The Organization for Economic Cooperation and Development (OECD) has released the first components of its comprehensive plan for creating an agreed set of international rules for fighting base erosion and profit shifting (BEPS) and ending opportunities for double non-taxation. The four model legal instruments and three reports are the first seven deliverables of the OECD's 15-action plan for fighting BEPS. In particular, two deliverables relate specifically to transfer pricing as follows:
- Action 8 — guidance on transfer pricing aspects of intangibles; and
- Action 13 — guidance on transfer pricing documentation, including a country-by-country reporting template.
Action 8: Intangibles
The deliverable in respect of action 8 sees revisions to the OECD Transfer Pricing Guidelines to align transfer pricing outcomes with value creation in the area of intangibles. The changes clarify the definition of intangibles and provide guidance for related parties; including transactions involving intangibles and the transfer pricing treatment of local market features and corporate synergies. Some transfer pricing issues relating to intangibles are closely related to other issues that are to be addressed during 2015, most notably in relation to the allocation of risk among multinational enterprise group members and re-characterisation of transactions.
Action 13: Country-by-Country Reporting
In BEPS Action 13, the OECD has delivered a six-column
country-by-country reporting template that asks multinationals to
disclose to tax authorities their turnover, profits, accrued taxes,
paid taxes, employees and assets, country-by-country, in all the
countries where they operate.
These new reporting provisions and the transparency they will
encourage, will contribute to the objective of understanding,
controlling and tackling BEPS behaviours. Effective implementation
of the new reporting standards and reporting rules will be
essential. Additional work will be undertaken to identify the most
appropriate means of filing the required information with and
disseminating it to tax administrations. The modalities of
implementing the country-by-country reporting template will be
decided by January 2015. Meanwhile, the OECD has agreed to consider
revising the template based on members' experience by
2020.
The OECD will present the seven deliverables to the G-20 finance
ministers meeting September 20-21 in Cairns, Australia and then to
G-20 leaders meeting November 15-16 in Brisbane, Australia. Stay
tuned for more to come on this later.
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