Contents
Part One: Country-By-Country Analysis
Part One: Country-by-Country Analysis
Part Two: Advanced Applications
Chapter 2: Australia’s Risk Assessment Transfer Pricing Approach
Preparation of the Documentation File
Applying the Arm’s Length Principle
Simplified Approach to Doing a Benchmarking Study
Four Steps for Testing International Transfer Prices
Outcome of Transfer Pricing Review or Audit
Audits Taking Place in Low-Risk Situations
Transfer Pricing Review Process
Categorizing the Results of the Transfer Pricing Review
How the Australian Transfer Pricing Audit Procedure Works
Australia’s Four-Step Process for Businesses
Chapter 3: Profit Attribution for a Dependent Agent’s Permanent Establishment in Australia
Permanent Establishment Concepts in Australia
Profit Attribution Concepts in Australia
The ATO’s Operational Approach
Determining Functional Analysis for a Permanent Establishment
Comparative Analysis for the Permanent Establishment
Application of the Resale Price Method
Application of the Cost Plus Method
Using a Transactional Net Margin Method
Chapter 4: Australia’s Advance Pricing Arrangement Program
Chapter 5: China Implements Transfer Pricing Procedures
Chapter 2: Reporting and Filing of Related Party Transactions
Chapter 3: Administration of Contemporaneous Documentation
Chapter 4: Transfer Pricing Methods
Chapter 5: Transfer Pricing Audits and Adjustments
Chapter 6: Administrative Guidance Concerning Advance Pricing Arrangements
Chapter 7: Administrative Guidance Concerning Cost Sharing Agreements
Chapter 8: Administrative Guidelines Concerning Controlled Foreign Corporations
Chapter 9: Administrative Guidance Concerning Thin Capitalization
Chapter 10: Administrative Guidance Concerning General Anti-Avoidance
Chapter 11: Corresponding Adjustments and International Negotiations
Chapter 12: Legal Responsibility
Chapter 13: Supplementary Provisions
Chapter 6: Reporting Related Party Transactions in China
Form 1—Related Party Relationships
Form 2—Summary of Related Party Transactions
Chapter 7: Hong Kong Advance Ruling Cases: Taxability of Profits
Chapter 8: Hong Kong Transfer Pricing Guidelines
Inland Revenue Ordinance and Case Law
Permanent Establishment Considerations
Applying the Arm’s Length Principle
Economic and Marketing Circumstances
Establishing the Reliability of the Data
Transfer Pricing Methodologies
Transfer Pricing Documentation
Intragroup Services Arrangements
Deduction of Expenditures Paid for Intragroup Service
Determining the Amount of Intragroup Charges
Services Provided by a Permanent Establishment
Chapter 9: Hong Kong Challenges Abusive Tax Schemes
Lack of “Economically Significant Functions”
How the Hong Kong Government Combats Abusive Tax Schemes
Distinguishing Tax Avoidance from Tax Evasion
How the Reinvoicing Structure Operates
Shifting Intangible Property: The Tax Perspective
Chapter 10: Winning Hong Kong’s Landmark Transfer Pricing Case
Hong Kong’s Advance Ruling Determinations
Hong Kong Issues Transfer Pricing Guidelines
Determination by the Court of Final Appeal
The Commissioner’s Determination
Determination by the Board of Review
Determination by the Court of First Instance
Determination by the Court of Appeal
The Case before the Court of Final Appeal
Deficiencies in the Scheme as to Manufacturing Profits
Deficiencies in the Scheme as to the Relevant Years of Assessment
Are the Scheme and the Tax Benefit Still Viable Bases for Section 61A Assessments?
Is There a “Tax Benefit” within the Meaning of Section 61A?
