Tax considerations for Pharmaceutical & Life Sciences Industry 27 November November 2013

Transcription

1 Tax considerations for Pharmaceutical & Life Sciences Industry 27 November November 2013

2 Discussion points 1. Update on few key tax, TP and GST points from Singapore perspective 2. Recent International Developments PwC 2

3 R&D Super tax deductions Applies not only to lab R&D but also to process related R&D PIC enhanced tax deductions (250%) Enhanced tax deductions (50%) Enhanced tax deductions (50%) Base tax deduction (100%) Base tax deduction (100%) Base tax deduction (100%) Prior to YA 2009 YA 2009 YAs 2011 to 2015 PwC 3

4 Cost sharing payments No EDB approval required Enhanced deductions would be applicable Enhanced tax deductions can be claimed including agreements previously approved by EDB Payment or contribution to become a party to an existing R&D cost-sharing agreement will not qualify for any tax deduction In the year of sale or disposal otherwise, claw back (to the extent of allowance claimed) will be considered trading receipt PwC 4

5 How to maximize the tax savings? 1. Identify and track Identify business activities eligible for the R&D tax concessions and track the R&D costs 2. Document Document activities and prepare cost reports to substantiate the claims in the R&D claim form Prepare R&D project plan(s) for R&D project(s) that cost S$150,000 and above 3. Submit and defend Submit R&D claim form with the income tax return Defend the R&D claims with project plan(s), documentation and cost reports if the claims are challenged / information is requested by the IRAS PwC 5

6 Tax and Transfer Pricing (TP) Tax Incentives Compliance requirements transparency Transfer Pricing Ownership of intangibles in contract R&D arrangement control over risk Impact of price controls Provision of services to related parties PwC 6

7 Goods & Services Tax GST cost on research grants If grants are taxable, actual grant amount received is reduced by GST payable If grants are non-taxable, the receipt of grants potentially result in a restriction of amount of GST to be claimed GST cost on service fees Service fees charged by Singapore to overseas entities could be subject to GST and become irrecoverable costs PwC 7

8 Global Tax Environment MP Margaret Hodge Obama proposals French proposals to clamp Pressure on tax collection: down on digital business Budget deficits & Austerity PwC measures 8

9 Expanded Stakeholders Intangibles draft Chapter IX: Business Restructuring UN TP Manual with country modules Exchange of information Arbitration Policy maker initiatives Developing economies Aggressive enforcement Arm s length principle vs Global formulary approach Differing definitions of key concepts such as PE, intangibles, etc. Increased complexity over all NGO / Public perspectives Developed countries Political, media & social pressures Economic pressures Attack on income migration PwC How to successfully defend your pricing model? How to prepare your tax model while managing these perspectives vis-a-vis corporate goals and tax exposures?? 9

10 The OECD s work on BEPS Feb 2013 BEPS Report 6 key pressure areas e-commerce and impact on PE Related party& intragroup financial transactions Harmful preferential regimes PwC Transfer pricing Hybrid mismatches & arbitrage Effectiveness of antiavoidance measures 10

11 Some Global Developments 2012: Netherlands implements interest deduction rules (targeting debt financing of exempt activities). July 2013: Australia Scoping Paper setting out Treasury s assessment on risks facing its corporate tax system as a result of BEPS and recommendations on actions. 2010: Germany implements Transfer package exit charge on transfer of business. Aug 2013: China joins global combat tax evasion efforts by signing the OECD Multilateral Tax Convention. 2012: French proposal to implement German inspired transfer exit package. Aug 2013: South Africa introduced a string of strict measures in its draft 2012: Luxembourg and Austria sign-on to end tax secrecy. Taxation Laws Amendment Bill to curb the erosion of its tax base and profitshifting, e.g. excessive deductible interest. Jun 2013: South Korea start a namingand-shaming campaign for those who fail to declare more than 5 billion won in foreign account assets. Sep 2013: G-20 declaration on BEPS initiatives including Automatic Information Exchange Sep 2013: Netherlands announces intention to re-negotiate tax treaties PwC 11

12 Pharmaceutical and life sciences tax technical webcast Tax issues, opportunities and challenges in China, India and Singapore (5 September 2013) Archive webcast will be available until 4 October 2014 Webcast link: &sessionid=1&key=87240DDDF3746D30DFFB7622AC7283E0. PwC 12

13 Contact us Abhijit Ghosh Partner - Pharmaceutical and Life Sciences Tax Leader abhijit.ghosh@sg.pwc.com DID: Ajay Sanganeria Director - Corporate Tax Services ajay.k.sanganeria@sg.pwc.com DID: PwC 13

14 Thank you The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers Services LLP ( PwC ). Before taking any action, please ensure that you obtain advice specific to your circumstances PricewaterhouseCoopers Services LLP. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 14