WCO Guide Links Customs Valuation And Transfer Pricing
July, 09th 2015
The World Customs Organization (WCO) has released a guide on customs valuation and transfer pricing, to provide concrete guidance on revenue collection to governments around the globe in an effort to encourage harmonized revenue collection procedures.
The new guide explores the linkages and the possibilities for customs authorities to use transfer pricing information to examine related-party transactions. A key message included in the guide is that customs and tax authorities should work together and exchange information and knowledge in this area. Meanwhile, businesses are encouraged to take into account customs authorities' needs when preparing documentation, such as transfer pricing studies and applications for advance pricing agreements.
Announcing the release, the WCO explained: "The issue concerns international transactions within a multinational group. Customs aim is to ensure that the price for transactions of imported goods is not influenced by the relationship between buyer and seller (based on the methodology for customs valuation contained in the WTO Valuation Agreement). Tax administrations, on the other hand, are examining the same transactions to ensure the conditions are consistent with the arm's length principle for profit tax purposes. Generally, the methodology used for this purpose is based on the OECD Transfer Pricing Guidelines."
Available in English and French, the guide includes proposals from the International Chamber of Commerce (ICC) for more coherent tax and customs revenue collection.
The ICC said: "ICC has long called for governments to address the major challenges that businesses face due to discrepancies between the customs valuation approach and the 'arm's length principle' for profit tax purposes. In response to rising concerns within the business community, ICC has identified seven innovative and pragmatic solutions based on convergence to secure, clarify, and simplify transfer pricing and customs valuation rules gathered from customs experts from businesses worldwide."
Vanessa De Saint Blanquat, who led the joint work of the ICC Commission on Taxation and the ICC Commission on Customs and Trade Facilitation, said: "The frequent disparities between customs and tax regulations result in significant difficulties for international business and trade flows. Tax and customs examinations should result in the same value determination – this is in the interests of all concerned. ICC is therefore thrilled that its recommendations are incorporated in the WCO Guide."
Donia Hammami, executive in charge of ICC Policy on Taxation, Customs, and Trade Facilitation, said: "The world business organization applauds the leadership of the WCO to harmonize existing customs and tax approaches which will help reduce legal uncertainty, trade costs, and the risk of penalties, while at the same time reduce the risk of double taxation that can seriously hamper cross-border trade and investment. ICC will continue to encourage the Organisation for Economic Co-operation and Development and the United Nations to work towards further coherence of tax and customs administrations."
In February 2015, the ICC put forward proposals in a new Policy Statement in an effort to secure harmonized rules internationally on the valuation by tax and customs officials of related-party transactions. The proposals form part of a 2015 update to the ICC's Policy Statement on "Transfer Pricing and Customs Valuation," which was first released in 2012.