Transfer Pricing: Rules and Practice in Selected Countries (T-Z) (Portfolio 6975)

Be a trusted advisor to your clients with Bloomberg BNA Tax Portfolios. In this Portfolio, our expert authors present the rules and practice related to transfer pricing in Taiwan and the United Kingdom.

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The Transfer Pricing: Rules and Practice in Selected Countries (T–Z) Portfolio begins with a brief introduction of Taiwan, including a brief description of the history of Taiwan's transfer pricing rules, then discusses the rules themselves, setting forth the principles for determining arm's-length prices, the scope of transactions subject to the rules, applicable transfer pricing methods available for different types of transactions, and audits and penalties. These topics are followed by a discussion of disclosure, reporting, and documentation requirements, the burden of proof in a transfer pricing audit, and, finally, whether an appeal is available.

The Portfolio also analyzes the United Kingdom's transfer pricing legislation in Part 4 of Taxation (International and Other Provisions) Act 2010 (TIOPA 2010), rules on advance pricing agreements (in Part 5 of TIOPA 2010), penalties and information powers (in Finance Act 2008), and rules on the application of the mutual agreement procedure (in Part 2 of TIOPA 2010). This chapter also considers relevant guidance provided by Her Majesty's Revenue and Customs (HMRC) and relevant case law. Also considered is a framework for HMRC transfer pricing inquiries, including governance and review procedures, formalized by HMRC and overseen by the Transfer Pricing Group within HMRC.


Bloomberg BNA Portfolios are written by leading tax professionals who set the standard as leaders in their fields. The Transfer Pricing: Rules and Practice in Selected Countries (T–Z) Portfolio was authored by the following attorneys.  

Michael Wong

Michael Wong is a tax partner in the Taipei office of Baker & McKenzie. His practice focuses on taxation and mergers and acquisitions. Michael is a leading authority on transfer pricing issues in Taiwan.

Credentials / Michaels holds a Juris Doctor degree from the University of California, Hastings College of Law, a Master of Laws degree from Soochow University, Taiwan, and a Bachelor's degree from the University of California, Los Angeles. He is admitted to practice law in California.

Andrew Lee

Andrew Lee is a senior tax consultant in the Taipei office of Baker & McKenzie. His practice focuses on taxation and structuring. Before joining Baker & McKenzie in Taipei in February 2006, he worked for 12 years in the audit and tax field for Arthur Andersen and Deloitte in Taiwan.

Credentials / Andrew received a Bachelor's degree in accounting from Tamkang University, Taiwan, and completed legal study courses at the National Taiwan University. He is an ROC-licensed CPA. 

Victoria Horrocks

Victoria Horrocks is a partner in the U.K. firm of PricewaterhouseCoopers (PwC) and is based in London. She has over 25 years of corporate tax experience and has specialized full-time in transfer pricing for the past 17 years. Prior to joining PwC in 1999, Victoria spent 12 years at HM Revenue & Customs where she began her career in transfer pricing and represented the United Kingdom at the OECD's Working Party 6.

Victoria's focus is on the automotive, telecommunications, technology, and natural resources sectors and the transfer pricing of debt. She leads a U.K.-wide team of specialists in the transfer pricing of debt including thin capitalization, interest rates, and guarantees. Victoria has secured a number of advance pricing agreements and advance thin capitalization agreements for clients and has experience in mutual agreement procedure cases involving the United Kingdom, other European countries, the United States, and Japan.

Ian Dykes, Esq.

Ian Dykes is the leader of PwC's U.K. transfer pricing network. He has been a full-time transfer pricing practitioner for 20 years, and is well-known internationally as the lead advisor to several major multinational corporations.

Ian led PwC's response to the OECD's work on business restructurings, has published a number of articles on the subject, and is regarded as an authority in this area. He has extensive experience in negotiating bilateral advance pricing agreements for companies that have implemented principal structures.

Ian has designed and defended transfer pricing policies for companies in a range of industry sectors, including the telecommunications, pharmaceutical, consumer and industrial products, and services sectors.

