UK and International Tax news

OECD To Simplify Transfer Pricing Rules

Friday 30th March 2012

At the OECD’s first Global Forum on Transfer Pricing, tax officials from 90 countries agreed on the need to simplify transfer pricing rules, strengthen the guidelines on intangible issues and improve the efficiency of dispute resolution.

Transfer pricing rules determine how international transactions within a multinational company must be priced to ensure each country receives its fair share of tax. Based on the OECD and UN Model tax conventions, the rules are meant to eliminate double taxation and ensure better compliance by companies. These rules now need to be simplified and made more robust. This is particularly critical in the area of intangible assets, whose location may have a strong impact on tax revenues.

The OECD has confirmed that the existing rules are a compliance burden for both tax authorities and taxpayers and are a barrier to cross-border trade and investment.  Views of all countries need to be taken into account to ensure that the rules will be applied in a globally consistent manner, eliminating double taxation and avoiding double exemption.

Delegates agreed that during the coming year the Global Forum will carry out a transfer pricing risk assessment, developing a detailed “how-to” manual which will establish good practices for governments when they assess transfer pricing risk at the beginning of an audit.

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