book

Asia-Pacific Transfer Pricing Handbook

by Robert Feinschreiber, Margaret Kent

December 2012

Beginner

720 pages

21h 17m

English

Wiley

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Cover
Contents
Title
Copyright
Dedication
Preface
Part One: Country-By-Country Analysis
Chapter 1: Introduction
Part One: Country-by-Country AnalysisPart Two: Advanced Applications
Chapter 2: Australia’s Risk Assessment Transfer Pricing Approach
Introductory IssuesTransfer Pricing ReviewsDocumentation RequirementsPreparation of the Documentation FileApplying the Arm’s Length PrincipleSimplified Approach to Doing a Benchmarking StudyFour Steps for Testing International Transfer PricesDecision TreeHow the ATO Scores RiskScoring the Three LevelsScore GraphOutcome of Transfer Pricing Review or AuditAudits Taking Place in Low-Risk SituationsTransfer Pricing Review ProcessCategorizing the Results of the Transfer Pricing ReviewHow the Australian Transfer Pricing Audit Procedure WorksAustralia’s Four-Step Process for Businesses
Chapter 3: Profit Attribution for a Dependent Agent’s Permanent Establishment in Australia
Permanent Establishment Concepts in AustraliaProfit Attribution Concepts in AustraliaThe ATO’s Operational ApproachDetermining Functional Analysis for a Permanent EstablishmentComparative Analysis for the Permanent EstablishmentApplication of the Resale Price MethodApplication of the Cost Plus MethodUsing a Transactional Net Margin MethodUsing a Profit Split MethodToll ManufacturersFour Examples

