRMS

1 Alston & BirdDeloitteDLA PiperEYFenwick & WestKPMGMiller & ChevalierPwCSkadden Arps Slate Meagher & FlomSullivan & CromwellVinson & Elkins

2 Alvarez & Marsal – TaxandBaker & McKenzieBasefirmaCaplin & DrysdaleDuff & PhelpsMayer BrownMcDermott Will & EmeryMorgan, Lewis & BockiusWhite & Case

The persistence of deficits and growing public dis-pleasure with perceived tax avoidance has increasedboth the number of audits and the likelihood of fun-damental change to transfer pricing in the US.

“There are structural deficits in the US and aroundthe world that are motivating countries in need ofmoney to try to get it from corporations, rather thanaverage citizens,” said Rob Plunkett of Deloitte.

Melinda Phelan of Baker & McKenzie agreed:“Governments are becoming much more aggressivein terms of auditing what were routine transactions,and are proposing more frequent and larger adjust-ments.”

The IRS has also become more sophisticated.Assistant treasury secretary, Michael Mundaca, hasreorganised, and substantially increased, theRevenue’s team of transfer pricing specialists. Theresult is “an IRS that is more assertive and smarteron how it audits transfer pricing in this country”

according to Paul Oosterhuis of Skadden Arps SlateMeagher & Flom.

Many transfer pricing professionals expect changesto transfer pricing will come from legislative, ratherthan regulatory reforms. “I think legislation is going todrive business decisions for a lot of companies bothfrom an OECD standpoint and a Congressional stand-point,” said EY’s Purvez Captain.

Public opinion is another source of concern. “Thebiggest issue right now is base erosion and profitshifting,” said KPMG’s Brian Trauman. “The fact thatcompanies are shifting profits to low-tax jurisdictions,even while complying with the law, does not res-onate well with the public,” he said.

Baker & McKenzie’s Phelan agreed: “Companiesare increasingly concerned that what are perfectlyappropriate and legitimate attempts to comply withthe law are in the current environment sometimesperceived and misunderstood.”

As a result, “a lot of companies are looking at theirtransfer pricing and making sure it matches up withthe functions and risks that they have,” she added.

Henry Birnkrant of Alston & Bird said the challengesarising from increased audits and public scrutinyhave created two different markets for transfer pric-ing services.

“There is a market for what I call commodity work,basic compliance. Most companies want documen-tation to show they have tried to comply with trans-fer pricing rules,” said Birnkrant. “This is mostly theprovince of accounting firms and low-cost providers.”

“Then there are bespoke, value-added services,usually from law firms, custom-designed to with-stand IRS scrutiny. Their clients want more dedicatedresources and the benefit of a law firm more gearedto advocacy,” Birnkrant added.

The present environment greatly favours law firms,said Rocco Femia of Miller & Chevalier. “There is agreater emphasis on finding advisers who are capa-ble of litigating.”

Patricia Sweeney, also of Miller & Chevalier, added:“The firm is getting referrals from accounting firms forsignificant transfer pricing work. The accountantsneed to demonstrate the ability to litigate even if

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they can’t do it themselves, with someone next tothem.”

In all, law firms expect the demand for transferpricing services, particularly audit defense, to remaina business driver for years to come.

“I see the future as one where there will be con-tinuing disputes between taxpayers and govern-ments in the transfer pricing area,” said JoelWilliamson of Mayer Brown.

Tier 1Led by Henry Birnkrant, Alston & Bird’s transfer pric-ing group provides consulting and planning servicesto US and foreign multinationals, and assists them inthe development and implementation of tax-efficienttransfer pricing strategies. It also helps with the

preparation and filing of documentation and withnegotiating advance pricing agreements with the IRSas well as with foreign tax authorities. Alston & Bird’sextensive experience with APAs dates to August1990, when the firm filed the second-ever suchagreement in the US on behalf of Japan’s Panasonic.The firm also represents clients in audits and appealsto the IRS and in court.

Deloitte has a full-service transfer pricing practicecomprising more than 230 professionals across thecountry. Todd Wolosoff is Deloitte’s US and globalmanaging tax partner for transfer pricing. In New York,Rob Plunkett leads the firm’s financial services group,which provides transfer pricing services to investmentbanks and other financial institutions. DarcyAlamuddin is head of the Chicago transfer pricing

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Tax rates at a glance As of January 1 2013 As of June 11 2012 IRS - As of January 1 2012

Corporate income tax 35% (a) 35% (a) 35%Capital gains tax 35% 35% 35%Branch Tax 35% (a) 35% (a) 35%

Withholding tax (b)Dividends 30% (c) 30% (c) 30%Interest 30% (c)(d) 30% (c)(d) 30%Royalties from patents, know-how, etc. 30% (c) 30% (c) 30%Branch Remittance Tax 30% (e) 30% (e) 30%

Net Operating Losses (years)Carryback 2 (f) 2 (f) 2Carryforwards 20 (f) 20 (f) 20

a) In addition to corporation tax and branch tax, many states levy income or capital-based taxes. Analternative minimum tax is imposed.

b) Withholding tax rates may be reduced by treaty.c) Withholding tax on dividends, interest and royalties from patents, know-how etc. is applicable to

payments to non-residents.d) Interest on certain portfolio debt obligations issued after July 18 1984 and noneffectively connected

bank deposit interest are exempt from withholding tax.e) Branch remittance tax is the branch profits tax.f) Regarding carryback and carryforwards, special rules apply to certain types of losses and entities.

Source: Tax advisers from Alvarez & Marsal Taxand


team, whose clients include companies in the manu-facturing, consumer products, engineering, executiverecruiting and healthcare sectors. The Houston andDallas practice, led by Randy Price and John Wells,mainly services multinational oil & gas companies.Mark Nehoray, head of transfer pricing in Los Angeles,has a clientele of mostly media and entertainmentcompanies. The San Francisco practice, led by RonSaake, deals almost entirely with transfer pricing fortech companies in Silicon Valley. The Washingtonteam, headed by Arindam Mitra, is particularly strongin audit defense and in negotiating competent author-ity and advance pricing agreements (APAs).

DLA Piper prides itself on offering the same trans-fer pricing services as the large accounting firms –planning, documentation, advance pricing agree-ments (APAs) and litigation – but with a more per-sonalised service and with more input from high-level, experienced transfer pricing professionals. Thefirm’s global transfer pricing practice comprises 200professionals and is led by D. Clarke Norton in theNew York office. Alan Winston Granwell is in chargeof transfer pricing at the Washington, DC, office, whileDavid Colker leads transfer pricing operations in SanFrancisco and Palo Alto. Recent personnel changesinclude the promotion of Palo Alto’s Joy Dasgupta toprincipal economist. The firm is representing a pub-licly traded retailer of children’s clothing in competentauthority negotiations between the US and Canada.It is also representing a life sciences company innegotiations for the first bilateral APA between the USand Ireland.

EY has one of the largest transfer pricing practicesin the US, with 48 partners. The practice providesservices for all four “pillars” of transfer pricing: Thepractice is led by Purvez Captain, Americas director oftransfer pricing; Jay Camillo, Americas market’s leaderof transfer pricing; and David Canale, Americas leaderof transfer pricing controversy.

Fenwick & West is a nationwide transfer pricingpractice with Fortune 500 companies among itsclients. Transfer pricing strategy accounts for abouthalf of its transfer pricing business, with the otherhalf coming from litigation. The firm has successfully

defended a number of clients, including Apple,Hitachi, Limited Brands, Adaptec and DHL eitherbefore the IRS or in state or federal courts. The firm’stransfer pricing planning practice is led by Jim Fuller,who is widely recognised by peers for his expertisein corporate tax and international tax. Kenneth Clarkleads the firm’s litigation team.

