Transfer Pricing Documentation and Action 13 of the BEPS: an Update

Par Robert Robillard - 5 juin 2014

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On May 26, 2014, the OECD gave an update on its numerous projects related to the Action Plan on Base Erosion and Profit Shifting (the BEPS initiative), published July 19, 2013, following the Declaration on Base Erosion and Profit Shifting adopted May 29, 2013, at the Meeting of the OECD Council at the Ministerial Level in Paris.

Part of that webcast discussed the work in progress regarding Action 13 of the BEPS initiative that read as follow on page 23:

“Develop rules regarding transfer pricing documentation to enhance transparency for tax administration, taking into consideration the compliance costs for business. The rules to be developed will include a requirement that MNE’s provide all relevant governments with needed information on their global allocation of the income, economic activity and taxes paid among countries according to a common template.”

The May 26 webcast indicated that the White Paper on Transfer Pricing Documentation released July 30, 2013, has been the subject of over 1400 pages of comments publicly made available.

The PPT presentation pertaining to the May 26 webcast suggests that there is a “consensus in WP6 that the new approach will greatly improve the access for governments to relevant information for transfer pricing purposes”

More to the point, it would indeed seem that the OECD members will go forward with the “three tier approach (CbC [country-by-country] template, Masterfile and Local File)” suggested in the white paper.

Moreover, the PPT presentation stated that:

“There is also broad recognition within WP6 that a structured and careful implementation is necessary to guarantee:

  • consistency in the approaches by governments
  • that the relevant information is available to governments for which it is relevant on a timely basis
  • that commercially sensitive information is treated confidentially
  • that the costs for both taxpayers and tax administrations are balanced
  • to secure that the information is used as intended”

As such, we would therefore expect that both Canada and the United States will adjust their own transfer pricing regulations in the upcoming months, following the formal approval by the OECD members, to accommodate these news changes.

In fact, in Canada, the minister of Finance has already announced through its February 11, 2014 budget a “consultation on tax planning by multinational enterprises” in tune with the BEPS initiative. Annex 2 of the budget explains:

“Input from stakeholders on issues related to international tax planning by MNEs – and on other issues, such as ensuring the effective collection of sales tax on e-commerce sales by foreign-based vendors – would help the Government to set its priorities and inform Canada’s participation in international discussions. The Government is interested in obtaining views on how to ensure fairness among different categories of taxpayers (e.g., MNEs, small businesses and individuals) and how to better protect the Canadian tax base, while maintaining an internationally competitive tax system that is attractive for investment.“

Another consultation pertains to “treaty shopping”. Annex 2 of the budget states:

“Since Budget 2013, international developments have confirmed that many of Canada’s main economic partners also have concerns with treaty shopping. In July 2013, the Organisation for Economic Co-operation and Development (OECD) issued an Action Plan to address the issue of aggressive tax planning by multinational enterprises, referred to as “base erosion and profit shifting” (BEPS). One of the issues identified for action is the abuse of tax treaties. The Action Plan calls for the development of “model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances”. Canada is an active participant in the OECD work on the BEPS project. The OECD is expected to issue its recommendations in this regard in September 2014. These recommendations will be relevant in developing a Canadian approach to address treaty shopping.”

In short, serious changes may be coming soon in the Canadian transfer pricing landscape.

Stay tuned for more details.

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Robert Robillard, CPA, CGA, MBA, M.Sc. Econ.
Transfer Pricing Chief Economist, RBRT Inc.
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RBRT Inc. is all about transfer pricing. We specialize in transfer pricing. Our services include transfer pricing documentation, transfer pricing dispute resolution, advanced pricing agreement (APA), value chain management and TP planning, transfer pricing training. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. and the author are not responsible or liable for any error, omission or inaccuracy in such information. Readers should seek independent tax advice and tax counsel from RBRT Inc. as required.

The content of this article first appeared at https://cantransferpricing.wordpress.com maintained by Robert Robillard.