Chapter 4: Australia’s Advance Pricing Arrangement Program
Pre-Formal APA DiscussionsAPA Processing TimesUnilateral and Bilateral APAsThe ATO’s APA Work in ProcessAPA Issues and Methods
Chapter 5: China Implements Transfer Pricing Procedures
OverviewRegulationsChapter 1: General PrinciplesChapter 2: Reporting and Filing of Related Party TransactionsChapter 3: Administration of Contemporaneous DocumentationChapter 4: Transfer Pricing MethodsChapter 5: Transfer Pricing Audits and AdjustmentsChapter 6: Administrative Guidance Concerning Advance Pricing ArrangementsChapter 7: Administrative Guidance Concerning Cost Sharing AgreementsChapter 8: Administrative Guidelines Concerning Controlled Foreign CorporationsChapter 9: Administrative Guidance Concerning Thin CapitalizationChapter 10: Administrative Guidance Concerning General Anti-AvoidanceChapter 11: Corresponding Adjustments and International NegotiationsChapter 12: Legal ResponsibilityChapter 13: Supplementary Provisions
Chapter 6: Reporting Related Party Transactions in China
Form 1—Related Party RelationshipsForm 2—Summary of Related Party TransactionsForm 3—Purchases and SalesForm 4—Services FormForm 5—Intangible AssetsForm 6—Fixed AssetsForm 7—FinancingForm 8—Outbound InvestmentForm 9—Outbound Payments
Chapter 7: Hong Kong Advance Ruling Cases: Taxability of Profits
Advance Ruling ProcessAdvance Ruling Case No. 4Advance Ruling Case No. 8Advance Ruling Case No. 9Advance Ruling Case No. 10Advance Ruling Case No. 11Advance Ruling Case No. 12Advance Ruling Case No. 13Advance Ruling Case No. 16Advance Ruling Case No. 19Advance Ruling Case No. 21Advance Ruling Case No. 23Advance Ruling Case No. 26Advance Ruling Case No. 30Advance Ruling Case No. 34Advance Ruling Case No. 35Advance Ruling Case No. 36Advance Ruling Case No. 37
Chapter 8: Hong Kong Transfer Pricing Guidelines
Double Tax AgreementsArm’s Length PrincipleAssociated EnterprisesAppropriate AdjustmentsInland Revenue Ordinance and Case LawPermanent Establishment ConsiderationsApplying the Arm’s Length PrincipleFour StepsFunctional AnalysisComparability AnalysisDetermining ComparabilityFunctions, Assets, and RisksContract TermsEconomic and Marketing CircumstancesBusiness StrategiesGlobal Price ListsEstablishing the Reliability of the DataTransfer Pricing MethodologiesSources of Profits and IncomeAbusive Tax SchemesTransfer Pricing SchemesTransfer Pricing DocumentationIntragroup Services ArrangementsDeduction of Expenditures Paid for Intragroup ServiceDetermining the Amount of Intragroup ChargesServices Provided by a Permanent Establishment
Chapter 9: Hong Kong Challenges Abusive Tax Schemes
Macroeconomic IssuesAbusive Tax SchemesTransfer Pricing SchemesLack of “Economically Significant Functions”How the Hong Kong Government Combats Abusive Tax SchemesExtreme Forms of Tax AbuseDistinguishing Tax Avoidance from Tax EvasionHow the Reinvoicing Structure OperatesShifting Intangible Property: The Tax Perspective
Chapter 10: Winning Hong Kong’s Landmark Transfer Pricing Case
Ngai Lik LitigationHong Kong’s Advance Ruling DeterminationsHong Kong Issues Transfer Pricing GuidelinesStatutory ProvisionsDetermination by the Court of Final AppealThe Commissioner’s DeterminationDetermination by the Board of ReviewDetermination by the Court of First InstanceDetermination by the Court of AppealThe Case before the Court of Final AppealDeficiencies in the Scheme as to Additional Annual Bulk Discounts Received by Din Wai Electronics LimitedDeficiencies in the Scheme as to Manufacturing ProfitsDeficiencies in the Scheme as to the Relevant Years of AssessmentAre the Scheme and the Tax Benefit Still Viable Bases for Section 61A Assessments?Is There a “Tax Benefit” within the Meaning of Section 61A?The Narrower Scheme and the Narrower Tax BenefitDominant Purpose of the Narrower SchemeBoard of Review’s ApproachRibeiro’s Dominant Purpose of the Narrower SchemeCommissioner’s Assessment PowerCommissioner’s Exercise of the Section 61A(2) PowerBoard’s Approach to the Exercise of the Section 61A(2) PowerDisposal of the Appeal
Chapter 11: Transfer Pricing Litigation in India
BackgroundTransfer Pricing Chronology and AdministrationRelated PartiesTransfer Pricing Method Selection in IndiaContemporaneous Documentation in IndiaAudit ProceduresPenaltiesAppellate ProceduresTransfer Pricing LitigationVodafone: Hutchison Essar Acquisition
Chapter 12: PE Issues Impact Indian Transfer Pricing
BackgroundNexus, Effectively Connected Status, and Permanent EstablishmentFour Fact-Based Permanent Establishment InquiriesImpact of the Morgan Stanley CasePermanent Establishment Transfer Pricing Litigation in IndiaGalileoHotel ScopevistaWorleyParsonsKnoWerx EducationICICI BankZimmer AGIntergraficaRanbaxy LaboratoriesDevelopment ConsultantsPerfittiData Software ResearchSNC Lavalin /Acres Inc.Airport Authority of IndiaRadha Rani HoldingsMashreq Bank PSCMentor Graphics (Noida) Pvt. Ltd.Millennium Infocom Technologies Ltd.Van Oord ACZ IndiaTokyo Marine & Fire Insurance Co. Ltd.Western Union Money TransferCargo Communities NetworkHyundai Heavy IndustriesE. Gain Pvt. Ltd.Infosys International Activities in New York State
Chapter 13: Taxation of Travel Services in India
SabreGalileoInstalled Hardwire
Chapter 14: Transfer Pricing in Indonesia
Historical BackgroundTransfer Pricing ConsiderationsSpecial Attachment
Chapter 15: Japan’s Directive on Transfer Pricing Operations
BackgroundRegulations and the Examples—How They DifferOperation of the Japanese Transfer Pricing Administrative GuidelinesChapter 1: Definitions and Basic PoliciesChapter 2: ExaminationChapter 3: Points to Note in Calculating Arm’s Length PricesChapter 4: Treatment of Foreign Transferred IncomeChapter 5: Advance Pricing Arrangements
Chapter 16: Selecting the Arm’s Length Price in Japan
