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Transfer Pricing News for the Week of April 19, 2021 

19th April 2021

Compromise is never easy. Just ask the United States. The Biden Administration recently proposed a compromise for Pillar One. The plan would limit the number of MNEs subject to Pillar One to 100, so long as they reach profit-margin and revenue thresholds. It would also include changes to Pillar One, Amount A, which deals with allocation of group profits. The U.S. plan wants Amount A to be a multinational-one-size-fits-all, instead of just applying to MNEs that conduct consumer-facing business or sell automated digital services. In addition, the U.S. is open to flexible nexus thresholds, to allow Pillar One tax to spill over into developing countries. Pillar One has become a seesaw of compromise and proposals in response to the OECD Secretariat’s Blueprint published in October 2020. The OECD Blueprint proposed a scope of 2,300 MNEs with a 750 million euros global revenue threshold. Inclusive framework countries are aiming to cross the consensus finish line by mid-2021, and finally, the war over Pillar One will be won. 

Sharing is caring. The OECD announced that 12 tax havens shared details about business entity activity. With whom you ask? This is where it gets interesting. The information was presented to the country in which the beneficial owner or parent entity is a tax resident. The requirements are derived from the OECD’s Forum on Harmful Tax Practices and mandate that information be reported about entities located in low- or no-tax jurisdictions that earn income from mobile activities or intangible property. So, who makes the list? Anguilla, the Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, and Turks and Caicos Islands. Essentially, everywhere you’d want to vacation. Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, considers it “good news for tax administrations around the world” as it provides a more objective look into what’s happening in low-tax jurisdictions.  

Another day, another dollar—or in this case, another jurisdiction, another guidance. Singapore’s latest guidance tackles centralized activities in MNEs. The new e-tax guide, titled Transfer Pricing Guidelines: Special Topic—Centralized Activities in Multinational Enterprise Groups, is a supplement to the country’s transfer pricing guidelines that went into effect February 2018.  The tax roadmap addresses the economic value of centralized activities performed by the Singapore headquarters for the MNE group, and how to price centralized activities—specifically related-party transactions and appropriate transfer pricing methods. With so many MNEs calling Singapore home, the guidance proves beneficial in more ways than one. It reminds taxpayers to examine existing transfer pricing policies, along with service transaction analyses and documentation