International Tax | Australian Simplified Transfer Pricing Record-Keeping – Technical Services

Transfer Pricing | Australian Simplified Transfer Pricing Record-Keeping | Technical Services

To reduce the compliance cost and burden of complying with the requirements of Australian transfer pricing documentation, the Simplified Transfer Pricing Record-Keeping Options (STPRO) in PCG 2017/2 offers a simplified approach to pricing cross-border transactions for eligible taxpayers within multinational groups. The article will discuss the compliance requirements under the STPRO, specifically focusing on technical services.

Australian multinational entities can rely on the safe harbour provided by STPRO for transactions related to technical services, provided the Australian economic group meets all the following conditions:


      • Total income and expenditure on technical services do not exceed 50% of the total international related-party dealings.

      • A mark-up on costs of the relevant services of 10% or less for services received or 10% or more for services provided.

      • The group has not sustained losses.

      • No restructuring has taken place within the year.

      • The group has assessed its compliance with the transfer pricing rules.

    In PCG 2017/2, technical services are defined as advice and/or assistance or support provided by persons with relevant technical expertise for activities associated with engineering, architecture and industrial design. Technical services exclude advice or assistance related to:


        • the use of Intellectual Property, know-how, processes, systems or other like intangibles or rights

        • provision or acquisition of goods, commodities, other services (including financial services) or financial accommodation, and

        • the provision or acquisition of marketing or other activities associated with engagement with customers or potential customers.

      It is important to note that STPRO does not extend its safe harbour provisions to international related-party dealings beyond the scope of technical services as defined under PCG 2017/2. However, a common misapplication arises in practice due to a misconception that technical services encompass expert advice in activities unrelated to engineering, architecture and industrial design. Examples include providing advice on financial services, management and administration services, information technology (IT) services (that is IT services that are not part of the principal activity of the group such as installing, maintaining, and updating IT system), accounting, auditing, processing and management of account services.

      Failure to meet the STPRO conditions means the 10% safe harbour markup on costs for technical services is not available. This could result in the mark-up cost may not being suitable for transfer pricing purposes, potentially leading to transfer pricing adjustments by tax authorities. It is imperative for businesses to carefully assess their eligibility for STPRO, ensuring that the technical services align with the defined technical services.

      In conclusion, while STPRO offers a simplified approach to transfer pricing for eligible taxpayers, a precise understanding of all the conditions of STPRO and technical services, as outlined in PCG 2017/2, is crucial. Businesses must exercise caution to avoid unintended misapplications, ensuring compliance and mitigating the risks associated with transfer pricing adjustments.

      This document is provided for general informational purposes only and does not constitute specific tax advice. The information contained herein is not tailored to your individual circumstances, and we strongly recommend that you seek professional advice from a qualified tax advisor before making any decisions based on the content of this document. Any reliance on the general information provided is at your own risk, and Ezzura Tax Advisory expressly disclaims any responsibility or liability for actions taken or not taken based on this information.



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