The Discussion Draft on Transfer Pricing has been released.

19 July 2013, the OECD published the Base Erosion and Profit Shifting (BEPS) Action Plan, following the G20's concern that current international tax rules and frameworks are inadequate to counter the perceived tax avoidance by multinationals. Action 13 of the 15 Points BEPS Action Plan was directed at re-examining transfer pricing documentation rules (currently found for example in Chapter V of the OECD Transfer Pricing Guidelines) and in particular, to developing transfer pricing documentation rules that will enhance transparency for tax administrations, taking into account the compliance costs for business.

Consequent on the Action Plan, the OECD recently published a discussion draft (OECD Discussion Draft on Transfer Pricing Documentation and Country by Country reporting), which addresses BEPS Action Point 13. Comments on the document are due by 23 February 2014, while the deadline for completion of the OECD project is September 2014.

Follow the link to find a copy of the discussion draft.

Key points from the OECD Discussion Draft are:

  • Proposed two-tiered approach, i.e. "Masterfile" and "Local File" documentation;
  • Proposals regarding timing of submission of transfer pricing documentation to tax authorities;
  • Proposed rules/suggestions for transfer pricing penalties;
  • Proposal that transfer pricing files should be reviewed annually, and specific suggestions regarding when database searches need to be updated;
  • Proposal for specific rules for non-material transactions; and
  • Apparent focus on taxpayer compliance self-review.

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