Transfer Pricing News for the Week of March 29, 202129th March 2021
Mongolia Issues Its First Transfer Pricing Assessment
Your first car, first home purchase–it’s hard to forget monumental firsts. Mongolia is having a first of its own—its first transfer pricing assessment. So, who is the lucky recipient? A mining company, strapped with a $228 million tax bill and denial of $1.5 billion in loss carryforwards. The OECD and other international organizations have been working with the Mongolian tax administration since 2019 to beef up its tax collections from the extractives sector, an area that contributed 80% of Mongolia’s exports and 24% of its tax revenue in 2019. The OECD considers the assessment a “significant milestone and step forward.”
EU Inches Closer to Public Country-by-Country Reporting
When it comes to EU public country-by-country reporting, it’s a matter of ‘when,’ not ‘if.’ The European Commission for Financial Stability, Financial Services and Capital Markets Commissioner, Mairead McGuiness, recently announced new plans to require multinationals to disclose tax activity and payments per member state. The majority of EU members are on board, but not Ireland. The Irish sees the proposal as a tax measure, which would require unanimous approval from finance ministers. But the EU has done its homework. The proposal was submitted through the EU’s competitiveness council, meaning that it needs only a qualified majority vote to pass.
India Supreme Court Rules on Software Royalty Case
A 20-year software battle comes to a hard stop. The Supreme Court of India recently ruled in favor of Engineering Analysis Centre of Excellence regarding taxability of cross-border payments for resale or use of software. The court case examined whether computer software end-user license agreements or distribution agreements payments count as royalty or business income for the non-resident taxpayer. The tax authority argued for royalties, saying that the Indian entity can use the intellectual property or copyright at its discretion and should incur a withholding tax as a result. On the flipside, the taxpayer argued that these transactions are part of the nature of the sale, and that copyright is not licensed to the taxpayer. For Samsung Electronics, IBM India, Hewlett Packard India, and 100 other software import companies, the legal victory is a sigh of relief. But they’re not completely out of the woods. Tax authorities will be looking to make up deficits in other types of transactions.