Pricing Disputes Research Articles

Factors Militating against the Efficacy of the Mutual Agreement Procedure: A Comparison between South Africa, Kenya, Uganda and Ghana

The effective resolution of transfer pricing disputes has been identified as one of the primary challenges to eliminate double taxation and/or double non-taxation as well as to enhance the free flow of trade and investment. This article investigates the unique challenges faced by selected African countries, including South Africa, Kenya, Uganda and Ghana, which militate against the use of the mutual agreement procedure (MAP) as a preferred Organisation for Economic Co-operation and Development (OECD) transfer pricing dispute resolution mechanism. The research used a qualitative legal review of existing literature in the selected regimes by comparing the domestic tax law framework in these countries. Transfer pricing manipulation is a significant source of illicit financial flows of capital as identified in the research by Global Financial Integrity on Africa, which drew from Ghana, Kenya and Uganda as case studies. South Africa and Kenya are considered as the gateways to Africa with many multinational enterprises (MNEs) taking residence in them before expanding to the rest of Africa. The article focuses specifically on a number of guidelines that should be in place for the effective use of the MAP in the resolution of tax treaty disputes. It also demonstrates how the absence of guidelines, or the lack of clarity thereof, discourages both taxpayers and revenue authorities from effectively using the MAP to resolve transfer pricing disputes. The absence of guidelines has resulted in many aggrieved taxpayers opting to approach the courts as opposed to using the MAP as a mechanism to resolve tax treaty disputes. Furthermore, it highlights the importance of how resolved transfer pricing disputes eliminates double taxation. The article recommends that the same benefits enjoyed under the domestic dispute resolution process be incorporated into the MAP. It also makes recommendations on how jurisdictions with a low tax treaty network can address this challenge to enable them to effectively use the MAP as a tax treaty dispute resolution.

Projection of Predatory Pricing Dispute Resolution in The Context of Business Competition Between UMKM in The Digital Economy Era Based on Win-Win Solution

Predatory pricing disputes between UMKM have been in the public spotlight since the alleged practice of predatory pricing by UMKM businesses selling through the Tik-Tok Shop application. UMKM players in the Jakarta Tanah Abang Market suffered losses due to lack of visitors because the products sold through the Tik-Tok Shop application were twice as cheap. Government policy by modifying the Regulation of the Minister of Trade as a responsive effort in anticipating Predatory Pricing disputes, instead causing losses to Tik-Tok Shop UMKM actors. This research aims to analyze the regulation of Predatory Pricing dispute settlement on business competition practices among UMKM, as well as to offer ideas on the projection of Predatory Pricing dispute settlement on business competition practices among UMKM based on win-win solution. This is a normative research, with statutory, conceptual and comparative law approaches, and analyzed perscriptively. The results of this research show that, First, the Law on Business Competition and Anti-Monopoly, the Law on UMKM, the Law on Trade and the Regulation of the Minister of Trade on PMSE have not regulated the dispute settlement of Predatory Pricing practices in the context of Business Competition between UMKM. Second, the projection of Predatory Pricing dispute settlement in business competition among UMKM must be done by optimizing out-of-court settlements, involving the role of UMKM organizations in Indonesia, assessing with the Rule of Reason approach, and containing business competition dispute settlement norms in the UMKM Law.

Evaluasi Implementasi Analisis Kesebandingan atas Sengketa Transfer Pricing PT OCI

Transfer pricing is one of the most popular drivers of tax disputes between taxpayers and tax authorities around the world. To lessen the probability of disputes, the OECD proposes procedures for comparability analysis. These procedures help taxpayers and tax authorities to determine the arm's length values of related-party transaction, which is the main cause of many transfer pricing disputes. This study uses a case study method, focusing on PT OCI, to evaluate a firm’s comparative analysis practice and its conformity to OECD Transfer Pricing Guidelines. Data collection through interviews and documentation. The results of this study indicate that PT OCI had conducted a comparability analysis of transfer pricing transactions in conformity with the OECD guidelines, while the tax authorities have not carried out a comparability analysis in carrying out transfer pricing audits. However, specifically for trademark utilization transactions, PT OCI must accept the results of inspection corrections. Fulfillment of the arm’s length principle for transactions utilizing intangible assets must comply with two additional provisions, namely related to the existence of transactions and economic benefits from the utilization of intangible assets. With the results of the benefit test, it was concluded that the trademark used by PT OCI did not contribute to increasing the success of PT OCI's sales so that transactions for the use of intangible assets did not meet the arm’s length principles.

