Transfer Pricing News for the Week of May 3, 20213rd May 2021
Canada’s 2021 Budget Focuses on Transfer Pricing Measures
Canada is making moves—ones that multinationals will definitely want to watch. Finance Minister Chrystia Freeland recently presented Canada’s 2021 Budget, which includes measures around profit shifting, mandatory disclosure rules, interest deductibility, and digital taxation. The government plans to implement a digital services tax on January 2, 2022, despite the very glaring problem of multilateral disagreement on the matter. The budget will also take a deep dive into transfer pricing after the Cameco-case decision and intends to distribute a consultation to address changing the transfer pricing rules. While Canada hasn’t issued a budget in two years (thanks, COVID), the country is coming back swinging, with transfer pricing in its crosshairs.
Poland Clarifies “Controlled Transaction” Definition for Transfer Pricing
Clarity: It’s essential for diamonds, water, and now, transfer pricing. Poland is working on clarifying its definition of controlled transactions, as part of its new guidance. The Ministry of Finance opened the matter to public consultation early last month and closed it at the end of April. So, why the potential change-up? The 2019 definition is creating more headaches than one, from comprehension to application to documentation. It defines controlled transaction as business activities based on actual behavior of the parties, and the terms and conditions that were made as a result of the association. The proposal aims to expand the accepted activity between related parties to more than just traditional transactions— think cooperation agreements, partnership agreements, and restructurings.
Vietnam Enacts Decree 132
News of Vietnam’s transfer pricing crackdown is making waves. The Vietnamese government enacted Decree 132 in December 2020, solidifying the new regulatory environment just in time for the new year. As for what taxpayers can expect—it’s a mixed bag. The Decree reduces the arm’s length range from the 25th to 75th percentile to 35th to 75th percentile and provides clarification around submission of a country-by-country report. It also includes a broader definition of related party, along with a revised definition of “commercial database”—a move that will help companies facing an audit. The new changes are in effect for the financial year 2020 and onward. Vietnam isn’t wasting any time getting multinationals in shape, while maintaining a friendly, competitive business environment.