Upward onward: Bajan excellence 2030

Introduction of transfer pricing legislation in the coming financial year Measure announced The Prime Minister announced that transfer pricing legislation would be enacted this financial year. Our view: We expect that the legislation will provide specific stipulations as to the appropriate pricing and reporting of transactions between an enterprise operating in Barbados and its related parties. The Income Tax Act currently enables the Revenue Commissioner to adjust the pricing of certain transactions between related parties deemed not to have taken place at arm's length where this is done with a view to reducing the person's assessable income. The introduction of transfer pricing specific legislation will further align Barbados with its commitments to the OECD Base Erosion and Profit Shifting (BEPS) International Framework. The Prime Minister did not provide details as to the content of the new legislation. However, in line with OECD current guidance, we would expect the forthcoming legislation to require Barbados resident enterprises to prepare transfer pricing documentation that presents details of group operations and provides supporting evidence that controlled transactions (e.g. services, tangible goods sales, royalties, loan arrangements) with related parties are undertaken at arm's length. The introduction of transfer pricing legislation builds on the recent introduction of country-by country reporting for multinational enterprises and economic substance regulations. These measures serve to further increase tax scrutiny and tax transparency of cross border transactions within multinational enterprises. We would recommend multinational enterprises review their current transfer pricing policy to ensure that transactions with related parties are undertaken at arm's length to mitigate both future and historical transfer pricing risks in the face of increased revenue authority scrutiny. Transfer pricing regulations have the potential to impose significant administrative requirements on taxpayers. This is particularly the case where a taxpayer may not currently have a transfer pricing policy in place for Barbados. We therefore highly recommend that all relevant internal stakeholders (tax, finance and operations) are prepared in advance for the implications to the business of implementing a new transfer pricing model. PwC | 2023/24 Budget review | Barbados 11

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