The Narrower Scheme and the Narrower Tax Benefit
Dominant Purpose of the Narrower Scheme
Ribeiro’s Dominant Purpose of the Narrower Scheme
Commissioner’s Assessment Power
Commissioner’s Exercise of the Section 61A(2) Power
Board’s Approach to the Exercise of the Section 61A(2) Power
Chapter 11: Transfer Pricing Litigation in India
Transfer Pricing Chronology and Administration
Transfer Pricing Method Selection in India
Contemporaneous Documentation in India
Vodafone: Hutchison Essar Acquisition
Chapter 12: PE Issues Impact Indian Transfer Pricing
Nexus, Effectively Connected Status, and Permanent Establishment
Four Fact-Based Permanent Establishment Inquiries
Impact of the Morgan Stanley Case
Permanent Establishment Transfer Pricing Litigation in India
Mentor Graphics (Noida) Pvt. Ltd.
Millennium Infocom Technologies Ltd.
Tokyo Marine & Fire Insurance Co. Ltd.
Infosys International Activities in New York State
Chapter 13: Taxation of Travel Services in India
Chapter 14: Transfer Pricing in Indonesia
Transfer Pricing Considerations
Chapter 15: Japan’s Directive on Transfer Pricing Operations
Regulations and the Examples—How They Differ
Operation of the Japanese Transfer Pricing Administrative Guidelines
Chapter 1: Definitions and Basic Policies
Chapter 3: Points to Note in Calculating Arm’s Length Prices
Chapter 4: Treatment of Foreign Transferred Income
Chapter 5: Advance Pricing Arrangements
Chapter 16: Selecting the Arm’s Length Price in Japan
Demonstrating the Selection of Arm’s Length Price
Selection of the Method of Calculation of Arm’s Length Price
Case 1: Use of the Comparable Uncontrolled Price Method
Case 2: Use of the Resale Price Method
Case 3: Use of the Cost Plus Method
Case 4: Methods Consistent with the Comparable Uncontrolled Price Method
Case 5: Methods Consistent with the Cost Plus Method
Case 6: Transactional Net Margin Method
Case 7: Contribution Profit Split Method
Case 8: Residual Profit Split Method
Case 9: Adjustment for Differences
Chapter 17: Applying Japanese Intangible Transfer Pricing Methods
Case 10: Intangibles Created by R&D and Marketing Activities
Case 11: Distribution Channels and Quality Control Know-How
Case 12: Know-How Accumulation through Human Resource Business Activities
Case 13: Contributions to Create, Maintain, and Develop Intangible Properties
Case 14: A Company Bearing only the Cost of Creation of the Intangible Properties
Case 15: Intangible Properties for Employees on Loan
Chapter 18: Japanese Profit Split Transfer Pricing Methods
Case 16: Applying the Profit Split Method to a Series of Foreign-Related Transactions
Case 17: Excluding Transactions from the Profit Split Method
Case 18: Calculation of the Profit to Be Split
Case 19: Differences in Labor Costs Impact the Residual Profit Split Method
Case 20: Treatment of Market Fluctuations
Case 21: Calculation of Basic Profit
Case 22: Factors for Splitting the Residual Profit
Chapter 19: Japanese Guidelines Address Diverse Transfer Pricing Issues
Case 23: Determining Whether Services Provide Commercial Value
Case 24: Multiple-Year Considerations
Case 25: Establishing the Target Profit Margin
Chapter 20: Malaysia Advance Ruling Guidelines
General Facets of the Advance Ruling Procedure in Malaysia
Binding Nature of an Advance Ruling
Scope of the Advance Ruling Request
Circumstances in Which Malaysia Tax Authorities Will Not Issue an Advance Ruling
Circumstances in Which the DGIR Can Decline to Issue an Advance Ruling
Advance Ruling Application Procedure
Advance Ruling Application Form
Information Request Requirement
Issuance of the Advance Ruling
Advance Ruling Finality and Disclosure
The DGIR Can Withdraw the Advance Ruling
Situations in Which the Advance Ruling Ceases to Apply
Chapter 21: Malaysia Transfer Pricing Guidelines
Malaysian Transfer Pricing Procedure
