Tag: Transfer pricing documentation

Germany vs X GmbH & Co. KG, October 2022, European Court of Justice, Case No C-431/21

Germany vs X GmbH & Co. KG, October 2022, European Court of Justice, Case No C-431/21

A Regional Tax Court in Germany had requested a preliminary ruling from the European Court of Justice on two questions related to German transfer pricing documentation requirements. whether the freedom of establishment (Article 49 TFEU) or the freedom to provide services (Article 56 TFEU) is to be interpreted in such a way that it precludes the obligation to provide transfer pricing documentation for transactions with a foreign related parties (Section 90 (3) AO) and whether the sanctions regulated in section 162(4) AO could be contrary to EU law The Regional Tax Court considered that these provisions establish special documentation requirements for taxpayers with transactions with foreign related parties. In the event of non-compliance with these documentation requirements, section 162(4) AO leads to a sanction in the form of a fine/surcharge. Neither was provided for taxpayers with transactions with domestic related parties. However, such discrimination can be justified by compelling reasons in the public interest. In this context, the Regional Tax ... Read more
Denmark vs. Codan Forsikring A/S, August 2022, Eastern High Court, Case no BS-11370/2020

Denmark vs. Codan Forsikring A/S, August 2022, Eastern High Court, Case no BS-11370/2020

This case concerns pricing of four reinsurance agreements concluded between Codan Forsikring A/S (Codan) and a controlled Irish company, RSA Reinsurance Ireland Ltd. for FY 2010-2013. The tax authorities had increased Codan’s taxable income for FY 2010, 2011 and 2012 by DKK 23 million, DKK 25 million, and DKK 18 million and reduced the taxable income for FY 2013 by DKK 4 million. At issue was whether the expenses incurred by Codan under the reinsurance agreements with RSA Ireland were commercially justified and thus deductible. If so, there were questions as to whether the reinsurance agreements had been concluded at arm’s length. By decision of 26 June 2019 the Tax Court reduced the assessment to DKK 0 for the 2010-2012 tax years and upheld Codan’s taxable income for FY 2013. An appeal was filed by the tax authorities. Judgement of the Eastern High Court The High Court upheld the decision of the Tax Court and set aside the assessment of ... Read more
Poland vs A. Sp. z o. o., February 2022, Supreme Administrative Court, Case No II FSK 1475/19

Poland vs A. Sp. z o. o., February 2022, Supreme Administrative Court, Case No II FSK 1475/19

A. Sp. z o.o. was established to carry out an investment project consisting in construction of a shopping center. In order to raise funds, the company concluded a loan agreement. The loan agreement was guaranteed by shareholders and other related parties. By virtue of the guarantees, the guarantors became solitarily liable for the Applicant’s obligations. The guarantees were granted free of charge. A. Sp. z o.o. was not obliged to pay any remuneration or provide any other mutual benefit to the guarantors. In connection with the above description, the following questions were asked: (1) Will A. Sp. z o.o. be obliged to prepare transfer pricing documentation in connection with the gratuitous service received, and if so, both for the year in which the surety is granted to the Applicant or also for subsequent tax years during the term of the security? (2) Will A. Sp. z o.o. be obliged to disclose the event related to the free-of-charge consideration received in ... Read more
TPG2022 Chapter V Annex III

TPG2022 Chapter V Annex III

Annex III to Chapter V Transfer Pricing Documentation – Country-by-Country Report A. Model template for the Country-by-Country Report Table 1. Overview of allocation of income, taxes and business activities by tax jurisdiction Table 2. List of all the Constituent Entities of the MNE group included in each aggregation per tax jurisdiction Please specify the nature of the activity of the Constituent Entity in the Additional Information” section. Table 3. Additional Information B. Template for the Country-by-Country Report – General instructions Purpose This Annex III to Chapter V of these Guidelines contains a template for reporting a multinational enterprise’s (MNE) group allocation of income, taxes and business activities on a tax jurisdiction-by-tax jurisdiction basis. These instructions form an integral part of the model template for the Country-by-Country Report. Definitions Reporting MNE A Reporting MNE is the ultimate parent entity of an MNE group. Constituent Entity For purposes of completing Annex III, a Constituent Entity of the MNE group is (i) any ... Read more

TPG2022 Chapter V Annex II

Annex II to Chapter V Transfer Pricing Documentation – Local file The following information should be included in the local file: Local entity A description of the management structure of the local entity, a local organisation chart, and a description of the individuals to whom local management reports and the country(ies) in which such individuals maintain their principal offices. A detailed description of the business and business strategy pursued by the local entity including an indication whether the local entity has been involved in or affected by business restructurings or intangibles transfers in the present or immediately past year and an explanation of those aspects of such transactions affecting the local entity. Key competitors. Controlled transactions For each material category of controlled transactions in which the entity is involved, provide the following information: A description of the material controlled transactions (e.g. procurement of manufacturing services, purchase of goods, provision of services, loans, financial and performance guarantees, licences of intangibles, etc.) ... Read more

