panel 10 : managing transfer pricing risks - by ms.marlies de ruiter
TRANSCRIPT
OECD/G20 BEPS
PROJECT:
ALIGNING TAXATION
WITH VALUE CREATION
Globalisation
1869
Profit
Tax Base
Shifting
Base Erosion
International Tax Rules
1890192019501980201020131869
BEPS Action Plan
February 2013 July 2013 October 2015
International Consensus
The Report, Aligning Transfer Pricing
Outcomes with Value Creation, contains 6 interlinkedsections
• Guidance for Applying the Arm’s Length Principle
• Guidance on Commodity Transactions
• Further work on Transactional Profit Split isscoped
• Guidance on Intangibles
• Guidance on Low Value-adding Intra-groupServices
• Guidance on Cost Contribution Arrangements
• In addition, the Report on Action 13 sets out therevised standard for Transfer PricingDocumentation
6
Overview
Transfer Pricing
I. Careful delineation of the actual
transaction between associated enterprises
Economically relevant characteristics
II. Compare conditions and the other
economically relevant characteristics of
the controlled transactions
HQ
Sub1
SubSub
Sub2
1. Contractual terms
2. Functions performed, taking into account
assets used and risks assumed
3. Characteristics of property/service
4. Economic circumstances
5. Business strategies
Transfer Pricing
HQ
Sub1
1. Identify risk
2. Determine how risk are contractually
assumed
3. Functional analysis
4. Determine whether contractual
assumption of risk is consistent with
the conduct of the associated
enterprises and other facts of the
case
Contract
__ ______
____ ___
___ _ __
Sub 1 -
____ __
!
Transfer Pricing
HQ
Sub1
5. Apply guidance for allocation of
the risk
Allocation to party that exercises
control and has the financial
capacity to assume the risk
Taxablepr
ofit
o Does not exercise control over the
risk?; or
o Does not have the financial capacity
to assume the risk
Taxablepr
ofit
Contract
__ ______
____ ___
___ _ __
Sub 1 -
____ __
!
Transfer Pricing
HQ
Sub1
Guidance on Intangibles
• Follows framework Chapter 1
• Funder without performing important functions
related to intangible and without assuming the risks
related to the intangible:
risk-adjusted financial return
• Funder without control over financial risk:
no more than risk free financial return
Development
EnhancementExploitation
MaintenanceProtection
Sub2PATENT
______
_____ _
__ Sub 1 -
____ __
!
Control over
financial risk
Transfer Pricing
HQ
Sub1
Guidance on Intangibles
Hard-to-Value Intangibles
• Allows taxpayer to demonstrate proper
transfer pricing analysis
• Addressing information asymmetries
• Ex post outcomesPATENT
______
_____ _
__ Sub 1 -
____ __
?
TP
doc
• Ex ante pricing agreements
presumptive evidence for
appropriateness
Transparency
Country by Country
Reporting
Mandatory disclosure
Exchange
of rulingsMAC
Membership
FHTP
Large MNE Group
CbC Reporting
HQ
SubSub
Sub1 Sub2
MNE Group
Master file Local File CbC Report
cbccbccbc
LF
LFMF
LF
MF
MF
Overview of MNE
group business
More detailed information
on intercompany
transactions affecting local
jurisdiction
Aggregate tax
jurisdiction wide
information
Further revised guidance (transactional
profit splits, financial transactions and
consolidation of other parts of the TPG with the
new guidance)
Implementation HTVI and Low Value
Adding Services
Work mandated by the G20 Development
Working Group on TP toolkits for Low
Income Countries
14
Follow up work
Holistic Approach
Monitoring
Legal certainty and
dispute resolution
Transparency
New and
revised rules
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