OECD Surveys Transfer Pricing Regimes

by Ulrika Lomas, Tax-News.com, Brussels

15 June 2011

The Organization for Economic Cooperation and Development (OECD) has conducted a major new survey on the simplification of transfer pricing regimes, and found that over 80% of respondents have simplification procedures in place.

As part of its work on the issues surrounding transfer pricing regulations, the OECD sent out questionnaires to all Member and Observer states in July 2010. Of these, 33 participated in the survey, and their responses were analyzed. The survey, titled "Multi-Country Analysis of Existing Transfer Pricing Simplification Measures", was subsequently published on June 10.

The respondents were as follows: Argentina, Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, India, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Slovenia, Spain, South Africa, Sweden, Switzerland, Turkey, the United Kingdom and the United States, along with the European Union.

The OECD analyzed five categories of simplification measures. These are:

• Exemptions from transfer pricing rules or from transfer pricing adjustment;
• Simplified transfer pricing methods, safe harbour arm's length ranges and safe harbour interest rates;
• Exemptions from or simplified documentation requirements;
• Exemptions from or alleviated penalties; and
• Simplified Advanced Pricing Arrangement (APA) procedures or reduced APA charges.

The survey's key findings include:

• 27 of the 33 respondents indicated that they have simplification procedures in place. 58 measures in total were found;
• More than 70% of these measures are directed at small and medium sized enterprises, small transactions and low value-added services. The OECD says this is unsurprising, given the pragmatic risk assessment strategies pursued by many governments, which aim at keeping compliance costs proportionate with the size and complexity of transactions;
• Six countries - Australia, Austria, Japan, the Netherlands, New Zealand and the US - have measures applicable to low value-added services: namely, simple transactions with limited tax revenues at stake; and
• Nine countries have simplified their transfer pricing methods, safe harbour arm's length ranges and safe harbour interest rates. These are all optional methods, and the OECD states that this probably explains why no country reported double taxation cases that may have been caused by the application of their own or another country's simplification measures.

The OECD is to use its analysis here, along with comments received during a current public consultation, to inform its future work on transfer pricing. A public invitation to comment, launched by the OECD's Committee on Fiscal Affairs, involves a review of the techniques which could be implemented to optimize the use of taxpayers' and tax administrations' resources. In particular, the OECD is also looking into its current safe harbour guidance, included in its Transfer Pricing Guidelines.

The public invitation to comment remains open until June 30.

Recommended