Led by Brian Trauman, KPMG’s transfer pricingpractice is one of the largest in the US, with 19 part-ners and 301 fee earners. The practice offers multi-nationals an “end-to-end” transfer pricing servicecomprising planning, documentation, implementa-tion and controversy, although clients are also free toengage KPMG for specific transfer pricing services.Through its “operational transfer pricing” approach,KPMG helps clients to set, maintain and adjust theirtransfer pricing structures and build processes toautomate them, creating efficiencies throughout thecompany. The practice is assisting a manufacturerand supplier of high-tech products to automate themonitoring and adjusting of transfer prices usingtransaction-level data “mined” from source systems.

Miller & Chevalier brings together lawyers who arewidely renowned for their transfer pricing expertise,including practice leader, Rocco Femia, recognisedby his peers for his work on complex and high-valuetransfer pricing matters. Alex Zakupowsky’s clientscelebrate him for his technical expertise and negoti-ating skills, while Kevin Kenworthy is known for hisskill as a litigator. The practice advises multinationalson transfer pricing strategy, negotiates advance pric-ing agreements (APAs) and guides them through thecompetent authority process. In the last two years,Miller & Chevalier has helped resolve transfer pricingadjustments initiated by tax authorities in the US,Canada, Germany, Mexico, Korea, Japan and India.Clients are from a broad range of business sectors,including oil & gas, natural resources, pharmaceuti-cals, electronics, telecommunications and retail.

Skadden Arps Slate Meagher & Flom advises USand non-US multinationals on the establishment ofsound and effective transfer pricing strategies, andworks with outside economists to prepare contem-poraneous documentation. The firm also negotiates

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competent authority issues and advance pricingagreements (APAs) with the IRS and other nationaltax authorities, and represents clients in transfer pric-ing disputes at both the administrative and judiciallevels. Hal Hicks is Skadden’s national leader fortransfer pricing.

PwC provides services in all areas of transfer pric-ing, including planning, documentation, advancepricing agreements (APAs), supply chain manage-ment and controversy and dispute resolution.Horacio Pena leads PwC’s transfer pricing network inthe US, while Kevin Brown is the US tax controversyand dispute resolution leader.

Sullivan & Cromwell focuses on transfer pricing forlarge financial institutions and non-US multinationalcompanies. Clients are advised on which transferpricing strategies to adopt, and on what corporaterestructuring is required to implement these strate-gies. The firm also advises clients on documentingtransfer pricing compliance, but consults with aneconomist who reviews calculations. The firm takesa proactive approach to controversy, by negotiatingbilateral and multilateral APAs with the tax authoritiesof different countries. The firm is representing a multi-national client in a significant transfer pricing disputeinvolving cost-sharing/cost-contribution agreementsin which the OECD and US transfer pricing rules arearguably in conflict. Don Korb, a former IRS ChiefCounsel, leads the transfer pricing practice. Otherpartners include Andy Solomon and S. Eric Wang,who have significant first-hand knowledge of theissues that the IRS and other tax authorities raise intransfer pricing disputes. Led by George Gerachis, Vinson & Elkins’ transfer

pricing team comprises attorneys located in thefirm’s Austin, Dallas, Houston, Washington andLondon offices. The team assists with the planningand documentation of transfer pricing strategies,focusing on pricing for intangibles, cost-sharing andservices. The team also negotiates APAs, andresolves transfer pricing disputes through competentauthority procedures and in trials at both the admin-istrative and judicial levels. Vinson & Elkins is repre-senting Transocean in tax disputes concerning the

company’s 2006 to 2009 federal income tax returns.The IRS is asserting the existence of intangibles aris-ing from the performance of technical and engineer-ing services between and among Transocean sub-sidiaries, as well as hundreds of millions of dollars inincome adjustments related to the value of deepwater drilling services. The total value of the adjust-ments in the case is about $1 billion.

Tier 2Alvarez & Marsal – Taxand is a full-service transferpricing firm working with US and foreign clients in avariety of business segments, including consumergoods, oil & gas, IT, advertising and pharmaceuticals.As head of international operations, CEO Robert Loweis also in charge of transfer pricing, although SteveLabrum oversees the firm’s US and UK transfer pric-ing operations on a daily basis. In the past year, A&MTaxand assisted a client – a provider of next-genera-tion data centre solutions – to set up a cost-sharingarrangement in conjunction with a procurement enti-ty and then relocate major procurement functionsand interaction in Asia to a new procurement compa-ny in Singapore. The firm is also assisting a client inthe advertising industry to manage and deploy newlydeveloped intangible property as advertising contin-ues to move from a service-oriented delivery systemto a technology-based platform. Melinda Phelan, head of transfer pricing at Baker &

McKenzie, estimates that about 60% of her firm’s 175or so tax professionals are involved in transfer pricing.The firm provides all transfer pricing services: planning,documentation, APAs and controversy. It is represent-ing a number of leading US and non-US multination-als challenging large transfer pricing adjustments, inappeals and in court. The firm is also negotiating sev-eral APAs, including two bilateral APAs – one betweenthe US and Mexico, and the other between the USand Canada – for a larger retail company. Led by Ricardo Rosero, Basefirma is an internation-

al boutique firm for transfer pricing and internationaltax services. The firm provides services in all areas oftransfer pricing: planning, documentation, APA, intangi-ble assets valuation and audit defense. Basefirma

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uses sophisticated statistical and financial models, todefend transfer pricing policies, and consults with locallaw firms on how to best approach local tax authori-ties. The firm provides transfer pricing services to 350clients in 14 countries, including major businessesfrom virtually every economic sector.

Caplin & Drysdale focuses mainly on transfer pric-ing controversy, and combines extensive transferpricing expertise with a deep bench of preeminenttax litigators to represent clients in audits, appealsand litigation, and to negotiate APAs and competentauthority relief on their behalf. The practice is led byPatricia Lewis, who has worked at Caplin & Drysdalefor over four decades. David Rosenbloom, who fre-quently serves as an expert witness in transfer pric-ing cases, previously served as international taxcounsel and director of the Office of International TaxAffairs in the US Treasury Department. New hiresinclude Elan Keller, former managing director and taxdirector for US operations at Macquarie; Pete Lowy,a prominent litigator; and Richard Skillman, a formeracting chief counsel of the IRS.

Duff & Phelps established its transfer pricing prac-tice in October 2012, after acquiring Ceteris, thelargest independent transfer pricing firm in NorthAmerica. The practice comprises 13 partners, includ-ing practice leader Mike Heimert, and more than 50transfer pricing professionals overall. The practiceprovides services in all areas of transfer pricing,including APAs, competent authority and auditdefense before the IRS and other tax authoritiesaround the world. About 85% to 90% of the firm’sclients are US multinational corporations, although itis representing a growing number of foreign clients.

Mayer Brown’s transfer pricing practice focuses pri-marily on controversy and disputes, and representsclients in both administrative and judicial proceed-ings. The practice, which comprises 14 partners, isled by Joel Williamson, who is the firm’s lead trialattorney in tax litigation. Williamson has served astrial counsel for Mayer Brown in several landmarktransfer pricing cases brought before US courts.Previously, he represented the US government asSpecial Trial Attorney for the IRS.

In the last year, Mayer Brown successfully repre-sented Eaton in the US Federal District Court in thefirst case to address the right of the IRS to cancel anAPA, and whether the burden of proof regarding theneed to cancel an APA belongs to the IRS or the tax-payer. An October 2012 decision resulted in a taxsavings of $75 million and the cancelation of $52million in penalties. Summary judgment motionsregarding the burden of proof are pending. Mark Martin leads McDermott Will & Emery’s

interdisciplinary team of lawyers, economists andaccountants who lend considerable expertise in sup-port of international transfer pricing projects. Thepractice is heavily controversy-oriented, with Martinand partners, Cym Lowell and Mark Horowitz, lead-ing a seven-member, full-service controversy teamfocused on transfer pricing. It is negotiating compe-tent authority cases with the tax authorities of theUK, Italy, Japan and the Netherlands. It also does abrisk business in APAs, which include both bilateraland multilateral. A fourth partner, John Woodruff,advises on transfer pricing strategy.

