PKF Takes Transfer Pricing Regulation to Clients

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LICPA President Steve Seimavula, giving the background of Transfer Pricing.

PwC Business School begins training over 50 CEOs and Managers 

Panell Kerr Froster (PKF), a global network of legally independent firms providing quality accounting and business advisory services around the world with a branch in Liberia, has completed an awareness campaign on a newly introduced regulation referred to as “Transfer Pricing” in collaboration with PKF Kenya.

The two expert facilitators of the workshop were: James Mulili, Director for Taxation at PKF Kenya, and John Magu, Senior Manager for Taxation, also at PKF Kenya. Also present at the workshop were senior level representatives of the Liberia Revenue Authority (LRA).

Transfer Pricing Regulation was introduced by the Liberia Revenue Authority (LRA) with the intent of ensuring that a fair market price of service is paid and that fraud is avoided.

According to Steven D. Seimavula, President of Liberia Institute of Certified Public Accountants and senior staff of PKF Liberia, the seminar for clients and other stakeholders is meant to acquaint beneficiaries with this new regulation in the LRA tax system.

“Transfer Pricing is a trending taxation issue worldwide. It has to do with prices that multinational enterprises (MNEs) charge for goods and services delivered to their subsidiaries and associates in other countries. How such goods and services are priced between members of the same multinational enterprise can have a significant effect on taxes that are paid by either the seller or the buyer. One variation of such Transfer Pricing practices is that a member company of a multinational located in a country with zero taxation (e.g. Dubai or Saudi Arabia) or in a country with low taxation regime (e.g., Cayman Islands, Ireland, Mauritius, etc.) sells goods and/or services in a country where enterprise profits are taxed. The item sold to the member company in a country with a high taxation regime may be deliberately priced significantly higher than would obtain if the receiving company had bought the items in question (goods and/or services) from an unrelated party,” Seimavula said.

According to a statement issued by PKF, when this is done, the group of companies, taken as a whole, benefits in two ways: Firstly, the revenue of the seller is either not taxed at all (e.g., in Dubai, Saudi Arabia, etc.); or is taxed at a low rate (e.g., in Cayman Island, Ireland, Mauritius, etc.); secondly, because the price at which the item is sold to the buyer is high enough to depress the taxable profits of the buyer to a lower level than would otherwise apply if the same or a comparable product were obtained from an unrelated party.

PKF is present in most African countries and has clients comprising multilateral companies with auxiliary groups around the world. Mr. Seimavula told journalists on January 30, 2018 that in order for PKF’s clients to act in line with the new regulation, they are conducting the seminar to share the rationale associated with transfer pricing.

Another PKF managing partner, Nim’ne Elliot Mombo, said the transfer pricing system is important in restricting tax related and service fraud.

He clarified that transfer pricing helps service fees charged both internally and externally to be consistent with each other to determine a fair tax to be paid.

He emphasized that without a standard to know transfer prices of services, there would be an eroding tax system for a country, which will adversely affect that country.

Without transfer pricing, Mr. Mombo said, “a company may charge heavily for service here and pay less tax as compared to another country where the same service is provided.”

Therefore, the two PKF officials said it was an insightful strategy for the LRA to introduce the transfer pricing regulation so that companies will not make use of the vulnerable environment to defraud the country of its fair tax.

“From the seminar, we will know how the regulation works and those who are supposed to file transfer price for services will start to do,” Seimavula said.

In recent times the Organization for Economic Cooperation and Development (OECD) has spearheaded an international movement to effectively deal with unfair transfer pricing practices. Towards that end the (OECD) has over the years, particularly since 2003, developed a series of guidelines to help developing economies deal effectively with harmful transfer pricing practices that are technically referred to as tax Base Erosion and Profit Shifting (BEPS) Action Plans.

On November 11, 2016, under an official Gazette of the Government of Liberia of that date, the Liberia Revenue Authority (LRA) promulgated the Liberia Income Tax Transfer Pricing Regulations 2016. The regulations came into effect on July 1, 2016. It is, in effect, Liberia’s tax law on transfer pricing practices.

Upon issuance of that regulation, the Liberia Revenue Authority (LRA) has joined other tax administrators around the world, particularly in developing economies, in efforts to tackle transfer pricing practices that erode the tax base of developing economies such as Liberia.

However, the regulation mentioned above is new to affected taxpayers in Liberia, and this is where PKF Liberia has stepped in.

Meanwhile more than fifty chief executive officers, business owners, lawyers, accountants, and business advisors will attend the first of an intensive two-day hands-on training in Transfer Pricing, according to a release from PricewaterhouseCoopers (PWC) Liberia Business School.

The release said Transfer Pricing (TP) is now a tax-reporting requirement on related party transactions, and entities that fail to prepare TP documentation and/or present TP documentation on the request of the Liberia Revenue Authority (LRA) may be subject to significant tax penalties and interest.

“In view of the significance of understanding the fundamentals of Transfer Pricing, PwC is offering this two-day course on Transfer Pricing at your fingertip,” the release said.

Tax practitioners, CEOs, CFOs, business owners, lawyers, accountants and business advisors are expected to attend this two-day training course.

The training, scheduled for Wednesday, February 7, and Thursday, February 8, will be facilitated by PwC’s Transfer Pricing experts from the U.S., Nigeria, and Liberia.

The training will be held at the PwC Liberia Business School on 9th Street, Payne Avenue, Sinkor, outside Monrovia.

PwC is a member of PricewaterhouseCoopers International Limited, where each member is a separate legal entity.

The PwC business focus is to provide the knowledge and skills required to excel in the fast-changing local and global business environments.

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