TPG2022 Chapter IV paragraph 4.104

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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter IV: Administrative Dispute Resolution | Tag: ,
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Although they would not fully meet the foregoing description of a safe harbour, it may be the case that some countries adopt other administrative simplification measures that use presumptions to realise some of the benefits discussed in this Section. For example, a rebuttable presumption might be established under which a mandatory pricing target would be established by a tax authority, subject to a taxpayer’s right to demonstrate that its transfer price is consistent with the arm’s length principle. Under such a system, it would be essential that the taxpayer does not bear a higher burden to demonstrate its price is consistent with the arm’s length principle than it would if no such system were in place. In any such system, it would be essential to permit resolution of cases of double taxation arising from application of the mandatory presumption through the mutual agreement process.

Related Guidelines

TPG2022 Chapter IV paragraph 4.113Any potential disadvantages to taxpayers from safe harbours diverging from arm’s length pricing are avoided when taxpayers have the option to either elect the safe harbour or price transactions in accordance with the arm’s length principle. With such an approach, taxpayers that believe the safe harbour would require them to...
TPG2022 Chapter IV paragraph 4.112Safe harbours involve a trade-off between strict compliance with the arm’s length principle and administrability. They are not tailored to fit exactly the varying facts and circumstances of individual taxpayers and transactions. The degree of approximation of prices determined under the safe harbour with prices determined in accordance with the...
TPG2022 Chapter IV paragraph 4.111Where a safe harbour provides a simplified transfer pricing approach, it may not correspond in all cases to the most appropriate method applicable to the facts and circumstances of the taxpayer under the general transfer pricing provisions. For example, a safe harbour might require the use of a particular method...
TPG2022 Chapter IV paragraph 4.110The availability of safe harbours for a given category of taxpayers or transactions may have adverse consequences. These concerns stem from the fact that: The implementation of a safe harbour in a given country may lead to taxable income being reported that is not in accordance with the arm’s length...
TPG2022 Chapter IV paragraph 4.109A safe harbour would result in a degree of administrative simplicity for the tax administration. Although the eligibility of particular taxpayers or transactions for the safe harbour would need to be carefully evaluated, depending on the specific safe harbour provision, such evaluations would not necessarily have to be performed by...
TPG2022 Chapter IV paragraph 4.108Another advantage provided by a safe harbour is the certainty that the taxpayer’s transfer prices will be accepted by the tax administration providing the safe harbour, provided they have met the eligibility conditions of, and complied with, the safe harbour provisions. The tax administration would accept, with limited or no...
TPG2022 Chapter IV paragraph 4.107Properly designed safe harbours may significantly ease compliance burdens by eliminating data collection and associated documentation requirements in exchange for the taxpayer pricing qualifying transactions within the parameters set by the safe harbour. Especially in areas where transfer pricing risks are small, and the burden of compliance and documentation is...
TPG2022 Chapter IV paragraph 4.106Application of the arm’s length principle may require collection and analysis of data that may be difficult or costly to obtain and/or evaluate. In certain cases, such compliance burdens may be disproportionate to the size of the taxpayer, its functions performed, and the transfer pricing risks inherent in its controlled...
TPG2022 Chapter IV paragraph 4.105The basic benefits of safe harbours are as follows: Simplifying compliance and reducing compliance costs for eligible taxpayers in determining and documenting appropriate conditions for qualifying controlled transactions; Providing certainty to eligible taxpayers that the price charged or paid on qualifying controlled transactions will be accepted by the tax administrations...
TPG2022 Chapter IV paragraph 4.103For purposes of the discussion in this Section, safe harbours do not include administrative simplification measures which do not directly involve determination of arm’s length prices, e.g. simplified, or exemption from, documentation requirements (in the absence of a pricing determination), and procedures whereby a tax administration and a taxpayer agree...