Morgan, Lewis & Bockius’ transfer pricing practicehas three core offerings: transactional support, con-sulting, and controversy and litigation. The practicealso has extensive experience in using the APA andcompetent authority programmes to avoid possiblecontroversy. Clients are from a broad range of sectors,including pharmaceuticals, technology, banking andfinance. Baron Bassett is head of the practice.

White & Case employs seven lawyers focused ontransfer pricing in the US, including practice leaderBrian Gleicher, who has over fifteen years of transferpricing experience, and is considered an expert ontransfer pricing matters related to South Korea andJapan. Kim Boylan litigates and negotiates APAs, andhas over 25 years of experience advising on transferpricing matters, including the new cost-sharing regula-tions. Michael Quigley, partner of counsel, advisesWhite & Case on transfer pricing in multiple jurisdic-tions. The practice is focused on APAs and dispute res-olution before the IRS, foreign tax authorities, compe-tent authorities and the US courts, including the TaxCourt, the Court of Federal Claims, federal district courts

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and various federal appellate courts. Much of thefirm’s transfer pricing business originates in Japan,India and Korea, and Gary Thomas, who leads theglobal tax practice from Japan, also assists in sometransfer pricing matters. The firm is advising a multi-bil-

lion dollar Korean distributor on transfer pricing issuesarising from related party sales, and is representing aUS manufacturer and its Japanese subsidiary in thecompetent authority process to resolve a transfer pric-ing assessment from Japan’s tax authority.

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CRA is a leading global consulting firmthat offers economic, financial, and busi-ness management expertise to major lawfirms, corporations, accounting firms, andgovernments around the world. Ourtransfer pricing experts have a wide rangeof industry experience and provide themost rigorous, fact-based economic andfinancial analysis available. We provideclients with clear, implementable solu-tions to complex business problems, par-ticularly in cases with pivotal and highstakes outcomes. We offer the full com-plement of transfer pricing services,including documentation, supply chainassistance, planning/economic bench-marking, IP migration and valuation, ASC740/FIN 48, enterprise valuation, andaudit and controversy.

Contact

Rebel CurdVice President, Practice Leader ofTransfer [email protected]

Deloitte30 Rockefeller PlazaNew York , NY 10112-0015 USAPhone: +1 212 492 4000Fax: +1 212 489 1687Website: www.deloitte.com

Contact: Todd WolosoffEmail: [email protected]

Firm profile:Multinational organizations are operatingin an environment of unprecedentedcomplexity. The rising volume and varietyof intercompany transactions and transferpricing regulations, accompanied byincreased enforcement activities world-wide, have made transfer pricing a leadingrisk management issue for global busi-nesses.The goal of the DTTL member firms’globally managed transfer pricing networkis to help companies manage tax compli-ance risks by aligning practical transferpricing solutions with their overall globalbusiness operations and objectives, assistwith documentation to support theirtransfer pricing practices, and resolve dis-putes efficiently. Deloitte has a well-earned reputation for quality and deliver-ing results. Our services include:• Dispute Avoidance: Advance Pricing

Agreements• Dispute Resolution: Examination

Defense and Mutual AgreementProcedure/Competent Authority

• Transfer Pricing Planning andDocumentation

• Business Model Optimization (BMO)

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http://www.deloitte.com


Fenwick & WestSilicon Valley Center801 California StreetMountain View, California 94041Tel: +1 650 988 8500Fax: +1 650 919 0942

Firm profile:Fenwick & West LLP has representedover 100 of the Fortune 500 largest cor-porations in tax planning, transfer pricing,acquisitions, joint ventures and tax dis-pute resolution, including litigation. Over50 are Fortune 100 companies.Our primary focus is in the internationaltax area. International Tax Review namedus in 2013 as having one of the world’sleading tax planning and tax transactionalpractices.Dispute resolution also is an importantpart of our tax practice. We have favor-ably resolved disputes in well over 100IRS appeals proceedings. We currentlyhave pending or resolved during the past12 months 17 large-corporation appealsproceedings. We also have been counselto corporate taxpayers in over 70 federaltax court cases. Many of these appealsproceedings and cases involve or haveinvolved transfer pricing.Four Fenwick tax partners appear inEuromoney’s Tax Controversy Leaders(2013), and four appear in Euromoney’sWorlds Leading Transfer Pricing Advisors(2013).Euromoney Legal Media Group has, forthe seventh time running, named JimFuller, one of our tax partners, as one ofthe top 25 tax lawyers in the world in2012. Six Fenwick partners, including our

tax practice group leader, David Forst,Jim Fuller, Ron Schrotenboer, JenniferFuller, Michael Solomon, and WaltRaineri have appeared in Euromoney’sWorld’s Leading Tax Advisors.

US

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C. Cabell ChinnisPartner, Palo [email protected] +1 650 331 2020

John T. HildyPartner, [email protected] +1 312 701 7769

Charles P. HurleyPartner, Washington [email protected] +1 202 263 3260

Thomas Kittle-KampPartner, [email protected] +1 312 701 7028

Shawn R. O’BrienPartner, [email protected] +1 713 238 2848

Scott M. StewartPartner, [email protected] +1 312 701 7821

Charles S. TriplettPartner, Washington [email protected] +1 202 263 3262

Joel V. WilliamsonPartner, [email protected] +1 312 701 7229

Mayer Brown’s Transfer Pricing Practice:Mayer Brown’s Transfer Pricing group isone of the most active in the country, andis known for employing innovative tech-niques in providing clients with adviceand representation for transfer pricingstructuring, large case audit and adminis-trative appeals, U.S. and foreign unilater-al and bilateral advance pricing agree-ments, competent authority matters andlitigation.

A number of our attorneys are devotedalmost exclusively to transfer pricing mat-ters, with broad experience in the repre-sentation of corporate taxpayers in trans-fer pricing planning, audits, IRS Appeals,and Competent Authority, as well as inthe federal courts including the U.S. TaxCourt. Several of our partners have beenrecognized among the leading transferpricing advisors in the U.S. and many ofour attorneys have significant governmentexperience at the IRS and Department ofJustice, where they participated inCompetent Authority and treaty negotia-tions; litigated various transfer pricingissues; and contributed to the develop-ment of and major revisions in several reg-ulatory and procedural projects.

In 2008, we launched our fully integratedEuropean Transfer Pricing Centre, head-quartered in Brussels, to coordinate trans-fer pricing strategies in the area. Thebreadth of practice experience, the abili-ty to manage Pan-European projects, andthe concentrated EU focus of the Centreensures that each client’s transfer pricingstrategy is optimized on a multi-countrylevel.

US










LEADING FIRMS

1 FerrereGrant ThorntonGuyer & Regules

2 DeloitteKPMGPwC

3 EY

Transfer pricing is relatively new to Uruguay, withthe country’s first transfer pricing rules implement-ed in July 2007. Transfer pricing audits began fouryears later, and have steadily grown in number eversince. This increase in audit activity is largely due to the

country’s economic performance, which grew 3.9%in 2012 and is expected to grow 3.8% in 2013, driv-en by a resurgent Brazil. As a result, “Uruguay is becoming a more integrated

country from a tax perspective,” said Nicolas Piaggio,of Guyer & Regules. For evidence, he cited the doubletaxation treaty Uruguay is negotiating with Brazil. Piaggio added that “we will see more work in the

transfer pricing area” as the Uruguayan tax authoritygrows “more sophisticated as the years elapse,” dueto greater transfer pricing experience. Yet there is also an upside to a more effective tax

authority, said Piaggio. “A more intelligent authority,capable of more precise analysis, helps clients byproviding clearer guidance on effective and compli-ant transfer pricing strategies,” he said.