BackgroundDemonstrating the Selection of Arm’s Length PriceSelection of the Method of Calculation of Arm’s Length PriceCase 1: Use of the Comparable Uncontrolled Price MethodCase 2: Use of the Resale Price MethodCase 3: Use of the Cost Plus MethodCase 4: Methods Consistent with the Comparable Uncontrolled Price MethodCase 5: Methods Consistent with the Cost Plus MethodCase 6: Transactional Net Margin MethodCase 7: Contribution Profit Split MethodCase 8: Residual Profit Split MethodCase 9: Adjustment for Differences
Chapter 17: Applying Japanese Intangible Transfer Pricing Methods
Case 10: Intangibles Created by R&D and Marketing ActivitiesCase 11: Distribution Channels and Quality Control Know-HowCase 12: Know-How Accumulation through Human Resource Business ActivitiesCase 13: Contributions to Create, Maintain, and Develop Intangible PropertiesCase 14: A Company Bearing only the Cost of Creation of the Intangible PropertiesCase 15: Intangible Properties for Employees on Loan
Chapter 18: Japanese Profit Split Transfer Pricing Methods
Case 16: Applying the Profit Split Method to a Series of Foreign-Related TransactionsCase 17: Excluding Transactions from the Profit Split MethodCase 18: Calculation of the Profit to Be SplitCase 19: Differences in Labor Costs Impact the Residual Profit Split MethodCase 20: Treatment of Market FluctuationsCase 21: Calculation of Basic ProfitCase 22: Factors for Splitting the Residual Profit
Chapter 19: Japanese Guidelines Address Diverse Transfer Pricing Issues
Case 23: Determining Whether Services Provide Commercial ValueCase 24: Multiple-Year ConsiderationsCase 25: Establishing the Target Profit MarginCase 26: Critical Assumptions
Chapter 20: Malaysia Advance Ruling Guidelines
General Facets of the Advance Ruling Procedure in MalaysiaBinding Nature of an Advance RulingScope of the Advance Ruling RequestCircumstances in Which Malaysia Tax Authorities Will Not Issue an Advance RulingCircumstances in Which the DGIR Can Decline to Issue an Advance RulingNotice RequirementsAdvance Ruling Application ProcedureAdvance Ruling Application FormInformation Request RequirementIssuance of the Advance RulingAdvance Ruling Finality and DisclosureThe DGIR Can Withdraw the Advance RulingSituations in Which the Advance Ruling Ceases to ApplyFee StructureInternal Procedure
Chapter 21: Malaysia Transfer Pricing Guidelines
Introductory ProvisionsMalaysian Transfer Pricing ProcedureApplication of the Arm’s Length PrincipleMalaysia’s Transfer Pricing RegimeComparability and Transfer PricingTransfer Pricing AlternativesComparable Uncontrolled Price Transfer Pricing MethodResale Price Transfer Pricing MethodCost Plus Transfer Pricing MethodAdditional Transfer Pricing MethodsProfit Split Transfer Pricing MethodResidual Analysis ExampleTransactional Net Margin MethodIntangible PropertyTransfer Pricing Services RegulationsDocumentationMalaysia Issues Advance Rulings GuidelinesGeneral Facts about of the Advance Ruling Procedure in MalaysiaBinding Nature of an Advance RulingScope of the Advance Ruling RequestAdvance Ruling Application ProcedureAdvance Ruling Application FormInformation Request RequirementIssuance of the Advance RulingAdvance Ruling Finality and DisclosureThe DGIR Can Withdraw the Advance RulingSituations in Which the Advance Ruling Ceases to ApplyFee StructureInternal Procedure
Chapter 22: New Zealand Transfer Pricing Developments
New Zealand Transfer Pricing GuidelinesInitial DevelopmentsArm’s Length Principle and the Pricing MethodsBasics of the Transfer of Intangible PropertyProfit Split Method and the Joint Ownership of Intangible PropertyProfit Split MethodResidual Profit Split AnalysisTransactional Net Margin MethodMarket Penetration TechniquesAustralia’s Four-Step Process to Ascertain the Arm’s Length ApproachDocumentationDocumentation and the Burden of Proof RuleInland Revenue Seeks to Ascertain the Risks to the RevenueRetention of RecordsTransfer Pricing in Countries without a Double Tax AgreementIntangible Property AuditsTrade Intangibles and Marketing IntangiblesAscertaining the Arm’s Length Amount for Intangible PropertyAscertaining the Ownership of Intangible PropertyFactors in Ascertaining the Nature of Intangible PropertyTerms and Conditions of the Intangible Property TransferValuing Intangible PropertyNon-Owner’s Marketing ActivitiesApplying the Profit Split Method to Intangible PropertyIntangible Property Planning
Chapter 23: Philippine Transfer Pricing Regulations
Scope of the Philippine ProvisionsPhilippine-Specific Provisions
Chapter 24: Singapore Implements Advance Pricing Arrangement Procedure
Objectives of the Supplementary CircularWhat the Supplementary Circular ProvidesMinimum Information RequirementsConsiderations for Accepting the APAPre-Filing APA ProcessFormal APA Submission ProceduresAPA Review and Negotiations: Considerations and RequirementsAPA Roll-BackDiscontinuation of the APA ProcessNonsubmission of the APA ApplicationInsufficient Level of Support during the APA ProcessAbsence of CommunicationEffective Date
Chapter 25: Singapore Transfer Pricing Consultation Process
BackgroundObjectives of the Transfer Pricing ConsultationIssuance of the Transfer Pricing QuestionnaireTransfer Pricing ConsultationTransfer Pricing Questionnaire
Chapter 26: Singapore Transfer Pricing Guidelines
Key Concepts and Arm’s Length PrinciplesThree-Step ApproachComparison of Economically Significant FunctionsComparable Uncontrolled Price MethodTransfer Pricing Method SelectionTransfer Pricing DocumentationMutual Agreement ProceduresAdvance Pricing AgreementsComments
Chapter 27: Singapore Transfer Pricing Guidelines for Related Party Loans and Services
Transfer Pricing Guidelines for Related Party LoansTwo Loan CategoriesFacts and Circumstances to Determine Comparability AnalysisTransfer Pricing Guidelines for Related Party ServicesDirect Charging versus Indirect Charging of ServicesAscertaining the Arm’s Length FeeRoutine Services and the 5% MarkupCost Pooling ContractsStrict Cost Pass-throughDocumentation
