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Transfer Pricing News for the Week of April 12 2021

12th April 2021

U.K. Considers Adopting OECD Approach to Transfer Pricing    

Things are brewing in the United Kingdom (and it isn’t just the tea.) Her Majesty’s Revenue and Customs, or HMRC, is considering adopting the OECD approach for transfer pricing.  As it stands, UK businesses already have to substantiate their transfer pricing positions. But this would be a step up. The adoption would tighten the compliance parameters, enforcing specific, standardized documentation. There’s also talk of an international dealings schedule, an annual report aligned with the tax return schedule. It would cover details about related party transactions, along with restructuring, transfer pricing methodologies, and financial matters. The consultation is open to comments until June 1st 

IRS Is Set to Address Altera Case Questions in New Guidance   

Taxpayers will be getting some intel from Intel—it’s subsidiary that is. The IRS is hard at work on a sub-regulatory guidance to iron out questions from the Altera legal case, Intel’s subsidiary. The legal battle waged over stock-based compensation in cost-sharing agreements. Altera was opposed to including stock-based compensation in agreements, but the Ninth Circuit Court of Appeals ruled against it. The Supreme Court refused to hear its appeal last June. The guidance comes at a perfect time, as stock-based compensation becomes a hot-button issue in recent litigation. IRS Associate Chief Counsel Peter Blessing addressed the topic at a recent American Bar Association tax conference, saying that case had “fallout issues, and it’s important to get those right.”  

Poland Releases Guidance Regarding Transactions in Tax Havens 

Poland is giving tax havens the cold shoulder. The country recently requested public comments on draft guidance to clarify new reporting obligations for taxpayers doing business in tax havens that entered into force on 1 January 2021. Per the guidance, the threshold for transfer pricing documentation requirements for normal controlled transactions is 2,000,000 Polish Zloty ($518,000). For transactions conducted with a person or entity in a tax haven, the threshold is around 100,000 Polish Zloty ($26,000). The threshold stands at around 500,000 Polish Zloty ($130,000) if conducted with a beneficial owner. When it comes to documenting the transaction, it’s the same information found in the local file—the functional analysis, comparability analysis, and key financial information. While tax havens may be a great place to vacation (Barbados, US Virgin Islands, Fiji) they’re becoming increasingly monitored in transfer pricing.