Fundamentals of Transfer Pricing

Name: Fundamentals of Transfer Pricing | Industries, Regions, New Technologies, and Other Topics
Brand: Wolters Kluwer
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Industries, Regions, New Technologies, and Other Topics

Raffaele Petruzzi Giammarco Cottani Michael Lang(Herausgeber*in)

Wolters Kluwer (Verlag)

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Erschienen am 20. Juni 2022

608 Seiten

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978-94-035-3520-3 (ISBN)

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Beschreibung

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Inhalt

Intro
Half-Title Page
Title Page
Copyright Page
Editors
Assistant Editor
Contributors
Summary of Contents
List of Figures
List of Tables
List of Abbreviations
Note to Readers
Preface
Industries
CHAPTER 14 Transfer Pricing in the Automotive Sector
1 Introduction
2 TP of OEMs
2.1 Central Entrepreneur Model
2.2 Development/Design of a Car
2.3 Production
2.4 Sales & Distribution
2.5 Financing
3 Automotive Supplier Industry
3.1 Typical Value Chain in the Automotive Supplier Industry
3.2 Role of DEMPE Functions
3.3 TP Implications of Major Transaction Flows
3.4 Brand Value
3.5 Contract Manufacturer/Delivery of Semi-finished Products
3.6 Contract R&D
3.7 Sales Function for OEM Business
3.8 Sales in the Aftermarket
3.9 Shared Services
4 Outlook: Data-Driven Business Models and Digitalization
CHAPTER 15 Transfer Pricing in the Banking and Asset Management Sector
1 Introduction
1.1 Typical Activities
1.2 Regulation
1.3 Recent Challenges
2 Value Creation in the Banking and Asset Management Sector
2.1 Preliminary Remarks
2.2 Retail Banking
2.2.1 Functions
2.2.2 Risks
2.2.3 Assets
2.3 Wealth Management
2.3.1 Functions
2.3.1.1 General Remarks
2.3.1.2 Product Marketing & Sales Support
2.3.1.3 Client Relationship Management
2.3.1.4 Portfolio Management and Product Development
2.3.1.5 Operations & Services
2.3.1.6 Back-Office Services
2.3.2 Risks
2.3.3 Assets
2.4 Investment Banking: Financial Products
2.4.1 Functions
2.4.2 Risks
2.4.3 Assets
2.5 Asset Management
2.5.1 Functions
2.5.2 Risks
2.5.3 Assets
3 Impact of Digitalization on the Value Creation in the Banking and Asset Management Sector
4 TP Issues in the Banking and Asset Management Sector
4.1 Categorization of Functions
4.2 Outsourcing
4.3 Overview of the TP Methods
4.3.1 General Remarks
4.3.2 Transactional Profit Split Method
4.4 Interaction of VAT and TP
4.5 Guarantees and Cash Pools
4.6 Intangibles and CCAs
5 Conclusions
CHAPTER 16 Transfer Pricing in the Commodities Trade Sector
1 Introduction
2 Value Creation in the Commodities Trade Sector
2.1 The Commodity Value Chain Lifecycle
2.2 The Mining Value Chain Lifecycle
2.3 The Phases in the Mining Value Chain
2.3.1 The Paragraphs Below Discuss in Further Detail the Phases in the Mining Value Chain Outlined in Figure 16.1
2.3.2 Mine Development
2.3.3 Mining and Concentration
2.3.4 Transportation
2.3.5 Smelting, Refining, Solvent Extraction, and Electrowinning
2.3.6 Sales and Marketing
2.3.7 Mine Closure and Abandonment
3 TP Issues in the Commodities Trade Sector
3.1 A Preliminary Overview of the Relevant TP Issues