Chapter 28: South Korea Transfer Pricing
BackgroundRelated Party Transfer Pricing Relationships in KoreaComputation of Indirect OwnershipEconomic Interest and ControlTransfer Pricing Method AlternativesInformation Requests and DocumentsTransfer Pricing AuditsPermanent Establishment, Competent Authority, and Advance Pricing AgreementsThin Capitalization and Tax HavensApplying the “Most Reasonable Method” Standard to Determine Arm’s Length PriceUnderpayments and OverpaymentsSelecting Transfer Pricing MethodsReporting Methods for Determining Arm’s Length PriceAdvance Pricing ArrangementsSanctions Imposed on Failure to Comply with the Data RequestPenaltiesThin Capitalization RulesDebt under an Arm’s Length SituationAnti–Tax Haven RulesScope of the “Tax Haven” JurisdictionComputation of the Reserved Income Distributed AmountGift Tax on Property Located Outside KoreaMutual Agreement ProcedureInternational Tax Cooperation
Chapter 29: Sri Lanka Transfer Pricing
Associated UndertakingsArm’s Length PriceDocumentationThreshold for Applying Sri Lanka Transfer PricingAdvance Pricing AgreementsBurden of ProofImplementationAnnex 1: Test of Control—Associated UndertakingAnnex 2: Arm’s Length Pricing MethodologiesAnnex 3: Appropriate Pricing Methodology—Factors to ConsiderAnnex 4: Comparability of an Uncontrolled Transaction—Factors to ConsiderAnnex 5: Prescribed DocumentationSuggested Supporting Documents
Chapter 30: Taiwan Transfer Pricing
Enactment of the Transfer Pricing StatuteTransfer Pricing Regulations
Chapter 31: Thailand Transfer Pricing
Transfer Pricing BookletPart 1: Tax Legislation Impacting Transfer PricingRevenue Department of Thailand Departmental Instruction Paw 113/2545Part 2: Methodologies in Calculating Market PricePart 3: Process in Establishing the Market PriceProcess of Establishing the Market PriceGuidelines on the Determination of Market Price
Chapter 32: Vietnam Transfer Pricing
Expansive View of Related Party OwnershipTransfer Pricing MethodsDocumentation RequirementsCompliance Considerations
Part Two: Advanced Applications
Chapter 33: Services Transfer Pricing in Hong Kong and in Singapore
Services Transfer Pricing in Hong Kong and in Singapore: Basic ComparisonHong Kong Services Transfer Pricing MethodsShareholder Activity and Stewardship FunctionsFinancial Services Audit ExampleDeduction of Expenditures Paid for Intragroup Services“Objective Commercial Explanation” StandardDetermining the Amount of Intragroup ChargesServices Provided by a Permanent EstablishmentScope of Activities for Related Party Services in SingaporeSingapore Transfer Pricing Services GuidelinesDirect Charging versus Indirect Charging of ServicesAscertaining the Arm’s Length FeeRoutine Services and the 5% Markup in SingaporeCost Pooling ContractsCost Pooling versus Pass-Through Allocation AlternativesDocumentation
Chapter 34: Permanent Establishment Parameters: Hong Kong versus India
General Permanent Establishment ConsiderationsPermanent Establishment Considerations in IndiaPermanent Establishment Considerations in Hong Kong
Chapter 35: Pacific Tax Administrators Coordinate Transfer Pricing Documentation
BackgroundPATA ProvisionsThree Operative PrinciplesSpecific Mandatory Documentation
Chapter 36: Shared Services and Cost Pooling Arrangements in the United States and Singapore
Historical BackgroundExplanation of the Shared Services Arrangement ProvisionsShared Services ArrangementsServices Cost Method ExamplesSingapore Shared Services Arrangements
Chapter 37: South Korea–Japan Bilateral Investment Treaty
BackgroundU.S. Involvement in BITsArbitrationICSID ArbitrationTreaty Shopping within the Bilateral Investment Treaty ContextTax Provisions within the Korea–Japan Bilateral Investment Treaty
Chapter 38: China–Taiwan Trade
Taiwan and China: A History LessonEconomic ConsiderationsOne-China PolicyEconomic Cooperation Framework AgreementTax ConsiderationsChoice of Transfer Pricing MethodFunctional AnalysisAnalysis of the Production ActivitiesFact PatternAccounting and Tax OperationsPermanent EstablishmentTaiwanese–Chinese Electronics CompanyTransactional Profit Split Method CriteriaMost Appropriate Transfer Pricing MethodAllocation Key SystemStrong Correlation StandardSelecting among Allocation KeysAPA Process
Chapter 39: Malaysia–Singapore Allocation Keys
Importance of Allocation KeysSelection of the Real Estate Leasing ExampleWhen the Transactional Profit Split Method Is the “Most Applicable” Transfer Pricing MethodSpecialized ServicesApplying the Transactional Profit Split MethodFour Allocation Keys CategoriesKey FunctionsSelecting Potential Allocation KeysResidential Condominium Leasing ExampleResidential Condominium DatabaseSelecting among Allocation Keys“Strong Correlation” StandardAllocation KeysTransfer Pricing StrategiesCorporate Tax StrategyMalaysia’s Tax Strategy
Chapter 40: Permanent Establishment Parameters
OECD’s Permanent Establishment ProvisionsConsequences of Permanent Establishment StatusConsequences of a Permanent Establishment to BusinessTransfer Pricing and Permanent EstablishmentOverall Tax ConsiderationsPotential for the Imposition of Two Levels of TaxationOECD Approach to Determine Permanent EstablishmentHong Kong Applies the OECD Permanent Establishment ProvisionsHow Hong Kong Applies the Permanent Establishment ProvisionsCommon Law Permanent Establishment CriteriaDirect ActivitiesAgency RelationshipsShareholder Activities in Subsidiaries’ LocationsPresence of Personnel Shifts among EntitiesEntirety of the OperationsDeclining Businesses“Preparatory to” and “Auxiliary from” ExemptionsTime SpentWill the OECD Approach Prevail?
About the Authors
Index

