Transfer pricing and the arms length principle after beps
Transfer Pricing and the Arms Length Principle After Beps by Richard CollierThis is the first book to present a sustained analysis and critique of arms length based transfer pricing rules following the G20 / OECD Base Erosion and Profit Shifting (BEPS) project. The book considers the nature and scope of transfer pricing rules based on the arms length principle starting with an explanation of how the rules were created and and how they evolved over time. It provides how internationally accepted transfer pricing rules were applied immediately prior to the BEPS project, and describes the principal problems that had arisen with those rules. The issues highlighted include problems relating to the complexity of the rules, the use and availability of comparables, and, in particular, problems permitting avoidance and income shifting, including problems related to low tax entities with excessive capital. Having described the pre-BEPS rules and inherent problems, the book goes on to examine the extent to which the work undertaken by the BEPs project provides a solid foundation for future transfer pricing determinations and the problems that remain after BEPS. It identifies those issues on which the BEPS output has been positive, and also those issues which BEPS has not successfully addressed and which remain problematic.
This book is the most detailed and up-to-date publication on this highly topical and often controversial topic.
Transfer Pricing regarding loans & financial instruments
Arm’s Length Principle
Over the last decades and in step with the globalisation of the economy, worldwide intra-group trade has grown exponentially. Transfer pricing rules, which are used for tax purposes, are concerned with determining the conditions, including the price, for transactions within an MNE group resulting in the allocation of profits to companies within the group in different countries. However, with its perceived emphasis on contractual allocations of functions, assets and risks, the existing guidance on the application of the principle has also proven vulnerable to manipulation. This manipulation can lead to outcomes which do not correspond to the value created through the underlying economic activity carried out by the members of an MNE group. In this regard, the work under Actions seeks to align transfer pricing outcomes with the value creation of the MNE group. In other words, the guidance provided under Actions provides guidance to determine the transfer pricing outcomes in accordance with the actual conduct of related parties in the context of the contractual terms of the transaction.
The new guidance has been hailed as a game changer expected to alter the transfer pricing outcomes in many situations and require multinational enterprises to undertake additional analysis and documentation. But how will the new guidance impact your company? This new guidance has been hailed as a game changer expected to alter the transfer pricing outcomes in many situations and to require multinational enterprises to undertake additional analysis and documentation. In this book, the transfer pricing professionals of Deloitte have sought to provide practical considerations in answer to that question. The nine articles in this collection each address a specific transfer pricing issue, providing an overview of the changes wrought by the new guidance and practical recommendations for taxpayers who will find themselves navigating the new transfer pricing environment. The articles are presented in the same order as the topics they address appear in the final OECD reports.
See a Problem?
During the legislative process, a Bills Committee was set up by the Legislative Council to review the BEPS Bill and, as a result, a number of amendments were made to the initial proposal, largely in response to public comments. The amendments most worth noting are as follows:. This empowers the IRD to adjust profits or losses where a transaction between two related parties departs from the transaction that would have been entered into between independent persons, in cases in which this has created a tax advantage.
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