Q : Given the proposal of common consolidated corporate tax base (CCCTB) of the EU, do you expect formulary apportionments to gain further prominence?


Kunj Vaidya (Partner and Leader, Transfer Pricing, PwC India)

The CCCTB approach could be in deviation to the arm’s length principle since the factors determining the aforementioned approach may not necessarily adopt a fair market comparison. Such formulary apportionments have not been prescribed under the OECD guidelines. Such apportionments also seem to be contrary to the profit split approach.

Given the increased focus on protection of tax base by jurisdictions, it may be unlikely for formulary apportionments to be preferred over arm’s length as determination of arm’s length considers more number of variables to determine an appropriate share (geographical factors, economic factors etc). However, similar to safe harbour provisions, it may be possible to consider a formulary apportionment for certain class of transactions within a defined threshold.

The above responses to the questions has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. PricewaterhouseCoopers Private Ltd, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences faced by anyone who have chosen to rely on the information contained in this publication or for any decision based on it. 

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