It is important to observe that the problems of non-arm’s length results and potential double taxation and double non-taxation arising under safe harbours could be largely eliminated if safe harbours were adopted on a bilateral or multilateral basis by means of competent authority agreements between countries. Under such a procedure, two or more countries could, by agreement, define a category of taxpayers and/or transactions to which a safe harbour provision would apply and by agreement establish pricing parameters that would be accepted by each of the contracting countries if consistently applied in each of the countries. Such agreements could be published in advance and taxpayers could consistently report results in each of the affected countries in accordance with the agreement.
TPG2022 Chapter IV paragraph 4.119
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter IV: Administrative Dispute Resolution | Tag: Safe harbor
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- TPG2022 Chapter II Annex I paragraph 1[See Chapter II, Part III, Section B of these Guidelines for general guidance on the application of the transactional net margin method. The assumptions about arm’s length arrangements in the following examples are intended for illustrative purposes only and should not be taken as prescribing adjustments and arm’s length arrangements...
- TPG2022 Chapter IV paragraph 4.114One major concern raised by a safe harbour is that it may increase the risk of double taxation. If a tax administration sets safe harbour parameters at levels either above or below arm’s length prices in order to increase reported profits in its country, it may induce taxpayers to modify...
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