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Issue No. 5 - 2018 of the International Transfer Pricing Journal is now available online.

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Number 5 - 2018 contains the following:

New Transfer Pricing Decree: No Longer Ahead of the Curve

Danny Oosterhoff

The new Dutch transfer pricing decree confirms the Dutch adherence to the revised OECD Guidelines. This new decree very much underscores that the broader value chain perspective has always been an integral part of the Dutch approach to the arm’s length principle.

European Union

Profit Attribution Challenges in a Digital Economy – A Transfer Pricing Analysis of the EU Virtual Permanent Establishment Concept

Willem Neuvel, Sylvia de Jong and Ágata Uceda

In this article, the authors discuss some implications for multinational enterprises of the proposed introduction of a “virtual permanent establishment” (virtual PE) by the European Commission. First, the authors discuss the update of the PE definition, i.e. the virtual PE. Second, the authors discuss how the profit attribution to this updated PE definition is intended to work and to what extent this profit attribution is aligned with value creation of MNEs in a digital economy as highlighted by the OECD Transfer Pricing Guidelines. It can be concluded that the EC proposal is not in line with the existing consensus on the taxation of the digital economy and artificially aims to be in accordance with the OECD Guidelines. The authors suggest that the EC considers the recommendations by the OECD more thoroughly in tackling this difficult issue of taxation of the digital economy.


Transfer Pricing Rules under the ECJ’s Scrutiny: Green Light for Non-Arm’s Length Transactions?

Svitlana Buriak and Raffaele Petruzzi

This article analyses the ECJ decision in Hornbach-Baumarkt (C-382/16) from 31 May 2018 and its implications for the transfer pricing legislations of EU Member States. First, to argue that cross-border transactions targeted by the arm’s length principle are comparable to purely domestic ones, the article scrutinizes the situations when the application of the transfer pricing rules is domestically relevant. Second, the article examines the justification of balanced allocation of taxing powers to the restrictive measure and its possible criteria for proportionality. Finally, the article analyses whether the ECJ allows related parties to act on non-arm’s length terms within the European Union.



The Greek Council of State Rules on the Nature of Mutual Agreement Procedures and Their Relationship with the Judicial Proceedings before Domestic Courts

Nina Kakali, Loukas Panetsos and Emmanouela Vitsa

This article discusses the decision 3413/2017 of the Greek Council of State regarding the relationship between mutual agreement procedures and the judicial proceedings before domestic courts, which affects the right of the taxpayer to be involved in state-to-state tax dispute resolution procedures.


Analysis of the Samsung Case on the Determination of a Permanent Establishment for Services Provided by Seconded Employees of a Korean Parent to Its Subsidiary in India

Vispi T. Patel, Kejal P. Visharia and Amol Mahajan

This article examines the ruling of the Delhi Bench of the Income Tax Appellate Tribunal (ITAT or the Tribunal), i.e. the highest fact-finding authority under the Indian Income Tax Act (the Act), in the case of Samsung Electronics Co. Ltd. and the ramifications of that case for the interpretation of the treaty article on the determination of a permanent establishment, especially in the case of expatriate employees seconded and visiting the Indian subsidiary and the attribution of profits to a PE. The issue of reassessment proceedings under Indian law is also considered.


Irish Revenue Confirms Services Safe Harbour

Joe Duffy and Tomás Bailey

Irish Revenue’s recent confirmation of an arm’s length safe harbour for certain intercompany services provides certainty and clarity to affected taxpayers in Ireland with cross-border operations. It also provides evidence of Irish Revenue's willingness to adopt a pragmatic and cooperative approach to transfer pricing compliance where possible.

Stock-Based Compensation and the Arm’s Length Principle

Shlomo Hubscher and Jacky Houlie

This article will explain the background and the accounting/tax implications of stock-based compensation (SBC) and its context within transfer pricing (TP) and the arm’s length principle. More specifically, the article will focus on the inclusion of SBC in the cost base for TP purposes. Legislation and judicial decisions regarding SBC are raised and considered and, finally, the article provides alternative approaches to TP methodologies for SBC.


Guidance from the Italian Legislator on the Correct Application of the Arm’s Length Principle: Alignment to the OECD Standards

Gabriella Cappelleri and Matteo Cataldi

Recently, the Italian Ministry of Economy and Finance released a decree setting out the general guidance for the correct application of the arm’s length principle. This article provides an analysis of the nine articles of the new decree, taking into account, in particular, the extent to which they comply with the OECD Guidelines as updated by Actions 8-10 and Action 13 of the OECD/G20 BEPS Project.


The Transfer Pricing Implications of “Business Restructurings” from the Perspective of the Italian Tax Police

Simone Zucchetti, Giulio Tombesi, Armando Tardini and Oreste Lanfranchi

This article discusses the approach (to be) adopted by the Italian tax police in relation to the transfer pricing implications of business restructurings, as disclosed under their Circular Letter No. 1/2018, also in light of the relevant and most recent OECD Guidelines. The article includes some additional remarks as well as working examples to expand on the viewpoint of the tax police regarding cross-border restructurings.


Introduction of TP Penalties

Jee Chang See

The cost of non-compliance for transfer pricing (TP) in Singapore has recently increased tenfold, and maybe more, under the newly introduced formal legislation mandating the preparation of contemporaneous transfer pricing documentation. The changes mark the beginning of a formal, legislation-based transfer pricing regime, and is part of the increasing emphasis the Singapore tax authorities place on transfer pricing compliance.

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