Table of Contents

Portfolio 6975-1st: Transfer Pricing: Rules and Practice in Selected Countries (T-Z)

Portfolio Description


Technical Advisors


Significant Developments

Significant Developments



Administrative Developments

Guidance on Technical Services Provided by Employees Stationed with Foreign Affiliates

Guidance on the Analysis of Controlled Transactions, Comparable Profits Method


Supreme Administrative Court Rejects Taxpayer's Retroactive Transfer Pricing Adjustments


Enacted Legislation

Taxation (International and Other Provisions) Act 2010

Administrative Developments

U.K. Technical Note Outlines Proposal on Compensating Adjustments

U.K. Guidance on Advance Pricing Agreements

U.K. Guidance on Mutual Agreement Procedure and Arbitration

U.K. Guidance on Advance Thin Capitalization Agreements


DSG Retail Ltd. vs. Revenue and Customs Commissioners

Detailed Analysis

CHAPTER 170: TRANSFER PRICING RULES AND PRACTICE IN THE REPUBLIC OF CHINA (TAIWAN) by Michael Wong and Andrew Lee Baker & McKenzie Taipei, Republic of China

170:I. Introduction

170:II. Overview of Taiwan's Tax System

A. In General

B. Profit-Seeking Enterprise Income Tax

C. Business Tax

D. Alternative Minimum Tax

E. Surtax on Retained Earnings

F. Withholding Tax

170:III. History of Taiwan's Transfer Pricing Rules

170:IV. Current Transfer Pricing Rules in Taiwan

A. Overview

1. The Transfer Pricing Regulations

a. Source of Authority

b. Scope

c. Official Definitions

d. Covered Transactions

e. Principles for Determining an Arm's-Length Price

f. Applicable Methods for Different Transactions

g. Types of Methods

(1) Comparable Uncontrolled Price Method

(2) Comparable Uncontrolled Transaction Method

(3) Resale Price Method

(4) Cost Plus Method

(5) Comparable Profit Method

(6) Profit Split Method

h. Advance Pricing Agreements

i. Investigation, Assessment, and Adjustments

j. Penalties

2. Transfer Pricing and Customs Valuation

a. Transfer Pricing Valuation Methodologies

b. Customs Valuation Methodologies

c. Post-Entry Transfer Pricing Adjustments

B. Tangible Assets

1. Definition

2. Applicable Methods

C. Intangible Assets

1. Definition

2. Applicable Methods

D. Services

1. Definition

2. Applicable Methods

3. Cost-Sharing Arrangements

E. Loans and Similar Monetary Instruments

1. Definition

2. Applicable Methods

170:V. Documentation and Disclosure Requirements

A. Documentation Requirements

1. Content of Documentation

2. Safe Harbor Rules

B. Disclosure Requirements

1. In General

2. Income Thresholds

3. Transaction Thresholds

4. Information to Be Disclosed

C. Review by External Auditors

170:VI. Audit Practice

170:VII. Appeals

Introductory Material

A. Request for Redetermination

B. Appeal to the MOF

C. Judicial Review

170:VIII. Penalties

170:IX. Resolving Conflicts with Other Countries

170:X. Adjustments to Be Made in the Wake of a Transfer Pricing Adjustment

170:XI. Advance Pricing Agreements

Introductory Material

A. General Requirements

B. Documents to Be Provided After Acceptance of Application

C. Notice of Occurrence of a Significant Event

D. Review by the Tax Authorities

E. Concluding the APA

F. Content of an APA

G. Submission of Annual Reports

H. Effect of an APA

I. Dealing with Changes to Factors Affecting Prices or Profits

J. Extension of the Application of an APA

CHAPTER 175: TRANSFER PRICING RULES AND PRACTICE IN THE UNITED KINGDOM A revision by Jenny Cottrell Stephenson Harwood London, England  of a previous version by Steve Edge, Tax Specialist Tony Beare, Tax Specialist Bob Ramage, Tax Specialist Graham Earles, Tax Specialist Slaughter & May London, England

