Transfer Pricing

Recent Indian TP court ruling suggests change of direction on AMP expenses

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The case of Luxottica India Eyewear Pvt. vs Acit was heard in New Delhi on 23 May 2017 and the decision on 25 May has created new uncertainty for multinationals operating in India. Read the rest of this entry »

The Approach to Hard-to-Value Intangibles: OECD Discussion Draft released.

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On May 23 2017 the OECD released a public discussion draft on the implementation guidance on Hard-to-Value Intangibles (HTVI).

This discussion draft presents the principles that should underlie the implementation of the HTVI approach, provides examples illustrating the application of this approach and addresses the interaction between the approach to HTVI and the mutual agreement procedure. Read the rest of this entry »

Cash Pooling – HMRC Guidance

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HMRC has recently published its guidance on the Transfer Pricing of Cash Pools.  Read the rest of this entry »

UK 2016 Autumn Statement – corporate interest expense restrictions

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In his Autumn Statement Chancellor Philip Hammond confirmed the implementation of the UK’s new restriction on tax relief for corporate interest expense. Most of the draft legislation has been published (here), with the remainder coming this month. The new interest restriction measures will apply from 01.04.2017.

The new rules are intended to ensure that businesses won’t be able to avoid UK tax by borrowing excessively in the UK to finance activities elsewhere.

Broadly, the proposals are unchanged from the consultation document released in 2016, but there is more detail on what will be included in EBITDA and the carry forward of unused capacity has been extended from 3 to 5 years.

The restrictions on the tax deductibility of corporate interest expense are based on BEPS Action 4 and apply a fixed ratio rule that limits deductions for net interest expense to 30% of a group’s UK EBITDA.

There is no avoidance or purpose condition for the rules to apply, but they apply after most other tax rules, including transfer pricing and anti-hybrid, so the arm’s length principle takes precedence.

The Group Ratio Rule and the Public Benefit Infrastructure Exclusion will allow a deduction of a greater amount of interest in appropriate circumstances and there are rules to deal with timing differences between interest expense and EBITDA.

Restricted interest is carried forward indefinitely and must be deducted in a later period if there’s sufficient interest allowance. Unused interest allowance can be carried forward for up to five years.

Businesses may submit comments to interest-restriction.mailbox@hmrc.gsi.gov.uk by 1 February 2017 and there is likely to be a further opportunity to comment on the legislation coming out this month.