Connection between Transfer Pricing, Customs Valuation and Voluntary Declaration

When:
Tuesday, 18 April 2017

Activity Time:
09.00 a.m. to 05.00 p.m

Where:
DDTC Academy
Menara Satu Sentra Kelapa Gading 5th Floor,
Unit #0501
Jl. Bulevar Kelapa Gading LA3 No.1 Summarecon
Kelapa Gading Jakarta Utara 14240

Investment:
IDR 3.000.000
(Click here for discount)

Background:
Customs and transfer pricing rules are designed to reach arm’s length value, but the differences in the processes and valuation standards may mean that transfer prices set for income tax purposes do not withstand the scrutiny of customs authorities, or vice versa. This seminar explains the significance of different views between tax and customs authorities in cross border business environment, which typically could create tension between these regimes and make it difficult to manage transfer pricing and customs in a coordinated manner. At a glance, our approach to deliver this topic is by explaining the sample case by case or issue encountered by an enterprise. Our detailed key differences in approach and process are as below:

• Customs procedures and scrutiny occur in real-time as customs officials will investigate products and pricing as the goods are imported. Transfer pricing occurs after the fact as it is based on annual filings, tax returns and documentation studies covering the entire financial year. Tax authorities can review annual tax returns, often months or years after the actual transaction has taken place.
• Customs officials tend to look at transactions on a case-by-case basis as they are interested in import values for each customs entry. Tax officials tend to focus on aggregated or legal entity level results. The consequence of this is that customs officials are likely to focus on price comparisons while tax officials often turn to margin comparisons. This often makes it difficult for customs authorities to take any holistic view on the business model or any strategic reasons for low import values. This can be better communicated to tax authorities who review the overall tax return and get a snapshot of their business.
• Customs officials generally focus on goods only, while tax officials can look at tangibles, intangibles and services. However, some payments for intangibles may give rise to customs duties as well. These issues are sometimes overlooked when setting transfer prices.
• There is an inherent tension and a conflict between the objectives of customs and transfer pricing authorities, as customs would like to see inbound prices maximized whereas tax authorities in the importing countries would look for low inbound prices which maximize profits for the local entity.
• Transfer pricing regulations may lead to greater voluntary or imposed adjustments to taxable profits on an ex-post basis. These adjustments will typically lead to challenges on the customs side.

Topics Covered:

1. Background and introduction: mapping the problems,
2. Comparison between customs and transfer pricing: exploring some key differences and similarities,
3. Voluntary declaration,
4. Seeking for integration or joint approaches of customs and transfer pricing,
5. Transfer pricing from OECD policy framework vs. customs value from,
6. WTO perspective,
7. Comparative study,
8. Administration issue,
9. Compliance and disputes resolution.