The government of Eswatini has introduced several changes through the Income Tax (Amendment) Act 2023 in relation to direct taxation and tax administration.
The notable changes include, among others:
- Introduction of transfer pricing rules:
- the definition of the arms-length principle, which means the price payable between independent enterprises;
- rules for the use of the five standard transfer pricing methods, including comparable uncontrolled price, resale price, cost-plus, transactional net margin, and transactional profit split method;
- rules for the use of another method if none of the standard methods can be reasonably applied to determine the arm’s length price, in which case the Commissioner must be satisfied that none of the standard methods can be reasonably applied and that such other method yields an arm’s length result; and
- requirements for taxpayers to keep transfer pricing documentation.
- reduction in the corporate income tax rate from 27.5% to 25%;
- introduction of capital gains tax;
- introduction of a small business concession regime; and
- introduction of new penalties.
Russia has introduced amendments to the transfer pricing rules that will come into effect from 1 January 2024:
- Criteria for Controlled Transactions:
Changes to article 105.14 of the Tax Code expand controlled transactions to include those with counterparties in jurisdictions with suspended tax treaties with Russia. The place of residence and tax residence of participants (shareholders, principals, other persons) or other beneficiaries in whose interests the foreign structure without forming a legal entity carries out its activities will also be taken into account.
- Notification Requirements:
Article 105.16 is amended to mandate electronic submission of notifications of controlled transactions by legal entities, while paper submissions are reserved for individuals.
- Expansion of definition of Related Parties:
The definition of related parties is expanded to include controlled foreign companies controlled by the same person, effective from 2024.
- Tax Authorities Monitoring and Adjustment:
Tax authorities can monitor and audit transactions with non-resident related parties. If the prices used in such transactions differ from market prices, tax authorities may adjust the taxable base for these transactions based on market prices.
If the price adjustment is carried out by the Russian tax authorities, the transaction price will be adjusted to the median value of the price range. However, if the company independently makes the adjustment, it may adjust the transaction price to any value within the arm’s length range.
- Penalty Increases for Transfer Pricing:
Non-compliance with arm’s length pricing in controlled cross-border transactions incurs a penalty of 100% of the unpaid tax amount, but not less than RUB 500,000 (currently, 40%, but not less than RUB 30,000).
The penalties for failure to submit (late submission or submission containing incorrect information) are the following:
- Notification of controlled transactions: RUB 100,000 (currently, RUB 5,000);
- Notification of participation in an international group: RUB 500,000 (currently, RUB 50,000);
- Country-by-country report: RUB 1 million (currently, RUB 100,000); and
- Transfer pricing documentation (master file/local file): RUB 1 million (currently, RUB 100,000).
The Mauritanian Ministry of Economy and Finance (MoF) has published the draft Finance Law for 2024 (Projet de Loi de Finance, PLF). The key tax measures contained in the PLF are as follows among others:
- Replace “associated enterprises” with “affiliated enterprises” in transfer pricing matters for terminology harmonization.
- Extend transfer pricing documentation requirement to cover domestic transactions among members of the same group of associated enterprises.
- Update the threshold for consolidated annual turnover to MRU 25 billion for country-by-country reporting (equivalent to EUR 750 million), aligning with the BEPS measure Action 13.
- Treat profits deemed distributed to permanent establishments in Mauritania, under a contract for goods or services, as profits distributed to reserves for foreign companies.
- Extend the time limit for on-the-spot audits of transfer pricing from 2 to 3 months.
- 1 additional month for non-compliance with document requests.
- 3 additional months for transfer pricing audits.
- 9 additional months if the international administrative assistance procedure is applied.
- Introduce penalties for late filing of transfer pricing returns:
- Fine of MRU 2,500,000 for failure to file or filing incomplete/inaccurate annual transfer pricing disclosure.
- Penalty of 0.5% of relevant transaction amount for failure to respond to formal notice, with a minimum of MRU 500,000.
- Fine of MRU 4,000,000 for failure to submit or submitting an incomplete/inaccurate country-by-country declaration.
The Ministry of Finance has extended the deadline for submitting transfer pricing information to 31 January 2024 for taxpayers with deadlines falling between 30 November 2023 and 31 December 2023. The relevant regulation entered into force on the day following the date of announcement, i.e. on 28 November 2023.
The Tax Authority has recently updated its guidance on transfer pricing analysis, and key features of the updated guidelines include:
- “Excluded operations” are not required to be included in the Annex of Operations with Related Parties, the Comprehensive Transfer Pricing Study, and Form 101.
- Details of each related party transaction must include the financial account where the transaction was recorded.
- Intangibles developed in Ecuador must be reported, including the date of transfer to another country. Functions, risks of licensor and licensee, royalty percentage, amount, and a detailed explanation of the calculation basis must be accounted for.
- Functional analysis documentation should include information such as the geographical location of each group member, detailed explanation of each function performed, substantial risks, significant assets, business restructuring activities, and intangibles held by the group.
- To choose a reliable profit indicator, taxpayers should use financial information from independent third-party annual reports, provided the accounting closing date is after June 30 of the analyzed year.
- The Transfer Pricing Study and its annexes, once submitted, are considered final and binding.
Hungary & USA:
Hungary and the United States have signed the Hungary – United States Joint Statement on the Implementation of the Spontaneous Exchange of Country-by-Country (CbC) Reports for Fiscal Years Beginning in 2022. The joint statement temporarily allows for the exchange of CbC reports while negotiations are taking place for a new intergovernmental agreement (IGA) and a competent authority arrangement (CAA) to allow for the automatic exchange of CbC reports under the multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The Revenue has issued a new Tax and Duty Manual – Requests for Transfer Pricing Documentation providing operational guidance for the Revenue Commissionaire on requesting transfer pricing documentation (TP documentation).
In particular, the guidance clarifies that the Revenue Commissionaire may request only the local file and master file as part of the risk assessment/appraisal process.
The use of TP documentation at the appraisal stage is intended to ensure that appraisals are more effective in instances where functional and transaction level information is not available in sufficient detail from other sources