Jamaica Information Service
By Garfield L. Angus December 1, 2015
Senate Passes Bill to Prevent Tax Leakage through Transfer Pricing
The Senate, on Friday (November 27), passed amendments to the Income Tax Act, which will empower the Government to prevent tax leakage through the transfer pricing system.
Transfer pricing is used by multinational companies for sales and services within their corporate groups and by individuals in transactions with corporations under their control. The system, while legitimate, can be used as a mechanism for tax avoidance.
Minister of Justice, Senator the Hon. Mark Golding, in his contribution to the debate on the Bill, said without controls in place, distortions can occur in transfer pricing.
“Unless prevented from doing so, related parties engaged in cross border transactions can avoid income tax of a country by manipulating transfer prices. This results in the distortion of the allocation of profits between entities as well as their tax liabilities,” he pointed out.
Minister Golding told the Upper House that the Government and the private sector have agreed on the “urgency of the implementation of a transfer pricing regime.”
He noted that in 2012, the Private Sector Working Group on Tax Reform proposed that the Government embark on an international best practice system.
According to the Minister, developing countries such as Jamaica are increasingly opening their borders to multinationals, and it is estimated that as much as two thirds of cross border business takes place among companies that are members of the same group.
He noted that several local enterprises, which may not be part of a multinational, engage in intra-group transactions.
“Transfer pricing is a legitimate and necessary feature of the commercial activities of multinational enterprises; however, it is essential that countries are able to collect tax on the profits earned in their countries without discouraging of distorting international trade and investment,” he said.
The date for implementation of the new regime will be in respect of the year of assessment 2015.
All taxpayers will be asked to provide on their returns in March 2016, a list of their related party transactions.
Regulations will stipulate that only taxpayers with an annual gross revenue turnover of $500 million will be asked to provide documentation on request of the Commissioner General.Source:http://jis.gov.jm/senate-passes-bill-to-prevent-tax-leakage-through-transfer-pricing/