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Chapter 70, “Transfer Pricing Rules and Practice in Hong Kong,” provides an overview of the Hong Kong Inland Revenue Department's transfer pricing administrative practice guidance and its interaction with Hong Kong's sourcing rules for taxation.
Chapter 75, “Transfer Pricing Rules and Practice in India,” gives the reader a basic understanding of the transfer pricing legislation and regulations in India. Indian transfer pricing rules are broadly based on the OECD's Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, with some deviations, such as applying single-year data and using an arithmetic mean (rather than a range). The chapter also discusses compliance requirements, and the audit process, dispute resolution mechanisms, and Competent Authority relief and procedures. In connection with the discussion of the audit process, the chapter also considers the typical positions taken by Indian Transfer Pricing Officers on certain transfer pricing issues.
Chapter 80, “Transfer Pricing Rules and Practice in Ireland,” provides an overview of the Irish tax system and of Ireland's transfer pricing regime, which took effect for accounting periods commencing on or after January 1, 2011. In addition, the chapter briefly summarizes Ireland's tax audit, appeals, and litigation processes. Finally, the chapter discusses Ireland's treaty network and procedures for preventing double taxation.
Chapter 85, “Transfer Pricing Rules and Practice in Italy,” provides an overview of the Italian tax system and administration and analyzes the main Italian transfer pricing rule, contained in Article 110(7) of the Income Tax Code, as it has been interpreted and applied over the years, under the growing influence of the OECD Transfer Pricing Guidelines. The chapter also highlights developments in the application of transfer pricing rules to domestic transactions and analyzes specifically the transfer pricing issues applicable to selected transactions, together with the growing administrative practice and case law.
Portfolio 6955-1st: Transfer Pricing: Rules and Practice in Selected Countries (H-I)
Portfolio Description
Authors
Technical Advisors
Description
Significant Developments
Significant Developments
Content
CHAPTER 70: HONG KONG
Administrative Developments
Hong Kong Issues Guidance on APA Program
CHAPTER 75: INDIA
Administrative Developments
CBDT Finalizes Transfer Pricing Safe Harbor Rules
CBDT Instruction Publishes Criteria for Selection of Taxpayer Returns for Audit
CBDT Rescinds Guidance on Use of Profit Split Method for Transactions Involving Intangibles
CBDT Revises Guidance on Contract Research and Development Service Providers
CBDT Expands Transfer Pricing Reporting Requirements
Department of Revenue Issues Notification Narrowing Arm's-Length Range
CBDT Issues Guidance on APA program
India Amends Transfer Pricing Rules to Include Sixth Method
Litigation
Micro Inks Ltd. v. ACIT
Nimbus Communications Ltd. v. ACIT
Income Tax Officer v. Right Florist Pvt. Ltd.
GAP International Sourcing (India) Private Ltd. v. Asst. Comr. of Income Tax
LG Electronics (India) Pvt. Ltd. v. Asst. Comr. of Income Tax
CHAPTER 80: IRELAND
CHAPTER 85: ITALY
Administrative Developments
Circular on Application of Mutual Agreement Procedures
Bulletin on Advance Pricing Agreement Procedure
Litigation
Supreme Court Renders Decision on Deductibility of Royalty Payments Made to U.S. Parent
Detailed Analysis
CHAPTER 70: TRANSFER PRICING RULES AND PRACTICE IN HONG KONG by Patrick Cheung and Luis Coronado Ernst & Young People's Republic of China
70:I. Introduction
A. DIPN 46
B. Background to Hong Kong's Economic Environment
70:II. Overview of Hong Kong's Tax System
A. Basis of Taxation on Profits
B. Profits Tax
C. Tax Treaty Network
D. Exchange of Information
70:III. History of Hong Kong's Transfer Pricing Rules
70:IV. The Transfer Pricing Rules of Hong Kong
A. Overview
1. Applicable Tax Legislation and Statutory Rules
2. DIPN 44 (Revised)
3. DIPN 45
4. DIPN 46 and DIPN 21 (Revised)
B. Definition of Related Parties or “Closely Connected Persons”
C. Transfer Pricing Rules for Different Types of Transactions
1. Tangible and Intangible Property
2. Services
3. Permanent Establishments
