VIEWpoint Issue 1 | 2023
2023 Compliance Trends: Staying Ahead in an Evolving Regulatory E...
2023 Tax Calendar
The 34-nation Organisation for Economic Cooperation and Development (OECD) and the G20 countries issued its proposed Guidance on Transfer Pricing Documentation and Country-by-Country Reporting, which is designed to constrain global tax avoidance.
It’s no surprise the OECD and the G20 have set their sights on transfer pricing, which refers to pricing arrangements for transfers of goods, services and intangibles between related companies in different jurisdictions. These arrangements can be easily manipulated to shift profits into jurisdictions with lower tax rates, resulting in fraudulent transfer pricing.
Most countries have transfer pricing rules designed to deter this sort of tax avoidance by requiring intercompany transactions to have terms similar to arm’s-length transactions between unrelated parties. But not all jurisdictions require companies to document their transfer pricing decisions.
Under the guidance, companies operating in two or more countries would file a single “country-by-country” report annually, disclosing revenues, profits before income tax, and income tax paid and accrued for each jurisdiction.
Additional requirements include:
According to the OECD, the documentation will help tax administrations identify whether companies have “engaged in transfer pricing and other practices that have the effect of artificially shifting substantial amounts of income into tax-advantaged environments.”
It’s not certain whether the OECD’s recommendations will be adopted and, if they are, when and by which countries. But given the high level of interest in global tax reporting, multinational companies should begin to think about the types of policies, procedures and systems they would need to have in place to comply with the OECD’s proposed reporting requirements.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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