A qualitative analysis on transfer pricing tax audit performance in Indonesia

This study is qualitative research using inductive reasoning through documentation and literature studies. The finding showed seven areas of dispute: gross income-related items, purchase cost, intra-group services, royalty, dividend, interest expense, and interest income. Furthermore, it concluded that documentation, comparable data, and comparability method were the three main issues in transfer pricing disputes. Ultimately, it showed that the tax court decree was dominated by decrees that favored taxpayers’ appeals.
 Public interest statement
 Tax disputes are known for their lengthy and costly process, but in the end, it turned out that the taxpayers mostly won the cases. To that end, this paper seeks to analyze the transfer pricing audit performance in Indonesia based on 2021’s Tax Court Decree. This allows us to know what factor(s) contributed to the transfer pricing dispute and how the tax court settled the dispute. As a practical implication, it is suggested that state revenue agencies improve the quality of their transfer pricing tax audit performance.

Resolution of International Transfer Pricing Disputes: A Non-Starter, Despite BEPS

The OECD’s initiative under BEPS Action 14 is a welcome step towards minimizing international tax disputes (including those relating to transfer pricing adjustments by way of administrative measures through larger international cooperation). However, several legal, conceptual and practical issues remain unaddressed. This article intends to explore whether the measures recommended under BEPS Action 14 are adequate to bring improvement to current dispute resolution mechanisms, especially with regard to post-BEPS changes in transfer pricing policy. Secondly, it also aims to explain how the unaddressed legal, conceptual and practical issues may hinder achieving the stated objective. The author restricts the discussion to only international transfer pricing-related disputes at this stage although several discussions pertain to cross-border tax disputes in general.

Australian Transfer-Pricing in the Aftermath of Glencore Investment Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (2019)

Glencore Investment Pty Ltd v Commissioner of Taxation of the Commonwealth of Australia (2019) 272 FCR 30 has dominated the Australian transfer pricing landscape for the past two years, with international tax specialists awaiting the outcome with great anticipation. The decision in the Federal Court of Australia and its subsequent appeal to the Full Federal Court and the High Court are of great importance to Australian transfer pricing due to its direct implications on the Australian Commissioner of Taxation’s powers of reconstruction. While dealing with older statutory legislation, the insights of the court and the methods utilised to come to a decision have the potential to provide a strong interpretative precedent in future transfer pricing disputes. It is the opinion of the author that the outcome in Glencore will affect the current transfer pricing regime despite the gradual strengthening of the Commissioner of Taxation’s powers under the new legislation. This article revisits the decision in Glencore and aims to provide a frame of reference for the use of members of the tax community and other individuals interested in understanding the context of the appeal and the implications this will have for Australian transfer pricing.

Assessing the Transfer Pricing Disputes Framework in Nigeria

Transfer pricing, from documentation to audit, can be complicated and costly. Despite the release of transfer pricing regulations and increased scrutiny over intercompany dealings, the revenue authorities and taxpayers still disagree over various aspects of transfer pricing documentation. This situation necessitated the creation of various transfer pricing dispute resolution and dispute prevention mechanisms in jurisdictions across the globe. The Organization for Economic Cooperation and Development (OECD) has set the global standards on the mechanisms for transfer pricing dispute resolution/prevention and how they should apply. These transfer pricing dispute prevention mechanisms seek to avoid the costly and complicated process that is associated with transfer pricing audit while the transfer pricing dispute resolution mechanisms seek to resolve transfer pricing disputes in the most efficient manner. Accordingly, this article seeks to assess the transfer pricing dispute resolution/prevention framework in Nigeria against the global standards for resolving and preventing transfer pricing disputes. Transfer pricing, safe harbour, advanced pricing arrangement, mutual agreement procedure, dispute resolution, dispute prevention

