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Transfer Pricing News for the Week of June 14, 2021

14th June 2021

G-7 Agrees to 15 Percent Global Minimum Tax  

It’s big news in the tax world. The G7 has agreed to back a 15 percent global minimum tax plan, as proposed by the U.S. The G-7 consists of Canada, France, Germany, Italy, Japan, the U.K., and the U.S, and meets semi-annually to discuss global issues. The deal also seeks to tax 100 to 150 of the most profitable companies on where their goods and services are sold, versus where the operation is registered. How much you ask? At least 20 percent on profits over a 10 percent margin. So, what does this historic news mean for MNEs? It’s time to ship up or shape out. The OECD Inclusive Framework will discuss forward motion on the deal in Paris next month.   

EU Public Country-by-Country Sees Forward Motion  

The G-7 news isn’t the only deal making headlines. The European Parliament and European Council have agreed to public country-by-country reporting.  Public disclosure would apply to multinationals operating in more than one EU member state with two years of consecutive consolidated revenue of over 750 million euros, or 915 million dollars. As for format—it would be submitted using an EU template, and then electronically formatted for public consumption.  Much to multinationals dismay, it’s not a ‘one size fits all’ report. Companies would publicly release their income tax innards for each member state they are operating. And if MNEs are conducting business in an EU ‘blacklist’ or ‘grey list’ jurisdiction, you bet they’re going to want to see that too. While it could take some time to implement into law (try 18 months) it’s a step in the right direction for tax transparency. As for the MNEs, the tax-complexity stress could be just beginning…. 

 Peruvian Tax Authority Issues Guidance on Multi-Year Data Use  

The Peruvian tax authorities are examining the use of multi-year data. The tax authority released guidance pertaining to this matter, and where it fits in the transfer pricing equation. The guidance specifies that two year or older data is acceptable for identifying comparable transactions but cannot be used to determine arm’s length pricing or preparing interquartile ranges. It also provides additional clarity on the compatibility analysis—specifically that taxpayers are allowed to use either the non-resident entity or the Peruvian entity as the tested party.