Kreston K&E Advisors (Correspondent)
June 10, 2021
June 10, 2021
June 1, 2021
Transfer Pricing in the STA 2021 General Tax Control Plan
By Mario Quiliez, Mario Pires & Elena Ramirez
The 2021 publication of the Annual Tax and Customs Control Plan in early February has confirmed that the Spanish Tax Agency is looking more and more closely, in their investigations and checks for tax fraud, at issues associated with related-party transactions and transfer pricing in multi-national groups, large corporations, and medium-sized companies.
The special economic and financial conditions due to the coronavirus pandemic and the State’s response to its effects pose significant challenges for both companies and tax administrations, from a practical standpoint, in applying the arm’s length principle.
The Spanish Tax Agency, to tackle challenges from 2021 and in studies regarding transfer pricing for 2020 (the year of the outbreak and spread of Covid-19) and following years, will take into account the guidelines recently passed for the Inclusive Framework on BEPS on the application of the Organisation for Economic Co-operation and Development (“OECD”) transfer pricing guidelines, concerning several specific issues arising from or exacerbated by the Covid-19 pandemic, as well as their consistency with the general pricing policy of companies or business groups.
Specifically, the issues covered in the recent OECD guidelines, as a practical example of how the arm’s length principle should be applied to related-party transactions impacted by the Covid-19 crisis, are as follows: (i) comparability analysis; (ii) losses and the allocation of Covid-19 specific costs; (iii) government assistance programmes; and (iv) advance pricing agreements (“APAs”).
Furthermore, for 2021, STA has announced a specific campaign to verify proper compliance with obligations to report related-party transactions on form 232. It is important to note that the information reported on this form must be consistent with the transfer-pricing dossier. Likewise, failure to report operations and/or reporting inaccurate data on the 232 form is a serious tax violation, punishable with a fine of up to 2% of the value of the operations not reported or inaccurately reported.
Other priority focuses announced, regarding related-party transactions, are:
All the above confirms that Spanish companies with related-party transactions must properly document transfer pricing, which must be in line with the company’s transfer pricing policy, taking into account that studies from 2020, and for other years affected by the situation caused by the coronavirus, the OECD Guidance on the transfer pricing implications of the Covid-19 pandemic will apply.
As a final note, in recent years, the Spanish Tax Agency has been looking closely at issues related to transfer pricing and related-party transactions, as per guidance from the OECD.
May 21, 2021
Kreston Global Tax Group’s webinar on the impact of Brexit on international tax structuring, held on 12 May 2021, gathered over 45 tax specialists within our Network.
The webinar focused on the impact of Brexit on tax regulations and trade across the UK, US, European and Asian markets.
Special thanks to Mark Taylor, Leader of Kreston Global Tax Group, and to all our panellists Don Reiser, Ganesh Ramaswamy, Guillermo Narvaez, Jelle Bakker, Sharon Bedford for sharing their local perspective.
Kreston members can view the event page for more information and related resources.
May 18, 2021
TP-Link is a global provider of reliable networking and wi-fi devices and accessories, distributing to more than 170 countries and serving billions of people worldwide. Its products include ‘smart’ bulbs, plugs and cameras for people’s homes and cloud solutions, routers and high-speed wired and wireless networking for businesses.
TP-Link UK’s group auditor is Kreston Reeves, led by Peter Manser. During 2020, the company carried out a restructure. This meant that TP-Link NL needed a group audit to reflect the new corporate structure and Kreston Reeves referred the company to Van Herwijnen Kreston (VHK). After a short proposal process, TP-Link NL appointed VHK as its group auditor. They are also advising on income tax assessment, general tax matters and our Dutch firm Bentacera is assisting in transfer pricing support and documentation.
This successful outcome demonstrates the strength and reach of the Kreston International network. It also shows how the network can help smooth the changes many companies have to make following the UK’s departure from the EU.
Olivier Walravens, from Van Herwijnen Kreston, said “We were pleased to be able to help TP-Link change its group audit process so effectively and efficiently. Sharing and transferring the necessary data and documents was straightforward as Kreston firms are part of the same, secure system.”