APPLICATION OF NEW REQUIREMENTS FOR STANDARDIZED TRANSFER PRICING DOCUMENTATION IN THE REPUBLIC OF BULGARIA – ADVANTAGES AND BENEFITS FOR TAX AUTHORITIES AND TAXPAYERS

Transfer pricing raises a number of issues and challenges for companies operating transfer operations and for the tax administrations of the countries in which they operate. Along with the increasing role of international transfer pricing on a global scale, increasing attention is paid to possible improvements in the control in this area and improving the regulatory measures in the individual countries aimed at limiting and countering the attempts at manipulation by companies in order to reduce paid profit taxes, customs duties, etc. through the transfer pricing. In modern conditions of continuously increasing globalization, more and more perceivable is the need for application of uniform, internationally recognized requirements and rules to documentation and control of transfer prices.
 The main purpose of this scientific paper is to examine the major rules and requirements related to the preparation of standardized transfer pricing documentation in the Republic of Bulgaria in the contemporary conditions. It discusses the increasing role and significance of international transfer pricing in the context of globalization and the necessity for application of uniform international guidelines on transfer pricing. A special attention is paid to the systematization of significant advantages and benefits of the application of standardized, globally recognized requirements in the field of transfer pricing in the Republic of Bulgaria both for companies -taxpayers and for tax administrations.
 The methodology of research of the issues in the paper involves the application of the historical-logical and systematic approaches and the methods of observation, comparison, analogy, analysis and synthesis, induction and deduction, etc. In accordance with the systematic approach, the information for transfer pricing of the different constituent entities of the multinational groups is considered as an integral part of the information for transfer pricing of the group as a whole.
 As a result of the research made, it is concluded that the implementation of the standardized rules for documentation that multinational groups must prepare in order to justify the methodology for determining transfer prices used in their international intra-group transactions provides valuable advantages and benefits both for the tax administrations of the relevant countries and for the taxpayers.
 From the perspective of tax authorities, the adoption of standardized requirements achieves improvement of the methodology of transfer pricing and tax audit in this area, higher degree of reliability, comparability and transparency of information provided by taxpayers for control over transactions between related parties. Through these requirements are achieved also better results in the tax discipline, the prevention of tax evasion and effective tools for avoidance and resolution of transfer pricing disputes.
 From the position of the taxpayers it is of utmost importance that through the uniform, internationally recognized requirements for documentation and tax audit of transfer prices the burden and costs in preparing the documentation on pricing in international transactions between related parties are significantly reduced. The introduction of these rules creates clarity and predictability with regard to information required to prove that their transactions with related parties satisfy the arm’s length principle. The standardized documentation enables taxpayers to defend their tax position, provides guarantees for the tax treatment of the transactions between related parties, possibilities for advance compliance with the requirements and hence for avoidance of penalties and transfer pricing disputes with tax administrations.

The Implementation of Advance Pricing Agreement in Indonesia Following The Adoption of Dispute Resolution Guideline

Advance Pricing Agreement (APA) is one of the fiscal instruments for minimizing transfer pricing disputes. In Indonesia, the regulation of APA was initially adopted in Income Tax Law year 2000 art 18(3a). Later, the implementation regulation was issued through Directorate General of Taxes Regulation, PER No. 69/PJ/2010. However, during that period the implementation of APA in Indonesia was still on very low progress. In 2015 Directorate General of Taxation (DGT) has not concluded to agree on any APA until the last revision of APA rule through Minister of Finance Regulation No 7/PMK.03/2015. This research utilizes a descriptive qualitative methodology where data is collected through a review of the literature and semi-structured in-depth interviews with key stakeholders. The result of this research shows that the development of APA implementation after the issuance of Minister of Finance Regulation No 7/PMK.03/2015 has increased. Based on statistics of APA in Indonesia after 2016 there was an increase in the APA submissions and the DGT has successfully concluded some APAs. The latest APA implementation in Indonesia has followed the dispute resolution guidelines as proposed by the Organization for Economic Cooperation and Development (OECD) through Base Erosion and Profit Shifting (BEPS) project as proposed in the Action Plan 14. However, there are issues pertaining to the implementation of APA such as transparency and certainty related to the APA process. Responding to these issues the DGT has made several attempts such as, improving human resources and strengthening the regulatory. Normal 0 false false false IN X-NONE X-NONE