Content preview from Asia-Pacific Transfer Pricing Handbook

Index

Advance pricing agreements/arrangements (APAs)

Australia

Canada

China

India

Indonesia

Japan

Malaysia

New Zealand

Singapore

South Korea

Sri Lanka

Taiwan

Vietnam

Allocation keys

Australia

based on marketing costs

based on R&D costs

China-Taiwan trade

functional analysis

Hong Kong

importance of

Malaysia-Singapore real estate leasing example

OECD guidelines

Singapore

Arm’s length principle

Australia

China

cost pooling contracts

Hong Kong

Japan

Malaysia

New Zealand

OECD guidelines

PATA Transfer Pricing Documentation Package

Philippines

Singapore

South Korea

Sri Lanka

Taiwan

Thailand

Vietnam

ASEAN (Association of Southeast Asian Nations)

ASEAN + three

Associated enterprises

Australia

China

Hong Kong

India

Malaysia

New Zealand

PATA Documentation Package

Philippines

Singapore

South Korea

Sri Lanka

Thailand

transactional profit split method

Association for Relations Across the Taiwan Straits (ARATS)

Association of Southeast Asian Nations (ASEAN)

Australia

advance pricing arrangement (APA) program

allocation keys

arm’s length principle

associated enterprises

audits

benchmarking analysis

comparability analysis

comparable uncontrolled price method (CUP)

cost method

cost plus method

decision tree

documentation

double tax agreements (DTAs)

functional analysis

Income Tax Assessment Act of 1936 (ITAA)

intangible property

marketing activities

and New Zealand transfer pricing guidelines

OECD membership

overview

PATA membership

penalties

permanent establishment of dependent agent

pricing information, ...

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Asia-Pacific Transfer Pricing Handbook

by Robert Feinschreiber, Margaret Kent

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