Transfer Pricing and Customs Valuation

Transfer Pricing and
Customs Valuation
Current WCO and international developments
What is the issue for Customs?
Customs objective:
 To verify whether a price has been influenced in a related-party
 Test values (difficult to use)
 Examine ‘circumstances surrounding the sale”
Key questions:
 How can information contained in a transfer price study be
accepted as the basis for verifying a related party transaction?
 How should post-importation adjustments be dealt with?
Business concerns :
 “Double obligation”; need to satisfy both Customs and Tax
authorities on similar issues
Competing tensions
Customs administration objective
Direct Tax authority objective
Ensuring all appropriate elements are
included in the customs value
Ensuring the transfer price does not
include inappropriate elements
Pull in opposite directions
Trade objective
Trade objective
To minimise Customs value
To maximise transfer price (incl.
cost of imported goods) to
reduce taxable profit
Key Differences
Customs Valuation
Transfer Pricing
 Goods only
 Goods and services etc.
 Transaction based
 Often based on
 Confirmed at point of
customs clearance
 Different definition of
aggregates/annual in
practice (transactional in
 Confirmed retrospectively
(some years after event)
Activities to date
 Two joint WCO/OECD
conferences (2006, 2007)
 Full alignment not possible/
 Focus Group – identified key
technical issues
 On agenda of TCCV
 Commentary 23.1
 Draft case studies
 WCO producing guidance
TCCV Commentary 23.1
Examination of the expression “circumstances
surrounding the sale” under Article 1.2 (a) in relation to
the use of transfer pricing studies
 …the use of a transfer pricing study as a possible basis for
examining the circumstances of the sale should be
considered on a case by case basis
 … any relevant information and documents provided by an
importer may be utilized for examining the circumstances of
the sale
 A transfer pricing study could be one source of such

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