UK and International Tax news

TP Documentation And CbC Reporting

Monday 10th February 2014

The OECD has recently issued an initial draft of revised guidance on transfer pricing documentation and country by country reporting, for comment by 23 February 2014.  It is proposed that the text of Chapter V of the Transfer Pricing Guidelines be deleted in its entirety and replaced with the new draft guidance.

In the 19 July 2013 BEPS Action Plan, the OECD was directed to “….developing rules regarding transfer pricing documentation to enhance transparency for tax administrations, taking into account the compliance costs for business. The rules to be developed will include a requirement that multi national enterprises provide all relevant governments with information on their global allocation of the income, economic activity and taxes paid among countries according to a common template”.

The OECD comments that the document does not necessarily reflect consensus views of either the Committee on Fiscal Affairs or of Working Party no 6 regarding the issues it addresses. Rather, it reflects limited consideration of the issues in the short time since the publication of the Action Plan and seeks to identify issues for public comment. It is considered that stakeholder comments are essential to advancing this work.

The OECD notes that their paper was prepared in the context of revisions to Chapter V of the Transfer Pricing Guidelines, concerning transfer pricing documentation. The call to develop a common template for country by country reporting to tax authorities did not specifically limit the application of country by country reporting to transfer pricing administration and the OECD will be giving further consideration as to whether information relevant to other aspects of tax administration and the BEPS Action Plan should also be included in the common template.

Comments have been invited on the following matters:

– whether work on BEPS Action 13 should include development of additional standard forms and questionnaires beyond the country-by-country reporting template.

– the circumstances in which it might be appropriate for tax authorities to share their risk assessment with taxpayers.

– the scope and nature of possible rules relating to the production of information and documents in the possession of associated enterprises outside the jurisdiction requesting the information.

– whether more specific guidelines on materiality could be provided and what form such materiality standards could take.

– what measures could be taken to simplify the documentation process.

– safeguarding the confidentiality of sensitive information without limiting tax administration access to relevant information, and

– the most appropriate mechanism for making the master file and country by country reporting templates available to relevant tax administrations.

The OECD paper also includes guidance on the contents of the master and local files of transfer pricing documentation.

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