Transfer Pricing Risk
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Source: EY Press Release, 22 November 2016
Seventy-five percent of businesses identify tax risk management as their top transfer pricing priority, according to an EY report, In the spotlight: a new era of transparency. Rising from 66% in 2013, the survey of 623 tax and finance executives across 36 countries reflects the striking impact of global calls for greater tax transparency on the boardroom agenda.
Peter Griffin, EY Global Transfer Pricing Leader, says “As governments increasingly move toward real-time reporting processes and the focus on transfer pricing intensifies, businesses need to evaluate the tools available to align their transfer pricing activities with IT reporting systems. Relying on periodic, ad hoc manual adjustments is no longer enough and could be costly both in terms of time and resources.”
Country-By-Country Reporting (CBCR) is simply a report produced by multi-national enterprises (MNEs) showing their revenue, profit before tax, tax paid, tax accrued, capital, tangible earnings, retained earnings and their total number of employees, for each tax jurisdiction in which they operate. They are also required to identify each group member doing business in each jurisdiction along with details of their business activities.
Sources: HMRC Consultation Document, 12 May 2106, KPMG response dated 13 May 2016
Following the first consultation the UK government announced at Budget 2016 that new rules for addressing BEPS through interest expenses will be introduced from 1 April 2017 in line with the OECD recommendations.
This is a demonstration of the UK’s commitment to aligning the location of taxable profits with the location of economic activity, and is in line with the UK’s more territorial approach to corporate taxation.
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