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Transfer Pricing News for the Week of March 22, 2021

29th March 2021

The United States and Argentina Will Exchange Country-by-Country Reports  

Argentina and the United States are teaming up in the name of compliance. The two countries will exchange country-by-country reports. The first exchange will pertain to financial years beginning on or after January 1, 2018.  The tax authorities plan to exchange immediately, but no later than 15 months of the last day of the group’s financial year. While the IRS and The Administración Federal de Ingresos Públicos, or AFIP, are getting comfortable, it doesn’t mean MNES can follow suit. Tax administrations use exchanged information for high-risk assessments, including, of course, country-by-country reports, which are only part of the compliance puzzle. It can’t be used as the sole source of data to determine if transfer prices are arm’s length—that’s what comparability and functional analyses are for.    

The Philippines Issues New Guidelines for Related-Party Transactions and Transfer Pricing Documentation  

 The Philippine Bureau of Internal Revenue, or BIR, issued new guidelines on Form 1709, which covers related-party transactions, and supporting transfer pricing documentation. The form’s submission is required by taxpayers who meet the following requirements: if they are large taxpayers, if they are receiving tax incentives, if they are reporting net operating losses for three consecutive years, and if they have transactions with a related party that checks the same boxes. As for transfer pricing documentation—it’s mandatory for taxpayers meeting one of three criteria. Criteria one: if the taxpayer is making over 150 million pesos ($3.1 million) and total related-party transactions, with both foreign and domestic parties, exceeds 90 million pesos ($1.9 million). Number two: taxpayers with related party, tangible good transactions exceeding 60 million pesos ($1.2 million), or related party, service, interest, or intangible good transactions exceeds 15 million pesos ($308,000). And last, but not least, criteria three: if transfer pricing documentation was required in the previous year. The good news is that transfer pricing documentation and supporting documentation are no longer part of the related party transaction form. But the tax authority will want to see it within 30 days if audited.  

 Singapore Issues New Guidance for Businesses Affected by COVID-19 

It’s a little less sticky in Singapore—at least in the tax department. The Inland Revenue Authority released an updated guidance to address Covid-19‘s effect on transfer pricing and related-party agreements. It replaces the initial guidance that was published in September 2020 and aligns with the OECD’s pandemic recommendations. This version covers treatment of government aid, how to show loss-making comparables in benchmarking, and the additional documentation required to illustrate disruptions caused by the coronavirus. The Singapore Inland Revenue Authority knows that businesses have been hit hard by the pandemic. The guidance is a gentle reminder that taxpayers don’t have to go it alone.