The Status of the OECD Transfer Pricing Guidelines in the Post-BEPS Dynamic

Despite the vast literature on the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines), its status has received little consideration. The image in the literature is that the OECD Guidelines is a significant publication, given the substantial cross-border trade between associated enterprises. In the OECD/G20 BEPS Project, the Final Report on Actions 8-10, published in 2015, revised the OECD Guidelines as part of the sweeping measures to counter aggressive tax avoidance by certain multinational enterprises (MNEs), such as Google LLC, Facebook Inc. and Apple Inc. BEPS Actions 8-10, inter alia, revised the guidance on intangibles and cost contribution arrangements to prevent profits from intangibles being allocated to low-tax jurisdictions. As anticipated, the OECD has reported that transfer pricing disputes are rising. In particular, BEPS Action 14, on dispute resolution, requires tax treaties to include article 9(2) of the OECD Model Tax Convention, on corresponding transfer pricing adjustments, in tax treaties. Moreover, BEPS Action 14 (element 1.1 of the minimum standard) requires that access to the mutual agreement procedure be available for transfer pricing cases in tax treaties and that countries implement the resulting mutual agreements. As a minimum standard, members of the Inclusive Framework are obliged to implement this measure, which further elevates the status of the OECD Guidelines, as resulting disputes will be resolved on the basis of the principles in the OECD Guidelines. The membership of the Inclusive Framework exceeds 135 countries. As there is a dearth of transfer pricing case law, the consequence is that courts have only established limited jurisprudence on the topic. One Australian transfer pricing case concluded that the OECD Guidelines had no formal status in treaty interpretation. It is asserted in this article that the OECD Guidelines is part of the Commentary accompanying the OECD Model Convention on Income and on Capital. Even so, it is argued that treaty countries should not only use the OECD Guidelines as a guidance document in their domestic rules, but expressly state in their tax treaties that the OECD Guidelines are to be used for the interpretation of the associated enterprises article. In addition, the treaty statement should specify whether the static or ambulatory approach should be applied. This article asserts that the best way forward is for the OECD to illuminate the status of the OECD Guidelines by including a clear statement in the Commentary on the intrinsic character of the OECD Guidelines and expressly identify which parts of the OECD Guidelines form part of the Commentary, adapting the approach taken in the Commentary on the business profits article incorporating the 2010 Report on the Attribution of Permanent Establishments.

Related Parties as Used in Transfer Pricing

The paper examines the scope of related party transactions falling under the OECD Transfer Pricing Guidelines (TPG) and the transfer pricing regimes of selected tax jurisdictions. The OECD TPG does not deal with the concept of associated enterprises as used in Article 9 of the OECD Multilateral Tax Convention (MTC), while Article 9 of the OECD MTC does not define the terms used to describe associated enterprises. This gives rise to the question of what exactly was intended for under the scope of Article 9 and its consequent applicability. At the same time, many jurisdictions define related party transactions for transfer pricing purposes using the concept of “control”, but countries may perceive “control” from different perspectives. The paper discusses the practical implications arising from such differences in specific scenarios, e.g. joint ventures, family owned companies, comparability and country-by-country reporting. The “closely related” concept proposed under BEPS Action 7 is also discussed. Finally, the paper concludes with some recommendations to resolve these issues. Given the increasing focus on transfer pricing, more transfer pricing disputes are expected and correspondingly a greater use of Article 9 to eliminate economic double taxation. This intensifies the need for clarity on the scope of Article 9. It would also be timely to review the scope in light of the changes that are being made to the OECD TPG.