TPG2022 Chapter V Annex I

Annex I to Chapter V Transfer Pricing Documentation – Master file The following information should be included in the master file: Organisational structure Chart illustrating the MNE group’s legal and ownership structure and geographical location of operating entities. Description of MNE group’s business(es) General written description of the MNE group’s business including: –     Important drivers of business profit; –      A description of the supply chain for the group’s five largest products and/or service offerings by turnover plus any other products and/or services amounting to more than 5% of group turnover. The required description could take the form of a chart or a diagram; –      A list and brief description of important service arrangements between members of the MNE group, other than research and development (R&D) services, including a description of the capabilities of the principal locations providing important services and transfer pricing policies for allocating services costs and determining prices to be paid for intra-group services; –      A description of ... Read more

TPG2022 Chapter X paragraph 10.124

A potential difficulty for tax administrations in analysing cash pooling arrangements is that the various entities in a cash pool may be resident across a number of jurisdictions, potentially making it difficult to access sufficient information to verify the position as set out by the taxpayer. It would be of assistance to tax authorities if MNE groups would provide information on the structuring of the pool and the returns to the cash pool leader and the members in the cash pool as part of their transfer pricing documentation. (See Annex I to Chapter V of these Guidelines about the information to be included in the master file) ... Read more

TPG2022 Chapter X paragraph 10.68

It is important that the MNE group appropriately documents the reasons and selection of the credit rating used for a particular MNE when pricing intra-group loans and other controlled financial transactions ... Read more

TPG2022 Chapter IX paragraph 9.33

As part of their transfer pricing documentation, MNE groups are recommended to document their decisions and intentions regarding business restructurings, especially as regards their decisions to assume or transfer significant risks, before the relevant transactions occur, and to document the evaluation of the consequences on profit potential of significant risk allocations resulting from the restructuring. In describing the assumption of risk as part of a business restructuring, it is recommended that taxpayers use the framework set out in Section D. 1.2.1 of Chapter I ... Read more

TPG2022 Chapter VIII paragraph 8.53

Over the duration of the CCA term, the following information could be useful: a) any change to the arrangement (e.g. in terms, participants, subject activity), and the consequences of such change b) a comparison between projections used to determine the share of expected benefits from the CCA activity with the actual share of benefits (however, regard should be had to paragraph 3.74) c) the annual expenditure incurred in conducting the CCA activity, the form and value of each participant’s contributions made during the CCA’s term, and a detailed description of how the value of contributions is determined ... Read more

TPG2022 Chapter VIII paragraph 8.52

The following information would be relevant and useful concerning the initial terms of the CCA: a) a list of participants b) a list of any other associated enterprises that will be involved with the CCA activity or that are expected to exploit or use the results of the subject activity c) the scope of the activities and specific projects covered by the CCA, and how the CCA activities are managed and controlled d) the duration of the arrangement e) the manner in which participants’ proportionate shares of expected benefits are measured, and any projections used in this determination f) the manner in which any future benefits (such as intangibles) are expected to be exploited g) the form and value of each participant’s initial contributions, and a detailed description of how the value of initial and ongoing contributions is determined (including any budgeted vs actual adjustments) and how accounting principles are applied consistently to all participants in determining expenditures and the ... Read more

TPG2022 Chapter VIII paragraph 8.51

The transfer pricing documentation standard set out in Chapter V requires reporting under the master file of important service arrangements and important agreements related to intangibles, including CCAs. The local file requires transactional information including a description of the transactions, the amounts of payments and receipts, identification of the associated enterprises involved, copies of material intercompany agreements, and pricing information including a description of reasons for concluding that the transactions were priced on an arm’s length basis. It would be expected that in order to comply with these documentation requirements, the participants in a CCA will prepare or obtain materials about the nature of the subject activity, the terms of the arrangement, and its consistency with the arm’s length principle. Implicit in this is that each participant should have full access to the details of the activities to be conducted under the CCA, the identity and location of the other parties involved in the CCA, the projections on which the ... Read more

TPG2022 Chapter VIII paragraph 8.1

This chapter discusses cost contribution arrangements (CCAs) between two or more associated enterprises. The purpose of the chapter is to provide some general guidance for determining whether the conditions established by associated enterprises for transactions covered by a CCA are consistent with the arm’s length principle. The analysis of the structure of such arrangements should be informed by the provisions of this chapter and other provisions of these Guidelines and should be based on an adequate documentation of the arrangement ... Read more

