Transfer Pricing News Issue 41 - December 2022

Transfer pricing bytes

  • United Arab Emirates The UAE on 9 December 2022 issued a decree-law on the taxation of corporations and businesses that provides the legislative basis for the introduction and implementation of a federal corporate tax in the UAE. The law, which is effective for financial years starting on or after 1 June 2023, includes transfer pricing provisions, such as the adoption of the arm’s length principle, a definition of related parties, the transfer pricing methods that will be accepted, and the concept of transfer pricing adjustments.
    A list of Frequently Asked Questions released at the same time as the decree-law provide additional guidance, and further guidance is expected to be provided in the form of ministerial decisions and tax authority guidance.
  • OECD The OECD on 22 November 2022 released mutual agreement procedure (MAP) statistics for the calendar year ended 31 December 2021. The 2021 MAP statistics show that significantly more MAP cases were closed in 2021 than in 2020, with 22% more transfer pricing cases closed. The OECD concludes that competent authorities were able to close more cases in 2021 thanks to the greater use of virtual meetings, the prioritisation of simpler cases and greater collaboration to solve common issues collectively that could be applied across multiple MAP cases.
    Fewer new MAP cases were opened in 2021, compared to 2020, a decrease attributed to a significant reduction in the number of new transfer pricing cases opened (down almost 10.5%), On a less positive note, the MAP statistics demonstrated that cases still take a long time. On average, MAP transfer pricing cases closed in 2021 took 32 months to conclude, compared to 35 months in 2020.
    The OECD also released its 2021 MAP Awards winners, with Spain taking the honours for the shortest time in closing transfer pricing cases. Canada won for the smallest proportion of pre-2016 cases in end inventory, and Ireland and New Zealand for the most effective caseload management. The award for the pairs of jurisdictions that dealt most effectively with their joint transfer pricing caseload went to France-United States. Finally, the award for the most improved jurisdiction went to Germany, which closed an additional 144 cases with positive outcomes compared to 2020.
  • Cyprus & U.S. Cyprus’s tax authorities announced on 13 October 2022 that the bilateral Competent Authority Arrangement for the exchange of country-by-country (CbC) reports between Cyprus and the United States is expected to be effective for reporting fiscal years starting on or after 1 January 2022.
    Thus, if the ultimate parent entity of a multinational enterprise (MNE) group is considered a tax resident in the U.S., the secondary filing mechanism should apply for reporting fiscal years starting on or after 1 January 2021 and before 1 January 2022.