Please pay attention to your transfer pricing documentation
Transactions between members of a multinational group must always be conducted on an arm’s length basis for tax purposes. This prevents profits generated by a group from being allocated to the country with the most favourable tax regime. For many years now, companies have been subject to the statutory obligation to document the arm’s length nature of their transactions. Does your documentation on transfer pricing comply with the rules?
The rules for country-by-country reporting have been changed and tightened with effect from the fiscal year 2016. Multinational groups whose consolidated global revenue is € 50 million or higher are required to include additional transfer pricing documentation per entity in their accounting records.
Members of multinational groups whose revenue is € 50 million or higher are subject to the following two documentation requirements. They must produce:
- a master file; and
- a local file.
Members of multinational groups whose consolidated global revenue is at least € 750 million are not only required to keep a master file and a local file, but they also have to include a country-by-country report in their accounting records.
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