Nevertheless, some of Uruguay’s transfer pricingprofessionals believe that the rules comprising theircountry’s transfer pricing regime could use someclarification. “There has been lots of discussion aboutwhich regulations need improvement,” said RafaelSanchez, of Grant Thornton. “Companies want standardised and clear guid-

ance on transfer pricing, especially with respect to

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UruguayTax authoritiesDirección General Impositiva (DGI)Av. Daniel Fernández Crespo 1534CP 11200 MontevideoTel: +598 21344Website: www.dgi.gub.uy


Corporate income tax rate 25%Capital gains tax 25%Branch tax 25% (a)

Withholding taxDividends 7% (b)Interest 3% 5% 12% (c)Royalties 12%Branch remittance tax 0%

Net operating losses (years)Carryback 0%Carryforward 5

a) Branches are taxed at the same rates asdomestic companies. There is no branchremittance tax.

b) Dividends paid to a nonresident company aresubject to a 7% withholding tax.

c) The withholding tax on interest paid tononresidents is 12%, which may be reduced to3% or 5% (depending on the period of the loan)if paid by a Uruguayan financial institution.

http://www.dgi.gub.uy


commodity transactions, which are vital to thecountry’s economy,” Sanchez said. Sanchez added that, like his peers, his practice

has benefitted from the expanding market for trans-fer pricing services. “We are really confident aboutthe market and our firm’s development in particu-lar,” he said.

Tier 1Led by Gianni Gutiérrez, Ferrere’s transfer pricing teamadvises on the implementation of transfer pricingstrategies, documentation and audit defense. InDecember 2012, Ferrere assisted Cementos Artigas,Uruguay’s largest cement producer and a subsidiary ofSpain’s Cementos Molins, in the implementation of itstransfer pricing policy for its imports of raw materialsand exports of finished products to related parties.

Grant Thornton assists clients with transfer pric-ing studies and represents them in litigation. Itsclients include some of Uruguay’s leading agribusi-nesses, financial institutions and manufacturers:Bunge, Cargill, HSBC, Volvo/Renault and Yamaha.Led by Rafael Sanchez, its transfer pricing teamtakes a multidisciplinary approach that bringstogether economists, lawyers and accountants,with senior transfer pricing professionals routinelyassigned to other Grant Thornton firms in theregion for training. In February 2013, the firm suc-cessfully defended a Cargill subsidiary in an auditthat involved forwards contracts, swaps and othercomplex hedging instruments. The tax authorityhad sought $423 million in income tax adjust-ments. Led by Juan Albacete and Nicolas Piaggio, Guyer

& Regules’ transfer pricing practice focuses onpreparing contemporaneous documentation forclients, to show their transfer prices with related par-ties meet the arm’s-length standard. The practicealso advises on transfer pricing strategy, negotiatesadvance pricing agreements (APAs), and representsclients before the tax authority and in court. Clientsinclude some of the largest domestic and foreigncompanies doing business in Uruguay, including

HSBC, Ford, Grupo Fiorucci and Mulimotors. In thepast year, Guyer & Regules prepared transfer pricingstudies for one of Uruguay’s leading agriculturalexporters, to show that the interest rate of a loangranted to a related Argentine company was atarm’s-length.

Tier 2Deloitte’s transfer pricing practice focuses primarilyon assisting clients in preparing and filing theirtransfer pricing reports with the tax authority. Thepractice also advises clients on transfer pricing strat-egy and represents them in negotiations foradvance pricing agreements (APAs) and in adminis-trative trials, with an affiliated law firm, Costa Brum,representing clients in court. The practice is led byGonzalo Lucas, who is also head of Deloitte’s taxdepartment.

KPMG’s transfer pricing service focuses on review-ing documentation to make sure that transfer pricesare at arm’s-length. Clients are mostly foreign multi-nationals with operations in Uruguay, and includeleading companies in the pharmaceutical, agribusi-ness and insurance industries. Last year, KPMG suc-cessfully negotiated one of the first advance pricingagreements (APAs) in Uruguay, for a multinationalcellular phone manufacturer. The practice is led byAlejandro Horjales. Led by Sergio Franco, PwC’s transfer pricing prac-

tice assists clients with the preparation and filing ofdocumentation to show compliance with thearm’s-length standard. The firm also negotiatesadvance pricing agreements (APAs), and was as anadviser in the first unilateral APA in Uruguay. In theevent of a transfer pricing audit, PwC possesses astrong controversy practice capable of defendingclients in both administrative and judicial proceed-ings.

Tier 3EY’s transfer pricing practice focuses mainly on com-pliance services for multinationals. Martha Rocaleads the practice.

Uruguay


LEADING FIRMS

1 DeloitteD’Empaire Reyna AbogadosEY

2 KPMGMendoza, Delgado, Labrador & AsociadosPwC

Two years after Venezuela set price controls to sta-bilise its economy, consumers are enduring short-ages of everything from food to housing, while itstransfer pricing professionals are witnessing unprece-dented audit activity.The Law on Fair Costs and Prices allows the gov-

ernment to set prices for nearly all goods and serv-ices imported or traded within the country. The lawis intended to reduce what the government believesare excessive profits earned by multinationalsimporting into Venezuela. The new law, which took effect in December 2011,

does not apply to financial institutions, which aresubject to preceding regulations. All other companiesdoing business in Venezuela are subject to the law,however. The law created a new government agency, the

National Superintendence of Costs and Prices(Sundecop), which sets permissible prices for goodsand services. These prices are determined based on companies’

unit costs, unit prices, financial statements, rawmaterial invoices and pricing methods. Companies

were required to turn over this information toSundecop when the law went into effect. Soon afterward, price ranges were set, beginning in

April 2012 with personal hygiene, food and householdproducts. If Sundecop determines that a companymust reduce its prices, the result is a lower profit mar-gin and possibly a transfer pricing adjustment. Opponents of the law have said it does not place

any limits on what Sundecop may consider a fairprice. If the government sets prices too low, not onlydo profits suffer, but so does income tax and VAT col-lection. Also, opponents warn that lower profit margins

mean fewer imports, causing scarcity. Venezuela’sstrong dependence on imports – they comprise 60%of its food stocks – is one of the reasons the coun-try has such high inflation in the first place. Two years after the Law on Fair Costs and Prices

went into effect, the Venezuelan government hasissued more than 500,000 price edicts. Prices forsome items, such as bread, have plunged so far thattheir scarcity has created black markets. While prices are falling, transfer pricing audits are

rising, in terms of both their frequency and their cost.One of the most substantial ongoing audits is ofCoca Cola Femsa, which D’Empaire Reyna Abogadosis defending against an $80 million assessmentrelated to transfer pricing.

Tier 1Deloitte’s transfer pricing practice is recognised forthe quality of its work, the strength of its client rela-tionships and the depth and breadth of its transferpricing experience. Led by Iliana Salcedo, the prac-

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VenezuelaTax authoritiesServicio Nacional Integrado de Administración Aduanera y TributariaTorre Capriles, PlazaVenezuela, CaracasTel: +58 212 709 2888 / 709 2064 / 709 2027Website: www.seniat.gob.ve

http://www.seniat.gob.ve


tice comprises the first team of Venezuelan transferpricing professionals trained in the US, Canada andMexico. It assists multinational companies in theirinteraction with the country’s tax authority, particular-ly in transfer pricing audits, as well as with their relat-ed party documentation. Its clients are some ofVenezuela’s largest domestic and foreign companies,including Cerveceria Polar, Interamericana de Cables,3M and Bristol Myers. Led by Alberto Benshimol, the transfer pricing prac-

tice of D’Empaire Reyna Abogados focuses on advis-ing global companies on effective and tax-efficienttransfer pricing planning and on documentation,although calculations are outsourced to specialisedfirms. Humberto Romero-Muci, head of the firm’s con-troversy practice, has litigated in some of the country’slargest transfer pricing disputes. Romero-Muci andBenshimol are representing Coca Cola Femsa deVenezuela in its appeal of a $30 million transfer pric-ing assessment.