3.2 Financing Arrangements in the Mining Industry
3.3 Transfer of Intangible Assets in the Mining Industry
3.4 Indirect Transfer of Mining Assets
3.5 Group Shared Services in the Mining Industry
3.6 Sale or Purchase of Mineral Products
4 Conclusions
CHAPTER 17 Transfer Pricing in the Fast-Moving Consumer Goods Sector
1 Introduction
2 Value Creation in the FMCG Sector
2.1 Value Drivers in the FMCG Industry
2.2 Generic FMCG Value Chain
2.3 Prevalent Business Models in the FMCG Industry
2.3.1 Centralized Model
2.3.2 Decentralized Model
3 TP Issues in the FMCG Sector
3.1 Transfer Pricing
3.1.1 Transaction Categories
3.1.2 TP Methods Employed
3.2 VAT Effects on Customs Values and TP
3.3 Supply Chain Management and TP Issues
3.3.1 Purchasing
3.3.2 Production
3.3.3 Distribution
3.3.4 Management Functions
4 Outlook
4.1 COVID-19 Impact on Transfer Price Determination
CHAPTER 18 Transfer Pricing in the Insurance Sector
1 Introduction
2 Value Creation in Insurance Sector
3 The Main Types of Insurance
3.1 Material Damage (or Property) Insurance
3.2 Financial Loss (or Pecuniary) Insurance
3.3 Liability Insurance
3.4 'Package' Policies and Combined Forms of Insurance
4 TP Issues in the Insurance Sector
4.1 Proportional Reinsurance
4.2 Non-proportional Reinsurance
4.3 Why Reinsurance: The Commercial Rationale
4.4 TP Key Aspects in Reinsurance
4.4.1 The Actuarial Pricing
4.4.2 The Multinational Programmes
4.4.3 The TP Analysis
4.4.4 Negotiation
4.4.5 Commercial Rationale for Reinsurance
4.4.6 Economic Analysis
5 Conclusions
CHAPTER 19 Transfer Pricing in the IT Sector
1 Introduction
2 Value Creation in the IT Industry
2.1 History of Value Creation in the IT Industry
2.2 Industry 4.0: Key Characteristics and Market Players
2.3 4IR: Value Drivers
2.4 4IR: Trends
2.5 Global Value Chains
2.6 4IR: Challenges
2.7 4IR: Operating Models
3 TP Issues in the IT Sector
3.1 General Remarks
3.2 FCM TP Application and Challenges
3.3 Application of TP Methods to Specific Transaction Types
3.3.1 Tangible Property
3.3.2 Intra-group Services
3.3.3 Intangible Assets
3.4 Digital Services Tax
4 Conclusion
CHAPTER 20 Transfer Pricing in the Oil and Gas Sector
1 Introduction
2 Value Creation in the O&G Sector
2.1 The O&G Value Chain
2.2 Primary Activities in the O&G Industry
2.2.1 Exploration
2.2.2 Development & Production
2.2.3 Transportation and Storage
2.2.4 Refining, Processing, and Manufacturing
2.2.5 Marketing and Distribution
2.3 Support Activities in the O&G Industry
2.3.1 Firm Infrastructure
2.3.2 Research & Development
2.3.3 Procurement
2.3.4 Trading
2.4 Value Drivers in O&G Value Chain
2.4.1 Strategic Choices
2.4.2 Upstream
2.4.3 Midstream
2.4.4 Downstream
2.4.5 Conclusions
3 TP in the O&G Sector
3.1 Introduction
3.2 O&G Commodity TP
3.3 Cost Sharing Arrangements and Intra-group Services
4 Conclusions
CHAPTER 21 Transfer Pricing in the Pharmaceutical and Life Sciences Sector
1 Introduction
2 Value Creation in the Pharmaceutical and Life Science Industry
2.1 Key Value Drivers and Assets
2.1.1 Research & Development
2.1.2 Manufacturing
2.1.3 Marketing
2.1.4 Patents and Brands
2.2 Trends
2.2.1 Mergers and Acquisitions
2.2.2 New Market Entrants: Tech Players
2.2.3 Technological Leaps
