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Transfer Pricing Agenda 2021: Tax Innovation

25 Jan 2021
Aktuelles, BEPS, Current news, Europe, German SMEs, Germany, Steuerplanung, Tax Planning, Tax Pricing Agenda
ATAD, Europe, European Commission, Germany, KPMG, OECD, tax, Tax CMS, Tax Pricing Agenda, Transfer Pricing Life Cycle, VerSanG

Tax security is a high priority for tax authorities. The most critical influences on investment and location decisions are uncertainties in corporate tax and the VAT system. It is crucial to ensure financial security, which is also the case with digital business models in Germany.

To have Tax Certainty, you need Compliance and Controversy. You have obligations to cooperate with the tax audit, and you need to record your work before and during this audit. Are there tax disputes? Then you can use dispute settlement instruments.

 

Verwaltungsgrundsätze 2020

The recently applied administrative principles of the tax auditing practice in Germany are:

  • Increased duty of cooperation, according to Section 90 (2) AO. The relevance of documents and data of foreign persons, such as e-mails, Messenger messages, and electronic media, is necessary. If necessary, you can contractually guarantee the internal group relationship.
  • Increased obligation to cooperate in accordance with Section 90 (3) AO. You must provide evidence for data or documents as a basis for testing by using different methods.
  • Suitability documentation. With the introduction of the “Best Method”-rule, you can leverage third-party comparison data for budget calculations and sensitivity analysis for valuation.
  • Estimates, according to Section 162 (3) and (4) AO. Please refer to this Section if your documentation cannot be used, even if the content differs from the tax authorities’ view.

 

ATAD implementation law (Anti-Tax Avoidance Directive)

Little change has taken place in ATAD. If you wish to read about this law, the European Commission is consistent in releasing ATAD information.

 

Tax CMS: Accounting obligations and tax audits in Germany

“For tax evasion of the various forms of intent, conditional intent is already sufficient.” Legal Framework – Decision Implementing Section 143 AO.

If the taxpayer has set up an internal control system (ICS) to meet tax obligations, this may be an indication against intent or recklessness. However, this does not exclude an investigation of the concerned individual case.

 

Verbandssanktionengesets/Association Sanctions Act (VerSanG):

The basis of the association sanction is a so-called association law. This includes tax evasion. Association acts can be punished with hefty fines; the amount of the fine depends on the company’s size. If there are sufficient factual indications, public prosecutors are obliged to conduct an investigation (principle of legality). It is explicitly stated that (fiscal) CMS measures can have a mitigating effect as part of the sanction.

 

Transfer Pricing Life Cycle

Even errors down to the smallest details can cause issues. You can use the Transfer Pricing Life Cycle to determine where attention is necessary.

  1. Identification: Provide continuous identification of transfer pricing issues.
  2. Tax Assessment: Provide a tax analysis of the identified transfer pricing issues based on provided calculations.
  3. Contract and Action Instructions: Ensure documented formalization of transfer pricing models in written agreements and instructions.
  4. Methodology and Actual Implementation: Ensure uniform application of transfer pricing methods for comparable transactions.
  5. Data Delivery and Calculation: Provide a consistent calculation of transfer prices according to the defined methodology.
  6. Booking: Provide the accounting mapping of transfer prices in an understandable and uniform form. Monitoring: Provide regular monitoring of compliance with transfer pricing models throughout the year.
  7. Archiving: Provide audit-proof storage of the data in an understandable form.
  8. Process Monitoring and Escalation: Provide monitoring of processes and escalations.
  9. TP Documentation: Secure the documentation content for so-called local files.
  10. Tax audit: Ensure implementation of tax audit findings in subsequent years.

If you need further information, or if you have any questions, feel free to contact us. You can find the necessary information on this topic on the OECD (Organisation for Economic Cooperation and Development), the BMF (Federal Ministry of Finance of Germany), the European Commission, and KPMG Germany websites.

Related GCA articles:

Transfer Pricing Agenda 2021: Tax Efficiency

Transfer Pricing Agenda 2021: Tax Certainty

Transfer Pricing Guidance on Financial Transactions by OECD

Base Erosion and Profit Shifting

Transfer Pricing Focus of International Tax Authorities

Country by Country Reporting

 

Sources:

Organisation for Economic Cooperation and Development – Federal Ministry of Finance (Germany) – European Commission – KPMG Germany

Workshop Tax advantages for Dutch companies

06 Mar 2019
Aktuelles, China, GCA on Tour, Niederlande, Steuerplanung

Global Connect Admin Tax Workshop für Chinese Companies in the Netherlands

On March 5, the Global Connect Admin Tax Workshop for Chinese Companys in the Netherlands took place in Amsterdam. More than 30 interested participants of Chinese companies based in the Netherlands took part in our seminar “Tax advantages for a Dutch company”. Our tax experts have provided information in Chinese and English on relevant topics of Dutch tax legislation. The focus was on low corporate tax rate, which is still decreasing in recent years, no withholding taxes for interests and royalties, withholding tax for dividends as low as 15% (to Chinese residents is 10%) and possible participation exemption.

Furthermore, the latest news in tax regulations in 2019 was on the agenda: The Global Connect admin team explained to the participants that 19% and 25% in 2019, respectively. The substantive tax will increase, which is 25% in 2019 and the lower VAT rate has increased to 9% in 2019. In addition, it dropped Wealth tax rate insignificantly. Expat settlement has been shortened to 6 years in 2019. A number of innovations that must be observed in the company administration.

The second part of our seminar was very practical and focused on invoice compliance requirements. Using concrete examples, the participants from all over the Netherlands were able to practice the correct billing process.

Do you have any questions about tax advantages for Dutch company? Please feel free to contact us directly to see what GCA can do for you. Global Connect Admin B.V. (GCA) is a trusted partner in all matters of company administration, financial management, bookkeeping and accounting. As an experienced administration office, we provide our client with an extensive package of services. We closely align these services with our clients’ specific needs and adapt our corporate culture to guarantee a long-term partnership.

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