TPG2022 Chapter VII paragraph 7.64

An MNE group electing for application of this simplified methodology shall prepare the following information and documentation and make it available upon request to the tax administration of any entity within the group either making or receiving a payment for low value-adding intra-group services. A description of the categories of low value-adding intra-group services provided; the identity of the beneficiaries; the reasons justifying that each category of services constitute low value-adding intra-group services within the definition set out in Section D.1; the rationale for the provision of services within the context of the business of the MNE; a description of the benefits or expected benefits of each category of services; a description of the selected allocation keys and the reasons justifying that such allocation keys produce outcomes that reasonably reflect the benefits received, and confirmation of the mark-up applied; Written contracts or agreements for the provision of services and any modifications to those contracts and agreements reflecting the agreement of ... Read more

TPG2022 Chapter VII paragraph 7.55

While low value-adding intra-group services may provide benefits to all recipients of those services, questions may arise about the extent of the benefits and whether independent parties would have been willing to pay for the service or perform it themselves. Where the MNE group has followed the guidance of the simplified approach the documentation and reporting discussed in Section D.3 below, it should provide sufficient evidence that the benefits test is met given the nature of low value-adding intra-group services. In evaluating the benefits test, tax administrations should consider benefits only by categories of services and not on a specific charge basis. Thus, the taxpayer need only demonstrate that assistance was provided with, for example, payroll processing, rather than being required to specify individual acts undertaken that give rise to the costs charged. Provided such information outlined in paragraph 7.64 is made available to the tax administration, a single annual invoice describing a category of services should suffice to support ... Read more

TPG2022 Chapter VII paragraph 7.8

Some intra-group services are performed by one member of an MNE group to meet an identified need of one or more specific members of the group. In such a case, it is relatively straightforward to determine whether a service has been provided. Ordinarily an independent enterprise in comparable circumstances would have satisfied the identified need either by performing the activity in-house or by having the activity performed by a third party. Thus, in such a case, an intra-group service ordinarily would be found to exist. For example, an intra-group service would normally be found where an associated enterprise repairs equipment used in manufacturing by another member of the MNE group. It is essential, however, that reliable documentation is provided to the tax administrations to verify that the costs have been incurred by the service provider ... Read more

TPG2022 Chapter VI paragraph 6.160

Because of the importance of the underlying assumptions and valuation parameters, taxpayers and tax administrations making use of valuation techniques in determining arm’s length prices for transferred intangibles should explicitly set out each of the relevant assumptions made in creating the valuation model, should describe the basis for selecting valuation parameters, and should be prepared to defend the reasonableness of such assumptions and valuation parameters. Moreover, it is a good practice for taxpayers relying on valuation techniques to present as part of their transfer pricing documentation some sensitivity analysis reflecting the consequential change in estimated intangible value produced by the model when alternative assumptions and parameters are adopted ... Read more

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 ... Read more

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 ... Read more

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, a secondary mechanism would be accepted as appropriate, through local filing or through filing of ... Read more

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 tax matters in the course of a tax audit. (Access to a mutual agreement procedure ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 be filed by 31 December 2017. For MNEs with a fiscal year ending on a ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

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 be preferred ... Read more

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 ... Read more

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 ... Read more

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 ... Read more

TPG2022 Chapter V paragraph 5.42

Care should be taken not to impose a documentation-related penalty on a taxpayer for failing to submit data to which the MNE group did not have access. However, a decision not to impose documentation-related penalties does not mean that adjustments cannot be made to income where prices are not consistent with the arm’s length principle. The fact that positions are fully documented does not necessarily mean that the taxpayer’s positions are correct. Moreover, an assertion by a local entity that other group members are responsible for transfer pricing compliance is not a sufficient reason for that entity to fail to provide required documentation, nor should such an assertion prevent the imposition of documentation-related penalties for failure to comply with documentation rules where the necessary information is not forthcoming ... Read more

TPG2022 Chapter V paragraph 5.41

Documentation-related penalties imposed for failure to comply with transfer pricing documentation requirements or failure to timely submit required information are usually civil (or administrative) monetary penalties. These documentation-related penalties are based on a fixed amount that may be assessed for each document missing or for each fiscal year under review, or calculated as a percentage of the related tax understatement ultimately determined, a percentage of the related adjustment to the income, or as a percentage of the amount of the cross-border transactions not documented ... Read more

TPG2022 Chapter V paragraph 5.40

Many countries have adopted documentation-related penalties to ensure efficient operation of transfer pricing documentation requirements. They are designed to make non-compliance more costly than compliance. Penalty regimes are governed by the laws of each individual country. Country practices with regard to transfer pricing documentation-related penalties vary widely. The existence of different local country penalty regimes may influence the quality of taxpayers’ compliance so that taxpayers could be driven to favour one country over another in their compliance practices ... Read more