Application of the Arm’s Length Principle
Malaysia’s Transfer Pricing Regime
Comparability and Transfer Pricing
Comparable Uncontrolled Price Transfer Pricing Method
Resale Price Transfer Pricing Method
Cost Plus Transfer Pricing Method
Additional Transfer Pricing Methods
Profit Split Transfer Pricing Method
Transactional Net Margin Method
Transfer Pricing Services Regulations
Malaysia Issues Advance Rulings Guidelines
General Facts about of the Advance Ruling Procedure in Malaysia
Binding Nature of an Advance Ruling
Scope of the Advance Ruling Request
Advance Ruling Application Procedure
Advance Ruling Application Form
Information Request Requirement
Issuance of the Advance Ruling
Advance Ruling Finality and Disclosure
The DGIR Can Withdraw the Advance Ruling
Situations in Which the Advance Ruling Ceases to Apply
Chapter 22: New Zealand Transfer Pricing Developments
New Zealand Transfer Pricing Guidelines
Arm’s Length Principle and the Pricing Methods
Basics of the Transfer of Intangible Property
Profit Split Method and the Joint Ownership of Intangible Property
Residual Profit Split Analysis
Transactional Net Margin Method
Australia’s Four-Step Process to Ascertain the Arm’s Length Approach
Documentation and the Burden of Proof Rule
Inland Revenue Seeks to Ascertain the Risks to the Revenue
Transfer Pricing in Countries without a Double Tax Agreement
Trade Intangibles and Marketing Intangibles
Ascertaining the Arm’s Length Amount for Intangible Property
Ascertaining the Ownership of Intangible Property
Factors in Ascertaining the Nature of Intangible Property
Terms and Conditions of the Intangible Property Transfer
Non-Owner’s Marketing Activities
Applying the Profit Split Method to Intangible Property
Chapter 23: Philippine Transfer Pricing Regulations
Scope of the Philippine Provisions
Philippine-Specific Provisions
Chapter 24: Singapore Implements Advance Pricing Arrangement Procedure
Objectives of the Supplementary Circular
What the Supplementary Circular Provides
Minimum Information Requirements
Considerations for Accepting the APA
Formal APA Submission Procedures
APA Review and Negotiations: Considerations and Requirements
Discontinuation of the APA Process
Nonsubmission of the APA Application
Insufficient Level of Support during the APA Process
Chapter 25: Singapore Transfer Pricing Consultation Process
Objectives of the Transfer Pricing Consultation
Issuance of the Transfer Pricing Questionnaire
Transfer Pricing Questionnaire
Chapter 26: Singapore Transfer Pricing Guidelines
Key Concepts and Arm’s Length Principles
Comparison of Economically Significant Functions
Comparable Uncontrolled Price Method
Transfer Pricing Method Selection
Transfer Pricing Documentation
Chapter 27: Singapore Transfer Pricing Guidelines for Related Party Loans and Services
Transfer Pricing Guidelines for Related Party Loans
Facts and Circumstances to Determine Comparability Analysis
Transfer Pricing Guidelines for Related Party Services
Direct Charging versus Indirect Charging of Services
Ascertaining the Arm’s Length Fee
Routine Services and the 5% Markup
Chapter 28: South Korea Transfer Pricing
Related Party Transfer Pricing Relationships in Korea
Computation of Indirect Ownership
Transfer Pricing Method Alternatives
Information Requests and Documents
Permanent Establishment, Competent Authority, and Advance Pricing Agreements
Thin Capitalization and Tax Havens
Applying the “Most Reasonable Method” Standard to Determine Arm’s Length Price
Underpayments and Overpayments
Selecting Transfer Pricing Methods
Reporting Methods for Determining Arm’s Length Price
Sanctions Imposed on Failure to Comply with the Data Request
Debt under an Arm’s Length Situation
Scope of the “Tax Haven” Jurisdiction
Computation of the Reserved Income Distributed Amount
