Transfer pricing has become a very popular term in South Africa over the last few years, even more so since July 2013 when the Base Erosion and Profit Shifting (BEPS) Action plan was issued by the Organisation for Economic Co-operation and Development (OECD) and G20 (an international forum for the governments and central bank governors from 20 major economies). The OECD and G20 has issued the plan to address the perceived flaws in international tax rules, giving rise to profit shifting. Subsequently, the OECD has issued numerous reports and as a result has updated its 2010 Transfer Pricing Guidelines. Many countries have adopted these guidelines. However as South Africa is not an OECD member, there is no certainty that it will be adopted. The question is therefore: has the South African Tax legislation met the OECD guidelines and addressed the BEPS issue? Therefore, the objective of the research is to understand whether the current South African tax legislation is in line with the OECD Transfer Pricing Guidelines and BEPS Action Plan. The South African tax legislation provides South African taxpayers with no guidance as to how the OECD Transfer Pricing Guidelines needs to be implemented and interpreted. However, even though not legislation, the SARS practice note 7 and draft interpretation note on thin capitalisation provides taxpayers with a good basis of understanding the OECD Transfer Pricing Guidelines, as these documents provided by SARS is similar to that of the guidance in the OECD Transfer Pricing Guidelines, specifically relating to transfer pricing documentation. The issue that may result where the South African tax legislation is not in line with the OECD guidelines and the BEPS Action Plan is that Multinational Enterprises (MNEs) may use South Africa as the country to shift its profits to or from, thus effectively resulting in a loss to the Fiscus.

The aim of this study is to compare the methodology for determining transfer prices in the Czech Republic and the United States. The reason for choosing these countries are different models, which are governed by states. Czech Republic sets transfer prices according to the OECD model. United States of America set transfer prices according to own regulations. The theoretical part is focused on comparing models and approaches to pricing methodologies. The practical part compares the creatin of a Benchmarking study in these two models.

For the last decades, transfer pricing has been one of the most important issues for both tax authorities and multinational corporations. On the one hand, tax authorities, despite their counter-measures, have not been able to cope with international tax avoidance or evasion using transfer pricing by multinational corporations owing to the deficiency of tax systems and the inability of tax administrations and this has resulted in a huge revenue loss to the coffers of their countries. On the other hand, while multinational corporations have been using transfer pricing as vehicles to maximize their overall after-tax profits as a group, they have been suffering intolerable administrative burdens and double taxation caused by enforcement of counter-measures by tax authorities. The basic principle for transfer pricing taxation legislation is the "arm's length principle", that transactions between parties that are not dealing at arm's length should be carried out for tax purposes under terms and at a price that one could reasonably have expected in similar circumstance had the parties been dealing at arm's length. This principle has been endorsed by the OECD, Canada, the U.S. and other developed countries, however, common specific guidelines under this principle have not been established among tax authorities and even multinational corporations themselves cannot always find an arm's length price acceptable to tax authorities. Since the OECD Committee on Fiscal Affairs issued the report "Transfer Pricing and Multinational Enterprises" in 1979, tax authorities, multinational corporations and tax practitioners have been making strenuous efforts to find a reasonable and practical transfer pricing taxation system and to coordinate its enforcement, all of which enables tax authorities to recover or keep their fair share of revenue and protect multinational corporations from double taxation. At present, the situation already shows some improvements due to efforts for the harmonization of guidelines among tax authorities, and due to multinational corporations' application of transfer pricing policy in a more self-restricted manner, and more appropriate advice from tax practitioners. However, there is still room for possible improvements. In Canada, there have been no guidelines other than the Income Tax Act which provides general principles of transfer pricing taxation, and actual enforcement has been based on the internal assessing guideline of Revenue Canada. But, on February 27, 1987 Revenue Canada issued Information Circular 87-2. Although an information circular does not carry any legal weight, it is expected that the circular will eliminate taxpayers' uncertainty and augment tax compliance. On the other hand, in Japan, despite its export-oriented economy, the Japanese tax authorities have not been keeping pace with the internationalization of economic activities. Having introduced anti-tax haven legislation in 1978, Japan in 1986 introduced transfer pricing taxation legislation. Although fairly concrete pricing methods have been written into legislation in order to permit the reasonable enforcement of the new system, there is much to be learned from the experience of the "advanced" countries. Above all, Canada's experience could be useful, as the provisions of the new Japanese transfer pricing taxation legislation are similar to those of the Canadian Income Tax Act and both countries have several similarities in terms of their relationship with the U.S. In this thesis, after reviewing the background to these problems, I will discuss the Canadian transfer pricing taxation system and its enforcement by looking at each type of intra-group transaction and the corresponding adjustment and mutual agreement procedure system. Then I will compare the Canadian approach and Japanese approach. Possible improvements will be dealt with in the conclusion. Since there has been little jurisprudence in this area, the discussions are primarily based on the tax authorities' perspectives and the OECD reports. / Law, Peter A. Allard School of / Graduate

