th Annual Tax & Legal How will BEPS … · 2016-10-17 · PwC BEPS project timeline MaximiseShareholder Value 2017 18 October 2016 5 2012 2013 July 2013 2014-2015 The OECD BEPS project

18th Annual Tax & Legal Conference

Maximise Shareholder Value 2017

How will BEPS impact customs and trade, and how can you prepare for it?18 October 2016

www.pwccustoms.com

PwC

Agenda

Introduction to BEPS

Potential impact of BEPS on customs and trade

Preparing for BEPS

Recent developments

218 October 2016Maximise Shareholder Value 2017

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BEPS in context

• What is BEPS

- OECD’s base erosion and profit shifting project

• Why BEPS now

- Government desire to protect tax base

- Public perception of whether or not multinational companies pay their “fair share” of taxes

- Perceived need to correlate tax liabilities with operations

• What OECD is trying to accomplish

- Multi-step plan to reshape international tax rules

- Encourage global consistency in the way tax rules are applied


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BEPS project timeline


2012

2013

July 2013

2014-2015

The OECD BEPS project starts

G20 governments urge OECD to move against BEPS arrangements

The OECD issues the BEPS Action Plan

The OECD releases reports and discussion drafts on all topics

October 2015 The OECD released final reports on BEPS action plan

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Transfer Pricing Documentation

Action item 13

Transfer Pricing Outcomes

Action item 8, 9 and 10

Strengthen Controlled Foreign Corporation

(“CFC”) Rules

Action item 3

BEPS Action Plan

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Key focus areas of BEPS project from a trade perspective

• Management of intellectual property and intercompany licensing agreements

- What are the value drivers in the business, how are they developed, which entities are responsible for development, how are they deployed

• Functions and substance of regional centres / headquarters / principals

• Mapping and alignment of functions, risks and assets within the organization and appropriateness of tax positions


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Illustration

Before

HQ / Mfg.Co

Distribution Co

Distribution Co0

Distribution Co

Prod

uct s

ales

After

Regional Principal(low tax

jurisdiction)

Limited Risk

Distributor

Limited Risk

Distributor

Limited Risk

Distributor

Prod

uct s

ales

5% OM 5% OM 5% OM

HQ / Mfg.Co

2% OM 2% OM 2% OM

Related Party Contract

Manufacturers

1. HQ license right to utilize IP to manufacture and distribute products in territory to regional principal

2. Regional principal utilizes related parties to manufacture and distribute products in region

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Illustration of Transfer Pricing Documentation Requirements


Effective 1 January 2016

Three tier TP Documentation

Local File

Information specific to the local entity

Country-by-country reporting

Group wide financial information

Master File

Overview of the Group’s global operations

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The potential impact of BEPS on customs and trade

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Valuation Trade flows

Consistency of documents

Impact

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Thai Customs perceptions and developments


Revenue collection

Dutiability of payment for intangibles

TP adjustments and related party pricing

High margins

TP based customs values

Data sharing

TP and customs value related documents

Price changes

Origin

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Customs audits and investigations – watch out areas

• Related party importations and pricing?

• Transfer prices and price adjustment?

• Royalties? Assists? Management fees?

• Consistency in information submitted to Customs and the tax authority

• Increase in suspicious


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Customs audits and investigations – Customs statutory liabilities


change

New proposal

0.5 to 4 times of duty shortfall or imprisonment for not more

than 10 years or both

Customs has to prove wilfulintent or negligence

Current

4 times of CIF value +duty or Imprisonment not more

than 10 years or both

No prove of wilful intent or negligence required

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Preparing for BEPS

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Preparing for BEPS

• Develop an understanding of global tax footprint and relationship to operations

• Help to facilitate discussion between operations and tax to optimize impact of BEPS compliance

• Engage in early discussions with Customs on the impact of BEPS on your companies import pricing

• Countries in the process of implementing BEPS related changes in tax law:

- Australia - Japan

- China - Singapore

- France - UK

- Thailand?


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Preparing for BEPS

• Ensure that documentation to support prices as being arm’s length can be readily and timely presented to Customs

• Achieve internal harmony and consistency between Tax (Transfer Pricing) and Trade (Customs Valuation)

• Avoid different “arm’s length prices” for Customs and TP

• Manage the frequency & magnitude of price adjustment

• Proactive planning

- Existing documentation supporting pricing method

- Advance rulings / agreements with Customs

- Confirmation possible for past shipments from the Customs Standard Procedures and Valuation Bureau (CSPVB)

o Typically no “formal” approval


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Recent developments

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Recent developments

Current status of Draft Customs Act


Council of State finalised review in August 2016

Now subject to Cabinet and Parliament approval

Enter into force by August 2017?

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Recent developments

New Free Zone Regulations


• Customs Notification 32/2559Free Zone Establishment Criteria

• Ministry of Finance Notification • Customs Notification 73/2559• Office of Industrial Economics (OIE)

Notification

Duty reduction/exemption for domestic sales

• The Order of the National Council for Peace and Order (NCPO) Storage requirements

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Recent developmentsFree Zone Establishment Criteria


Establisher• Paid registered capital

o > 60 million bahto > 20 million baht

• Areao Manufacturing: as appropriateo > 50 rai (80,000 square meters)

• Management of Free Zone• Changing of business operation

User• Paid registered capital

o > 5 million bahto > 1 million baht (special economic zone)

• Reporto Excel file in read-only memory o The Certified financial report

• Inventory checking requirements

• Exemption of prototype vehicle/motorcycle

• Appeal procedures• Withdrawal procedures• Nameplate of Free Zone• Map

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Recent developments

Duty reduction/ exemption for domestic sales • Only imported raw materials from ASEAN countries members can be considered as

originating raw materials.

• Eligible products shall pass the essential production process in a Free Zone.


2. Chemical 3. Petrochemical

4. Plastic

13. Aluminium

8. Paper packaging

9. Textile, clothes and textile used

in industry

11. Steel and iron

10. Gems and jewellery

16. Automotive

and parts

12. Copper

15. Electric appliances

and electronics

5. Rubber and rubber

product

1. Food

14. Machinery and spare parts

Parts and accessories of

machinery

7. Paper

17. Medical device

6. Bag and leather goods

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Recent developments


Storage requirements

2 years from the first date that the goods are taken into the Free Zone

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Recent developments


Origin audits

• Free Trade Agreement origin claims

• ‘watch list’

Export Control

• Dual-use items• Permission for export• 1 January 2018

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Contact: WMS Thailand

Paul Sumner (Partner)Tel: +66 (0) 2 344 1305Email: [email protected]

Santi Krongsithidej (Director) Tel: +66 (0) 2 344 1341Email: [email protected]

Nu To Van (Director) Tel: +66 (0) 2 344 1353Email: [email protected]

Wiphawee Rungwanitcha (Senior Manager)Tel: +66 (0) 2 344 1248Email: [email protected]

Monrudee Phuttirodtaworn (Manager)Tel: +66 (0) 2 344 1462Email: [email protected]


Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2016 PricewaterhouseCoopers WMS Bangkok Ltd. All rights reserved. PwC refers to the Thailand member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

http://www.pwc.com/structure

Documents

th Annual Tax & Legal How will BEPS … · 2016-10-17 · PwC BEPS project timeline MaximiseShareholder Value 2017 18 October 2016 5 2012 2013 July 2013 2014-2015 The OECD BEPS project