Chris Sun, International Accountant at TP-Link NL, said: “We’re very grateful to Kreston for making this major change so ‘smart’. It was achieved in good time and they took care of everything for us. Using firms within the Kreston network has undoubtedly saved the company time and money.”
May 12, 2021
Q&A: Liza Robbins on commerce, people and the future of accounting
Our CEO, Liza Robbins, has recently taken part in a Q&A session with AccountancyAge in which she discusses and gives insight into her work at Kreston and how she sees the future of accounting.
By Guillermo Narvaez – Technical Director of the Kreston International Global Tax Group
Digital Services Taxes (DSTs) are a new global initiative designed to charge larger technology companies that provide digital platforms such as social media, advertising, online marketplaces and other search engine tools for commercial transactions or selling user data online advertising. It is beginning to apply across the world at the behest of the G20 – the Organisation for Economic Co-operation and Development (OECD) who are calling for changes to the international tax system to address the challenges of the digitisation of the economy by mid-2021.
A simple enough idea – impose additional tax costs on those who earn more – but is it really this simple? Who actually pays this tax, as on the face of it, it is the customers themselves who face liability rather than the platforms on which they are advertising.
Online platforms essential for SMEs to grow
Big tech companies like Amazon, Google and Apple shift the tax burden instigated by DSTs downstream to their customers, many of whom are SMEs. The European Centre for International Political Economy (ECIPE) has stated that “the EU’s commercial landscape is characterised by an overall share of highly diverse SMEs who account for 99.8% of all EU enterprises and 66.6% of overall EU employment.”
Copenhagen Economics also point out that 82% of SMEs in Europe use search engines to promote products and services online, while 42% of SMEs use online marketplaces to sell their products and services.
So we can see that SMEs are disproportionately affected by DSTs and are the ones left with the bill.
But in reality, to what extent are DSTs targeting the big fish? The DSTs’ purpose is well-meaning – challenge some of the world’s largest multinational enterprises (MNEs) to pay their dues.
However, when these enterprises can just pass this on to others – particularly digitally dependent SMEs who cannot otherwise achieve their goals – the DST is surely not having its desired effect?
Not looking at the profitability of the platforms means that the DST may end up being a disproportionate levy and, as a result, drive a possible deceleration of economic growth.
SMEs are inadvertent “victims” of the new tax levy
So what is the thinking behind this new levy? Many SMEs exist either in the middle of the digital services supply chain or to ensure the delivery of a product or service to its final customer. Where tech companies at one end of the chain and final customers at the other, SMEs sit between the two, paying for services (such as advertising) provided by the tech companies.
The logic of the DST is, in part, that tax on profitability (such as income tax) do not have the reach to impose tax burdens on tech companies for digital services. However, tech companies can circumvent the economic burden of the DST by transferring the levy to their customers, as they currently do with SMEs.
Conversely, whilst tech companies can pass on the levy to SMEs by increasing the cost of their services and so cover their tax liability, SMEs cannot similarly shift the burden downstream to their customers, as doing so may well take away their competitive advantage.
A well-meaning but flawed tax concept
Finally, even though consumers successfully use one or more digital service, they do not usually have to pay anything at all. Most of these can access any information, products and services through the use of free online services.
While SMEs serve a vital purpose in domestic economies, they are often the primary victims of this tax burden, whereas tech companies escape cost-free. Hence this system of taxation is a flawed one and deeply unfair.
SMEs are part of the digital services supply chain and a vital element of any country seeking to pursue economic growth while achieving a healthy economy. Since over 99% of EU businesses are SMEs, surely it would be fairer to support their development, rather than leave them to have to shoulder most of the actual tax burden?
(a version of this article also appeared in Accountancy Daily, May 12th 2021)
May 6, 2021
This publication aims to provide an overview of the different tax systems across Latin America, Spain and Portugal, to support member firms in this vital area of every practice.
