Transfer Pricing

Transfer Pricing

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  • Lukasz Kubicki
    Lukasz Kubicki
    The company name is only visible to registered members.
    TP Books - China/SME/Denmark
    Dear Members,

    I recommend the following publications, which were authored/co-authored by leading Transfer Pricing experts of TPA in Europe and Asia. The strength of them is a practical approach which is based on years of experience in dealing with various TP issues.

    http://www.tpa-global.com/component/option,com_wrapper/Itemi...

    Regards
    Lukasz Kubicki
    • 20 Feb 2009, 10:12 am
  • Lukasz Kubicki
    Lukasz Kubicki
    The company name is only visible to registered members.
    Re: TP Books - China/SME/Denmark
    Dear members,

    Below some information about the “Practical Guide for China”, one of the books available at
    TPA’s book-shop (under the link above).

    This book has been prepared to enable multinationals in China to understand the transfer pricing regulations in force in China in the light of the global transfer pricing issues and developments, since this is how multinationals should approach the design of their transfer pricing systems.

    • Part One of the book sets out and discusses global transfer pricing issues in the context of the need for multinationals to design and implement a workable and defensible transfer pricing system driven by commercial realities and the actual business model rather than any tax planning objectives

    • Part Two of the book outlines the specific transfer pricing rules and practices that multinationals need to factor into the design and documentation of their transfer pricing systems in China

    • Part Three discusses in more detail a number of particularly difficult and contentious transfer pricing issues, along with practical approaches that may be adopted by multinationals in order to deal with them properly

    • Part Four discusses a number of real life examples and case studies to illustrate the concepts involved and some of the difficulties that may be encountered in practice.


    Table of contents

    1. MANAGING YOUR TRANSFER PRICING GLOBALLY

    1.1. Transfer pricing in concept

    1.2. The transfer pricing process
    1.2.1. Overview of transfer pricing process
    1.2.2. Box 1 – Identify the Relevant Business Context
    1.2.3. Box 2 – Design and Implement the Transfer Pricing System
    1.2.4. Box 3 – Documentation of the Transfer Pricing System
    1.2.5. Box 4 – Transfer Pricing Controversy Management

    1.3. Introduction to transfer pricing methods
    1.3.1. Terminologies used for labels
    1.3.2. Introduction
    1.3.3. OECD LABELS
    1.3.4. Managerial labels
    1.3.5. Legal labels
    1.3.6. Matching OECD, managerial and legal labels
    1.3.7. OECD Transfer Pricing Guidelines Methods
    1.3.8. Other methods
    1.3.9. Methods not acceptable
    1.3.10. Ranking of OECD transfer pricing methods
    1.3.11. Application of one more or more methods
    1.3.12. Examples of illustrate application of OECD methods

    1.4. Arm’s length transfer pricing methodologies
    1.4.1. The CUP method
    1.4.2. The resale price method
    1.4.3. The cost plus method
    1.4.4. The profit split method
    1.4.5. The transactional net margin method
    1.4.6. Practical issues regarding choice of methods
    1.4.6.1. Introduction
    1.4.6.2. Relevance of industry, conditions and industry analysis
    1.4.6.3. Price setting versus outcome testing

    1.5. Economic analysis
    1.5.1. Overview of economic analysis
    1.5.2. Terminologies use for comparables
    1.5.3. The concept of an arm’s length principle
    1.5.4. Comparability analysis
    1.5.4.1. Introduction
    1.5.4.2. Characteristics of property or services
    1.5.4.3. Functional analysis
    1.5.4.4. Contractual terms
    1.5.4.5. Economic circumstances
    1.5.4.6. Business strategies
    1.5.4.7. Special comparability factors for intangible property
    1.6. Financial ratios

    1.7. The use of commercial database
    1.7.1. Introduction
    1.7.2. Dutch protocol on how to perform a good database search
    1.7.3. May 2006 OECD draft guidance on comparables searches
    1.7.4. Example of manufacturing benchmarking study
    1.7.5. Example of distribution benchmarking study
    1.7.6. Example of royalty benchmarking study
    1.7.7. Selection of period of review
    1.7.8. Analysis of the arm’s of length result
    1.7.9. Adjustments to functional comparables
    1.7.9.1. Overview
    1.7.9.2. Asset intensity adjustment
    1.7.9.3. Accounts receivable adjustment
    1.7.9.4. Accounts Payable adjustment
    1.7.9.5. Inventory (Stock) adjustment
    1.7.9.6. Effect of asset intensity adjustment
    1.7.10. Relevance of comparable searches
    1.7.11. The use of third party quotes or statement
    1.7.12. Other public domain sources
    1.7.13. Use of data from associated enterprises
    1.7.14. Safe harbours
    1.7.15. How to use benchmarking results

