Category: TPG2022 Chapter V: Transfer Pricing Documentation

TPG2022 Chapter V paragraph 5.62

Jurisdictions endeavour to introduce as necessary domestic legislation in a timely manner. They are also encouraged to expand the coverage of their international agreements for exchange of information. The implementation of the package will be monitored on an ongoing basis. The outcomes of this monitoring will be taken into consideration in the 2020 review ... Continue to full case

TPG2022 Chapter V paragraph 5.61

Annex IV to Chapter V of these Guidelines contains an implementation package for government-to-government exchange of Country-by-Country Reports, which includes: • Model legislation requiring the ultimate parent entity of an MNE group to file the Country-by-Country Report in its jurisdiction of residence. Jurisdictions will be able to adapt this model legislation to their own legal systems, where changes to current legislation are required. Key elements of secondary mechanisms have also been developed. • Implementing arrangements for the automatic exchange of the Country- by-Country Reports under international agreements, incorporating the conditions set out in Section E.2.3. Such implementing arrangements include competent authority agreements (CAAs) based on existing international agreements (the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bilateral tax treaties and TIEAs) and inspired by the existing models developed by the OECD working with G20 countries for the automatic exchange of financial account information ... Continue to full case

TPG2022 Chapter V paragraph 5.60

Jurisdictions should require in a timely manner Country-by-Country Reporting from ultimate parent entities of MNE groups resident in their jurisdiction and referred to in Section E.2.2 and exchange this information on an automatic basis with the jurisdictions in which the MNE group operates and which fulfil the conditions listed in Section E.2.3. Only in cases where a jurisdiction fails to provide information to a jurisdiction fulfilling the conditions listed in Section E.2.3, because (a) it has not required Country- by-Country Reporting from the ultimate parent entity of such MNE groups, (b) no competent authority agreement has been agreed in a timely manner under the current international agreements of the jurisdiction for the exchange of the Country-by-Country Reports or (c) it has been established that there is a failure to exchange the information in practice with a jurisdiction after agreeing with that jurisdiction to do so, ... Continue to full case

TPG2022 Chapter V paragraph 5.59

Jurisdictions should use appropriately the information in the Country- by-Country Report template in accordance with paragraph 5.25. In particular, jurisdictions will commit to use the Country-by-Country Report for assessing high-level transfer pricing risk. Jurisdictions may also use the Country-by- Country Report for assessing other BEPS-related risks. Jurisdictions should not propose adjustments to the income of any taxpayer on the basis of an income allocation formula based on the data from the Country-by-Country Report. They will further commit that if such adjustments based on Country- by-Country Report data are made by the local tax administration of the jurisdiction, the jurisdiction’s competent authority will promptly concede the adjustment in any relevant competent authority proceeding. This does not imply, however, that jurisdictions would be prevented from using the Country-by-Country Report data as a basis for making further enquiries into the MNE group’s transfer pricing arrangements or into other ... Continue to full case

TPG2022 Chapter V paragraph 5.58

Jurisdictions should use their best efforts to adopt a legal requirement that MNE groups’ ultimate parent entities resident in their jurisdiction prepare and file the Country-by-Country Report, unless exempted as set out in paragraph 5.52. Jurisdictions should utilise the standard template contained in Annex III of Chapter V of these Guidelines. Stated otherwise, under this condition no jurisdiction will require that the Country-by-Country Report contain either additional information not contained in Annex III, nor will it fail to require reporting of information included in Annex III ... Continue to full case

TPG2022 Chapter V paragraph 5.57

Jurisdictions should have in place and enforce legal protections of the confidentiality of the reported information. Such protections would preserve the confidentiality of the Country-by-Country Report to an extent at least equivalent to the protections that would apply if such information were delivered to the country under the provisions of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, a Tax Information Exchange Agreement (TIEA) or a tax treaty that meets the internationally agreed standard of information upon request as reviewed by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Such protections include limitation of the use of information, rules on the persons to whom the information may be disclosed, ordre public, etc ... Continue to full case

TPG2022 Chapter V paragraph 5.55

It is considered that no exemptions from filing the Country-by- Country Report should be adopted apart from the exemptions outlined in this section. In particular, no special industry exemptions should be provided, no general exemption for investment funds should be provided, and no exemption for non-corporate entities or non-public corporate entities should be provided. Notwithstanding this conclusion, MNE groups with income derived from international transportation or transportation in inland waterways that is covered by treaty provisions that are specific to such income and under which the taxing rights on such income are allocated exclusively to one jurisdiction, should include the information required by the Country-by-Country Report template with respect to such income only against the name of the jurisdiction to which the relevant treaty provisions allocate these taxing rights ... Continue to full case

TPG2022 Chapter V paragraph 5.54

It is the intention of the countries participating in the OECD/G20 BEPS Project to reconsider the appropriateness of the applicable revenue threshold described in the preceding paragraph in connection with their 2020 review of implementation of the new standard, including whether additional or different data should be reported ... Continue to full case