EY advises on a number of transfer pricing issues,including transfer pricing planning and documentation,customs valuations and tax-efficient supply chain

management, as well as the role of transfer pricing inrisk management and financial services transactions.The practice is led by Luis Vegas.

Tier 2KPMG’s transfer pricing practice advises on transferpricing strategy and assists with the preparation oftransfer pricing studies and documentation. JorgeRodriguez leads the practice.The transfer pricing practice of Mendoza, Delgado,

Labrador & Asociados is recommended by clients forthe quality of its work involving supply chain manage-ment and customs and international trade. The prac-tice also has a very strong litigation practice, particu-larly among pharmaceutical companies. It is led byMaria Calvino, Carolina Nadal and Luis Benitez, whoare widely recognised by peers for their extensiveexperience in transfer pricing.

PwC assists clients with the preparation of transferpricing assessment studies, and with documentationrequired for demonstrating compliance with the arm’s-length principle. It also advises on transfer pricingplanning. The practice is led by Elys Aray.

Venezuela



Corporate income tax rate 15% to 34%Capital gains tax rate 15% to 34%Branch tax rate 15% to 34%

Withholding taxDividends 0%/34% (a)Interest 15% to 34% (b)Royalties from patents and licences 34% (c)Branch remittance tax 0%/34%

Net operating losses (years)Carryback 0Carryforwards 3

a) Dividends are generally exempt from incometax. However, if the dividend distribution ismore than taxable profits, a withholding tax is

imposed at the same rate as the corporateincome tax rate, that is, 34%.

b) Interest paid to a non-resident legal entity istaxed at the normal corporate income tax rates,that is, 15% to 34%. Interest paid to non-resident banks or financial institutions is subjectto a withholding tax of 4.95%. Interest paid toa non-resident individual is subject towithholding tax of 34% applied to 95% of thegross payment, resulting in an effective rate of32.3%.

c) Royalties paid to a non-resident company orindividual are subject to tax at a maximum rateof 34% applied to 90% of the gross payment,resulting in an effective rate of 30.6%.

Source: Taxand advisers from Taxand Venezuela

LEADING FIRMS

1 DeloitteEYKPMGPwC

2 Grant Thornton

Transfer pricing is top of the agenda in Vietnam, withthe introduction of the 2012 to 2015 period action planfor transfer pricing management and the advance pric-ing agreement (APA) system starting from July 2013.Officials from the both tax and non-tax departmentscame together to form a special transfer pricing taskforce in 2012.“Currently, transfer pricing in Vietnam is one of rela-

tively focused regulations, but poor compliance andmediocre enforcement,” Tom Prescott from GrantThornton noted. Richard Irwin of PwC added: “Thetransfer pricing regime in Vietnam is still very basic, thetax offices do not really understand it.”Additional efforts have also been taken to train

provincial tax officials to more adequately cope withincreasingly complex transfer pricing issues. Theaction plan, up to 2015, is to further develop provin-cial authorities’ understanding of the subject, refineregulations and improve the legal framework and todevelop a tax database supported by electronic fil-ing. However, specific audit procedures are still not inplace and regulations remain unchanged since itslatest update in 2010.

Generally, taxpayers who come across transfer pric-ing in the country face two obstacles: Although thetransfer pricing regulations generally follow the OECDrules, the implementation and application is ambigu-ous. “The regulations were first introduced in 2006, but

there is still lack of guidance specific to how to imple-ment concepts,” said Thomas McClelland from Deloitte.Moreover, documenting transactions is burdensome. “In some cases the arm’s-length position, as adopt-

ed by the taxpayer, may be arbitrarily dismissed by theauthorities regardless of the facts and circumstancesspecific to that taxpayer,” Prescott said.Having said that, tax disputes continue to be an

issue for most taxpayers. Small and medium sizeenterprises are influenced the most, because theyare in a weak position to appeal decisions imposedby the tax authorities. However, the market hopeswith the launch of the APA scheme, this problemshould be eased as more certainty is granted.

Tier 1 Deloitte is one of the market leaders in Vietnam inthe sphere of transfer pricing service provision.Thomas McClelland leads the team of 13 dedicatedprofessionals. The transfer pricing has ensured alldocumentations are prepared on a standard formatwhich meets the local tax authority’s requirement.The team has people with lengthy experience in cor-porate tax audit, as well as former GeneralDepartment of Taxation officials who were instru-mental in the development of Vietnam’s transfer pric-ing regulations. That means the unit knows what the

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VietnamTax authoritiesGeneral Department of Taxation, Ministry of Finance123 Lo Duc St, Hanoi, VietnamTel: +84 4 3971 2310Fax: +84 4 3971 2286Email: [email protected]: www.gdt.gov.vn


http://www.gdt.gov.vn


tax authority expects and can get clients better pre-pared. McClelland and Dinh Mai Hanh have just finished

assisting the country’s first transfer pricing audit case inthe real estate industry. The duo helped with preparingsupporting documents before and during the audit onthe biggest real estate project in Hanoi and negotiatedwith the tax authority upon technical issues.Although the APA regime has just started, the team

has equipped itself by hiring APA specialist ImaiShimpei from Deloitte Japan in June 2013. Four otherlocal specialists also joined since last year, and furtherenhanced the practice.

EY is a leading transfer pricing firm in Vietnam, led byChristopher Butler. The practice has a wealth of expe-rience providing relevant support to clients. At thesame time, it often advises the tax authority abouttransfer pricing trends and policies, leveraging off itsglobal network.

KPMG operates one of the oldest and largesttransfer pricing practices in Vietnam. The practice of26 professionals is active in transfer pricing planningand has seen an increasing number of multination-al clients from outside Vietnam. Led by Hoang ThuyDuong and Warrick Cleine, KPMG was the only firmto assist the GDT on capacity building and develop-ing the APA system under the newly issued legisla-

tion. Hoang and Nguyen Huong Giang worked withspecialists from the OECD and a foreign tax authorityunder the project, delivering a one-year trainingcourse to a team of 20 Vietnamese tax officials.Hoang and Cleine are helping a leading fast-movingconsumer goods company with its early stage APAnegotiation in Vietnam, which is a pilot case underthe new regime.The firm not only gets head starts in new issues, but

also maintains a leadership position in traditional serv-ice offering. Hoang and Tran Dong Binh, for instance,are advising a multinational’s Vietnamese operationwith the country’s first transfer priicng dispute. The duohas passed the burden of proof to the tax authorityand raised an appeal over the audit by challenging thetax authority’s administrative procedure.

David Fitzgerald heads the transfer pricing team of12 members at PwC Vietnam. Benefitting from the PwCglobal network, a number of transfer pricing partnersand directors from its Thailand and Malaysia practiceshave been seconded to the Vietnamese firm. The glob-al network has supported the practice through aninbound secondment programme, training and deliveryof innovative solutions on global or regional engage-ments. Matt Gulbis, transferred from Australia in April2013, has further enhanced the firm’s international out-reach.

