Direct Tax
OECD updates transfer pricing country profiles with new insights on hard-to-value intangibles and simplified distribution rules4
The Organization for Economic Co-operation and Development (OECD) has published updated transfer pricing country profiles reflecting the current transfer pricing legislations and practices of 11 jurisdictions and issued for the first time the profiles of Azerbaijan and Pakistan. These latest country profiles present country-specific information on the transfer pricing treatment of hard-to-value intangibles, and the simplified and streamlined approach for baseline marketing and distribution activities.
The transfer pricing country profiles focus on countries' domestic legislation regarding key transfer pricing aspects, including the arm's length principle, methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, documentation, administrative approaches to avoiding and resolving disputes, safe harbor, and other implementation measures.
The country profiles released include new sections covering the hard-to-value intangibles approach, and the simplified and streamlined approach for baseline marketing and distribution activities as a result of the work on Amount B as part of the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy.
Updates will be conducted in batches throughout the first and second half of 2025. The release of this first batch brings the total number of countries and jurisdictions covered to 78. The information in the profiles was provided by countries themselves in response to a transfer pricing questionnaire, which guarantees the highest degree of accuracy.
The OECD has published transfer pricing country profiles since 2009, offering high-level information on the transfer pricing systems of both OECD and non-OECD member jurisdictions. In 2017, the profiles were substantially revised to reflect the changes in jurisdictions’ transfer pricing frameworks following the 2015 OECD/G20 Base Erosion and Profit Shifting (BEPS) Project Reports – namely BEPS Actions 8-10 ‘Aligning Transfer Pricing Outcomes with Value Creation’ and BEPS Action 13 ‘Transfer Pricing Documentation and Country-by-Country Reporting’ – which introduced revisions to the OECD Transfer Pricing Guidelines. The scope of the country profiles was later expanded to include non-OECD jurisdictions and, in 2021, further extended to cover financial transactions and permanent establishments.
4. https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html
Indirect Tax
Washington State: Expands the retail sales tax base to include certain services
The Washinton State legislature recently passed Senate Bill 5814, effective from 1 October 2025, which expands Washington State’s retail sales tax to include various services such as IT support, advertising, staffing, and customized software. It also removes certain exemptions thereby making more digital services taxable, while exempting telehealth and intra-affiliate transactions (except staffing).
Kenya’s Finance Bill 2025 introduces significant tax reforms
Kenya's proposed Finance Bill 2025 contains several VAT & Excise reforms. The key proposals include:
- Definition of ‘Tax Invoice’ in VAT legislation: The definition of ‘Tax Invoice’ will include invoices generated via the Electronic Tax Invoice Management System (e-TIMS) in line with Tax Procedures Act. Accordingly, the Tax Invoices issued for VAT purposes shall be transmitted electronically through e-TIMS, except for the expressly exempted items such as payment of emoluments.
- VAT exemptions: The exemption has been extended to electric bicycles, inputs used in animal feed production, and electric buses.
- Harmonization of Goods classification: The classification for goods shall be harmonized with the East African Community (EAC) Tariff Code System. This alignment aims at enhancing legal clarity, facilitating smoother cross-border trade, and reducing classification disputes, while reinforcing the regional integration. It also places a compliance obligation on traders to adhere to EAC standards, thus promoting consistency and efficiency in tax procedures.
- Taxation of cross-border digital services: The definition of place of supply of services has been expanded to include supplies made by a non-resident person to a person consuming those services in Kenya through the internet, electronic network, or a digital marketplace. This would enable the government to levy taxes on foreign digital service providers whose services are accessed by Kenyan consumers.
- Introduction of digital marketplace and its definition: This proposal aims to broaden the tax base by ensuring that all economic activities carried out through digital marketplaces are subject to taxation.
