UHY GLOBAL JANUARY 2020 COGS AND WHEELS


INTERCOMPANY CONNECTION


OUR REGULAR COGS AND WHEELS PAGE LOOKS AT WHAT MAKES A SUCCESSFUL INTERNATIONAL NETWORK TICK. IN THIS ISSUE WE EXPLORE THE CHALLENGES MULTINATIONAL ENTERPRISES FACE FROM TOUGHER REGULATION ON INTERCOMPANY TRANSFER PRICING – AND THE HELP THEY CAN EXPECT FROM THEIR PROFESSIONAL ADVISORS. The UHY network of member firms provides well-connected expertise in over 100 countries, to ensure best-practice transfer pricing advice to clients, wherever they operate. TRANSPARENCY COMES AT A PRICE When the OECD/G20 countries revised guidelines on transfer pricing (TP), part of the 2015 BEPS report (anti-base erosion and profit shifting to reduce tax avoidance), they raised the bar considerably. Since implementation began over 130 countries have signed up to new international framework measured. In the same period, the US brought into law the 2017 Tax Cuts Jobs Act (TCJA) which affects existing US transfer pricing provision and like BEPS, raises scrutiny to protect the US tax base. However these laws are not part of OECD guidelines or BEPS recommendations and do not apply equally to all countries. Action 13 of the BEPS programme includes a three-tiered approach to TP documentation: the Master File, the Local File and Country-by-Country reporting. Its aimis to improve transparency and deter companies from exploiting tax loopholes. The US TCJA also introduces new reporting requirements for intangibles as well as complicated international tax concepts. As a result, multinationals are overhauling their TP policies and process – a painful journey for many. A NEW SYSTEM UNDER BEPS Businesses facing a greater compliance obligation have had to allocate more resources for the extra collection of data, its validation and analysis, and preparing reports. Under BEPS, businesses transacting with their operating entities in other countries must now disclose to tax authorities a full account of operations, financial activities and transfer pricing policies, for goods and services (the Master File) as well as providing detailed intercompany transaction data from each business in each country (the Local File). To complete the three-tiered requirement, a Country-by-Country Report is compiled, comprising an enterprise’s aggregate data on the global allocation of income, profit, taxes paid and economic activity among all the tax jurisdictions in which it operates. The report is shared with tax authorities in these countries for use in high level transfer pricing and BEPS risk assessments. GLOBAL CONNECTED SOLUTIONS Given the changes, the challenges and cross-border nature of transfer pricing, the involvement of local tax authorities (whether in the US, or operating under BEPS TP provisions, with their different legislative implementations and guidelines) it makes sense for multinationals to take advice from professional specialists. Transfer pricing can be an effective tool for international tax planning, so it makes sense to outsource analysis, documentation and planning to a trusted advisor with international connections. The UHY network operates in over 100 countries and is constantly expanding to meet the increasing global needs of clients. A key competitive differentiator of the network and its member firms is its longstanding collaborative culture and strategic goal of working together – with clients and with each other. The result is effective, seamless and high quality work, and transfer pricing is a typical example. KEEPING CURRENT UHY strongly values knowledge-sharing between firms in different countries. UHY TP specialists collaborate weekly, meet and exchange ideas via formal meetings, working together on client engagements – despite borders. The network’s global tax special interest group infrastructure facilitates this and enables member firms to stay current and offer the most authoritative advice. Plus two specialist transfer pricing centres of excellence representing the US and the BEPS jurisdictions ensure that TP knowledge sharing and effective client support is a key priority during this time of regulatory change. CLIENT CAPABILITY UHY member firms offer transfer pricing support to clients in the following areas: Documentation and compliance Design and implementation of TP policies Benchmarking services Defence files and dispute handling Analysis for highly leveraged entities Valuations for tax and TP purposes


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