CLIENT ALERT:
WHITE PAPER ON TRANSFER PRICING DOCUMENTATION RELEASED BY THE OECD Background The Organization for Economic Cooperation and Development (OECD) addressed in the Action Plan targeting Base Erosion and Profit Shifting (BEPS) published on 19 July 2013 (“Action Plan”) the re-examination of the existing transfer pricing regulations as one of the action steps (see Action 13, Action Plan of the OECD on BEPS). Following this Action Plan the OECD released on 30 July 2013 a “white paper on transfer pricing documentation” (“White Paper”) covering the improvement, simplification and standardization of transfer pricing documentation for multinational enterprises (“MNE”). The business community and interested parties are now requested to comment on this white paper by 1 October 2013 with the aim to initiate a global discussion on the optimization of the transfer pricing documentation provisions.
The White Paper in General The structure of the White Paper is set out below: In the first two sections, the OECD provides an overview of existing guidance and initiatives on transfer pricing documentation. This overview includes both local and international transfer pricing guidelines and requirements, and makes reference in particular to Chapter V of the OECD Transfer Pricing Guidelines (the “OECD TPG”, adopted 1995), the European Union Guidance of Transfer Pricing Documentation (the “EUTPD”, adopted 2006), and the Pacific Association of Tax Administrators Documentation Package (the “PATA documentation package”, adopted 2003). In section III the OECD identified three main purposes of the transfer pricing requirements: 1. to provide the tax authorities with the necessary information to thoroughly assess transfer pricing risks; 2. to ensure that taxpayers have given appropriate consideration to transfer pricing and intra group transactions; and 3. to provide all information that the tax authorities might require for a thorough transfer pricing audit. On the basis of these three purposes, the OECD suggests in the following two sections a tiered approach to set up transfer pricing documentation for a simpler and more efficient documentation (the “Coordinated Documentation Approach”): A master file, providing information about the global business, business restructurings, transfer of intangibles and the tax situation of the MNE allowing the tax authorities to understand the “big picture” and the relating significant transfer pricing risks. Secondly, a local file, including the local country and transaction specific information such as a detailed functional and economic analysis of the local taxpayer and the application of the transfer pricing methodology. By this Coordinated Documentation Approach the OECD believes to achieve two goals, more transparency from the MNEs on the one hand and more streamlined and thus simpler documentation requirements for taxpayers as well as for the tax authorities globally.
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CLIENT ALERT: WHITE PAPER ON TRANSFER PRICING DOCUMENTATION RELEASED BY THE OECD
Impacts for German MNEs Germany already disposes of extensive provisions on transfer pricing documentation requirements. In detail, a German parent or subsidiary of a MNE has to set up a transfer pricing documentation according to Sec. 90 Par. 3 AO if the respective cross-border transactions exceed the size criteria laid down in Sec. 6 GAufzV. Such a transfer pricing documentation has to comprise an overview on the shareholder structure and the intragroup transactions, the functional and risk analysis and an analysis of the transfer prices applied (Sec. 4 GAufzV). Besides that, Germany already set up regulation covering function shifts and the obligation for a relating documentation. Moreover, the German Federal Ministry of Finance issued several provisions dealing with transfer pricing documentation. In conclusion, the outcome of this White Paper for German taxpayer may be rather low. However, in the view of today’s climate it could not be excluded that the German legislator will use this approach to further strengthen the existing documentation requirements under domestic law.
Contact persons
Marcus von Goldacker
Reinhard Ewert
Tax Advisor
Attorney, Tax Advisor
Partner
Senior Manager
T +49 89 350 00-2324
T +49 89 350 00-2344
E m.vongoldacker@rbs-partner.de
E r.ewert@rbs-partner.de
Gertrud Bergmann
Bettina Grothe
Auditor, Tax Advisor
Auditor, Tax Advisor
Partner
Senior Manager
T +49 30 208 88-1954
T +49 30 208 88-1976
E g.bergmann@rbs-partner.de
E b.grothe@rbs-partner.de
Dirk Schulz Auditor, Tax Advisor Senior Manager T +49 30 208 88-1956 E d.schulz@rbs-partner.de
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CLIENT ALERT: WHITE PAPER ON TRANSFER PRICING DOCUMENTATION RELEASED BY THE OECD
Note to this Client Alert: Neither the RBS RoeverBroennerSusat GmbH & Co. KG, nor other related entities of the RBS Group (i.e. RBS RoeverBroennerSusat Geschäftsführungs-GmbH, RBS RoeverBroennerSusat Rechtsanwaltsgesellschaft mbH, SUSAT Gesellschaft für Beratung und Revision mbH, SUSAT GmbH, RBS RoeverBroennerSusat Consulting GmbH, RBS RoeverBroennerSusat Advisors GmbH & Co. KG hereinafter only and collectively called RBS Group) renders, by means of this client alert, professional advice, service or recommendation for a certain entrepreneurial or personal decision. The sole purpose of this client alert is to outline general thoughts regarding the OECD’s white paper on transfer pricing documentation. This client alert contains general information only. Decisions have to be made independently and autonomously by the client. Before making any decision or taking any action related to the content of this client alert both for yourself and on behalf of another person, you should consult a qualified professional advisor. No entity of the above defined RBS Group shall be responsible for any loss whatsoever sustained by any person who relies on this client alert. Publisher: RBS RoeverBroennerSusat GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft D-Domstrasse 15 20095 Hamburg Editorial: Marcus von Goldacker Herzog-Heinrich-Strasse 22 D-80336 München T +49 89 350 00-2324 E m.vongoldacker@rbs-partner.de