1. Specific Measures (Safe Harbors, Fixed Margins, 6 th Method) JUDr. Tomas Balco, LL.M., FCCA

2. Safe Harbor A provision that applies to a defined category of taxpayers or transactions and that relieves eligible taxpayers from certain obligations otherwise imposed by a country’s general transfer pricing rules. Example: – Simplified transfer pricing approach provided by the tax administration; – Exempting a defined category of taxpayers or transactions from the application of all or part of the general transfer pricing rules.

3. Country practices Brazil – Safe Harbours Scope out – less than 5% of revenue with related parties – Fixed Margins CUP (PIC) +/- 5%, for commodities 3% Other margins 15%-40% (import vs. export) India – Range of transactions and range of margins EU JTPF – Low Value Added Services – 3-10% -> 5% (CZ 3%-7%, HUN – 3%-10%) Thin-Cap Ratios (4:1, 6:1, 1:1) ?

4. Safe Harbor – Pro’s and Con’s Advantages Reduce compliance costs – TP documentation Degree of Certainty and Assurance – Prices accepted by Tax Authority Efficient use of limited TP Capacity – Direct them to more complex or higher risk Disadvantages Possible departure from the arm’s length principle; Risk of double taxation or double non-taxation when adopted unilaterally; Open avenues for inappropriate tax planning, May raise issues of equity and uniformity

5. 6 th Method Developing Countries – Latin America (Argentina, Peru, Brazil, Equator,…) – Asia & Africa follow (KZ, South Africa, India) Debate – Is it a 6 th Method? – Is it a variation of CUP? What and how? – “Home grown” approach of Developing countries to deal with TP complexities and challenges? – Reference to quoted prices on the day of shipment Adjustments or not? – Volume, quality, transportation costs, other factors? – Notable practice of Norway – Norm Price

6. Points of Discussion Safe Harbors (Focus on Unilateral): What are the advantages and disadvantages? Fixed Margins/Rebuttable Fixed Margins Transaction specific measures (6 th method)