TRANSFER PRICING AND CUSTOMS VALUATION - 2015 - ICC releases Policy Statement
INTERNATIONAL businesses face difficulties regarding the valuation of goods due to diverging customs and tax rules regulating transactions between related parties. ICC (International Chamber of Commerce) calls for more alignment and puts forward concrete proposals to secure harmonized tax and customs valuation of transactions between related parties in an international context.
ICC Recommends:
- Recognition by the customs administration that businesses which establish prices between related parties in accordance with the arm's length principle (as per Article 9 OECD Model Tax Convention) have generally demonstrated that the relationship of the parties has not influenced the price paid or payable under the transaction value basis of appraisement and consequently that the prices establish the basis for customs value.
- Recognition by the customs administration of post-transaction transfer pricing adjustments (upward or downward). This recognition should be applicable for adjustments made either as a result of a voluntary compensating adjustment - as agreed upon by the two related parties - or as a result of a tax audit.
- in the event of post transaction transfer pricing adjustments (upward or downward), customs administrations accede to review the customs value according to either of the following methods as selected by the importer: application of a weighted average duty rate, or an allocation according to specific codes of the customs tariff nomenclature.
- in the case of post-transaction transfer pricing adjustments (upward or downward), companies be relieved from:
The obligation to submit an amended declaration for each initial customs declaration
The payment of penalties, as variations of the transfer price
- Customs administrations recognize that the functions and risks undertaken by the parties as documented in a transfer pricing study following an OECD transfer pricing methodology are crucial to the economic assessment of the circumstances of the sale.
- Recognition of the acceptability of relevant transfer pricing documentation by the customs administration as evidence that the price paid for imported goods was not influenced by the relationship of the parties.
A recommended method to accomplish harmonization of customs and income tax requirements is for customs administrations to use information contained in transfer pricing studies.