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The Transfer Pricing Beat: News for the Week of March 1, 2021  

Change is in the air in Taiwan—for transfer pricing, that is. The Taiwan Ministry of Finance issued new transfer pricing regulations, which include adoption of some of the 2017 OECD guidelines and BEPS Action plans. The real point of interest, though, is its focus on intangible transactions, specifically Actions 8-10. Taiwan has adopted DEMPE functions for assessment of intangible transactions. DEMPE stands for development, enhancement, maintenance, protection, and exploitation. Functions aren’t the only thing seeing a change-up when it comes to intangible transactions—so is the method. The guidance includes the income method, also known as the discounted cash flow method, as an additional approach for valuing intangible transactions. Taxpayers also get a thumbs up for use of a single comparable when determining comparable uncontrolled price for all three transaction-based methods. The guidance also addresses penalties—in this case, a penalty is applicable when an entity doesn’t reveal the necessary related party transactions and is subsequently adjusted. The penalty will be applied if the taxpayer meets the following requirements: the adjusted taxable income is one and a half percent or more of the annual net revenue and five percent or more of the final taxable income. The damage? A penalty up to three times the adjustedtax amount.  

Transfer pricing scrutiny is heating up in Thailand. The Thai Revenue Department published two Director-General notifications, which buckle down on transfer pricing and related party-transactions. The first notification mandates online submission for controlled transactions and related-party information. The second notification, No. 400, irons out OECD-aligned transfer pricing concepts—we’re talking arm’s length range, approved methods, comparability, and income adjustments—and applies to financial years beginning on or after January 1, 2021. The recently published notifications are practically parallel to the June 2019 draft version, with some slight changes. The finalized version rules that compensation for service transactions performed primarily for the benefit of shareholders, like reporting requirements and investor relations, is not to be recognized as independent compensation. In addition, DEMPE functions must be utilized for comparability analysis. The takeaway? The Thai Revenue Department isn’t playing around when it comes to transfer pricing compliance 

The Danish Parliament has issued new rules around transfer pricing submission deadlines. The transfer pricing documentation, both master and local file, is now required 60 days from the tax return deadline and applies to income years beginning on or after January 1, 2021. Previously, transfer pricing documentation was only required to be submitted upon request. If the taxpayer fails to submit on time, it faces penalties and risk of discretionary assessments. Penalties start at 250,000 Danish Krone, approximately 41,000 U.S. dollars, and apply to each income year and entity. There’s also talk of daily penalties until documentation is received by the tax authority.