Global Transfer Pricing Conference

Transcription

1 Managing multiple stakeholders in the new economy Global Transfer Pricing Conference Transfer pricing controversy trends and techniques

2 Today s presenters Ward Connolly, moderator Diane Hay Fred Barrett Henry An Rahul Mitra Xavier Van Vlem Slide 2

3 Agenda Global dispute environment Dispute resolution life cycle Dispute prevention Audit management techniques Administrative appeals Advance pricing agreements Competent authority Litigation Slide 3

4 Global dispute environment Slide 4

5 Global environment The dynamic global tax audit and controversy environment Converging factors create an unsettled climate - Fiscal deficits at record-high levels equates to tax authorities on the hunt for revenues - As a result, the volume of tax audits is rising rapidly and audits are increasingly aggressive Including special audits and audits of conglomerates, foreign-invested MNCs, high net worth individuals, etc. Tax is no longer just a legal or technical issue it is front page news - It is political, even moral E.g., taxpayers being called before U.S. Congress and U.K. Parliament to testify regarding their aggressive transfer pricing/tax planning tactics Politicians accuse taxpayers of engaging in transfer pricing Increasing pressure on multinational companies ( MNCs ) to pay their fair share and be transparent with governments Slide 5

6 Global environment Worldwide Developments Government officials in the U.K., Italy, France, and other countries are increasingly singling out MNCs for alleged tax evasion Approximately 70% of all global transfer pricing litigation is in India Growing culture for dispute in China Increasingly aggressive audits in Korea OECD BEPS Action Plan - Recognizes need to make dispute resolution mechanisms more effective, promotes arbitration provisions in bilateral treaties Slide 6

7 Dispute resolution life cycle Slide 7

8 Overview Dispute Resolution Life Cycle Dispute Prevention Audit Management Administrative Appeals Advance Pricing Agreements (including rollback) Competent Authority (including Mandatory Binding Arbitration) Litigation Slide 8

9 Dispute prevention Slide 9

10 Preventing disputes Dispute Prevention Techniques Strategic Risk Assessments Planning Value Chain Transformation TP Documentation and Benchmarking Advance Pricing Agreements Defense Binders Pros/Cons Slide 10

11 Audit management techniques Slide 11

12 Audit management Managing the Audit International Differences at the Examination Level - Time frames, formality, aggressiveness, invasiveness, cultural differences, etc. Responding to IDRs - Increasingly common for tax authorities to request functional interview notes, mock audit materials, etc. Government Interviews - Interview Prep/Mock Audits - Conducting the Interview Aggressive Audits - Surprise visits by armed agents, seizures, summons enforcement; plant and facility tours; recorded interviews; and extensive requests for transfer pricing background documents (e.g., Belgium, Korea) Slide 12

13 Administrative appeals Slide 13

14 Administrative appeals Administrative Appeals International Differences at the Appeals Level - Increase in number and aggressiveness of audits had led to a dramatic increase in appeals around the world Negotiating with Appeals Coordinating with other venues (e.g., Competent Authority) Pros/Cons - Possibility of re-audit in certain countries Slide 14

15 Advance pricing agreements Slide 15

16 Advance pricing agreements ( APAs ) APAs APA programs gaining popularity worldwide - 40 countries, plus new implementation/testing in Hong Kong and Greece Increased emphasis on bilateral APAs - Often worse terms in unilateral than bilateral - Unilateral APAs are subject to internal audits in some countries Ability to include rollback years Pros and Cons Slide 16

17 Competent authority Slide 17

18 Competent authority ( CA ) / mutual agreement procedure ( MAP ) CA/MAP Can be effective at relieving double tax - In the U.S., 96 percent of disputed amounts received correlative relief or had adjustments withdrawn Coordination with other venues (e.g., Appeals) Differences in style, culture, philosophy, and relationships among CAs - Practical (e.g., Korea) v. Technical (e.g., Canada) - Delays in process (e.g., U.S.-India) Accelerated Competent Authority Process ( ACAP ) Mandatory Binding Arbitration Arbitration Pros/Cons Slide 18

19 Litigation Slide 19

20 Litigation Litigation Generally last resort Cultural considerations (e.g., becoming a targeted taxpayer) Coordination with other venues (e.g., Competent Authority) Pros/Cons - Political considerations Example Transfer Pricing dispute regards Belgian company and Dutch affiliate - Belgian company combined litigation and MAP - Before bilateral discussions opened, Belgian CA provided unilateral relief Slide 20

21 Thank you This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.