The OECD’s interim report on taxation of the digital economy examines the implications new nexus and profit allocation concepts could have on the international tax system. A re-evaluation of where value creation takes place will heavily impact big tech companies that use transfer pricing to shift profits to low-tax jurisdictions.
Profit attribution based on DEMPE functions is becoming a major point of uncertainty, Swedish corporate sources tell TP Week. Differing interpretations by the tax authority are increasingly deterring MNEs from conducting IP-related restructurings and may prompt litigation.
Singapore’s new transfer pricing regime and the tax authority’s expanded powers are set to heighten the potential for taxpayer disputes. New anti-base erosion and profit-shifting measures include stricter enforcement of the arm’s-length principle, surcharges and reviews of related-party agreements.
Brazil will likely need to move away from formulary apportionment and adopt the arm’s-length principle as it considers reforming its cross-border tax rules to become an OECD member.
