Slovakia is the first country providing technical assistance in transfer pricing (TP) to North Macedonia. Last year, the Ministry of Finance of the Slovak Republic and the United Nations Development Program (UNDP) launched a pilot project supporting the Ministry of Finance and the Public Revenue Office of North Macedonia in implementing TP by sharing Slovak experience. A group of 20 Macedonian experts from the above-mentioned authorities visited Slovakia from 13 – 16 January 2020.
“This workshop is crucial for us, as our experts do not have practical experience in transfer pricing. Slovak experience will help North Macedonia to put transfer pricing into practice more effectively,” said UNDP national expert, Professor Borce Trenovski from the University of Skopje.
Presently, transfer pricing is one of the most serious and frequently discussed tax problems. This is mainly because a substantial part of the total foreign trade is carried out through multinational companies operating in different countries through their subsidiaries. These companies carry out various transactions between themselves, where the price may be somewhat distorted by a multinational group´s decision and does not comply with market rules. Transfer pricing, as a specific methodology, enables market prices to be ensured for these transactions, de facto, guaranteeing fair disclosure and taxation of subsidiaries’ profits.
At the start of the workshop, the Macedonian colleagues were acquainted with basic terms enshrined in the Slovak legislation (Income Tax Act and the Ministry of Finance Guidelines on TP Documentation). In this context, companies have two basic obligations to apply prices to controlled transactions, namely, for the purposes of income tax, which would be agreed upon between independent parties in comparable transactions in comparable circumstances, and to keep transfer-pricing documentation in order to justify the prices used.
The Macedonian legislators have recently introduced legislative changes, which allow tax authorities to implement TP and thus control transactions between related parties. Implementation of these regulations is planned for this year. However, as Trenovski pointed out, it is first necessary to create a separate department for TP at the Public Revenue Office, in order to amend the Income Tax Act and issue respective guidelines. Last but not least, human resources and their education must be reinforced. In this context, the Slovak side was represented by the Financial Directorate of the Slovak Republic, and focused on practical approaches when planning the workshop.
“Macedonian experts highly appreciated first-hand information from Slovak tax inspectors. The added value of Slovak expertise is that we can present the entire development and what has been achieved in TO in our country so far. A few years back we were in a similar situation to that of our Macedonian colleagues, and we can provide advice and experience they can use during the implementation process,” said Silvia Karelová from the Financial Directorate of the SR.
Accordingly, tax experts from the Office for Selected Taxpayers presented the Macedonian partners with specific results of tax audits in multinational companies. In one case, they could follow the course of an almost two-year tax audit, which resulted in an agreement between the Slovak and Japanese tax authorities, thus avoiding double taxation.
At the end of the workshop, representatives of Bureau van Dijk presented databases that were used for TP purposes, which contain information about companies from around the world. The workshop participants could see in practice how qualitative and quantitative comparative analyses are made in an online application in order to be used for tax audit purposes.