    1.8. Documentation
    1.8.1. Request of documentation
    1.8.2. Traditional approach documentation
    1.8.3. Masterfile documentation
    1.8.3.1. Background to Masterfile concept
    1.8.3.2. EU JTPF Code of Conduct on transfer pricing documentation
    1.8.3.3. Outline of Masterfile approach
    1.8.3.4. Application of the Masterfile concept in Asia Pacific
    1.8.3.5. Key practical benefits
    1.8.4. Legal reality – inter-company agreements
    1.8.5. Accounting reality – invoices, etc
    1.8.6. Gathering of corporate background information

    1.9. Transfer pricing risk assessment
    1.9.1. Overview transfer pricing risk assessment
    1.9.2. Management of transfer pricing risks
    1.9.3. Single country risk assessment – ATO approach
    1.9.4. Single transaction risk assessment – TPA approach
    1.9.5. The FIN 48 approach
    1.9.5.1. Introduction
    1.9.5.2. Recognition phase
    1.9.5.3. Measurement phase

    1.9.6. Dispute resolution
    1.9.6.1. Why dispute
    1.9.6.2. Transfer pricing audit and mutual agreement procedures
    1.9.6.3. Arbitration
    1.9.6.4. Advance pricing agreement
    1.9.6.4.1. Introduction
    1.9.6.4.2. Unilateral APA
    1.9.6.4.3. Bilateral APA
    1.9.6.4.4. Multilateral APA
    1.9.6.4.5. Commentary on APA

    1.9.7. Global transfer pricing developments
    1.9.7.1. Business restructuring
    1.9.7.2. Review of comparability and profit methods
    1.9.7.3. Arbitration


    2. TRANSFER PRICING IN CHINA

    2.1. CHINA – TRANSFER PRICING AND ITS DEVELOPMENT

    2.1.1. Organisations and Institutions in the Chinese taxation system
    2.1.2. Overview of the current tax system in China
    2.1.3. Introduction to the transfer pricing environment in China
    2.1.4. Transfer pricing taxation system in China
    2.1.5. Law Enforcement Environment of Transfer Pricing In China
    2.1.5.1. Introduction
    2.1.5.2. Case Study Report 1 about Survey in Inland Province A
    2.1.5.3. Case Study Report 2 about Survey in Municipality B
    2.1.5.4. Case Study Report 3 about Nationwide Questionnaire Survey
    2.1.6. Development in Transfer Pricing In China
    2.1.6.1. Cost Sharing Arrangement
    2.1.6.2. Thin capitalisation
    2.1.6.3. Advance pricing agreement
    2.1.6.4. Levying of special interest on additional tax

    2.2. CHINA – RELEVANT LAWS ON TRANSFER PRICING

    2.2.1. Lists of main laws and regulations and circulars on transfer pricing
    2.2.2. Summary of the main laws and regulations and circulars on transfer pricing

    2.3. CHINA – IDENTIFICATION OF ASSOCIATED ENTERPRISES AND ARM’S LENGTH PRINCIPLE

    2.3.1. Overview of associated enterprises
    2.3.2. Identification of associated enterprises
    2.3.3. Forms of associated enterprises
    2.3.4. Types of business transactions between associated enterprises and the recognition of turnover

    2.3.4.1. Introduction to the types of related party transaction
    2.3.4.2. Recognition of the amount of related party transactions
    2.3.4.3. Purchase and sale, transfer and usage of tangible assets
    2.3.4.4. Transfer and usage intangible assets
    2.3.4.5. Financing
    2.3.4.6. Provisions of labour services
    2.3.5. Arm’s of Length principle

    2.4. CHINA – TRANSFER PRICING ADJUSTMENT METHODS

    2.4.1. Introduction to transfer pricing adjustment methods
    2.4.2. Comparable uncontrolled price method
    2.4.3. Resale price method
    2.4.4. Cost plus method
    2.4.5. Transactional net profit method
    2.4.6. Profit split method
    2.4.7. Deemed profit rate method
    2.4.8. Application of transfer pricing methods

    2.5. CHINA – ADVANCE PRICING AGREEMENT

    2.5.1. Overview of APA
    2.5.2. Advantages of APA
    2.5.3. Disadvantages of APA
    2.5.4. Related laws and regulations of APA
    2.5.5. Procedures of APA
    2.5.6. Case studies on APA

    2.6. CHINA – INFORMATION DISCLOSURE AND PENALTIES

    2.6.1. Information report request
    2.6.2. Documentation during investigation
    2.6.3. Documents request under the new Enterprise income tax law and its implementation rules
    2.6.4. Main operational points on documentation
    2.6.5. Intelligence report and duty to present evidence
    2.6.6. Transfer pricing penalties
    2.6.7. Transfer pricing adjustment

