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Comments on the future revision of Chapter IV, “Administrative Approaches to Avoiding and Resolving Transfer Pricing Disputes” of the Transfer Pricing Guidelines
Dear Sir / Madam,
Taxand welcomes the opportunity to provide comments on the future revision of Chapter IV of the Transfer Pricing Guidelines (TPG). We would like to share few thoughts based on our experience in advising multinational enterprises on Mutual Agreement Procedures (MAP) and Advance Pricing Arrangements (APA).
Our input will primarily focus on the first and last questions listed in the Invitation for Public Comments issued on the 9th of May 2018.
“What additional aspects or mechanisms to minimise the risk of transfer pricing disputes should be included as part of the guidance on transfer pricing compliance practices (e.g. co-operative compliance, risk assessment tax examination practices)?”
Comment – Promotion of co-operative compliance
The implementation of a co-operative compliance practice would definitely create a closer relationship between the taxpayers and the tax authorities, based on the fact that the taxpayer could choose it if he wants or not to be included on the referred mechanism.
It would stimulate compliance and prevent non-compliance, create an easier communication channel between the taxpayer and tax authorities, giving the parties the possibility to discuss, share and disclose relevant information of the business.
Comments on the scoping of future revisions of Chapter VII (intra-group services)
Dear Sir or Madame,
First of all, we would like to thank you for providing the opportunity to comment on the scoping of future revisions of Chapter VII (intra-group services). From our point of view, subjecting your work to public scrutiny constitutes an indispensable aspect of building and maintaining credibility with taxpayers and tax administrations.
Having said that, we would like you to consider the following comments as constructive criticism aimed at achieving better and generally accepted Transfer Pricing Guidelines.
I. Demonstrating that a service has been rendered and/or that the service rendered provides benefits to the recipient
The current OECD Transfer Pricing Guidelines 2017 (hereinafter: “OECD-TPG”) state that the questions of whether a service has been rendered “should depend on whether the activity provides a respective group member with economic or commercial value”. In addition, there is a reference to the arm’s length principle. Furthermore, there is the statement that “it is not possible in the abstract to set forth categorically the activities that do or do not constitute the rendering of intra-group services” but that “some intra-group services are performed […] to meet an identified need [in which case] it is relatively straightforward to determine whether a services has been provided” (Sec. 7.6 et seq.). All in all, from our point of view these guidelines are far too general and brief to constitute practical, hands-on guidelines and help taxpayers and tax administrations to find agreement on the question of whether a service has been rendered.
Discover more: Taxand comments on Chapter IV
Discover more: Taxand comments on Chapter VII
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We hope that these brief remarks will contribute to the further discussion of the topic.