On 21 October 2022 the Finance Ministry published the third series of frequently asked questions (FAQ) about transfer pricing reports by legal persons and natural persons (form TPR-C and TPR-P). This FAQ round relates to the forth version of the TPR form, i.e. TPR-C(4) and TPR-P(4), which applies to reporting for tax years beginning after 31 December 2020.
The document sets out the most frequent questions with answers in relation to TPR filing requirements. The new version updates and elaborates on the prior edition. Importantly, however, the document is not an official tax ruling or tax guidance and as such is not binding while following it does not mean having an official assurance of compliance.
Some of the issues addressed in the new FAQ are set out below:
- Time to be covered by TPR filed by a limited partnership
If a limited partnership became liable to CIT as of 1 May 2021 and did not prepare financial statements as at 30 April 2021, it should file one form TPR for its entire fiscal year 2021. The data disclosed should come from approved financial statements for full fiscal year 2021.
On the other hand, if the partnership did prepare financial statements as at 30 April 2021, then the designated partner should file form TPR for the period from 1 January 2021 to 30 April 2021. Depending on the partner’s legal status, the filing should be made using form TPR-C (if a legal person) or form TPR-P (if a natural person). The next TPR filing (for the period 1 May 2021 to 31 December 2021) will be made by the partnership using form TPR-C as it will already be a CIT payer.
- Need to file TPR for direct transactions with tax havens
TPR filing is obligatory also for taxpayers and unincorporated partnerships with respect to what are called direct transactions with tax havens. The scope of disclosure will basically be the same as in TPR filings with respect to controlled transactions, except that any reference to a controlled transaction should be understood as a reference to a direct transaction with a tax haven.
Taxpayers are no longer required to ensure that their transfer pricing documentation of direct transactions with tax havens is accompanied by a comparability analysis or a conformity analysis. Thus, “Not applicable” is the option to be chosen for box “Price verification method” in section E of the form.
- Scope of disclosure to be made by microundertakings and small undertakings exempt from submitting a comparability analysis or conformity analysis with their local TP documentation
Where form TPR for 2021 is filed by a microundertaking or small undertaking exempt from submitting a comparability analysis or conformity analysis with its local file, the option to be chosen for box “Price verification method” in section E of the form is “Not applicable“.
- Reporting of restructuring transactions with simultaneously identifiable revenues and costs
For TPR purposes, a restructuring transaction with simultaneously identifiable revenues and costs should be reported as two separate transactions.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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