    2.7. CHINA – APPROACHES OF PREVENTION AND RESOLUTION ON TRANSFER PRICING DISPUTE

    2.7.1. Anti-tax evasion situation in China
    2.7.2. Transfer pricing risk
    2.7.3. Transfer pricing audit
    2.7.4. Response to transfer pricing investigations
    2.7.5. Consideration of applying an APA
    2.7.6. Seeking support from external transfer pricing experts

    3. DEALING WITH SPECIFIC TRANSFER PRICING ISSUES

    3.1. Global business model
    3.1.1. Management centres
    3.1.2. Manufacturing entities
    3.1.3. Distribution entities
    3.1.4. Procurement entities

    3.2. Intangibles
    3.2.1. Introduction
    3.2.2. Definition of intangibles
    3.2.3. Some general principles in respect of intangibles
    3.2.4. Software and IT strategies as intangibles
    3.2.5. Distributors and marketing intangibles
    3.2.6. Embedded intangibles
    3.2.7. Approaches to benchmarking of royalty rates
    3.2.8. Royalty between related parties
    3.2.9. Comparable Uncontrolled Price (CUP) Method
    3.2.10. Transactional Net Margin method (TNMM)
    3.2.11. Profit Split Method
    3.2.12. Capitalised Cost Recovery Method
    3.2.13. Conclusion on kinds of methods
    3.2.14. Dealing with Contract R&D

    3.3. Management services
    3.3.1. Introduction
    3.3.2. Examples of intra-group services
    3.3.3. Consideration on the benefits from intra-group services
    3.3.3.1. The benefit test
    3.3.3.2. Shareholder activities
    3.3.3.3. Incidental benefits
    3.3.3.4. Other issues
    3.3.4. The arm’s length service charge
    3.3.4.1. Overview
    3.3.4.2. Direct versus indirect charges
    3.3.4.3. Selection of transfer pricing method
    3.3.4.4. Value-based pricing
    3.3.4.5. Allocations keys and profit mark-ups
    3.3.5. Process for calculation of the charges
    3.3.6. Financial services
    3.3.7. Alternative transfer pricing policies for services

    3.4. Financial transaction
    3.4.1. Introduction
    3.4.2. Characteristics of the funding arrangement
    3.4.3. Summary of rules and guidance by tax authorities
    3.4.4. Estimate an arm’s length interest rate
    3.4.4.1. Understand the term of loan
    3.4.4.2. Estimate credit rating of the borrower
    3.4.4.3. Determine cost of debts based on market data

    3.4.5. Intra-group guarantee arrangement
    3.4.6. Methods used to price an intra-group guarantee
    3.4.6.1. Alternative financing cost model
    3.4.6.2. Compound model
    3.4.7. Estimate the arm’s length debt
    3.4.8. Triggers for review
    3.4.9. Conclusion on financial transactions


    4. TRANSFER PRICING CASES

    4.1. Case 1: GlaxoSmithKline
    4.2. Case 2: DHL Corporation and Subsidiaries vs. Commissioner
    4.3. Case 3: Compaq Computer Corporation and Subsidiaries vs. Commissioner Inland Revenue
    4.4. Case 4: DIT (International Taxation), Mumbai vs. Morgan Stanley and Co. Inc.
    4.5. Case 5: Giordano International
    4.6. Case 6: A PRC/Korean wholly owned subsidiary (audited in 2000)
    4.7. Case 7: PRC-Korea Joint Venture (audited in 2000)
    4.8. Case 8: Japanese wholly owned subsidiary (audited in 2003)


    5. REGULATIONS AND TEMPLATES

    5.1. Summary of OECD Guidelines
    5.2. OECD comparability paper
    5.3. EU JTPF Code of Conduct
    5.4. Transfer pricing in key trading partners
    5.5. Checklist for taxpayers
    5.6. Designing the transfer pricing system
    5.7. Benchmarking protocol for the use of external databases
    5.8. TPA Toll – Masterfile template
    5.9. Proforma APA application
    5.10. Highlights of Guoshuifa [2004] No. 143
    5.11. Article 36 Of Administrative Law of the People’s Republic of China on Levying and Collection of Taxes
    5.12. Rules for Tax Administration on Transactions between Associated Enterprises (For Trial Implementation)
    5.13. Notice “Implementation Rules Of Advance Pricing Arrangement (APA) On Business Transaction between Associated Enterprises (Trial)
    5.14. Enterprise Income Tax Law of the People’s Republic of China
    5.15. Implementation Regulations for the Enterprise Income Tax Law of the People’s Republic of China
    • 23 Feb 2009, 10:17 am