This section describes three aspects of transfer pricing compliance that should receive special consideration to help tax jurisdictions administer their transfer pricing rules in a manner that is fair to taxpayers and other jurisdictions. While other tax law compliance practices are in common use in OECD member countries – for example, the use of litigation and evidentiary sanctions where information may be sought by a tax administration but is not provided – these three aspects will often impact on how tax administrations in other jurisdictions approach the mutual agreement procedure process and determine their administrative response to ensuring compliance with their own transfer pricing rules. The three aspects are: examination practices, the burden of proof, and penalty systems. The evaluation of these three aspects will necessarily differ depending on the characteristics of the tax system involved, and so it is not possible to describe a uniform set of principles or issues that will be relevant in all cases. Instead, this section seeks to provide general guidance on the types of problems that may arise and reasonable approaches for achieving a balance of the interests of the taxpayers and tax administrations involved in a transfer pricing inquiry.
TPG2017 Chapter IV paragraph 4.5
Category: B. Transfer pricing compliance practices, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter IV: Administrative Dispute Resolution | Tag: Burden of proof (Onus), Double taxation, Examination practices, Mutual agreement procedure (MAP), Penalty/Fine, Tax compliance
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- TPG2022 Chapter IV paragraph 4.6Examination practices vary widely among OECD member countries. Differences in procedures may be prompted by such factors as the system and the structure of the tax administration, the geographic size and population of the country, the level of domestic and international trade, and...
- TPG2022 Chapter IV paragraph 4.5This section describes three aspects of transfer pricing compliance that should receive special consideration to help tax jurisdictions administer their transfer pricing rules in a manner that is fair to taxpayers and other jurisdictions. While other tax law compliance practices are in common...
- TPG2022 Chapter IV paragraph 4.4Tax compliance practices are developed and implemented in each member country according to its own domestic legislation and administrative procedures. Many domestic tax compliance practices have three main elements: a) to reduce opportunities for non-compliance (e.g. through withholding taxes and information reporting); b)...
- TPG2022 Chapter V paragraph 5.41Documentation-related penalties imposed for failure to comply with transfer pricing documentation requirements or failure to timely submit required information are usually civil (or administrative) monetary penalties. These documentation-related penalties are based on a fixed amount that may be assessed for each document missing...
- TPG2022 Chapter IV paragraph 4.27It is generally regarded by OECD member countries that the fairness of the penalty system should be considered by reference to whether the penalties are proportionate to the offence. This would mean, for example, that the severity of a penalty would be balanced...
- TPG2022 Preface paragraph 17These Guidelines are also intended primarily to govern the resolution of transfer pricing cases in mutual agreement proceedings between OECD member countries and, where appropriate, arbitration proceedings. They further provide guidance when a corresponding adjustment request has been made. The Commentary on paragraph...
- TPG2022 Chapter V paragraph 5.8This compliance objective may be supported in two important ways. First, tax administrations can require that transfer pricing documentation requirements be satisfied on a contemporaneous basis. This would mean that the documentation would be prepared at the time of the transaction, or in...
- TPG2022 Chapter V paragraph 5.2This chapter provides guidance for tax administrations to take into account in developing rules and/or procedures on documentation to be obtained from taxpayers in connection with a transfer pricing enquiry or risk assessment. It also provides guidance to assist taxpayers in identifying documentation...
- July 2018: Transfer Pricing Practices in the Oil Sector, and their Potential Application to MiningIn July 2018 Center for Global Development published a study of special transfer pricing practices in the oil sector, and their potential application to hard rock minerals. According to the study, governments of mining countries are vulnerable to investors manipulating transfer prices as...
- July 2017: ATO guidance on related party financing arrangementsThe Practical Compliance Guideline (Guideline) from the ATO outlines the compliance approach to the taxation outcomes associated with a ‘financing arrangement’, as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), or a related transaction or contract, entered into...
Related Case Law
- Germany vs “Trademark GmbH”, November 2006, FG München, Case No 6 K 578/06A German company on behalf of its Austrian Parent X-GmbH distributed products manufactured by the Austrian X-KG. By a contract of 28 May 1992, X-GmbH granted the German company the right to use the trade mark ‘X’ registered in Austria. According to the...
- US vs Pacific management Group, August 2018, US Tax Court Case, Memo 2018-131This case concerned a tax scheme where taxable income was eliminated using factoring and management fees to shift profits. The Tax Court held that the scheme was in essence an attempt to eliminate the taxes. Factoring and management fees were not deductible expenses but rather disguised...
- Tanzania vs Alliance One Tobacco T. Ltd, August 2019, Court of Appeal, Case No.118 of 2018, TZCA 208In 2005 the tax authorities conducted an audit of Alliance One Tobacco T. Ltd and on that basis issued a notices of assessment for FY 2003 and 2004. In 2011 the tax authorities conducted another audit for the years of income 2009 and...
- Czech Republic vs. Českolipská, a. s. January 2011, Supreme Administrative Court 7 Afs 74-2010-81A lessor rented real estate for a low price to related parties. The tax authorities claimed that the price was too low and required additional income to be taxed with the lessor. The lessor explained that the low rental fees were due to...