Further to our newsletter of March 2018 we are now reverting with the second part for the summary of the transfer pricing guidelines as these are in place since July 2017. In short, transactions between related parties are reviewed under Transfer Pricing Guidelines in order to identify the tax treatment and compute any tax amounts.
Intangibles in terms of Transfer Pricing Guidelines have the following characteristics:
In the case of intangibles, consideration as to the TP methods and arm’s length pricing application is required. Comparable uncontrolled price method (CUP) and transactional profit split method are the methods that most likely will prove to be useful in matters involving transfers of intangibles. Other methods may be considered depending on each case. In cases where it is hard to value intangibles, i.e. there is no reliable comparable and the future cash projections are highly uncertain, then a possibility for “ex post” adjustment is expected to be included in the TP agreement.
Business Restructuring includes reallocation of functions, assets and risks within multinational enterprises (MNEs) with the profit potential attached to them.
Article 9 of the OECD model is discussing whether such business restructuring and hence reallocation of profits is in line with the arm’s length principle. In general, in such cases the arm’s length principle treats the entities in the group as separate members.
D.Intra Group Financing
1. The following criteria shall be met in order to qualify for intra group financing:
2. Approach to TP study (TPS) includes:
3. Simplification measures:
E.Arm’s Length Financing Arrangements
1. Arm’s Length Financing Arrangements include:
2. Other financing transactions;
Other transactions in investment
As you understand, transfer pricing is a very big and complex chapter. During our first article we intended to provide a general knowledge of the requirements, and we briefly describe TPS requirements. TPS requires specialized knowledge and expertise in order to be prepared. This article intended to provide more information on specific type of transactions such as intangibles, restructuring and financing.
Savva & Associates aims to work with clients to ensure their Cyprus, international and personal structures are established and administered to the highest level of international standards. Our highly experienced and qualified team will ensure the correct structuring of your Companies and provide comprehensive advice in all VAT and Tax matters.
For further information please contact Mr Charles Savva at firstname.lastname@example.org who will be happy to further assist you.