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Transfer Pricing News for the Week of May 31, 2021

31st May 2021

Paraguay Establishes Transfer Pricing Rules on Commodity Transactions   

It’s out with old and in with new in Paraguay. The South American country introduced new transfer pricing rules, related to commodity transactions. The new guidance, General Resolution No. 86, was released in December 2020 and went into effect on April 17th. What can taxpayers expect? The guidance covers the application of the sixth method, which is utilized for export commodities on some our favorite things: rice, corn, wheat, soy and more. Taxpayers will have to adjust recorded commodity prices to those of the price published by the relevant exchange and illustrate it in the transfer pricing technical report. They will also need to spell out related party transactions, the party relationship, and total exports.   

Ukraine Introduces New Transfer Pricing Rules  

Ukraine conducted a major overhaul of its tax code, which in turn affects transfer pricing. Taxpayers can expect a lengthy list of new additions and requirements: Adoption of the three-tiered documentation approach, a broadened definition of dividends, rules around controlled transactions with commodities, and the necessary economic justification for controlled transactions. While it’s an increased burden for taxpayers, it allows the tax authority to up their compliance strength and oversight.    

U.S. is Open to 15 Percent Global Minimum Tax Rate  

The U.S. recently proposed a 15 percent global minimum tax, a concession to the Biden administration’s original 21 percent.  While the plan has some countries on board, it has others in glaring opposition. Ireland has voiced its very public opinion against the tax, or at least anything higher than 12.5 percent, while Hungary considers it a “violation of financial sovereignty.” Even with the mixed bag of viewpoints, the U.S. Treasury still seeks the possibility of a higher rate, announcing that ‘discussions should continue to be ambitious and push that rate higher.’ With Pillar One and Pillar Two decisions in a stalemate, this global tax boxing match has definitely been thrilling to watch. And it’s not over yet.