Transfer Pricing and Customs Valuation Current WCO and international developments 1.
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Transcript of Transfer Pricing and Customs Valuation Current WCO and international developments 1.
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What is the issue for Customs?
Customs objective: To verify whether a price has been influenced in a related-party
transaction
Options: Test values (difficult to use) Examine ‘circumstances surrounding the sale”
Key questions: How can information contained in a transfer price study be
accepted as the basis for verifying a related party transaction? How should post-importation adjustments be dealt with?
Business concerns : “Double obligation”; need to satisfy both Customs and Tax
authorities on similar issues
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Competing tensions
Customs administration objective
Ensuring all appropriate elements are included in the
customs value
Direct Tax authority objective
Ensuring the transfer price does not include inappropriate
elements
Trade objective
To minimise Customs value
Pull in opposite directions
Trade objective
To maximise transfer price (incl. cost of imported
goods) to reduce taxable profit
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Key Differences
Customs Valuation
Goods only
Transaction based
Confirmed at point of customs clearance
Different definition of relationship
Transfer Pricing
Goods and services etc.
Often based on aggregates/annual in practice (transactional in theory)
Confirmed retrospectively (some years after event)
Activities to date Two joint WCO/OECD
conferences (2006, 2007) Full alignment not possible/
realistic
Focus Group – identified key technical issues
On agenda of TCCV Commentary 23.1 Draft case studies
WCO producing guidance material
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TCCV Commentary 23.1Examination of the expression “circumstances
surrounding the sale” under Article 1.2 (a) in relation to the use of transfer pricing studies
…the use of a transfer pricing study as a possible basis for examining the circumstances of the sale should be considered on a case by case basis
… any relevant information and documents provided by an importer may be utilized for examining the circumstances of the sale
A transfer pricing study could be one source of such information