Canada: OECD Issues Work On BEPS Actions
The Organization for Economic Cooperation and Development (OECD) has released the first components of its comprehensive plan for creating an agreed set of international rules for fighting base erosion and profit shifting (BEPS) and ending opportunities for double non-taxation. The four model legal instruments and three reports are the first seven deliverables of the OECD’s 15-action plan for fighting BEPS. In particular, two deliverables relate specifically to transfer pricing as follows:
- Action 8 — guidance on transfer pricing aspects of intangibles; and
- Action 13 — guidance on transfer pricing documentation, including a country-by-country reporting template.
Action 8: Intangibles
The deliverable in respect of action 8 sees revisions to the OECD Transfer Pricing Guidelines to align transfer pricing outcomes with value creation in the area of intangibles. The changes clarify the definition of intangibles and provide guidance for related parties; including transactions involving intangibles and the transfer pricing treatment of local market features and corporate synergies. Some transfer pricing issues relating to intangibles are closely related to other issues that are to be addressed during 2015, most notably in relation to the allocation of risk among multinational enterprise group members and re-characterisation of transactions.
Action 13: Country-by-Country Reporting
In BEPS Action 13, the OECD has delivered a six-column country-by-country reporting template that asks multinationals to disclose to tax authorities their turnover, profits, accrued taxes, paid taxes, employees and assets, country-by-country, in all the countries where they operate.
These new reporting provisions and the transparency they will encourage, will contribute to the objective of understanding, controlling and tackling BEPS behaviours. Effective implementation of the new reporting standards and reporting rules will be essential. Additional work will be undertaken to identify the most appropriate means of filing the required information with and disseminating it to tax administrations. The modalities of implementing the country-by-country reporting template will be decided by January 2015. Meanwhile, the OECD has agreed to consider revising the template based on members’ experience by 2020.
The OECD will present the seven deliverables to the G-20 finance ministers meeting September 20-21 in Cairns, Australia and then to G-20 leaders meeting November 15-16 in Brisbane, Australia. Stay tuned for more to come on this later.