Denmark expands digital book-keeping requirements for VAT registered entities
The new rules under the Danish Bookkeeping Act requiring companies, as of 1 January 2025, to use digital bookkeeping systems that can handle electronic invoices, have been expanded to also cover all VAT-registered entities (even those not registered in Denmark and not otherwise required to file annual reports in Denmark) with turnovers exceeding DKK 300,000 for two consecutive years, effective from 1 January 2026.
New entities registered in Denmark after 1 January 2026 will be subject to the requirement once their net turnover exceeds DKK 300,000 for two consecutive fiscal years, based on the actual net turnover and not expected turnover.
Philippines issues VAT guidance for cross-border digital services
The Philippines Bureau of Internal Revenue (BIR) has released Revenue Memorandum Circular No. 47-2025 in the form of FAQs to provide guidance on the application of VAT on cross-border digital services. Major highlights of the Circular include the following:
- All Non-Resident Digital Service Providers (NRDSPs) must register via the VAT on Digital Services (VDS) Portal once available.
- NRDSPs must verify if a buyer is engaged in business by collecting the buyer’s Taxpayer Identification Number (TIN) and/or using a questionnaire or tick box on their platforms.
- Even if transactions are purely B2B, NRDSPs are still required to register and file VAT returns.
- If payments are made directly to the NRDSP, the e-marketplace is not liable for VAT.
- Platforms offering online medical consultations (e.g., via websites, apps, or e-marketplaces) fall under the definition of ‘digital services’ and be subject to VAT.
Transfer Pricing
Australia: Enhanced ATO Guidance on Application of Pillar Two Tax Measures5
The Australian Taxation Office (ATO) has published updated guidance on the implementation of the Pillar Two global minimum tax rules. Key highlights include:
- Administration of Legislative Changes: Explanation of how the ATO will approach potential amendments to Australian tax laws to address any inconsistencies with Pillar Two requirements.
- Top-Up Tax Calculation: A breakdown of the methodology for determining the amount of top-up tax payable under the Pillar Two framework.
- Application to Specific Entities: Clarification on how the rules apply to various entity types, with additional guidance tailored to specific scenarios.
- ACompliance and Reporting: Detailed information and examples regarding filing requirements, payment procedures, and record-keeping responsibilities.
- Interaction with Existing Provisions: Insights into how the Pillar Two rules will coexist and operate alongside other provisions within the Australian tax system.
UK: Consultation Launched on Draft Legislation to Reform Transfer Pricing, PE, and DPT Rules6
On 28 April 2025, HM Revenue and Customs (HMRC) released draft legislation for consultation, proposing significant reforms to the UK’s transfer pricing (TP), permanent establishment (PE), and diverted profits tax (DPT) regimes. These reforms are intended to modernize and simplify the UK’s international tax framework, better aligning it with the OECD’s standards and the UK's treaty obligations. If enacted, the new rules would take effect no earlier than 1 January 2026.
The proposals build on a generally well-received consultation held in mid-2023 and form part of the UK Government’s broader Corporate Tax Roadmap. Key changes include expanding the definition of ‘associated enterprises’ for TP purposes; exempting specific domestic transactions between UK entities; aligning financial transaction rules with OECD guidance; and bringing exchange gains and losses on certain financial instruments within TP scope. For DPT, the reform suggests replacing the regime with a more streamlined unassessed transfer pricing approach, eliminating the ‘insufficient economic substance’ test, and removing notification obligations. The PE rules would be more closely aligned with the OECD Model Tax Convention, including revised profit attribution principles and an expanded investment manager exemption.
In parallel, HMRC is also consulting on two additional TPrelated measures, initially signaled in the Spring Statement 2025. The first would limit the current TP exemption to small enterprises only, thereby extending compliance requirements to medium-sized businesses. The second introduces a new reporting obligation for both large and medium-sized multinational enterprises—requiring disclosure of cross-border related-party transactions through a new filing known as the International Controlled Transactions Schedule (ICTS). Feedback on these proposals is invited by 7July 2025.