Current WCO and international developments 1 What is the issue for Customs Customs objective To verify whether a price has been influenced in a relatedparty transaction Options Test values difficult to use ID: 1028463
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1. Transfer Pricing and Customs ValuationCurrent WCO and international developments1
2. What is the issue for Customs?Customs objective: To verify whether a price has been influenced in a related-party transactionOptions: Test values (difficult to use)Examine ‘circumstances surrounding the sale”Key questions: How can information contained in a transfer price study be accepted as the basis for verifying a related party transaction?How should post-importation adjustments be dealt with?Business concerns :“Double obligation”; need to satisfy both Customs and Tax authorities on similar issues 2
3. 3Competing tensionsCustoms administration objectiveEnsuring all appropriate elements are included in the customs value Direct Tax authority objectiveEnsuring the transfer price does not include inappropriate elements Trade objectiveTo minimise Customs valuePull in opposite directionsTrade objectiveTo maximise transfer price (incl. cost of imported goods) to reduce taxable profit
4. Key DifferencesCustoms ValuationGoods onlyTransaction basedConfirmed at point of customs clearanceDifferent definition of relationshipTransfer PricingGoods and services etc.Often based on aggregates/annual in practice (transactional in theory)Confirmed retrospectively (some years after event)4
5. Activities to dateTwo joint WCO/OECD conferences (2006, 2007)Full alignment not possible/ realisticFocus Group – identified key technical issuesOn agenda of TCCVCommentary 23.1Draft case studiesWCO producing guidance material
6. TCCV Commentary 23.1Examination of the expression “circumstances surrounding the sale” under Article 1.2 (a) in relation to the use of transfer pricing studies…the use of a transfer pricing study as a possible basis for examining the circumstances of the sale should be considered on a case by case basis… any relevant information and documents provided by an importer may be utilized for examining the circumstances of the saleA transfer pricing study could be one source of such information6