Category: OECD Transfer Pricing Guidelines (2017)

2017 Transfer pricing guidelines for application of the arm’s length principle is provided by the OECD.

Countries are encouraged to follow commonly agreed guidelines for application of the arm’s length principle in their domestic transfer pricing practices, and taxpayers are encouraged to follow guidelines in evaluating for tax purposes whether their transfer pricing complies with the arm’s length principle.

Guidelines agreed between countries also govern the resolution of transfer pricing cases in mutual agreement proceedings between countries and, where appropriate, arbitration proceedings.

OECD COVID-19 TPG paragraph 112

A range of technological solutions are available to replace and/or complement, traditional methods of communication, such as face-to-face meetings and the exchange of physical documentation, while maintaining confidentiality and security requirements. There may be situations where flexible approaches are not readily identifiable or appropriate, however, tax administrations and taxpayers should be encouraged to assess alternative approaches to maintaining progress in APA discussions on a case-by- case basis rather than defaulting to historic working methods or […]

OECD COVID-19 TPG paragraph 111

Despite these potential challenges, the value of achieving advanced certainty and effective dispute prevention through APAs remains compelling. A number of tax administrations and taxpayers have identified a variety of ways to adapt working practices in order to overcome any practical impediments to working APAs. Tax administrations and tax payers should recognise that rigid adherence to pre COVID- 19 working practises may unduly lead to significant delays in APA negotiations. Instead, innovative and flexible approaches […]

OECD COVID-19 TPG paragraph 110

The COVID-19 pandemic also presents practical difficulties for tax administrations and taxpayers currently negotiating APAs. Potential challenges may arise for a number of reasons including restrictions on domestic and international travel; enforced or voluntary working from home; or additional resource pressures as a result of efforts to manage responses to the COVID-19 pandemic.

OECD COVID-19 TPG paragraph 109

Where taxpayers and tax administrations are negotiating APAs that are intended to cover FY2020, all parties are encouraged to adopt a flexible and collaborative approach to determine how to take into account the current economic conditions, and the various options discussed above in relation to the revision of existing APAs will be relevant. For example, consideration could be given to agreeing a short period APA covering the period affected by the COVID-19 pandemic and a […]

OECD COVID-19 TPG paragraph 108

In the current environment, taxpayers may be reluctant about continuing or initiating new APA applications. This is understandable given the significant level of economic uncertainty that many businesses face, uncertainty that for some taxpayers may mean it is not feasible to reach agreements on future APAs today. However, it is important to acknowledge the role of APAs in securing tax certainty for taxpayers and tax administrations, and in preventing future tax disputes.

OECD COVID-19 TPG paragraph 107

However, tax administrations are likely to respond differently to the failure to comply with the terms and conditions of an existing APA, than to the failure to meet critical assumptions.55 This may reflect differences in the procedures prescribed by an APA agreement, domestic law or procedural provision. For example, it may be the case that where there is a breach in the critical assumption the terms of the APA prescribe that it should be cancelled […]

OECD COVID-19 TPG paragraph 106

When considering the consequences of non-compliance with terms and conditions of an existing APA, tax administrations should adopt a similar approach to situations where there is a failure to meet critical assumptions. For example, when determining their response, tax administrations should consider (i) the terms of the APA; (ii) any agreement between relevant tax administrations as to how to deal with non-compliance; and (iii) any applicable domestic law or procedural provisions.54 54  Paragraph 74 of […]

OECD COVID-19 TPG paragraph 105

When engaging with tax administrations, it is important that taxpayers are transparent and disclose all relevant information in a timely manner. In so doing, they will help to maintain the non-adversarial spirit and environment that is vital to the success of APA negotiations.

OECD COVID-19 TPG paragraph 104

Where the critical assumptions of an APA are breached, it is important that taxpayers collect and provide tax administrations with relevant supporting documentation. Depending on the particular critical assumption and other facts and circumstances, this could include, but may not be limited to: A description of the narrowest relevant taxpayer business segment tracked by management that encompasses the entities and covered transactions involved in the APA. Forecast and actual business segment profits for the financial […]

OECD COVID-19 TPG paragraph 103

As economic conditions will remain uncertain until at least the end of 2020, where taxpayers notify tax administrations of the failure to meet critical assumptions, tax administration may want to consider waiting for a reasonable period until data and information on the magnitude and longevity of the economic impact of COVID-19 are available before determining how to respond to a breach. By deferring their response, until more data and information is available tax administrations may […]

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