Cosmos International Management Co., Ltd.

News (July 6, 2010)

NTA partially revised transfer pricing directive

On June 30, the National Tax Agency (gNTAh) announced a partial revision of Commissionerfs Directive on the Operation of Transfer Pricing (gTP Directiveh) and the same Directive for consolidated entities, as of June 22. The revision reflects and follows FY2010 tax reform proposal, which was announced on December 2009.

[Brief summary of the two main points of the revision]

‡@ 2-2 (Points to Consider when Conducting Examinations)
The revision has clarified that in examining armfs length nature of related-party transactions, negotiation process for determining transfer prices should be considered. But it also has notified that the only facts such as hard negotiations were carried, a third-party was involved in the pricing negotiation, or a third-party was involved as one of counterparties cannot justify armfs length nature of the related-party transactions.

‡A 2-4 (Documents to Be Inspected at the Time of Examination)
Definition of gdocuments containing the details of foreign-related transactionsh and gdocuments used by the corporation for the calculation of armfs length pricesh has been aligned with the documents that should be submitted in order to avoid deemed taxation by tax authorities, defined by Ordinance for Enforcement of the Act on Special Measures Concerning Taxation (gASMT Ordinanceh) Article 22-10, which was added in effect from April 2010 in relation to FY2010 Tax Reform.
(For the detail of ASMT Ordinance Article 22-10, please see our News as of April 30 2010.)

If you have any questions regarding the revision, please contact us.


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