The transfer pricing world is always turbulent and evolving. However, 2023 will probably go into history as one of the pivotal years, similar to 2015 (BEPS Action Plan finalization). After visiting TPMinds International Conference 2023 and talking to the community, we decided to highlight some of the hottest topics, including Pillar Two, new Brazilian transfer pricing rules, and digitalization.
Pillar Two: The Hottest Topic
The introduction of a global minimum tax of 15% and the incorporation of tax accounting concepts into tax law for the purposes of considering effective tax rates represent a fundamental shift in the way businesses are taxed. As countries adopt Pillar Two into domestic legislation, multinational and domestic top-up tax rules are coming into effect for accounting periods commencing on or after 31 December 2023.
The echo of Pillar Two was heard in almost every panel of the TPMinds Conference, emphasizing its impact on the international tax landscape and the need for organizations to adapt accordingly.
Since the end of the event, the OECD published "Tax Challenges Arising from the Digitalisation of the Economy – Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two)” in July 2023. This guidance provides further clarification on the implementation of Pillar 2 and the associated compliance requirements for multinational enterprises.
New Brazilian Transfer Pricing Rules
The Brazilian Federal Senate recently passed Provisional Measure No. 1,152, introducing significant changes to Brazil's transfer pricing system. The measure shifts from Brazil's historical, formula-based transfer pricing rules to an arm's length standard consistent with the OECD Guidelines. The new rules also establish updated transfer pricing methods, documentation requirements, and considerable changes to the treatment of intangible assets, financial transactions, and business restructuring. As the Brazilian president is expected to sign the legislation, tax professionals are now anticipating comprehensive guidance from the Brazilian tax authorities on applying the arm's length principle.
Digital Transfer Pricing
During TPMinds Conference, our Founder, and CEO, Hannu-Tapani Leppänen, delivered an inspiring talk on how digital transfer pricing is revolutionizing the industry.
He shared real-life stories and experiences demonstrating how embracing technology can optimize processes, mitigate risks, and create strategic competitive advantages. Hannu's talk highlighted the importance of being a leader in the era of Tax Administration 3.0 by adapting to digital transformation and leveraging technology in transfer pricing practices.