Shaw says transfer pricing tax will not be retroactive
April, 01st 2016
Minister of Finance and the Public Service Audley Shaw says the Government will not implement the retroactive provision under the transfer pricing tax regime.
“I am not going to insist that the transfer pricing submissions be made retroactive to last year. It does not make sense,” Shaw asserted, while addressing a Private Sector Organisation of Jamaica (PSOJ) President’s Forum, at the Jamaica Pegasus Hotel in New Kingston, on March 29.
Amendments to the Income Tax Act to introduce transfer pricing legislation were passed by both Houses of Parliament and took effect for year of assessment, 2015.
These amendments 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. The minister noted that while the regime was implemented last year, “the transfer pricing must commence properly this year.”
“A few months after the law was passed, there has to be a period of education, there must be companies understanding how to put together their advised pricing agreements and (it can be done) in an orderly fashion,” he said.
“You cannot impose complex legislation like that retroactively. It cannot be done and I am going to ensure that this is not insisted upon,” he stressed.
Cabinet had approved the introduction of Transfer Pricing Rules in 2011. These regulations govern transfer pricing transactions within companies that have local and overseas representation.
The Bill was subsequently tabled by the Minister of Finance on May 5, 2015, then debated and passed later in the year.
Provisions in the Bill require that the companies to which the regime applies pay the tax dated back to January 1, 2015. This, however, will not be enforced.