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Världsekonomin är i ständig tillväxt. Till följd av globaliseringen av ekonomin har allt fler multinationella koncerner etablerats. För att kunna effektivisera och vinstmaximera inom sina organisationer har multinationella bolag utnyttjat olika länders skattesystem. Det genom att förflytta sina vinster till skatteparadis eller andra länder med längre skatt för att på så vis uppnå ett högre resultat för koncernen i helhet. Det leder till att skattebaserna i länder med höga skattesatser eroderas. Av den anledningen har ett behov av en global accepterad standard rörande internprissättning uppkommit. Organisation for Economic Co-oporation and Development har gett ut riktlinjer som de anslutande medlemsländerna ska följa vilka går under namnet Transfer Pricing Gudelines For Multinational Enterprises And Tax Authorities. Riktlinjerna behandlar de viktigaste områdena inom internprissättning och består av totalt nio kapitel.Studien syftar till att undersöka om svensk respektive amerikansk lagstiftning och hänvisningar inom området internprissättning är harmoniserade. Detta med hänsyn till OECDs riktlinjer. För att ta reda på om länderna är harmoniserade inom området har en komparativ studie genomförts. I uppsatsen har en undersökning av kapitel 1, 2, 5, 8 ur OECDs riktlinjer utförts, vilka berör armlängdsprincipen, CCA, prissättningsmetoder och dokumentation. För att kunna avgöra om harmonisering råder inom samtliga områden har en kvalitativ metod använts för att kunna studera ekonomisk och juridisk litteratur. Det för att kunna lägga grund till den slutgiltiga analysen av empiri i form av lagtext och hänvisningar.Studien har bidragit med ökad kunskap för hur OECDs riktlinjer är utformade inom området. Genom djupare förståelse för dess utformning har det bidragit med en inblick i hur OECDs riktlinjer påverkar medlemsländernas utformning av sina hänvisningar och lagstiftningar inom internprissättning. Vid granskning av OECDs utformning inom samtliga områden som tas med i studien har en analys kunnat genomföras för att se hur dessa implementerats inom de två medlemsländerna som är utvalda i studien. Studien har dessutom bidragit med en ökad förståelse för hur de svenska respektive amerikanska hänvisningarna och lagstiftningarna ser ut inom området.Uppsatsen resulterar i att harmonisering råder mellan Sverige och USA inom området internprissättning. Genom analysering av lagar och hänvisningar har stora likheter kunnat urskiljas i enighet med OECDs riktlinjer. Vid genomförandet av studien har viss olikhet och differentiering i utformandet kunnat identifieras men inte i tillräckligt stor utsträckning för att kunna påverka vår slutsats om att det råder harmonisering mellan Sverige och USA i enighet med OECD. / The world economy is in constant growth. As a result of the globalization of the economy, more multinational enterprises have established. In order to streamline and maximize profits within their organizations, multinational companies have exploited various countries tax bases. By moving their profits to tax havens or other countries with lower tax rates they achieve higher earnings for the business as a group. Which leads to that the tax bases in countries with high tax rates will be eroded. Because of this a need for a globally accepted standard on Transfer pricing arise. Organisation for Economic Co-oporation and Development has issued guidelines that acceding member states should follow which is known as Transfer Pricing Guidelines for Multinational Enterprises and Tax Authorities. The OECD guidelines consist of nine chapters and address the key areas of Transfer pricing.This study aims to examine the Swedish and US laws and references to see if they are harmonized in the field of transfer pricing in regard with the OECD guidelines. To find out if the countries are harmonized within the region a comparative study has been select. In the study, a survey of Chapters 1, 2, 5, 8 of the OECD Guidelines were performed, which contains the arm's length principle, CCA, transfer pricing methods and documentation. In order to determine whether harmonization exists, a qualitative method has been used to study economic and legal literatures to lay the foundation for the final analysis of empirical data in the form of legal texts and references.This study has contributed to increased knowledge of how the OECD Guidelines are designed in the area. Through a deeper understanding of its design, it has given a glimpse of how the OECD guidelines affect the member countries design on their references and laws in the area of transfer pricing. Upon review of the OECDs guidelines of all the areas included in the study, an analysis has been carried out to see how these are implemented in the two member states that are selected in this thesis. The study has also contributed to a better understanding of how the Swedish and American references and legislation are implemented in the field.The thesis results in that harmonization exists between Sweden and the United States within the area of transfer pricing. By analyzing the laws and references great similarities have discernible in unity with the OECD guidelines. In the implementation of the study some diversity and differentiation in the design have been identified, but not sufficiently to affect our conclusion that there is harmonization between the United States and Sweden in unity with the OECD guidelines.This paper is hereinafter written in Swedish.

