Transfer Pricing International

Sustainable transfer pricing in an era of growth and business transformation



New trends in the transfer pricing environment, coupled with increased scrutiny from revenue authorities, mean companies have to work hard to keep abreast of the ever-changing landscape. Momentum is building with companies aligning and rationalising their business supply chains, tax, and legal operating models to deliver sustainable financial benefits. Pressure to combat tax-driven business structures means that defining sustainable transfer pricing strategies is a key priority on the agenda of multinational companies.

Written for the PwC 2011 annual transfer pricing conference, "Perspectives: Sustainable Transfer Pricing in an Era of Growth and Business Transformation", addresses some of the fundamental changes taking place in the tax landscape and provides additional content and depth to the conference sessions.

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Perspectives: Winds of Change, a collection of articles evolving from the PwC Global Transfer Pricing Conference 2010, that review some of the significant policy and legislative developments, including new OECD guidelines and increased documentation requirements in several jurisdictions. Our review covers 14 countries, with representation from all trading continents, and the key industries of automotive, industrial products and energy.

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PwC Romania provides, among others, the following transfer pricing services:

- Assistance with planning and/or restructuring existing inter-company transactions;
- Assistance with preparing transfer pricing documentation for inter-company transactions;
- Assistance with the development of transfer pricing policies;
- Assistance in the preparation of Advance Pricing Arrangement applications;
- Assistance during tax inspections performed by the tax authorities.

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Did you know that TPCR offers you the possibility to look inside your transfer pricing functions, by simply filling in a questionnaire. The TPCR consists of a qualitative assessment, positioning your perceived current state relative to your ambition level on the key items of the Transfer Pricing Value Chain. Upon completing the questionnaire, your PricewaterhouseCoopers contacts will discuss the results with you, and will offer best (industry) practices and prioritised advice on how to improve towards the optimal ‘delta-combination’ of your TP organisation, processes and systems.

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Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations

The Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Transfer Pricing Guidelines) is the internationally recognised main publication in the area of transfer pricing that provides a general framework on this topic, as well as useful guidance for both taxpayers and tax authorities.

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Report on the Attribution of Profits to Permanent Establishments

The Report provides guidance on the attribution of arm's length profits to a permanent establishment by leveraging upon the concepts and principles introduced in the OECD Transfer Pricing Guidelines. The authorised OECD approach ( i.e. the separate entity approach) refers to attributing profits to the permanent establishment as if it were a separate entity from the rest of the enterprise. There are specific chapters dedicated to permanent establishment of enterprises operating in the financial sector ( i.e. banking activities, global trading in financial instruments, insurance activities).

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Given the dynamics of today's business reality and the continuously evolving business models adopted by multinationals, the OECD stays alert and constantly strives to expand its work so keep pace with all these trends and developments.

Discussion Draft on the Transfer Pricing Aspects of Business Restructurings

Business restructurings by multinational enterprises have been a widespread phenomenon in recent years, raising difficult transfer pricing and treaty issues for which there was insufficient OECD guidance with respect to their treatment under both the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and the OECD Model Tax Convention on Income and on Capital. These issues, which involve primarily the application of transfer pricing rules upon and / or after the conversion, the determination of the existence of, and attribution of profits to, permanent establishments, and the recognition or recharacterisation of transactions, may lead to significant uncertainty for business as well as for governments and possible double taxation or double non-taxation, in the absence of a common understanding. Recognising the need for work to be done in this area, the OECD started a project to develop guidance on these transfer pricing and treaty issues.

To access this draft document and read more on this topic, please follow this link

Revision of Chapters I-III of the Transfer Pricing Guidelines

The OECD is currently working on a substantial revision of Chapters I-III of the OECD Transfer Pricing Guidelines dealing with comparability issues and profit based methods (i.e., the profit split method and the transactional net margin method).

To access this draft document and read more on this topic, please follow this link

Revised discussion draft of a new Article 7 (Business Profits) of the OECD Model Tax Convention on Income and Capital

The new Article 7 and its Commentary constitute the second part of the implementation package for the Report on Attribution of Profits to Permanent Establishments that the OECD adopted in 2008.

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Manual on Effective Mutual Agreement Procedures

This online Manual on Effective Mutual Agreement Procedures (MEMAP) is part of a broader project to improve the functioning of existing international tax dispute procedures and to develop supplementary dispute resolution mechanisms. The MEMAP is intended as a guide to increase awareness of the MAP process and how it should function. It will provide tax administrations and taxpayers with basic information on the operation of MAP and identify best practices for MAP without imposing a set of binding rules upon Member countries.

To access this draft document and read more on this topic, please follow this link

The 'Joint Transfer Pricing Forum (JTPF)' is an expert group that works within the framework of the OECD Transfer Pricing Guidelines and operates on the basis of consensus to produce pragmatic, non-legislative solutions to practical problems posed by transfer pricing practices in the EU. Based on its meetings, the forum group elaborated several documents, which were further approved by the EU Commission and the Council of the EU. This forum is made up of one expert from the tax administration of each Member State and 15 experts from the business community.

For more details on the JTPF and the agenda of its meetings, please follow this link

The work of the JTPF resulted in the following papers:

Code of Conduct on Transfer Pricing Documentation for Associated Enterprises in the European Union (EU Code of Conduct or EU TPD)

The EU TPD is aimed to introduce the concept of standardised and partially centralised transfer pricing documentation with the aim of simplifying documentation requirements for cross-border activities. This is to be achieved by way of producing a documenation set that includes the masterfile (common standartised information relevant for all EU group members) and a country-specific documenation tailored to the specific controlled transactions of the local entity.

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Guidelines for Advance Pricing Agreements (APA) within the European Union

This document is aimed to provide guidance to both tax administrations and tax payers within the EU so as to ensure a smooth and eficient APA program. 

To find out more and view this document, please follow this link

Arbitration Convention

The EU Arbitration Convention establishes a procedure to resolve disputes where double taxation occurs between enterprises of different Member States as a result of an upward adjustment of profits of an enterprise of one Member State. Whilst most bilateral double taxation treaties include a provision for a corresponding downward adjustment of profits of the associated enterprise concerned, they do not impose a binding obligation on the Contracting States to eliminate the double taxation. The Convention provides for the elimination of double taxation by agreement between the contracting states including, if necessary, by reference to the opinion of an independent advisory body. The Convention thus improves the conditions for cross-border activities in the Internal Market.

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For clarifications concerning some practical aspects of the Arbitration Convention, a separate Code of Conduct was made available and later revised.