Vietnam



Corporate income 25% (a)Capital gains 25%Branch tax 25%

Withholding taxDividends 5% Interest 5% Royalties 10%Technical service fees 5% (c)Branch remittance tax 0

Net operating lossesCarryback 0Carryforwards 5 years (d)

a) Reduced rates (10%, 15% or 20%) apply toinvestment in encouraged projects. Corporate rateapplicable to enterprises conducting prospecting,exploration and exploitation of petroleum andgas and other rate and precious natural resourcesis 32%-50%, depending on project.

b) A withholding tax of 5% (corporate tax) and 5%(value added tax) generally applies to technicalservice fees paid to a nonresident. The corporatetax may be exempt under a tax treaty.

c) Losses must be carried forward consecutively infull to taxable income for up to a maximum ofthe 5 years after the year in which the losses areincurred.

The practice works closely with the GDT and theMinistry of Finance on a number of matters, includingthe development of the APA programme and providingtraining to tax authority staff. The close working rela-tionship has provided the firm with a seat at the tableto key policy issues. The firm is piloting an APA appli-cation for a world-leading consumer product companyin Vietnam.During the past year, the team has been active

assisting clients with audit defence. One remarkableexample involved a multinational car manufacturerwhose selling price to its dealers was challenged bythe tax authority. The transfer pricing team assisted theclient to prove the price was in line with the arm’s-length principle and eliminated the potential adjustedincome tax of $1 million.

Tier 2Tom Prescott leads the small yet dedicated transferpricing team of three at Grant Thornton in Vietnam.

The firm’s international network has ensured the qual-ity and outreaching of its service provision.Professionals have international qualifications andgreat insights with regards to the local market. Thefirm delivers functional and economic analyses, riskreviews and innovative solutions to TP issues inVietnam, Cambodia and Malaysia, with significant sec-tor expertise in education and manufacturing. It pre-pares clients’ transfer pricing documentation and liais-es with the tax authorities where necessary. In addi-tion to design and practical transfer pricing systems forthe companies, the team also trains the in-houseteam to operate and maintain the systems, whichreduces on-going risks and the cost of compliance.Prescott and Van Nguyen are undertaking a trans-

fer pricing study for a US multinational’s Vietnamesesubsidiary. The duo tests several selected inter-grouptransactions, address risks and optimises the client’sdocumentation for meeting compliance require-ments in Vietnam.