The focus of this thesis is alternative methods used to determine transfer pricing in practice, mainly in the environment where there is a lack of available comparable information in the market. The paper is divided into four chapters. The first lists basic terminology, available relevant legislation and briefly outlines particular methods of determining a transfer pricing as recommended by OECD directives and the use of those. The second chapter focuses mostly on identifying of an interval for transfer pricing acceptable for tax authorities under a sale of an enterprise or its part. The third chapter mentions further alternative methods for which the underlying asset for determining of transfer price are financial derivatives. The last chapter discusses the results of carried out analyses and presents recommendations to using alternative methods. The thesis contents are supported by a designed computer program, which is a key element for using the alternative methods in practice.

The purpose of this thesis is to examine both the conditions for levying tax penalties in transfer pricing and the sustainability of the Swedish tax penalty framework in regard to transfer pricing in a post-BEPS world. This question is of relevance as BEPS has resulted in more extensive documentation requirements, affecting both the tax payer’s tax assessment procedure and the Swedish Tax Agency’s auditing practice. Tax penalties were introduced in order to incentivize the tax payer to disclose relevant information for the tax assessment. The scope of relevant information is relative to the correction rule, which has a significant connection to the OECD and BEPS. This thesis concludes that in a post-BEPS world, relevant information relates to domestic developments of the correction rule produced by the legislator, case law and the Swedish Tax Agency. Furthermore, this thesis concludes that transfer pricing documentation in full compliance with the Swedish content requirements should greatly mitigate a tax payer’s risk of being subjected to tax penalties. Court rulings from the lower administrative courts regarding tax penalties in transfer pricing demonstrate contradictory views to that of statutory law, case law and preparatory works. These opposing views constitute the current framework of tax penalties in transfer pricing, which is neither sustainable nor appropriate. For this reason, the Swedish tax system requires either extensive case law or statutory reform on the subject. This thesis concludes that statutory reform would perhaps be the most appropriate development in light of certain aspects of the principle of legality. Proceeding from that conclusion, this thesis therefore presents two amendments to the Swedish tax penalty framework in regard to transfer pricing.

Transfer pricing is a significant taxation problem facing both tax authorities and multinational enterprises. Tax authorities around the world regulate transfer pricing through tax legislation, which requires that cross-border transactions within multinational enterprises be at arm’s-length. A number of countries in the international community have amended their transfer pricing tax legislation to be prescriptive by including regulations in their legislation on how to transact at arm’slength price. This research study presents an argument that the South African transfer pricing tax legislation is non-prescriptive as it does not have regulations on how to transact at arm’s-length price. With reference to the transfer pricing guidelines issued by the Organisation of Economic Development and Corporation and the experience of the United States of America in the enforcement of transfer pricing, this research study examines whether or not the South African transfer pricing tax legislation should be amended to be prescriptive by including regulations on how to transact at arm’slength price. The research findings reveal that to a certain extent the South African transfer pricing tax legislation is consistent with the transfer pricing guidelines issued by the Organisation of Economic Development and Corporation, but to a certain extent it is not. The research findings also reveal that non-prescriptive legislation has in the past created a problem in certain countries. Furthermore, the research findings reveal through an analysis of the United States of America’s transfer pricing enforcement experience, that prescriptive transfer pricing tax legislation in a tax system has a positive impact. Recommendation is therefore made in this research study that the South African transfer pricing tax legislation should be amended to be prescriptive by including regulations on how to transact at arm’s-length price. viii Keywords of the study: arm’s-length price, arm’s-length principle, income tax, IRS, multinational enterprise, non-prescriptive, OECD, Practice Note 7, prescriptive, SARS, section 31, section 482, South Africa, tax legislation, taxation, tax law, tax authority, transfer pricing, transfer pricing methods, United States of America.

This thesis deals with transfer pricing, namely the documentation. It tries to map the legislative standards and procedures of transfer pricing documentation that could be applied in the Czech Republic. The main objective of this thesis is a compilation of documentation for a specific company in the Czech Republic in accordance with those procedures. The thesis contains three main chapters. The first section mainly covers the basic theoretical concepts and actual legislation regarding transfer pricing. This is the minimum necessary for initiation into the issue. The second chapter deals specifically with the theoretical process of creating documentation. The final, third part of the thesis includes the application of the theory to a specific company.

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