ICC Document & publication

ICC Comments on OECD Discussion Draft on Revisions to Chapter I of the Transfer Pricing Guidelines (2015)

In the context of the G20 mandated OECD/BEPS Action Plan, ICC submitted comments to the OECD’s Discussion Draft on BEPS Actions 8, 9 and 10 regarding transfer pricing rules assuring that transfer pricing outcomes are in line with value creation.

ICC has submitted high level and essential comments to the OECD’s Discussion Draft on Actions 8, 9 and 10 of the OECD Base Erosion and Profit Shifting (BEPS) project that set out proposals to modify the OECD Transfer Pricing Guidelines relating to risk allocation, recharacterisation and special measures.

BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ‘disappear’ for tax purposes and/or to shift profits to locations where there is little or no real activity but the taxes are low. This results in little or no overall corporate tax being paid.

ICC, acknowledges that transfer pricing must follow the business reality, reflecting actual conduct and actual allocation of functions and risks, and that contractual arrangements should reflect this. However, the business community is concerned that taxpayers may no longer rely on contractual terms they have entered into with both related and unrelated parties. Furthermore, the ICC comments raise several other concerns, for example, related to compliance burden and proposed special measures.

ICC calls for enhanced cooperation between customs and tax authorities: a stronger alignment of the interpretation of the arm’s length principle and harmonisation of valuation determination would help to reduce legal uncertainty and conflicts. In this regard, ICC recommends the OECD to take note of the 2015 ICC Policy Statement on Transfer Pricing and Customs Value that provides practical guidance to achieve this.