ICC Document & publication

ICC comments on the OECD Discussion Draft on BEPS Action 10: Proposed modifications to Chapter VII of the transfer pricing guidelines relating to low value-adding intra-group services (2015)

ICC submitted high level and fundamental comments to the OECD’s Discussion Draft on Action 10 of the G20/OECD’s BEPS project concerning proposed modifications to Chapter VII of the transfer pricing guidelines relating to low value-adding intra-group services.

Base Erosion and Profit Shifting (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.

OECD’s BEPS Action 10 proposes modifications to Chapter VII of the transfer pricing guidelines relating to low value-adding intra-group services, including a simplified charge mechanism set out to reduce the tax compliance burden for both taxpayers and tax administrations.

ICC welcomes modifications to the transfer pricing guidelines where this will enhance certainty and clarity for taxpayers and tax administrations alike. ICC also recommends that the following aspects be covered by the OECD in BEPS Action 10:

  1. The range of mark-ups could be from 0%-5% to allow for those industry sectors where the charging of a mark-up may not be permitted (e.g. some production sharing arrangements) or where the tax payer is using a 0% mark-up in compliance with the country’s cost sharing regulations.
  2. The draft guidelines tend to address simplification measures largely from a service provider’s perspective. More emphasis should also be given to respecting the election of the simplification measure from the perspective of the service recipient; or the low value-adding intra-group services should be made part of a bilateral safe-harbour.