4. Cost-Sharing Arrangements
D. Data Sources Commonly Used in Hong Kong
70:V. How the Transfer Pricing Rules of Hong Kong Differ from the OECD Transfer Pricing Guidelines
70:VI. Reporting and Documentation Requirements
70:VII. Penalties
70:VIII. Transfer Pricing Audits in Hong Kong
70:IX. Administrative Appeals of Transfer Pricing Adjustments
70:X. Litigation
70:XI. Resolving Conflicts with Other Countries
70:XII. Advance Pricing Agreements
CHAPTER 75: TRANSFER PRICING RULES AND PRACTICE IN INDIAÂ by Samir Gandhi, Minal Sharma, and Rakesh Alshi Deloitte, Mumbai, India
75:I. Introduction
A. General Overview of the Investment Climate
B. General Overview of the Tax System
75:II. The Transfer Pricing Legislation
A. History of the Legislation
B. Overview of the Legislation
75:III. The Transfer Pricing Regulations
75:IV. Burden of Proof
75:V. Methods
A. Most Appropriate Method Rule
B. Comparable Uncontrolled Price Method
C. Resale Price Method
D. Cost Plus Method
E. Profit Split Method
F. Transactional Net Margin Method
75:VI. Comparable Data
A. Tested Party
B. Availability of Comparable Data
C. Multiple-Year Data
D. Use of Overseas Data
75:VII. Arithmetical Mean vs. Range of Price
75:VIII. Contemporaneous Documentation
A. Legal Requirement
B. Nature of Documentation
75:IX. Tax Return Disclosure (Accountant's Report)
75:X. Penalties
Introductory Material
A. Adjustment to Transaction Price
B. Failure to Maintain or Submit Documentation
C. Failure to Submit Accountant's Report
75:XI. Transfer Pricing Audit Process
A. The Directorate for Transfer Pricing
B. Selection of Taxpayers for Audits
C. Review by the TPO
75:XII. Approaches Taken by TPOs in Transfer Pricing Audits
A. Services
1. Composition of Cost Base
2. High-End vs. Low-End Services
3. Application of Industry Rates
4. Captive Service Providers
B. Head Office Expenses
C. Manufacturers
D. Distributors
E. Intangibles
F. Location Savings
75:XIII. Appeals
A. In General
B. Alternative Dispute Resolution Mechanism
75:XIV. Competent Authority Relief
A. In General
B. Procedures for a MAP
75:XV. Advance Pricing Agreements
75:XVI. Benefit of Tax Holiday Under§ 10A
75:XVII. Conclusion
CHAPTER 80: TRANSFER PRICING RULES AND PRACTICE IN IRELAND by Sanford W. Stark, Esq. J. Clark Armitage, Esq. Saul Mezei, Esq. Bingham McCutchen LLP Washington, D.C.
80:I. Introduction
80:II. Overview of Ireland's Tax System
80:III. Overview of Ireland's Corporate Income Tax System
80:IV. History of Ireland's Transfer Pricing Rules
80:V. Ireland's Transfer Pricing Regime
A. Overview
B. Scope of Ireland's Transfer Pricing Rules
C. Definition of Related Party
D. Transfer Pricing Methods
E. Relationship between Ireland's Transfer Pricing Rules and Customs and VAT Rules
80:VI. How Ireland's Transfer Pricing Rules Differ from the OECD Guidelines
80:VII. Reporting and Documentation Requirements
80:VIII. Interest and Penalties
80:IX. Transfer Pricing Compliance Review Program
80:X. Transfer Pricing Audits in Ireland
80:XI. Administrative Appeals of Transfer Pricing Adjustments
80:XII. Litigation
80:XIII. Resolving Conflicts with Other Countries
80:XIV. Adjustments to Be Made in the Wake of a Transfer Pricing Adjustment
80:XV. Advance Pricing Agreements
CHAPTER 85: TRANSFER PRICING RULES AND PRACTICE IN ITALYÂ by Carlo Galli Clifford Chance MilanÂ
85:I. Introduction
A. Statutes and Forms of Interpretation Under Italian Tax Law
B. Italian Tax Principles
1. Taxpayers Subject to Italian Tax Jurisdiction
2. Income Subject to Italian Tax Jurisdiction
3. Procedural Rules
C. History of Transfer Pricing Rules
85:II. Overview of Italian Transfer Pricing Rules
A. Transfer Pricing in Domestic Transactions
1. General
2. The Concept of “Normal Value”: Article 9(3) and 9(4) of the Income Tax Code
3. The “Benefit” Principle (Principio dell'Inerenza)
4. Due Diligence Obligation of Directors of Italian Company
B. Overview of Transfer Pricing in Cross-Border Transactions
C. Impact of OECD Guidelines on Italian Transfer Pricing Standards
85:III. Statutory Rules on Transfer Pricing (Article 110(7) ITC) and the Interpretation Thereof by the Italian Ministry of Finance (Circular No. 32/9/2267 of 22 September 1980 and Circular No. 42/12/1587 of 12 December 1981)
A. Resident Persons Involved
B. Foreign Persons Involved
