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Issue No. 4 - 2018 of the International Transfer Pricing Journal is now available online.

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Other relevant events and courses:

Conference
IBFD-PwC Transfer Pricing Seminar: Mastering the IP Life Cycle - Grasping the Intangible
30 October 2018
Amsterdam, The Netherlands
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Course
Transfer Pricing and Intra-Group Financing
10–11 December 2018
Amsterdam, The Netherlands
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Number 4 - 2018 contains the following:
ARTICLES
United States
Treatment of Intangibles Under New US Tax Regime

Kristina L. Novak, Mark P. Thomas and Cym H. Lowell

Issues pertaining to intangibles always loom large in international taxation, and intangibles were indeed a focus of the recent US tax reform. The new law imposes many fundamental changes that will require advisors to challenge most of the conventional wisdom that has developed in connection with effective tax rate management and intangibles.

European Union
Proposed 3% Digital Services Tax

Fred van Horzen and Andy van Esdonk

In this article, the authors question the tenability of the temporary Digital Services Tax, as proposed by the European Commission in developing a tax system for the digital market.

International

The Use of Value Chain Analysis in a Profit Split

Cansu Bagran Ilhan

This article provides an introduction to the profit split method (PSM), giving a quick look into its evolution throughout time and explaining how it shall be identified and applied as the most appropriate transfer pricing method, while demystifying the terms “value creation” and “value chain analysis” (VCA) and explaining why they were introduced by the OECD in the Action Plan on Base Erosion and Profit Shifting (hereinafter BEPS Actions). This article elaborates what a VCA should consider, how it should be conducted and what should be the outcome, and addresses the practical aspects of the use of the PSM in a VCA, based on a numerical example in the light of the OECD’s recommendations in, inter alia, the OECD Model Tax Convention, the OECD Transfer Pricing Guidelines,the BEPS Actions, discussion drafts and public consultations on the application of the PSM.

International

The Use of the Profit Split Method in Highly Integrated Transactions

Lukas Stähli

Given the increased significance of the transactional profit split method, the author provides a critical analysis of this transfer pricing method related to highly integrated transactions within multinational enterprises in light of the recently published discussion drafts on profit splits by the OECD. Particularly, this article addresses different aspects of these discussion drafts and gives a real-life example of a profit split in the construction industry in the context of highly integrated transactions.

International

Using Economic Valuation Techniques for Transfer Pricing Purposes: Recent Developments for the Valuation of Brands

Sven-Eric Bärsch and Carsten Erb

The use of economic valuation techniques is internationally accepted for determining arm’s length transfer prices. For the intragroup transfer of brands, the relief-from-royalty method often results in the most reliable arm’s length prices, and international alignment can now be observed for the choice of valuation parameters.

International

From Value Chain to Blockchain – Transfer Pricing 2.0

Sunny K. Bilaney

This thought-provoking article discusses how the technology that underpins cryptocurrencies can be put to use for transfer pricing purposes. At present, the use of blockchain technology in the field of transfer pricing is at a nascent stage. Its practical use would depend on actual advancement in technology and, more importantly, its acceptability with tax administrations.

RECENT DEVELOPMENTS
Denmark

Microsoft Denmark: Incidental Benefit Did Not Qualify as a Service Transaction

Jens Wittendorff

This article discusses a recent transfer pricing case in Denmark regarding Microsoft Denmark ApS.

European Union

The Interplay between Transfer Pricing and Customs Valuation in Case of Retroactive Profit Adjustments: The Position of the ECJ in the Case Hamamatsu Photonics Deutschland GmbH (C-529/16)

Enrico De Angelis and Theo Elshof

This article discusses the position recently taken by the European Court of Justice (ECJ) regarding the impact on customs valuation of the goods of retroactive profit adjustments performed to bring the financial results of the tested party in line with arm’s length results. The article considers issues such as the choice of customs valuation method in case of transfer pricing systems envisaging year-end adjustments, the impact of advance pricing agreements (APAs) on the customs value of the goods, the options available to taxpayers when navigating through the nuances of the interplay between transfer pricing and customs valuation methods.

Germany/International

Freedom of Establishment and Transfer Pricing Threats for the EU Single Market

Raffaele Petruzzi and Svitlana Buriak

This article aims to examine the arguments and conclusions made by Advocate General Bobek in his Opinion delivered on 14 December 2017 in Hornbach-Baumarkt (C-382/16) and their potential consequences for taxpayers in EU Member States. In particular, it argues that cross-border situations targeted by the arm’s length principle (ALP) are comparable with purely domestic situations, which escape the burden of compliance with the ALP.

The German transfer pricing rules may be considered disproportionate to the aim they pursue due to the limitation on a taxpayer’s rights to provide the commercial justifications for the transactions that do not comply with the ALP resulting from the parent company’s status as a shareholder.

India

The Bombay High Court Decides Whether the CUP Method Can Be Applied to Customized Goods

Vispi T. Patel and Suresh Dhoot

In its ruling in Amphenol Interconnect India (P.) Ltd., the Bombay High Court affirms the action of the Pune Income-Tax Appellate Tribunal that the transaction net margin method is the most appropriate method for determining the arm’s length price relating to the transactions of export/import of goods and payment of commission by the taxpayer with its associated enterprises. The comparable uncontrolled price method applied by the transfer pricing officer had been rejected because the goods are customized. The High Court thus dismissed the appeal of the revenue authorities.

Kazakhstan

Transfer Pricing Legislation in Kazakhstan

Almabek Zhabbarov

Transfer pricing is one of the most controversial regulations in Kazakhstan. However, so far disputes have arisen only in certain industries. As the tax authorities apply transfer pricing regulations to a wide range of taxpayers, the limitations of the law and its inconsistency with international practices are becoming more apparent. Companies planning investments in Kazakhstan should be aware of the corresponding risks because, in some instances, transfer pricing regulations in Kazakhstan may become a deal-breaker.

Pakistan

Scope of CbC Reporting and TP Documentation Requirements

Ikramul Haq

Pakistan, in the wake of signing the Multilateral Convention on Mutual Administrative Tax Matters, has implemented BEPS Action 13 by making changes in the Income Tax Ordinance 2001 and the Income Tax Rules 2002. This article highlights the amendments made and explains the ensuing treatment of CbC reporting and TP documentation requirements.

Ukraine

Recent Transfer Pricing Developments

Vladimir Didenko

This article provides an outline of recent changes to Ukraine’s transfer pricing rules, presents the new list of low-tax jurisdictions and describes additional anti-abuse measures.

CUMULATIVE INDEX
GLOBAL COVERAGE OF TRANSFER PRICING ISSUES
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