Vietnam

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INDEX OF ADVERTISERS

Firm Country Page

Belluzzo & Partners Italy 129

BMR Advisors – Taxand India 103

Borenius – Taxand Finland 67

Castro, Barros, Sobral Gomes Brazil 31

CRA US 233

Deloitte Brazil 31

Deloitte Canada 45

Deloitte China 54

Deloitte France 73

Deloitte Greece 88

Deloitte Hong Kong 93

Deloitte India 103

Deloitte Mexico 146

Deloitte Switzerland 202

Deloitte US 233

Deloitte Anjin South Korea 190

EY Germany 83

Fenwick & West US 234

Galaz, Yamazaki, Ruiz Urquiza Mexico 146

Gowlings – Taxand Canada 44

Grant Thornton India 104

Hager & Partners Italy 129

KM Partners Ukraine 217

KPMG Brazil 32

KPMG Italy 130

KPMG Luxembourg 139

KPMG South Africa 183

KStudio Associato (KPMG) Italy 130

Mayer Brown US 235

McMillan Canada 45

Nangia & Co India 104

NERA Germany 84

Pekin & Pekin Turkey 213

PwC Chile 49

Skeppsbronn Skatt Sweden 199

Sudit K Parekh India 105

Taj (Deloitte) France 73

Taxand Ireland 116

Tokyo Kyodo Accounting Japan 135

Valente Associati GEB Partners Italy 130

Voegele Partner – NERA Germany 84

William Fry Taxand Ireland 116

WTS & Çelen Turkey 213

INDEX OF FIRMS

Firm Country Page

AB Taxand Belgium 23

Abel Advisory Netherlands 147, 149

Abreu Advogados Portugal 167, 169

Alder & Sound Oy Finland 64-65

Allen & Overy Italy 123-124, 126

Alston & Bird US 227-228

Altus Alliance Netherlands 147, 150

Alvarez & Marsal – Taxand US 227-228, 230

Alvarez & Marsal Taxand UK 218-219, 221

Arntzen de Besche Norway 154, 156

Arsene – Taxand France 68-70

Ashurst Australia 11, 13

Ashurst Spain 191, 194

Atoz – Taxand Luxembourg 136, 138

August & Debouzy France 68, 71

BA-HR Norway 154, 156

Baker & McKenzie Australia 11, 13

Baker & McKenzie Austria 15, 17

Baker & McKenzie Belgium 23, 25

Baker & McKenzie Chile 46

Baker & McKenzie China 50, 52

Baker & McKenzie Colombia 55-56

Baker & McKenzie France 68, 71

Baker & McKenzie Germany 78, 80

Baker & McKenzie Hong Kong 89, 91

Baker & McKenzie Italy 123, 127

Baker & McKenzie Japan 131, 133

Baker & McKenzie Mexico 143-144

Baker & McKenzie Netherlands 147-148

Baker & McKenzie Spain 191, 193

Baker & McKenzie Taiwan 203, 206

Baker & McKenzie Ukraine 214, 216

Baker & McKenzie UK 218, 221

Baker & McKenzie US 227, 230

Baker & McKenzie.Wong & Leow Singapore 177, 179

Baker Tilly Bulgaria 33, 35

Baker Tilly Portugal Portugal 167, 170

Bar Zvi & Ben Dov Israel 117-118

Barbosa, Mussnich & Aragao Brazil 27-28, 30

Basefirma Mexico 143, 145

Basefirma US 227, 230

BDO Netherlands 147, 150

BDO Spain 191, 194

BDO Consulting Romania 171, 173

Index


BDO Denet Turkey 210, 212

BDO Israel Israel 117, 119

Bech-Brunn – Taxand Denmark 61, 63

Bell Gully New Zealand 151

Belluzzo & Partners Italy 123, 125

Bernoni Grant Thornton Italy 123, 125

Blake, Cassels & Graydon Canada 40-41

BMR Advisors – Taxand India 97, 99

Bonelli Erede Pappalardo Italy 123, 125

Borenius Baltic States 18, 21

Borenius – Taxand Finland 64, 66

Bowman Gilfillan South Africa 180, 182

Brigard & Urrutia Abogados Colombia 55-56

Bruchou, Fernandez Madero & Lombardi Argentina 8

Caplin & Drysdale US 227, 231

Carey y Cia Chile 46-47

Cariola Diez Perez-Cotapos Chile 46, 48

Castro, Barros, Sobral Gomes Brazil 27-28

Ceteris New Zealand 151-153

CFA Advogados Brazil 27, 29

Chiomenti Studio Legale Italy 123, 126

Clifford Chance UK 218, 222

CMS Bureau Francis Lefebvre France 68, 70

CMS Russia Russia 174, 176

Crido – Taxand Poland 163, 165

Cuatrecasas, Gonçalves Pereira Spain 191, 193

D’Empaire Reyna Abogados Venezuela 238-239

Danny Darussalam Indonesia 106, 108

Delchev and Partners Law Firm Bulgaria 33

Deloitte Argentina 8-9

Deloitte Australia 11-12

Deloitte Austria 15-16

Deloitte Baltic States 18-19, 21

Deloitte Belgium 23-24

Deloitte Brazil 27-28, 30

Deloitte Bulgaria 33-34, 36

Deloitte Canada 40-42

Deloitte Chile 46, 48

Deloitte China 50-51

Deloitte Colombia 55-57

Deloitte Czech Republic 58-59

Deloitte Denmark 61-62

Deloitte Finland 64-65

Deloitte France 68, 70

Deloitte Germany 78-80

Deloitte Greece 85-86

Deloitte Hong Kong 89

Deloitte Hungary 94-96

Deloitte India 97-98

Deloitte Indonesia 106-107

Deloitte Ireland 113-114

Deloitte Israel 117

Deloitte Italy 123-125

Deloitte Japan 131

Deloitte Luxembourg 136-138

Deloitte Malaysia 140-141

Deloitte Mexico 143-144

Deloitte Netherlands 147-148

Deloitte New Zealand 151

Deloitte Norway 154

Deloitte Peru 157

Deloitte Poland 163-164

Deloitte Portugal 167

Deloitte Romania 171

Deloitte Russia 174-175

Deloitte Singapore 177

Deloitte South Africa 180-181

Deloitte Spain 191

Deloitte Sweden 196-197

Deloitte Switzerland 200

Deloitte Taiwan 203, 205

Deloitte Turkey 210-211

Deloitte Ukraine 214-215

Deloitte UK 218, 220-221

Deloitte US 224, 227-228

Deloitte Uruguay 236-237

Deloitte Venezuela 238

Deloitte Vietnam 240-241

Deloitte Anjin South Korea 186

Deloitte Tohmatsu Tax Co Japan 131

Dentons Germany 78, 81

Dentons Poland 163, 166

Di Tanno e Associati Italy 123, 128

DLA Cliffe Dekker Hofmeyr South Africa 180, 182

DLA Piper Australia 11, 14

DLA Piper China 50, 52

DLA Piper Hong Kong 89, 91

DLA Piper Italy 123, 127

DLA Piper Netherlands 147, 150

DLA Piper Poland 163, 165

DLA Piper Ukraine 214, 216

DLA Piper US 227, 229

Index

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DLA Piper Horváth & Partners Law Firm Hungary 94-95

Domanski Zakrzewski Palinka sp. Poland 163, 166

Dryllerakis & Associates Greece 85-87

Du-Baladad and Associates – WTS Philippines 160, 162

Duff & Phelps US 227, 231

ELP Advocates & Solicitors India 97, 100

ENS – Taxand South Africa 180, 182

Erdliker – Taxand Turkey 210, 212

Estudio O’Farrell Argentina 8, 10

Estudio Olaechea Peru 157-158

Eurofast Global Bulgaria 33

EY Australia 11-12

EY Austria 15-16

EY Baltic States 18-20

EY Belgium 23-24

EY Bulgaria 33-34, 36

EY Canada 40, 42

EY Chile 46, 48

EY China 50-51

EY Colombia 55, 57

EY Czech Republic 58-59

EY Denmark 61-62

EY Finland 64-65

EY France 68, 70

EY Germany 75, 78-80

EY Greece 85-86

EY Hong Kong 89-90

EY Hungary 94

EY India 97, 99

EY Indonesia 106, 108

EY Ireland 113-114

EY Italy 123-126

EY Luxembourg 136, 138

EY Malaysia 140-141

EY Mexico 143-144

EY Netherlands 147, 149

EY New Zealand 151-152

EY Norway 154-155

EY Peru 157-158

EY Poland 163-164

EY Portugal 167-168

EY Romania 171-172

EY Russia 174-175

EY Singapore 177-178

EY South Africa 180-181

EY South Korea 186, 188

EY Spain 191-192

EY Sweden 196-197

EY Switzerland 200-201

EY Taiwan 203-204

EY Turkey 210-211

EY Ukraine 214-215

EY UK 218, 220-222

EY US 227, 229

EY Uruguay 236-237

EY Venezuela 238-239

EY Vietnam 240-241

EY (Pistrelli, Henry Martin y Asociados) Argentina 8

EY Shinnihon Tax Japan 131-132

EY Terco Brazil 27, 29

Fahn Kanne & Co Israel 117, 119

Fantozzi e Associati – Taxand Italy 123, 126

Fava & Partners Italy 120, 123-124, 127

Felsberg e Associados Brazil 27, 30

Fenwick & West Global transfer pricing developments 5

Fenwick & West US 227, 229

Ferrere Uruguay 236-237

Fidal Direction Internationale France 68, 71

Flick Gocke Schaumburg Germany 78-80

Freshfields Austria 15, 17

Freshfields Bruckhaus Deringer France 68, 71

Freshfields Bruckhaus Deringer Germany 78, 81

Freshfields Bruckhaus Deringer Spain 191, 193

Freshfields Bruckhaus Deringer UK 218, 221

Galaz, Yamazaki, Ruiz Urquiza Mexico 144

Garrigues – Taxand Portugal 167-169

Garrigues – Taxand Spain 191-193

GM Kapadia & Co India 97, 101

Goltsblat BLP Russia 174, 176

Gowlings – Taxand Canada 40-42

Grant Thornton Bulgaria 33, 35

Grant Thornton China 50-53

Grant Thornton India 97, 100

Grant Thornton Ireland 113, 115

Grant Thornton Italy 123, 125

Grant Thornton Japan 131, 134

Grant Thornton New Zealand 151, 153

Grant Thornton Portugal 167, 169

Grant Thornton Spain 191, 194

Grant Thornton Sweden 196, 198

Grant Thornton Taiwan 203, 205

Grant Thornton UK 218, 220-221

Index


Grant Thornton Uruguay 236-237

Grant Thornton Vietnam 240, 242

Grupo GNP Argentina 8, 10

GTA Villamagna Spain 191, 194

Guyer & Regules Uruguay 236-237

Hadiputranto Hadinoto & Partners Indonesia 106, 108

Hager & Partners Italy 123, 126

Hannes Snellman Denmark 61, 63

Hendersen – Taxand China 50, 53

Isla Lipana & Co Philippines 160

Jalsovszky Law Firm Hungary 94-95

K C Mehta & Co India 97, 101

Khaitan & Co India 97, 101

Khattarwong – Taxand Singapore 177-178

Kim & Chang South Korea 186-188

King & Wood Mallesons China 50, 53

KM Partners Ukraine 214, 216

Kojima Law – Taxand Japan 131-132, 134

Kost Forer Gabbay & Kasierer Israel 117-118

KPMG Argentina 8-9

KPMG Australia 11, 13-14

KPMG Austria 15-16

KPMG Baltic States 18, 20-21

KPMG Belgium 23-24

KPMG Brazil 27-29

KPMG Bulgaria 33-35

KPMG Chile 46, 48

KPMG China 50-52

KPMG Colombia 55-56

KPMG Czech Republic 58, 60

KPMG Denmark 61-62

KPMG Finland 64-65

KPMG France 68, 70-71

KPMG Germany 78, 80-81

KPMG Greece 85, 87

KPMG Hong Kong 89, 91

KPMG Hungary 94-95

KPMG India 97, 99

KPMG Indonesia 106, 108-109

KPMG Ireland 113-114

KPMG Israel 117, 119

KPMG Italy 123-124, 126-127

KPMG Japan 131-132

KPMG Luxembourg 136-137

KPMG Malaysia 140-141

KPMG Mexico 143, 145

KPMG New Zealand 151-152

KPMG Norway 154, 156

KPMG Peru 157-158

KPMG Poland 163-164, 166

KPMG Portugal 167-168

KPMG Romania 171-172

KPMG Russia 174-175

KPMG Singapore 177, 179

KPMG South Africa 180-182

KPMG South Korea 184-186, 188

KPMG Spain 191, 193

KPMG Sweden 196-198

KPMG Switzerland 200-201

KPMG Taiwan 203, 205

KPMG Turkey 210-211

KPMG Ukraine 214-215

KPMG UK 218, 220-221

KPMG US 227, 229

KPMG Uruguay 236-237

KPMG Venezuela 238-239

KPMG Vietnam 240-241

KPMG Canada Canada 40, 42

KPMG Meijburg Netherlands 147, 149

KStudio Associato (KPMG) Italy 123-124

Landwell (PwC) Spain 191, 193

Landwell et Associés (PwC) France 68, 71

LAWIN Baltic States 18, 22

Lee & Ko South Korea 186, 189

Lee and Li Taiwan 203, 205

Legance Studio Legale Associato Italy 123, 127

Leitner & Leitner Austria 15

LexCase France 68-69, 71

Lilla, Huck, Otranto, Camargo Advogados Brazil 27-28

Loyens & Loeff Belgium 23, 25

Loyens & Loeff Luxembourg 136-138

Luther Taxand Germany 78, 80

Luthra & Luthra India 97, 101

Macfarlanes UK 218, 222

Machado Associados Brazil 27, 30

Maisto e Associati Italy 123-124

Majmudar & Partners India 97, 102

Manabat Sanagustin & Co Philippines 160, 162

Mancera (EY) Mexico 143

Mason Hayes & Curran Ireland 113, 115

Matheson Ireland 113-115

Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Brazil 27, 30

Index

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Mayer Brown Belgium 23, 25-26