3 TP Matters in the Pharmaceutical and Life Science Industry
3.1 Typical Centralized Operating Model and IP Ownership
3.2 Particularities of the Pharmaceutical Product Lifecycle
3.2.1 From Drug Discovery to Commercialization and the Perception of Profitability
3.2.2 Patent Cliff and Post-Patent Life
3.2.3 Hard-to-Value Intangibles
3.2.4 Marketing Intangibles
3.3 TP Steering Peculiarities
3.4 Digital Impact
3.5 OECD Pillar One: Should the Pharmaceutical Industry Be in Scope?
4 Conclusion
Regions
CHAPTER 22 Transfer Pricing in Brazil
1 Introduction
2 Rationale and Evolution of TP Rules
3 Description of the Rules
3.1 Scope of TP Legislation
3.2 TP Methods and Selection of the Method
3.2.1 The Freedom of Selection of Methods
3.2.2 General Rules
3.2.3 TP Methods for Export Transactions
3.2.3.1 PEVEX (Brazil's Equivalent to the CUP Method)
3.2.3.2 PVA (Brazil's Equivalent to the RPM)
3.2.3.3 PVV (Brazil's Equivalent to the RPM)
3.2.3.4 CAP (Brazil's Equivalent to the CPM)
3.2.4 TP Methods for Import Transactions
3.2.4.1 PIC (Brazil's Equivalent to the CUP Method)
3.2.4.2 PRL (Brazil's Equivalent to the RPM)
3.2.4.3 CPL (Brazil's Equivalent to the CPM)
3.2.5 Commodities Methods
3.2.6 TP Method Applicable for Loans
3.2.7 Alteration of Fixed Profit Margins
3.3 Safe Harbours
4 Other Related Rules
5 TP in DTCs
6 Conclusion
CHAPTER 23 Transfer Pricing in China
1 Introduction
2 Legal Framework
3 Important Concepts, TP Methods and Documentation
3.1 Important Concepts
3.1.1 Related Parties
3.1.2 Related-Party Transactions
3.2 TP Methods
3.3 Transfer Pricing Documentation
3.3.1 Contemporary Documentation
3.3.2 CbCR
3.3.3 Annual Reporting Form on Related-Party Transactions
4 Practical Solutions to Unique Challenges in China
4.1 Location Saving Advantages
4.1.1 Theoretical Framework
4.1.2 Application of the Location Saving Advantages in a TP Analysis
4.2 Intangibles
4.2.1 Theoretical Framework
4.2.2 Practice
4.2.3 Case Study
4.3 Intra-group Services
4.3.1 Theoretical Framework
4.3.2 Practice
4.3.3 Case Study
5 Three-Pronged Tax Avoidance Prevention and Control System
5.1 Administration
5.2 Services: Dispute Prevention and Resolution
5.2.1 Advance Pricing Agreements
5.2.2 Dispute Resolution
5.3 Investigation
6 Potential Impacts of the Unilateral Approach on China
7 Conclusions
CHAPTER 24 Transfer Pricing in the European Union
1 Introduction
2 EU Primary Law Applied to TP Rules
2.1 TP from the Perspective of the Fundamental Freedoms
2.1.1 Existing Case Law and Questions Answered by the CJEU
2.1.2 Unsolved Questions and Potential Compatibility Issues of the OECD Pillar One Project
2.2 TP from the Perspective of the State Aid Rules
2.2.1 The Design of TP Rules from a State Aid Perspective
2.2.2 The Application of TP Rules from a State Aid Perspective
2.2.3 Potential Interaction Between the State Aid Rules and the OECD Pillar One Project
3 EU Secondary Law Relating to TP
3.1 Compliance Obligations
3.1.1 Country-by-Country Reporting
3.1.2 Presence in Administrative Offices, Participation in Administrative Enquiries, and Simultaneous Controls
3.1.3 Automatic Exchange of Information on Advance Cross-Border Rulings and APAs
