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September 10, 2018

Revisions to OECD Guidance and Other Transfer Pricing Updates from Q2 (article)

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The Organisation for Economic Co-Operation and Development (OECD) has published new transfer pricing country profiles, which brings the updated country profile count to 45. Our Quarter 2 2018 Transfer Pricing update outlines the key aspects of these new profiles, the OECD’s request for public comments on several new projects, and new guidance on its Base Erosion Profit Shifting (BEPS) Actions 8-10.

OECD Releases 14 Additional Country Profiles Containing Key Aspects of Transfer Pricing Legislation

In April, the OECD published new transfer pricing country profiles for 14 new countries including Australia, China, Estonia, France, Georgia, Hungary, India, Israel, Liechtenstein, Norway, Poland, Portugal, Sweden, and Uruguay, which brings the updated country profile count to 45. These new profiles reflect key transfer pricing legislation and practices specific to each country such as:

  • Arm’s length principle
  • Transfer pricing methods
  • Comparability analysis
  • Intangible property
  • Intra-group services
  • Cost contribution agreements
  • Transfer pricing documentation
  • Administrative approaches to avoiding and resolving disputes
  • Safe harbors

Each country profile is intended to reflect the current state of that country’s legislation and indicate to what extent their rules follow the OECD Transfer Pricing Guidelines.

OECD Considers Two New Projects to Revise the Guidance in Chapter IV and Chapter VII of the Transfer Pricing Guidelines

In May, the OECD invited public comments on the scope of the future revision of Chapter IV, “Administrative Approaches to Avoiding and Resolving Transfer Pricing Disputes” and Chapter VII of the Transfer Pricing Guidelines, “Special Considerations for Intra-Group Services.” The comments were published by the OECD in June.

The goal is to finish the exercise by the end of 2018 and make changes that will proactively handle tax disputes and guidelines associated with risk assessment.

Although the OECD has come to the conclusion that there isn’t a current need to change or update guidance on safe harbors and arbitration, it is open to public comments on those issues as well as a handful of others.

OECD Releases New Guidance on the Application of the Approach to Hard-to-Value Intangibles and the Transactional Profit Split Method under BEPS Actions 8-10

In June, the OECD released two reports with new guidance on BEPS Actions 8-10. The first report was related to Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles. The new guidance for tax administrations on the application of the hard-to-value intangibles (HTVI) approach is aimed at creating a simplified common language among tax administrators on how to apply adjustments. The result is a more consistent process that should reduce the risk of economic double taxation.

The second report revolved around Revised Guidance on the Application of the Transactional Split Method.  The profit split method will still apply when considered the most appropriate method in each situation, but the new guidance will aid in determining when it is in fact deemed to be the most appropriate.

OECD Releases BEPS Discussion Draft on the Transfer Pricing Aspects of Financial Transactions

In early July, the OECD invited public comments on a discussion draft dealing with the transfer pricing aspects of financial transactions. The discussion draft’s goal is to provide guidance on the application of the principles outlined in the 2017 OECD Transfer Pricing Guidelines, drawing special attention to Chapter I, to financial transactions. Other items related to financial transactions that are in discussion include:

  • Treasury function
  • Intra-group loans
  • Cash pooling
  • Hedging
  • Guarantees and captive insurance

Comments on the discussion draft were due on Sept. 7, 2018.

For More Information

We will keep you up-to-date as more transfer pricing guidance becomes available. For any comments, questions, or concerns, please contact us.

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