Transfer Pricing on Intra-Group Financing in the Manufacturing Industry in Indonesia – An Essay on Tax Court Decisions (2014-2019)

The manufacturing industry has become the leading sector in Indonesia but also the most common source of transfer pricing disputes. The excessive payment of interest expenses that has caused the MNEs to suffer from years of consecutive losses remains questionable, compounded by the illogical debt-to-equity ratio. The Indonesian government formally introduced a set debt-to-equity ratio in 2016 for the second time. Its first introduction in 1983 was revoked in 1984 in a bid to attract foreign investors. Currently, an entity has to meet the enforced Indonesian anti-abuse rule, arm’s length principle and debt-to-equity ratio.

Does the European Union Primary Law Require Member States to Make Corresponding Adjustments?

Although for the time being the directive on tax dispute resolution mechanisms in the European Union has been transposed to the national legislation of majority of Member States and there is an effective solution for transfer pricing disputes, the taxpayers may need a faster solution for double taxation arising from transfer pricing adjustments. As the double tax burden undermines the internal market, this article analyses whether the European Union primary law could provide taxpayers with a solution. The potential requirement to make a corresponding downward adjustment is analysed in the light of freedom of establishment; moreover, considering the Belgium excess profit scheme, it is also examined whether State aid rules might require a corresponding upward adjustment. Transfer pricing, corresponding adjustment, Belgium excess profit, Article 9, upward adjustment, downward adjustment, profit shifting, double taxation, European Union primary law, OECD

Related Parties as Used in Transfer Pricing

There is a need to provide more clarity about the meaning of the term “associated enterprise” in article 9 of the OECD Model Tax Convention (OECD Model), as it serves the objective of the elimination of economic double taxation and ensures that transactions between associated enterprises are conducted at arm’s length. Given the increasing focus on transfer pricing, a rise in the number of transfer pricing disputes is expected, and correspondingly article 9 of the OECD Model and the relevant tax treaties will be applied more often and to a greater extent to eliminate economic double taxation.

Administrative Court of Appeals Case on Netting Subsidies and Costs under Cost-Plus Method

On 11 October 2016, the Administrative Court of Appeals of Versailles ruled in a case concerning the treatment of state subsidies when determining the cost base under the cost-plus method. The case is also significant as regards the burden of proof in transfer pricing disputes.

Witness Testimony in Transfer Pricing Litigation

In Portugal, an increasing number of cases involving transfer pricing disputes are being decided by arbitration courts. This article highlights the impact of testimonial evidence in some of these cases and shows how, in some circumstances, testimonial evidence plays an important role in influencing the outcome of transfer pricing cases.

Transfer Pricing Litigation Trends and Dispute Resolution Mechanisms

Transfer pricing is one of the most litigious areas of taxation. This article discusses transfer pricing litigation trends in India and various dispute resolution mechanisms available to taxpayers for resolving transfer pricing disputes. In addition, analyses of statistical data relating to results achieved by various dispute resolution mechanisms are also presented.

The IRS Transfer Pricing Roadmap: Overview and Comparison with HMRC’s Approach to Transfer Pricing Disputes

The authors provide an overview of the recently released IRS Transfer Pricing Roadmap and draw some comparisons between the new approach of the Internal Revenue Service to the conduct of transfer pricing examinations as set out in the Roadmap and the established practice of HM Revenue and Customs in this space.

The Effectiveness of Mutual Agreement Procedures as a Means for Settling International Transfer Pricing Disputes

This article addresses the current status quo of the mutual agreement procedure, tackling the various issues related to article 25 of the OECD Model Convention and the EU Arbitration Convention (90/436). Certain obstacles to a proper functioning of the MAP are also addressed, including the underlying reasons of why the MAP has been an ineffective process and double taxation persists even where a MAP is put in effect.

India Aims To Reduce Transfer Pricing Disputes through Safe Harbour Rules

In this article, the author describes and evaluates the Indian safe harbour rules, which were introduced with the aim of reducing transfer pricing disputes.