C. Forms of Control
1. Control of Capital or Voting Rights
2. Other Forms of Control
D. Transactions Covered and Arm's-Length Considerations
1. Tangible Property
a. Comparable Prices
b. Resale Price Method
c. Cost-Plus Method
d. Customs Value
e. Alternative (Profit-Based) Methods
(1) General
(2) Profit-Split Method
(3) Comparable Profit Method
(4) Return on Capital
(5) Other Methods
2. Services
a. Characterization of Intragroup Services
b. Pricing of Intragroup Services
3. Use of Money
a. Relevant Transactions
b. Relevant Market
c. Loan Agreements Between Branch and Head Office
d. Waiver of Credits
e. Interest-Free Loans
(1) Civil Law Rules
(2) Consequences of Adjusting a Zero Rate of Interest
(3) Indirect Taxes
f. Thin-Capitalization Rules
g. Tax Treatment of Nondeductible Interest
h. Withholding Tax
4. Intangible Property
a. General
b. Evaluation Methodology
c. Form of the Consideration
d. Safe Harbors
e. Anti-Avoidance Principles in the 1980 Circular
85:IV. Cost-Sharing Arrangements
85:V. Documentation
Introductory Material
A. Content of the Adequate Documentation
1. The Masterfile
2. The National Documentation
3. Annexes
4. Special Documentation Requirements
B. Form and Maintenance of the Adequate Documentation
85:VI. Compliance and Litigation
A. Compliance
1. Assessment
2. Reporting
B. Litigation and Penalties
1. Litigation
2. Penalties and Interest
a. Penalties
b. Interest
c. Waiver of Penalties
85:VII. Summary of Case Law
Introductory Material
A. Choice of Method for Sale of Goods
B. Arm's-Length Consideration for Use of Intangibles
C. Use of Money
D. Miscellaneous
85:VIII. Dealing with the Italian Tax Authorities on Transfer Pricing Issues
A. Advance Rulings
B. Participation in APA Process
C. Refund Claims Following U.S.-Initiated Adjustments
D. Negotiated Settlements of Italian-Initiated Adjustments
85:IX. Practical Aspects of the Competent Authority Process
85:X. Information Reporting and Recordkeeping
A. The Effect of Italian Secrecy Rules
B. Practical Application of Exchange of Information Agreements
C. Taxpayer Defenses to Information Requests Made by Italian Tax Authorities
85:XI. Elimination of Double Taxation Under the EEC Convention 90/436/EC
85:XII. Hypothetical Case Studies Involving Italian Transfer Pricing Rules and Practice
A. Example of Italian Export to the United States
1. Determining Arm's-Length Consideration Where Italian Parent Retains Intangibles and Technology
2. Determining Value: Segregation Versus Incorporation of Royalties in the Sale Price
3. Agency Versus Distributorship
4. Safe Harbors and Internal Documentation of Arm's-Length Nature of Transfer Price
B. Example of U.S. Export to Italy
1. Determining Arm's-Length Consideration Where U.S. Parent Retains Intangibles and Technology
2. Determining Value: Segregation Versus Incorporation of Royalties in the Sale Price
3. Agency Versus Distributorship
4. Safe Harbors and Internal Documentation of Arm's-Length Nature of Transfer Price
Working Papers
Table of Worksheets
Content
Worksheet 11 CBDT Explanation of Final Transfer Pricing Rules [Released 8/21/01]
Worksheet 12 India Audit Directive Implementing Transfer Pricing Law [Released by the Central Board of Direct Taxation, dated May 2003]
Worksheet 13 India Tax Appellate Tribunal's Ruling on PEs, Western Union [Decision No. 2006-TIOL-58-ITAT-DEL, dated 3/10/2006]
Worksheet 21 Revenue, Irish Tax &Â Customs, Technical Guideline Section, “Guidance on Revenue Opinions on Classification of Activities as Trading” (2003)
Worksheet 22 Revenue, Irish Tax &Â Customs, Code of Practice for Revenue Audit (relevant sections) (rev. Aug. 2011)
Worksheet 23 Revenue, Irish Tax &Â Customs, Tax Briefing Issue 07 (“June 2010 Guidance Note”) (June 10, 2010)
Worksheet 24 Revenue eBrief No. 62/2012: Monitoring Compliance with Transfer Pricing Rules Contained in Part 35A TCA 1997 (November 26, 2012)
Worksheet 31 Italian Transfer Pricing System — Income Tax Code Excerpts
Bibliography
OFFICIAL
(Hong Kong)
Statutes
Administrative Pronouncements
(India)
Statutes
Legislative Materials
Administrative Pronouncements
Cases
(Ireland)
Texts and Treatises
UNOFFICIAL
(Hong Kong)
Websites
(Ireland)
Articles
2011
Miscellaneous
(Italy)
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