TPG2022 Chapter V paragraph 5.39

The necessity of providing documentation in local language may constitute a complicating factor with respect to transfer pricing compliance to the extent that substantial time and cost may be involved in translating documents. The language in which transfer pricing documentation should be submitted should be established under local laws. Countries are encouraged to permit filing of transfer pricing documentation in commonly used languages where it will not compromise the usefulness of the documents. Where tax administrations believe that translation of documents is necessary, they should make specific requests for translation and provide sufficient time to make such translation as comfortable a burden as possible ... Read more

TPG2022 Chapter V paragraph 5.38

In order to simplify compliance burdens on taxpayers, tax administrations may determine, as long as the operating conditions remain unchanged, that the searches in databases for comparables supporting part of the local file be updated every three years rather than annually. Financial data for the comparables should nonetheless be updated every year in order to apply the arm’s length principle reliably ... Read more

TPG2022 Chapter V paragraph 5.37

It is recommended that transfer pricing documentation be periodically reviewed in order to determine whether functional and economic analyses are still accurate and relevant and to confirm the validity of the applied transfer pricing methodology. In general, the master file, the local file and the Country-by-Country Report should be reviewed and updated annually. It is recognised, however, that in many situations business descriptions, functional analyses, and descriptions of comparables may not change significantly from year to year ... Read more

TPG2022 Chapter V paragraph 5.36

Because the tax administration’s ultimate interest would be satisfied if the necessary documents were submitted in a timely manner when requested by the tax administration in the course of an examination, the way that documentation is stored – whether in paper, electronic form, or in any other system – should be at the discretion of the taxpayer provided that relevant information can promptly be made available to the tax administration in the form specified by the local country rules and practices ... Read more

TPG2022 Chapter V paragraph 5.35

Taxpayers should not be obliged to retain documents beyond a reasonable period consistent with the requirements of domestic law at either the parent company or local entity level. However, at times materials and information required in the documentation package (master file, local file and Country-by-Country Report) may be relevant to a transfer pricing enquiry for a subsequent year that is not time barred, for example where taxpayers voluntarily keep such records in relation to long-term contracts, or to determine whether comparability standards relating to the application of a transfer pricing method in that subsequent year are satisfied. Tax administrations should bear in mind the difficulties in locating documents for prior years and should restrict such requests to instances where they have good reason in connection with the transaction under examination for reviewing the documents in question ... Read more

TPG2022 Chapter V paragraph 5.34

For purposes of Annex III to Chapter V of these Guidelines, the Country-by-Country Report should include all tax jurisdictions in which the MNE group has an entity resident for tax purposes, regardless of the size of business operations in that tax jurisdiction ... Read more

TPG2022 Chapter V paragraph 5.33

A number of countries have introduced in their transfer pricing documentation rules simplification measures which exempt small and medium-sized enterprises (SMEs) from transfer pricing documentation requirements or limit the information required to be provided by such enterprises. In order not to impose on taxpayers costs and burdens disproportionate to the circumstances, it is recommended to not require SMEs to produce the amount of documentation that might be expected from larger enterprises. However, SMEs should be obliged to provide information and documents about their material cross-border transactions upon a specific request of the tax administration in the course of a tax examination or for transfer pricing risk assessment purposes ... Read more

TPG2022 Chapter V paragraph 5.32

Not all transactions that occur between associated enterprises are sufficiently material to require full documentation in the local file. Tax administrations have an interest in seeing the most important information while at the same time they also have an interest in seeing that MNE groups are not so overwhelmed with compliance demands that they fail to consider and document the most important items. Thus, jurisdictional transfer pricing documentation requirements based on Annex II to Chapter V of these Guidelines should include specific materiality thresholds that take into account the size and the nature of the local economy, the importance of the MNE group in that economy, and the size and nature of local operating entities, in addition to the overall size and nature of the MNE group. Measures of materiality may be considered in relative terms (e.g. transactions not exceeding a percentage of revenue or a percentage of cost measure) or in absolute amount terms (e.g. transactions not exceeding a ... Read more

TPG2022 Chapter V paragraph 5.28

Taxpayers should not be expected to incur disproportionately high costs and burdens in producing documentation. Therefore, tax administrations should balance requests for documentation against the expected cost and administrative burden to the taxpayer of creating it. Where a taxpayer reasonably demonstrates, having regard to the principles of these Guidelines, that either no comparable data exists or that the cost of locating the comparable data would be disproportionately high relative to the amounts at issue, the taxpayer should not be required to incur costs in searching for such data ... Read more

TPG2022 Chapter V paragraph 5.27

Each taxpayer should endeavour to determine transfer prices for tax purposes in accordance with the arm’s length principle, based upon information reasonably available at the time of the transaction. Thus, a taxpayer ordinarily should give consideration to whether its transfer pricing is appropriate for tax purposes before the pricing is established and should confirm the arm’s length nature of its financial results at the time of filing its tax return ... Read more