175:I. Introduction

175:II. Background: U.K. Corporation Tax

Introductory Material

A. Scope

B. Profits of U.K. Resident Companies

1. Income

2. Capital Gains

3. Computational Rules

a. Rules Applying Only to Trading Companies

b. Rules Applying to Both Trading and Investment Companies

C. Profits of Non-U.K. Resident Companies

D. Other Important Features of the U.K. Company Taxation System

1. Assessment Periods and Rate

2. Groups

a. Group Relief

b. Capital Losses

c. Group Income

3. Taxation of Dividends

a. The Former Imputation Rules

b. The April 1999 Changes

c. Shadow ACT

4. Controlled Foreign Companies

5. Administration

a. Corporation Tax Self-Assessment (“CTSA”)

b. Payment of Corporation Tax by Installments (Large Companies)

6. Inland Revenue Powers

7. Branches

175:III. Overview of U.K. Transfer Pricing Law

Introductory Material

A. The Transfer Pricing Regime Prior to 1999/2000

B. The Current Regime — An Overview

1. Significant Features

2. Features Not Included in the Current Regime

C. Basic Rules of the Current Regime

D. Meaning of Certain Terms in the Current Regime

1. OECD Principles

2. Transaction and Series of Transactions

3. Participation in the Management, Control or Capital of a Person

a. Direct Participation

b. Indirect Participation

4. Advantage in Relation to U.K. Taxation

a. General Position

b. U.K.-to-U.K. Exception

E. Elimination of Double Counting

F. Branches

G. Nonresident Landlords

H. Capital Allowances, Capital Gains, Foreign Exchange, Financial Instruments

I. Special Rules for Petroleum Companies

J. Exemption for Small and Medium-Sized Enterprises

K. Transfer Pricing Examinations for Large Businesses

175:IV. Disallowance of Trading Expenses

175:V. Sharkey v. Wernher and Associated Cases

175:VI. Double Taxation Treaty Provisions

Introductory Material

A. Adjustment Provisions

B. Economic Double Taxation

175:VII. The Course of a Transfer Pricing Inquiry

A. Record Keeping Requirements

B. Penalties

C. Practical Considerations and the Working of Cases

D. Section 20 TMA 1970

E. Competent Authority

175:VIII. The Arm's Length Price

Introductory Material

A. The Affirmation of the Arm's Length Principle

B. Transaction-Based Methods

C. Profit Methods

D. Practical Considerations

175:IX. Loans and Thin Capitalization

175:X. Advance Pricing Agreements

175:XI. Other Provisions

Introductory Material

A. Adjustment of Capital Allowances

1. Background

2. Regulation of Allowances

a. Machinery and Plant

b. Other Capital Expenditures

B. Imputation of Market Value Under TCGA 1992

C. HM Customs &  Excise

Working Papers

Working Papers

Table of Worksheets


Worksheet 1 Sample Transfer Pricing Report

Worksheet 2 Thresholds for the Safe Harbor Rules (12/30/2005)

Worksheet 3 Background to Current Status of Taiwan Transfer Pricing Development

Worksheet 4 Increase in the Thresholds for the Safe Harbor Rules (11/06/2008)

Worksheet 5 Requirements and Thresholds for Disclosure of Information Regarding Related Parties and Controlled Transactions in the Corporate Income Tax Return

Worksheet 11 Index of Abbreviations of U.K. Statutes

Worksheet 12 Statement of Practice SP 1/90

Worksheet 13 Section 770A of the ICTA 1988, as introduced in FA 1998

Worksheet 14 Schedule 28AA as introduced in FA 1998

Worksheet 15 The New Transfer Pricing Legislation

Worksheet 16 Penalties and the New Transfer Pricing Legislation

Worksheet 17 Advance Pricing Agreements: The Inland Revenue's Experience and Expectation of the Bilateral Process for Guidance to Its Taxpayers

Worksheet 18 Statement of Practice on Advance Pricing Agreements, SP2/10 [Issued 12/17/10]

Worksheet 19 Sections 20 and 20A, TMA 1970

Worksheet 20 U.K. Mutual Agreement Procedures and Arbitration Procedures [Statement of Practice SP 1/11, HMRC, Published 2/15/11]





(United Kingdom)