Introduction
The investment management exemption regime in the UK has key implications for Transfer Pricing. This scheme, designed to encourage investment and attract foreign managers, affects the allocation of income and costs between jurisdictions.
The Investment Management Exemption Regime
The regime exempts certain foreign investment managers from UK taxation on activities that meet specific criteria. This policy seeks to promote the competitiveness of the UK market and attract global fund managers.
Transfer Pricing Relevance
The Transfer Pricing implications of this regime are significant, as companies must ensure that intercompany transactions comply with arm’s length principles. Key aspects include:
- Allocation of Costs and Benefits: Companies must justify how revenues and costs related to investment management activities are allocated, avoiding tax adjustments.
- Rigorous Documentation: It is crucial to maintain clear documentation explaining the Transfer Pricing methodologies applied in these transactions.
- Tax Risk Assessment: Tax authorities may closely scrutinize exempt activities to ensure that they are not being used for tax base erosion or profit shifting.
Recommendations for Companies
To comply with the regulations, companies should:
- Review their Transfer Pricing policies considering exemptions.
- Perform comparable analysis to demonstrate the reasonableness of their transactions.
- Seek specialized advice to mitigate potential tax risks.
Conclusion
The investment management exemption regime offers competitive advantages, but poses challenges in terms of Transfer Pricing. Adopting a proactive approach ensures compliance and avoids tax risks.
Call to Action
Do you want to optimize your tax strategy while respecting Transfer Pricing principles?
Our team is ready to help you.
Source: Circular No. 23/E dated 19 November 2024 (IME Circular) isuued by The Italian Tax Authority (ITA)
