Transfer pricing update

OECD’s discussion draft on transfer pricing documentation and country-by-country reporting

The OECD released their discussion draft on revised guidance on transfer pricing documentation and country-by-country reporting on January 30th. This draft aims to standardize the approach for global documentation and increase the transparency for a company’s global country-by-country results. The work is part of OECD’s work on base erosion and profit shifting (BEPS).

Deloitte have issued a special edition of our transfer pricing publication – The Arm’s Length Standard which provides more detail in relation to the discussion draft. We also have a webcast to be hosted by our colleagues in the US which you may want to tune into this Thursday (13th February) titled “TP Documentation and OECD’s Country-by-Country Reporting: A First Look at the New Template” which will take you through the changes and the implications for documentation strategy. There will also be similar webcasts in the coming weeks hosted by EMEA (26th February) and Asia Pacific (19th February) based colleagues. For further information on the upcoming webcasts please refer to our Dbriefs website.

If you are not already subscribed to the Arm’s Length Standard and/or Transfer Pricing Alerts or do not receive invites to our webcasts and would like to, please click here.

Perspectives for Ireland
It is envisaged that the discussion draft will form the basis of the revised Chapter V of the OECD Transfer Pricing Guidelines which is likely to be implemented in 2015. As Ireland’s transfer pricing regime is aligned with OECD Guidelines, the transfer pricing documentation requirement for Irish purposes is likely to follow OECD rules. This will include the two-tiered approach to transfer pricing documentation – a masterfile and local country file, as well as country-by-country reporting which will form part of the masterfile.

Ireland’s transfer pricing regime accepts counterparty documentation to meet the Irish documentation requirement. The new rules envisaged will expand the level of documentation needed to be kept for multinational groups. This may mean that existing Irish rules allowing counterparty documentation are likely to be expanded to include requirement for local country files for Irish operations as well as a masterfile for the group. Grandfathering provisions which excluded certain pre July 2010 transactions from the Irish transfer pricing documentation requirement greatly lessened the burden for Irish companies. The continued exclusion for such transactions may now need to be questioned in light of the developments at OECD level.

To the extent that a group is headquartered in Ireland, the responsibility for preparing the masterfile and country-by-country information will fall on the Irish company. The country-by-country reporting information which will form part of the masterfile will increase the burden for companies to collate all the necessary information to provide to local tax authorities and ensure that accounting and reporting systems are aligned to capture such information. The OECD’s Working Party 6 which has responsibility for Action 13 of the BEPS project are of the view that groups should be encouraged to provide the country-by-country reporting information to every tax authority to which a tax return is filed, rather than providing the data to their headquarters location for sharing via exchange of information mechanisms.

The OECD are requesting comments regarding the contents of the discussion draft by 23 February 2014.

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