Transfer Pricing News for the Week of April 5th 20215th April 2021
Bahrain Implements Country-by-Country Reporting
Bahrain has RSVP’ed ‘yes’ to country-by-country reports. Bahrain’s Ministry of Industry, Commerce, and Tourism, or MoICT, joined the OECD Inclusive Framework on BEPS back in 2018, but now, the rubber really hits the road. The rules pertain to financial years beginning on or after January 1st, 2021 and must be filed by Bahrain resident entities with consolidated revenue of 342 million Bahraini Dinar ($901 million). The CbCR must be filled within 12 months of the group’s financial year-end. The constituent entity will also have to file a CbCR notification before the last day of the group’s financial year, specifying if it’s the ultimate parent entity. If it’s not the ultimate parent, the notification must identify the reporting entity and its tax residence. Bahrain isn’t kidding when it comes to transfer pricing compliance. Failure to submit or late submissions will cost you, in more ways than one. Administrative penalties can reach as high as 100,000 Bahraini Dinar ($264,000), along with suspension of commercial registration for six months.
Greece Releases COVID-19 Transfer Pricing Guidance
Just like Greece’s recent opening to vaccinated tourists, the country’s transfer pricing is also making headlines. The Greek Independent Authority for Public Revenues, or IAPR, recently issued a guidance addressing the COVID-19 pandemic. It closely aligns with the OECD guidance, and addresses comparability analysis, government assistance programs, advance pricing agreements, and how to report losses. Like many tax authorities, IAPR is paying close attention to the use of government aid. Government assistance must be highlighted in transfer documentation and analyzed in the comparability and functional analyses. As for intercompany agreements, the guidance notes that intragroup contractual obligations can be renegotiated, thanks to force majeure, a clause that frees parties from liabilities if an unavoidable catastrophe occurs.
Luxembourg Cracks Down on the EU Blacklist
Luxembourg is on the move. The country is leading the crusade against non-cooperative jurisdictions—an effort that was recently solidified into law. The law restricts interest and royalty tax deductions to associated enterprises in EU blacklist countries. The restriction can be waived, but requires proof that satisfactory economic benefit exists, aside from the tax deduction—one more ‘show and tell’ for the taxpayer. The new rules apply from March 1, 2021 and will use the latest version of the blacklist as of January 1st of each year. Luxembourg’s pioneering efforts are getting the attention they deserve—other EU member states are considering similar measures of their own, given cash flow’s important role during the pandemic.