Produced by Kreston Guatemala, other Kreston member firms in Latin America and Kreston Iberaudit, based in Spain.
April 30, 2021
Two member firms of Kreston – Kreston FLS, based in Mexico, and Daehyun Accounting Corporation, based in Seoul – have joined the Expatland Global Network, a leading provider of global mobility services.
The addition of the two firms as Expatland Global Network partners represents the latest expansion of the network’s collaboration with Kreston, which now includes a total of 13 member firms around the globe.
The Expatland Global Network brings together international teams of professionals to provide global mobility services across taxation, logistics, real estate, education advice and more. These ‘E-Teams’ are made up of like-minded service providers in over 30 cities globally. Their expertise ranges from banking and insurance to medical and education, each passionate about helping expats coordinate their moves abroad and settle into their new home.
The partnership with Expatland Global Network will provide expats with access to trusted advice on tax planning and financial reporting across Mexico and South Korea, benefitting from the expert advice and local insight offered by Expatland Global Network’s international ‘E-Teams’.
Kreston FLS is a full-service accounting, legal and financial services firm based in Mexico City. Its clients span a wide spectrum of sectors, most notably in manufacturing and services. With its five offices and 95 staff members, Kreston FLS is one of six firms that make up Kreston International’s Mexican presence.
Based in Seoul, Daehyun Accounting Corporation provides a broad spectrum of services, including audit, tax, consulting and M&A for its SME clients both local and international. Daehyun Accounting Corporation is one of two Seoul-based Kreston International members.
Kreston FLS and Daehyun Accounting Corporation become the 68th and 69th partners, respectively, to join the Expatland Global Network– 13 of which are Kreston International member firms – across the UK, Europe, Asia-Pacific and North America.
Liza Robbins, Chief Executive of Kreston: “Expatland Global Network has for some time been a trusted partner of Kreston Global and is at the forefront of providing global mobility services and insight. The addition of these two firms to the Expatland network is a testament to its success and we look forward to seeing this international partnership continue to bear fruit.”
John Marcarian, Founder of Expatland Global Network: “Despite the setbacks to international movement caused by the pandemic, the demand for expatriation among the internationally mobile community looks set to recover quickly. We’re pleased to expand our relationship with Kreston International by adding these two firms as new partners and, in doing so, significantly enhance our offering in Mexico and South Korea.”
April 26, 2021
Balluff is an international, family-run business specialising in sensors and automation for sectors including assembly and logistics plants. It was founded 100 years ago near Stuttgart, Germany, and has since expanded into 68 countries.
Kreston Global has worked closely with Balluff for many years, helping it develop as a global player built on solid financial foundations.
We are involved in the decision-making process at all stages, advising on everything from company formations to large acquisitions. We audit the consolidated financial statements and all German subsidiaries and look after tax matters globally.
From our side, the relationship has been led by Michael Kalmbach for the last 20 years. He said: “We are really proud to have been involved in the development of Balluff – their development is a real success story. Our dedicated team contributes their business and tax know-how to make sure we always deliver solutions that overcome obstacles, often before they arrive.”
In addition to our ongoing audit and tax consulting advice, our focus is to help Balluff grow.. Our consolidated, scaleable processes have helped them implement transfer pricing solutions to make the business work efficiently across its global footprint.
Balluff is part of a growing industry where its customers are constantly seeking to increase efficiencies and reduce costs. “Kreston Bansbach are looking forward to helping Balluff do the same”, said Michael, “we are looking forward to working alongside them in their future development. Happy 100th Anniversary!”.
We are delighted to announce the IFRS Essential Update webinar to be held on 6 May. This will be hosted by Andrew Collier, Kreston’s Director of Quality and Professional Standards, joined by our guest speaker Helen Kerrigan, Director at Future Finance Training.
Helen, a highly regarded financial trainer with over 15 years of specialist experience, will introduce the changes to the IFRS Standards and advise on how to apply them in your practice.
Please note this event is addressed to Kreston members only. More information can be found on the event page.