3.1.4 Mandatory Automatic Exchange of Information on Reportable Cross-Border Arrangements
3.2 The Resolution of Cross-Border Tax Disputes
3.2.1 The Arbitration Convention
3.2.2 The Dispute Resolution Directive
4 EU Soft Law on TP
4.1 Communications from the European Commission
4.1.1 Transfer Pricing Documentation
4.1.2 Guidelines for APAs Within the EU
4.1.3 Guidelines on Low Value-Adding Intra-group Services
4.1.4 Non-EU Triangular Cases
4.1.5 TP and SMEs
4.1.6 Cost Contribution Arrangements on Services Not Creating IP
4.1.7 Secondary Adjustments
4.1.8 TP Risk Management
4.1.9 Compensating Adjustments
4.2 Reports from the EU JTPF
4.2.1 Report on the Use of Comparables in the EU
4.2.2 Report on the Use of Economic Valuation Techniques in TP
4.2.3 Report on a Coordinated Approach to TP Controls Within the EU
4.2.4 Report on the Application of the Profit Split Method Within the EU
CHAPTER 25 Transfer Pricing in India
1 TP in India
1.1 Introduction and Overview of TP in India
1.2 TP Evolution in India
1.3 Salient Features of Indian TP Regulations
1.3.1 Related Parties
1.3.2 International Transactions
1.3.3 Specified Domestic Transactions
1.3.4 TP Methods
1.3.5 Use of Multiple Year Data
1.3.6 Range Concept
1.3.7 Documentation
1.3.8 Stringent Penalties
2 Dispute Resolution Mechanisms
2.1 Traditional Dispute Resolution Mechanism
2.2 Alternate Dispute Avoidance and Resolution Mechanisms
2.2.1 SHR
2.2.2 APA
2.2.3 MAP
3 Other Significant Developments
3.1 Secondary Adjustments
4 Significant Litigated TP Issues in India
4.1 Marketing Intangibles
4.1.1 Issue
4.1.2 View of Judiciary
4.1.3 Key Takeaways
4.2 Profit Attribution to PEs in India
4.2.1 Issue
4.2.2 View of Judiciary
4.2.3 Significant Developments
4.2.4 Key Takeaways
4.3 Location Savings
4.3.1 Issue
4.3.2 View of Judiciary
4.3.3 Significant Developments/India Chapter in UN TPM
4.3.4 Key Takeaways
4.4 Contract R&D Centres
4.4.1 Issue
4.4.2 View of Judiciary
4.4.3 Indian Regulations on Contract R&D
4.4.4 View of Indian Tax Authorities in UN TPM: India Chapter
4.4.5 Key Takeaways
4.5 Financial Transactions
4.5.1 Background and Evolution
4.5.2 Issuance of Guarantee
4.5.3 Intra-group Loans
4.5.4 Key Takeaways
5 Impact of COVID-19 on TP in India
CHAPTER 26 Transfer Pricing in the United States
1 US TP Principles
1.1 Controlled Parties
1.2 Arm's-Length Standard
1.3 Best Method
1.4 Comparability
1.5 Arm's-Length Range
1.6 Scope of Review
2 US TP Authority
2.1 Section 482
2.2 The Regulations
2.3 Supplemental Guidance
2.4 Case Law
3 TP Methods
3.1 Profit-Based Methods
3.1.1 Comparable Profits Method
3.1.2 Profit Split Methods
3.2 Tangible Property
3.3 Intangible Property
3.4 Cost-Sharing Arrangements
3.5 Services
3.6 Loans and Leases
4 Compliance
4.1 TP Adjustments
4.2 Penalties and Documentation
4.3 Advance Pricing Agreements
4.4 Controversy
5 Conclusions
New Technologies
CHAPTER 27 Use of New Technologies in Transfer Pricing by Taxpayers
1 Introduction
2 Intelligent Automation
2.1 Technological Development
2.2 Blockchain
2.3 Artificial Intelligence
3 The Use of Technologies in TP
3.1 Drivers for the Use of Technology in TP
3.2 What to Consider Before Using a TP Technology?
3.3 TP Life cycle
3.3.1 Which TP Processes Are Suitable for (Intelligent) Automation?
