Transfer Pricing

“ExxonMobil paid no tax on $18 billion revenue, unions allege”

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Source: smh.com.au 3 December 2017

“Exxon is more aggressive in minimising its tax than Chevron, which agreed to a settlement believed to be worth more than $1 billion this year, after being taken to court by the Australian Taxation Office”

“Energy giant ExxonMobil​ has not paid a cent in corporate income tax in Australia in at least two years, despite reaping more than $18 billion from the nation’s natural resources, according to three ofd the company’s workplace unions.

Tax campaigners accuse the company of cashing in on Australia’s soaring gas prices, but avoiding paying tax on its profits by sending much of its money to a network of offshore companies, some based in notorious tax havens.”

Source article here

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How clear is your Transfer Pricing documentation?

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Until recently I was a Senior Transfer Pricing Specialist with HM Revenue & Customs. I have HMRC TP risk-assessing and case-working experience for most business sectors and transaction types and was a member of HMRC’s TP Governance Panel, which has the final say on most TP enquiries.

I have now decided to specialise in helping MNEs and their advisers prepare their “final” TP documentation for HMRC eyes.

You may think your TP Documentation is clear and complete; but HMRC may think otherwise. Many TP enquiries are opened or extended by HMRC because the full facts and circumstances of the business and its transfer pricing are absent from or not clearly presented in the documents provided. Ironically, on establishing the facts it often becomes clear to HMRC that the pricing is actually at arm’s length and the enquiry can be closed without adjustment. Unfortunately, considerable time and money will have been expended on the enquiry in the meantime.

Such enquiries can be avoided or cut short.

I can “sense-check” your TP documentation; issues that might otherwise trigger “TP risk” alarm bells within HMRC will be identified and can be corrected, clarified or expanded as required, before submission to HMRC, to better demonstrate your principled and objective approach to achieving the appropriate arm’s length pricing.

To find out how I can help you please use the “contact me” tab above or email me directly.

Gordon McLeman 08 December 2017

How would your TP Documentation stand up to HMRC Audit?

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Netherland vs. A BV, October 2017, Lower Court, case no 2017: 5965

In this recent transfer pricing case the Dutch Courts reduced the tax authority’s adjusted assessment of €188.3m down to €32.1m

The basic facts are:

  • A Dutch parent company had provided services to foreign subsidiaries on a cost-plus basis.
  • The parent received compensation when a business restructuring transferred its HQ and strategic functions to Switzerland.
  • The Dutch Tax Authorities concluded that this compensation was not enough and that the parent continued to perform strategic functions for the group.

However, the Court ruled that:

  • the parent had fulfilled its legal obligations by preparing thorough transfer pricing documentation.
  • that the burden of proof was on the Dutch tax authorities and
  • the tax authorities did not provide sufficient arguments to support their adjustment.

This outcome illustrates the importance of ‘preparing thorough transfer pricing documentation’ and, although it’s a Dutch example, the principle holds good across jurisdictions.

If you are interested in finding out how your TP documentation might fare if audited by HMRC then read on…… Read the rest of this entry »

US Tax Court says IRS’s ‘drift-net’ argument to expand privilege waiver must be anchored in principles

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Source: McDermott Will & Emery via internationallawoffice.com 17 November 2017

“In cases where privilege is waived by asserting a reasonable-cause defense (to penalties), the question is the scope of the waiver.

Some courts have applied a fairness test to limit the scope of the waiver to reasonably contemporaneous documents, thereby not extending the scope of the waiver to legal advice rendered at a later date.

Estate of Levine is consistent with a recent pattern of the IRS aggressively arguing against the assertion of privilege and work-product protections in tax audits.

Taxpayers should carefully scrutinize IRS attempts to obtain privileged documents, and resist the IRS’s attempts to expand the waiver concept beyond reason and principle.

Courts are rightly reluctant to vitiate protections against disclosure, especially when the government’s arguments are full of holes!”

Source article here

 

“US Tax Court: prior closing agreement may have relevance in Coca-Cola’s transfer pricing case.”

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Source: McDermott Will & Emery via internationallawoffice.com 3 November 2017

“Coca-Cola is seeking a re-determination in Tax Court of certain Internal Revenue Service (IRS) transfer-pricing adjustments relating to its 2007–2009 tax years. In the case, the IRS moved for partial summary judgment seeking a ruling that a 1996 Internal Revenue Code Section 7121 “closing agreement” executed by the parties is not relevant to the case before the court.”

“In litigation, parties should carefully pick their battles before the court. In the Coca-Cola matter, the IRS is fighting what seems to be a losing battle over whether the prior closing agreement is relevant, which is a very low threshold evidentiary question. Spending court resources on clearly questionable motions may negatively affect the court’s future rulings. Our advice to clients is to look at the big picture strategy and do not get mired into petty squabbles with opposing counsel.”

Source article here