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OECD Issues Further Guidance On TP Documentation And CbC Reporting

Monday 16th February 2015

The OECD has recently issued further guidance on the implementation of transfer pricing documentation and country by country reporting.

In September 2014, the OECD/G20 published the report “Guidance on Transfer Pricing Documentation and Country by Country Reporting”. The report was presented to the G20 Finance Ministers at the September 2014 meeting in Cairns and to G20 Leaders at their November 2014 meeting in Brisbane, Australia.

The September 2014 report described a three tiered standardised approach to transfer pricing documentation, consisting of a master file containing standardised information relevant for all MNE group members, a local file referring specifically to material transactions of the local taxpayer, and a Country by Country Report containing certain information relating to the global allocation of the MNE group’s income and taxes paid together with certain indicators of the location of economic activity within the MNE group.

It was noted in the explanatory report to the 2014 deliverables that careful implementation will be required particularly in regards to the way that sensitive information is to be transmitted.

OECD’s guidance now sets out details of the timing of the preparation and filing of the CbC Report, which MNE groups should be required to file the CbC Report, the necessary conditions underpinning the obtaining and the use of the CbC Report by jurisdiction, and the framework for government to government mechanisms to exchange CbC Reports together with the work plan for developing an implementation package.

The guidance also recommends that the master file and local file elements of the new transfer pricing documentation standard be implemented through local country legislation or administrative procedures and that they be filed directly with the tax administrations in each relevant jurisdiction as required by those administrations.

Countries participating in the OECD/G20 Project agree that with regard to local and master files, confidentiality and consistent use of the standards, as contained in Annexes I and II of Chapter V of the Transfer Pricing Guidelines and included in the September Report, should be taken into account when introducing these elements in local country legislation or administrative procedures.

The OECD confirms that mechanisms are to be developed to monitor jurisdictions’ compliance with their commitments and to monitor the effectiveness of the filing and dissemination mechanisms, in addition to but acknowledging the role of the 2020 review of implementation set out in the September Report.

The OECD also recognises that the need for more effective dispute resolution may increase as a result of the enhanced risk assessment capability following the adoption and implementation of a CbC reporting requirement and the work under Action 14 of the BEPS Project should take that into account.

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