TPG2022 Chapter V paragraph 5.53

It is believed that the exemption described in paragraph 52, which provides a threshold of EUR 750 million, will exclude approximately 85 to 90% of MNE groups from the requirement to file the Country-by-Country Report, but that the Country-by-Country Report will nevertheless be filed by MNE groups controlling approximately 90% of corporate revenues. The prescribed exemption threshold therefore represents an appropriate balancing of reporting burden and benefit to tax administrations ... Continue to full case

TPG2022 Chapter V paragraph 5.52

There would be an exemption from the general filing requirement for MNE groups with annual consolidated group revenue in the immediately preceding fiscal year of less than EUR 750 million or a near equivalent amount in domestic currency as of January 2015. Thus, for example, if an MNE that keeps its financial accounts on a calendar year basis has EUR 625 million in consolidated group revenue for its 2015 calendar year, it would not be required to file the Country-by-Country Report in any country with respect to its fiscal year ending 31 December 2016 ... Continue to full case

TPG2022 Chapter V paragraph 5.51

It is recommended that all MNE groups be required to file the Country-by-Country Report each year except as follows ... Continue to full case

TPG2022 Chapter V paragraph 5.50

It is recommended that the first Country-by-Country Reports be required to be filed for MNE fiscal years beginning on or after 1 January 2016. However, it is acknowledged that some jurisdictions may need time to follow their particular domestic legislative process in order to make necessary adjustments to the law. In order to assist jurisdictions in preparing timely legislation, model legislation requiring ultimate parent entities of MNE groups to file the Country-by-Country Report in their jurisdiction of residence has been developed (see Annex IV to Chapter V of these Guidelines). Jurisdictions will be able to adapt this model legislation to their own legal systems. Given the recommendation in paragraph 5.31 that MNEs be allowed one year from the close of the fiscal year to which the Country-by-Country Report relates to prepare and file the Country-by-Country Report, this recommendation means that the first Country-by-Country Reports would ... Continue to full case

TPG2022 Chapter V paragraph 5.49

It is recommended that the master file and local file elements of the transfer pricing documentation standard be implemented in each jurisdiction through local legislation or administrative procedures and that the master file and local file be filed directly with the tax administrations in each relevant jurisdiction as required by those administrations. With regard to the local file and the master file, confidentiality and the consistent use of the standards contained in Annex I and Annex II to Chapter V of these Guidelines should be taken into account by jurisdictions when introducing these elements in local legislation or administrative procedures ... Continue to full case

TPG2022 Chapter V paragraph 5.48

This section contains guidance to ensure an effective and consistent implementation of transfer pricing documentation requirements, and in particular Country-by-Country Reporting ... Continue to full case

TPG2022 Chapter V paragraph 5.47

It is not recommended, particularly at the stage of transfer pricing risk assessment, to require that the transfer pricing documentation should be certified by an outside auditor or other third party. Similarly, mandatory use of consulting firms to prepare transfer pricing documentation is not recommended ... Continue to full case

TPG2022 Chapter V paragraph 5.46

The requirement to use the most reliable information will usually, but not always, require the use of local comparables over the use of regional comparables where such local comparables are reasonably available. The use of regional comparables in transfer pricing documentation prepared for jurisdictions in the same geographic region in situations where appropriate local comparables are available will not, in some cases, comport with the obligation to rely on the most reliable information. While the simplification benefits of limiting the number of comparable searches an entity is required to undertake are obvious, and materiality and compliance costs are relevant factors to consider, a desire for simplifying compliance processes should not go so far as to undermine compliance with the requirement to use the most reliable available information. See paragraphs 1.132-1.133 on market differences and multi-jurisdictional analyses for further details on when local comparables are to ... Continue to full case

TPG2022 Chapter V paragraph 5.45

The Confidentiality and Information Security Management Toolkit (2020) produced by the Global Forum on Transparency and Exchange of Information for Tax Purposes provides guidance to jurisdictions to ensure that their legal framework on the confidentiality of taxpayer information is adequate and protects the confidentiality and appropriate use of information exchanged under an international exchange agreement ... Continue to full case

TPG2022 Chapter V paragraph 5.44

Tax administrations should take all reasonable steps to ensure that there is no public disclosure of confidential information (trade secrets, scientific secrets, etc.) and other commercially sensitive information contained in the documentation package (master file, local file and Country¬by-Country Report). Tax administrations should also assure taxpayers that the information presented in transfer pricing documentation will remain confidential. In cases where disclosure is required in public court proceedings or judicial decisions, every effort should be made to ensure that confidentiality is maintained and that information is disclosed only to the extent needed ... Continue to full case

TPG2022 Chapter V paragraph 5.43

Another way for countries to encourage taxpayers to fulfil transfer pricing documentation requirements is by designing compliance incentives such as penalty protection or a shift in the burden of proof. Where the documentation meets the requirements and is timely submitted, the taxpayer could be exempted from tax penalties or subject to a lower penalty rate if a transfer pricing adjustment is made and sustained, notwithstanding the provision of documentation. In some jurisdictions where the taxpayer bears the burden of proof regarding transfer pricing matters, a shift of the burden of proof to the tax administration’s side where adequate documentation is provided on a timely basis offers another measure that could be used to create an incentive for transfer pricing documentation compliance ... Continue to full case
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