4 Limitations of Technologies
5 Outlook
6 Conclusion
CHAPTER 28 Use of New Technologies in Transfer Pricing by Tax Authorities
1 Introduction
2 Relevant Use of New Technology
2.1 e-Services
2.2 Data Analytics and AI
2.3 Blockchain
3 Implementation
4 Conclusion
Other Topics
CHAPTER 29 Transfer Pricing and Antitrust Rules
1 Introduction
2 Fundamentals of Antitrust Relevant for TP
2.1 Absence of a Statutory Market Price Concept
2.2 The Concept of 'Undertaking' and 'Relevant Market'
3 The Use of Comparisons in Antitrust
3.1 Price Comparison: Antitrust Damages Action
3.2 Cost-Price or Cost-Price Plus Price-Price Comparison: Predatory Pricing and Excessive Pricing
3.3 Identification of the Relevant Transaction and Comparable
4 Antitrust Considerations on TP Methods
5 Direct Relevance of TP in Antitrust Cases
6 Conclusion
CHAPTER 30 Transfer Pricing and Customs Valuation
1 Introduction
2 The Principles of Customs Valuation
2.1 General Remarks
2.2 Main Rules of Customs Valuation and Customs Valuation Method
2.2.1 Transaction Value Method
2.2.2 Transaction Value of Identical Goods
2.2.3 Transaction Value of Similar Goods
2.2.4 Deductive Value Method
2.2.5 Computed Value Method
2.2.6 Fall-Back Method
2.3 Administrative Issues in Customs
3 Interplay Between TP and Customs Valuation
3.1 Diverging Goals of Tax and Customs Authorities
3.2 ALP in View of Customs Valuation
3.3 Data Range Used for the Assessment of the Transaction
3.4 Scope of Information in TP and Customs Valuation
4 TP Adjustments and Their Influence on Customs
4.1 General Information
4.2 Possible Customs Treatment of TP Adjustments
4.2.1 Types of TP Adjustments and Potential Influence on Customs Valuation
4.2.2 Final Determination of the Customs Value Following TP Adjustments
4.2.3 Practical Challenges
5 Use of TPD and APAs for the Purposes of Customs Valuation
5.1 Practical Use of the TPD
5.2 Advance Pricing Agreements
6 Conclusions
CHAPTER 31 Transfer Pricing and VAT
1 General Introduction to the Interplay Between TP and VAT
1.1 Relevance of VAT
1.2 Increasing Importance of the Interplay Between TP and VAT
2 The Basics of VAT
2.1 General Principles Regarding VAT
2.2 Relevant EU VAT Rules
2.2.1 'Subjective Value' and Consideration Actually Received by the Supplier (Article 73 of the VAT Directive)
2.2.2 Objective Valuation in VAT: The Open Market Value (Articles 80 and 72 of the VAT Directive)
2.2.3 Price Adjustments
3 Interplay Between TP and VAT
3.1 Differences Between TP and VAT
3.1.1 Sources of Rules and the Main Concepts
3.1.2 Assessment of Transactions
3.1.3 Valuation Methods
3.2 Missing Harmonization
3.3 TP Adjustments and Their Influence on VAT
3.3.1 Categories of TP Adjustments
3.3.2 TP Adjustments Influencing VAT
3.3.3 Upward and Downward Adjustments
3.3.4 Other Elements Influencing the Interplay
3.3.4.1 Legal Relationship Between the Entities
3.3.4.2 Type of Entities
3.3.4.3 Direct Link Between the Adjustment and the Transaction and Remuneration and the Transaction
3.3.5 Customs, VAT, and TP
3.4 EU Approach
3.5 Country Practice
3.5.1 Austria
3.5.2 Italy
3.6 Potential Remedies
4 Conclusions
Table of Cases
Index

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