New Procedural Circular regarding Transfer Pricing

Transfer Pricing Documentation File for Intra-group Transactions

The Commissioner of Taxation has issued Procedural Circular 5, dated 2 January 2019, to clarify the principles that will be applied by the Tax Department in relation to the above topic:

1. As stated in Circular 3 issued by the Tax Department on 30 June 2017, intra-group financing transactions should be conducted in compliance with the arm’s length principle. In order to ensure that this principle is universally applicable, the Tax Department requires that this documentation is made in accordance with the OECD Transfer Pricing Guidelines for intra-group Transactions.
2. The Circular 3 summarizes the information that should be included in the Documentation File prepared in relation to this particular type of intra-group transactions. The organizational structure of this file, with all the details that must contain in order to be considered by the Tax Department as a complete file, will be communicated soon after the pass of the relevant legislation.
3. This documentation file will not be submitted in any case to the Tax department, but will be kept by the company that is required to prepare it, for as long as there is obligation to maintain the books and records of the relevant tax year. In case of any request for examination from the Tax department, this file and possibly all the supporting evidence for the preparation must be delivered to the competent authority within 60 days of receipt of the request.
4. The legal representative of the company that carries out intra-group transactions should submit, in accordance with the underlying legislation, a Summary Information Table within 9 months from the end of the tax year. It should be clearly stated that the Summary Information Table should under no circumstances be considered as a complete and extensive documentation of the transfer pricing aspects of intra-group transactions.

The draft Summary Information Table was attached to the Procedural Circular.