According to the UN’s World Tourism Organisation 800 million people travelled abroad for holidays (in 2008). However, international tourism took a hit during the global recession, with annual growth slipping to just 1.9% in 2008. France remains the world’s favourite destination just as it’s been for the past 15 years, attracting just under 80 million visitors in 2008 (the most recent year for which full data is available). The United States is second, with about 58 million visitors, while Spain is third, with just over 57 million. China ranked No. 4 on the list of top destinations and this is probably a sign of things to come with Asia-Pacific becoming a bigger player, overtaking the Americas to become the No. 2 regional destination, with just over 20% of arrivals. Europe’s share has fallen, too, but it still accounts for over half of arrivals worldwide.

 

Directorate General of Tax Regulations, under Directorate General Tax (“DG Tax”) is currently drafting a new regulation on Transfer Pricing. The Tax Income Law and the VAT Law stipulate transfer pricing provisions, but implementing regulations have not yet been issued. DG Tax invited EuroCham and other stakeholders to give input on the final draft before the regulation is ratified. The scope of the regulation is transactions conducted by the taxpayers with related parties. The government requires taxpayer to report transfer pricing transactions and submit its documentation to prove the arm’s length nature of related party transactions. The transfer pricing principles in the regulation consists of the following steps: (1) Comparability Analysis; (2) Methods to determine transfer pricing (3) Application of Arm’s Length Principle based on the Comparability Analysis and transfer pricing method applied. The concern of business present at the meeting was primarily to eliminate the strict requirement to use a transfer pricing method according to the hierarchy, as stipulated by DG Tax. OECD Guidelines has revised the requirement to use the method of hierarchy, therefore the business suggested that the regulation should be in line with OECD by eliminating the hierarchy, and instead the most suitable method for the type of industry the company runs should be used. Based on the regulation, DG Tax allows the companies to use different methods without hierarchy; however, the company has to be able to provide an explanation based on a report regarding why the method was picked to the DG Tax for using such method.