Mayer Brown France 68, 71

Mayer Brown US 227-228, 231

Mazars Hungary 94-95

Mazars Romania 171, 173

Mazars Spain 191, 195

Mazars Denge Turkey 210-211

McCarthy Tetrault Canada 40, 42

McDermott Will & Emery UK 218, 223

McDermott Will & Emery US 227, 231

McDermott, Will & Emery Italy 123, 127

McMillan Canada 37, 40, 42-43

MDDP Poland 163, 165

Mendoza, Delgado, Labrador & Asociados Venezuela 238-239

Mijares, Angoitia, Cortes y Fuentes – Taxand Mexico 144

Miller & Chevalier US 227, 229-230

Morgan, Lewis & Bockius US 227, 231

MUC Consulting Indonesia 106, 109

Muniz, Ramirez, Perez – Taiman & Olaya Peru 157-158

MZSK & Associates India 97, 101

Nagashima Ohno & Tsunematsu Japan 131, 134

Nangia & Co India 97, 102

NautaDutilh Luxembourg 136, 138

NERA China 50, 53

NERA Germany 78, 81

Oppenhoff & Partner Germany 78, 81

Pavlov & Partners Bulgaria 33-36

PB Taxand Indonesia 106-107, 109

Pekin & Pekin Turkey 207-210, 212

Pepeliaev Group – Taxand Russia 174-175

Plesner Denmark 61, 63

Prieto Carrizosa Colombia 55, 57

PT VDB Loi Indonesia 106, 109

PwC Argentina 8-10

PwC Australia 11, 13

PwC Austria 15-17

PwC Baltic States 18, 21

PwC Belgium 23-24

PwC Brazil 27, 29

PwC Bulgaria 33, 35

PwC Canada 40, 42

PwC Chile 46, 48

PwC China 50, 52

PwC Colombia 55, 57

PwC Czech Republic 58, 60

PwC Denmark 61-62

PwC Finland 64-65

PwC France 68, 71

PwC Germany 78, 80

PwC Greece 85-87

PwC Hong Kong 89, 91

PwC Hungary 94-95

PwC India 97, 99

PwC Indonesia 106, 108

PwC Ireland 113-114

PwC Israel 117

PwC Japan 131, 133

PwC Luxembourg 136-137

PwC Malaysia 140-141

PwC Mexico 143, 145

PwC Netherlands 147, 149

PwC New Zealand 151, 153

PwC Norway 154-156

PwC Peru 157-158

PwC Poland 163-164

PwC Portugal 167-168

PwC Romania 171, 173

PwC Russia 174, 176

PwC Singapore 177, 179

PwC South Africa 180-181

PwC South Korea 186-187

PwC Spain 191, 193

PwC Sweden 196-197

PwC Switzerland 200-201

PwC Taiwan 203, 205

PwC Turkey 210-211

PwC Ukraine 214, 216

PwC UK 218, 221

PwC US 227, 230

PwC Uruguay 236-237

PwC Venezuela 238-239

PwC Vietnam 240-241

Quantera Hong Kong 89, 92

Raja, Darryl & Loh Malaysia 140, 142

Ricardo da Palma Borges & Associados Portugal 167, 170

Rodrigo, Elias & Medrano Peru 157, 159

Rolim, Viotti e Leite Campos Advogados Brazil 27, 29

Roschier Finland 64, 66

Rosso Alba Francia & Asociados Argentina 8, 10

Salvador & Associates – Taxand Philippines 161

Samil PwC South Korea 186-187

Samjong KPMG South Korea 186, 188

Index


Selmer – Taxand Norway 155

SF Consulting Indonesia 106, 109

Shearman & Sterling UK 218, 223

Shearn Delamore & Co Malaysia 140, 142

Shin & Kim South Korea 186, 189

Siqueira Castro Advogados Brazil 27, 29

Skadden Arps Slate Meagher & Flom US 227, 229

SKATT International Mexico 143, 145

Skeppsbronn Skatt Sweden 196, 198

Slaughter and May UK 218, 220, 223

Sorainen Baltic States 18-19, 21

Stikeman & Elliott Canada 40, 43

STS Deloitte Italy 123-125

Studio Legale e Tributario (EY) Italy 123

Studio Musselli Italy 123, 127

Studio Professionale Associato a (Baker & McKenzie) Italy 123, 127

Studio Tributario e Societario (Deloitte) Italy 123

Sudit K Parekh India 97, 100

Sullivan & Cromwell US 227, 230

SyCip Gorres Velayo & Co Philippines 160-161

Taj (Deloitte) France 68, 70

Tax and Financial Solutions Bulgaria 33, 36

TAX EXPERT International Switzerland 200-201

Tax Partner AG – Taxand Switzerland 201

Taxand Italy 123, 126

Taxand Japan 131-132, 134

Taxand Turkey 210, 212

Taxand UK 219

Taxand US 227-228, 230

Taxand Malaysia Malaysia 140, 142

Taxand Venezuela Venezuela 239

Taxhouse – Taxand Romania 171-173

Taxonity Poland 163, 165

Taxperience Netherlands 147, 150

Taxperience Russia 174, 176

Taxperience Tandax Hungary Hungary 94-95

Taxplan Poland 163-166

Teijeiro y Ballone, Abogados Argentina 8, 10

Tokyo Kyodo Accounting Japan 131, 134

TP Associates France 68, 72

TP Ostwal & Associates India 97, 100

TPA Horwath Romania 171, 173

Transfer Pricing Associates Italy 123, 127

Transfer Pricing Associates Global Portugal 167, 169

Transfer Pricing Services Romania 171, 173

Transfer Pricing Solutions UK 218, 222

Trench, Rossi e Watanabe Brazil 27, 29

Uría Menéndez – Proença de Carvalho Portugal 167, 169

Valdani Vicari & Associati Italy 123, 125, 127

Valente Associati GEB Partners Italy 123, 125

VARUL Baltic States 18, 21

VDB Loi Indonesia 106, 109

Velten Partners Singapore 177, 179

Viboal FindEx Romania 171, 173

Vieira de Almeida & Associados Portugal 167, 170

Vinson & Elkins US 227, 230

Vistisen Tax Attorneys Denmark 63

Voegele Partner – NERA Germany 78

Webber Wentzel South Africa 180, 182

White & Case Japan 131, 133

White & Case US 227, 231

Wiersholm Norway 154, 156

William Fry Taxand Ireland 110, 113

WTS Germany 78, 81-82

WTS & Çelen Turkey 210, 212

WTS Alfery Czech Republic 58-60

WTS Consulting China 50-51, 53

WTS Klient Hungary 94, 96

YükselKarkinKüçük Turkey 210, 212

Yulchon South Korea 186, 188

Zeirishi-HoJin PwC Japan 131

Zepos & Yannopoulos – Taxand Greece 85, 87

Index

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