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OECD/G20 BEPS Project Aligns Taxation With Value Creation
- 1. OECD/G20 BEPS PROJECT: ALIGNING TAXATION WITH VALUE CREATION
- 2. 1869
- 4. February 2013 July 2013 October 2015
- 6. The Report, Aligning Transfer Pricing Outcomes with Value Creation, contains 6 interlinked sections • Guidance for Applying the Arm’s Length Principle • Guidance on Commodity Transactions • Further work on Transactional Profit Split is scoped • Guidance on Intangibles • Guidance on Low Value-adding Intra-group Services • Guidance on Cost Contribution Arrangements • In addition, the Report on Action 13 sets out the revised standard for Transfer Pricing Documentation 6 Overview
- 7. 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
- 8. 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 - ____ __ !
- 9. 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 - ____ __ !
- 10. 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 Sub2 PATENT ______ _____ _ __ Sub 1 - ____ __ ! Control over financial risk
- 11. HQ Sub1 Guidance on Intangibles Hard-to-Value Intangibles • Allows taxpayer to demonstrate proper transfer pricing analysis • Addressing information asymmetries • Ex post outcomes PATENT ______ _____ _ __ Sub 1 - ____ __ ? TP doc • Ex ante pricing agreements presumptive evidence for appropriateness
- 12. Country by Country Reporting Mandatory disclosure Exchange of rulings MAC Membership FHTP
- 13. Large MNE Group 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
- 14. 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
- 15. Monitoring Legal certainty and dispute resolution Transparency New and revised rules
- 16. Keep in touch Website: www.oecd.org/tax/beps.htm Contact: CTP.BEPS@oecd.org Tax email alerts: www.oecd.org/ctp/tax-news.htm Via Twitter: Follow us via @OECDtax
Editor's Notes
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