On 31 January 2014 the Organization for Economic Co-operation and Development (OECD) released an initial draft of revised guidance on transfer pricing documentation and country-by-country reporting. This is related to Action 13 under the Base Erosion and Profit Shifting (BEPS) Action Plan.
The OECD’s initial draft of revised guidance on transfer pricing documentation and country-by-country reporting is in response to the July 2013 BEPS Action Plan and is proposed as a replacement of Chapter V of the OECD Transfer Pricing Guidelines.
The draft revised guidance envisions contemporaneous, enhanced, and standardized reporting requirements regarding multinational entities’ global allocation of income, economic activity, and payment of taxes for the countries in which they operate. According to the OECD, such reporting requirements would allow tax authorities to conduct better informed transfer pricing analyses.
The documentation would consist of a master file, containing information about the multinational group to which the taxpayer belongs, and a local file including information about the local member of the group. The master file would include details of the organization structure of the group, its business activities, details of intangible assets and intragroup financial transactions, and the financial and tax affairs of the group, The section on the financial and tax affairs would include country by country reporting of how profits are allocated among the group, what tax is paid and other economic indicators such as tangible assets and employees.
The local file would concentrate on the local group member and its transactions with the rest of the group. This would include financial information, a comparability analysis and information on the transfer pricing methods used.
Comments are requested by 23 February 2014, with a public consultation to follow in March 2014, with invited persons from among those who provide comments. An open discussion with all interested persons will take place at a future date.