Gift Tax on Property Located Outside Korea
Chapter 29: Sri Lanka Transfer Pricing
Threshold for Applying Sri Lanka Transfer Pricing
Annex 1: Test of Control—Associated Undertaking
Annex 2: Arm’s Length Pricing Methodologies
Annex 3: Appropriate Pricing Methodology—Factors to Consider
Annex 4: Comparability of an Uncontrolled Transaction—Factors to Consider
Annex 5: Prescribed Documentation
Suggested Supporting Documents
Chapter 30: Taiwan Transfer Pricing
Enactment of the Transfer Pricing Statute
Chapter 31: Thailand Transfer Pricing
Part 1: Tax Legislation Impacting Transfer Pricing
Revenue Department of Thailand Departmental Instruction Paw 113/2545
Part 2: Methodologies in Calculating Market Price
Part 3: Process in Establishing the Market Price
Process of Establishing the Market Price
Guidelines on the Determination of Market Price
Chapter 32: Vietnam Transfer Pricing
Expansive View of Related Party Ownership
Part Two: Advanced Applications
Chapter 33: Services Transfer Pricing in Hong Kong and in Singapore
Services Transfer Pricing in Hong Kong and in Singapore: Basic Comparison
Hong Kong Services Transfer Pricing Methods
Shareholder Activity and Stewardship Functions
Financial Services Audit Example
Deduction of Expenditures Paid for Intragroup Services
“Objective Commercial Explanation” Standard
Determining the Amount of Intragroup Charges
Services Provided by a Permanent Establishment
Scope of Activities for Related Party Services in Singapore
Singapore Transfer Pricing Services Guidelines
Direct Charging versus Indirect Charging of Services
Ascertaining the Arm’s Length Fee
Routine Services and the 5% Markup in Singapore
Cost Pooling versus Pass-Through Allocation Alternatives
Chapter 34: Permanent Establishment Parameters: Hong Kong versus India
General Permanent Establishment Considerations
Permanent Establishment Considerations in India
Permanent Establishment Considerations in Hong Kong
Chapter 35: Pacific Tax Administrators Coordinate Transfer Pricing Documentation
Specific Mandatory Documentation
Chapter 36: Shared Services and Cost Pooling Arrangements in the United States and Singapore
Explanation of the Shared Services Arrangement Provisions
Singapore Shared Services Arrangements
Chapter 37: South Korea–Japan Bilateral Investment Treaty
Treaty Shopping within the Bilateral Investment Treaty Context
Tax Provisions within the Korea–Japan Bilateral Investment Treaty
Chapter 38: China–Taiwan Trade
Taiwan and China: A History Lesson
Economic Cooperation Framework Agreement
Choice of Transfer Pricing Method
Analysis of the Production Activities
Taiwanese–Chinese Electronics Company
Transactional Profit Split Method Criteria
Most Appropriate Transfer Pricing Method
Selecting among Allocation Keys
Chapter 39: Malaysia–Singapore Allocation Keys
Selection of the Real Estate Leasing Example
When the Transactional Profit Split Method Is the “Most Applicable” Transfer Pricing Method
Applying the Transactional Profit Split Method
Four Allocation Keys Categories
Selecting Potential Allocation Keys
Residential Condominium Leasing Example
Residential Condominium Database
Selecting among Allocation Keys
Chapter 40: Permanent Establishment Parameters
OECD’s Permanent Establishment Provisions
Consequences of Permanent Establishment Status
Consequences of a Permanent Establishment to Business
Transfer Pricing and Permanent Establishment
Potential for the Imposition of Two Levels of Taxation
OECD Approach to Determine Permanent Establishment
Hong Kong Applies the OECD Permanent Establishment Provisions
How Hong Kong Applies the Permanent Establishment Provisions
Common Law Permanent Establishment Criteria
Shareholder Activities in Subsidiaries’ Locations
Presence of Personnel Shifts among Entities
“Preparatory to” and “Auxiliary from” Exemptions