Current Work of Interest to Developing Countries. Michelle Levac Chair Working Party 6

Current Work of Interest to Developing Countries Michelle Levac Chair Working Party 6

Current work and recent initiatives 1. 1 st Annual International Meeting on Transfer Pricing under the auspices of the Tax Treaty and Transfer Pricing Global Forum (26-27 March 2012) 2. Administrative aspects of transfer pricing 3. Transfer pricing aspects of intangibles 2

1 ST ANNUAL INTERNATIONAL MEETING ON TRANSFER PRICING

1st Annual International Meeting on Transfer Pricing Since more than 15 years, the Global Forum on Tax Treaty and Transfer Pricing has addressed a mix of Treaty and Transfer Pricing issues 2009 edition focused on TP Need for a separate event to allow more in-depth discussion of TP topics given the growing interest of NOEs in these issues 1 st Annual International Meeting on Transfer Pricing will take place on 26-27 March 2012; Annual International Meetings on Treaty will continue to be scheduled in September. 4

1st Annual International Meeting on Transfer Pricing 34 OECD countries + EC, 107 non-oecd economies, 9 international organisations Ideal opportunity to hold bilateral talks 5

1st Annual International Meeting on TP Topics on the agenda: Implementation of the arm s length principle: challenges and opportunities Comparables: an impossible quest? Intra-group services: auditing headquarters cost allocations High value-added intra-group services: how different from intangibles? Case study on technology-based intangibles Case study on marketing intangibles Transfer pricing disputes: an international overview 6

TRANSFER PRICING AND NON-OECD ECONOMIES

Designated Participants 10 15 non-oecd Economies Work closely with Bureau WP6 Examples of topics The development of best practices in relation to auditing allocations of head office costs by multinational enterprises; The development of best practices in relation to transfer pricing documentation and access to the information needed to enforce transfer pricing legislation; and The development of a self-assessment tool for transfer pricing administrations

Key non-oecd Economies November 2010 : meeting of the WP6 Bureau with a small group of key non- OECD Economies (Brazil, Colombia, India, Malaysia, Russia, South Africa); To be repeated in November 2011

ADMINISTRATIVE ASPECTS OF TRANSFER PRICING

Improving the administration of transfer pricing Complex guidance needed for complex transactions; can enforcement / compliance be simplified for simpler transactions? Efficient use of resources (tax administrations and taxpayers) Stock taking of the administrative simplification measures that OECD countries and Observers have developed in the transfer pricing area

Invitation to comment Experience with various forms of TP administrative simplification measures and their effectiveness; What the different types of regimes referred to as safe harbours are and how best to describe them and differentiate among them; The pros and cons of safe harbour rules and other forms of TP administrative simplification, in practice and from a policy perspective; Whether the existing guidance on safe harbours in Chapter IV of the TPG should be revised, and if so how.

Improving the administration of transfer pricing Multi-country analysis of Existing Transfer Pricing Simplification measures - 10 June 2011 - http://www.oecd.org/dataoecd/55/41/48131481.pdf 24 Comments from private sector on: http://www.oecd.org/document/54/0,3746,en_2649_337 53_48340470_1_1_1_1,00.html Review of the existing guidance on safe harbours in Chapter IV of the TPG with a view to possibly updating it in order to reflect the experience acquired since 1995.

MONITORING

Monitoring activities Promote a more consistent application of the arm s length principle and TP Guidelines among OECD and non OECD countries Substantive discussions by WP6 of country transfer pricing developments: In the area of financial transactions and thin capitalisation issues (March 2010); in the area of intangibles (November 2010) ; others to come.

INTANGIBLES

Process aspects: 34 member countries + non-oecd economies: Argentina, China, India, Russia, South Africa Ad hoc observers TPI: Brazil, Colombia, Indonesia, Malaysia, Singapore Involvement of the business community Format of expected final output: revised TPG; requests for examples 17

Transfer pricing aspects of intangibles Scoping paper approved by the Committee on Fiscal Affairs in January 2011 (www.oecd.org/ctp/tp/intangibles) 1. What is an intangible for transfer pricing purposes? 2. How to allocate between associated enterprises the (ownership) rights / rights to share in the return from intangibles? 3. How to determine an arm s length price (or range of prices, or returns) for transactions involving the development, use or transfer of intangibles?

Boundaries of the project: Not reopen issues that were resolved in the 2010 TPG Focus on intangible-specific issues for which there is a lack of guidance Scope = Article 9 (associated enterprise); not Article 7 (profits of PEs) 19

Tentative timeline: July 2010 Approval of the 2010 revision of the Transfer Pricing Guidelines, including a new Chapter IX on business restructuring Invitation to comment on the scoping of work to be undertaken on intangibles September 2010 50 contributions received from the public, see www.oecd.org.ctp/tp/intangibles November 2010 Meeting with commentators January 2011 Scoping paper approved by the Committee on Fiscal Affairs, see www.oecd.org/ctp/tp/intangibles 2011-2013 Working Party No. 6 Special Session on the TP Aspects of Intangibles meeting 3 times / year; involvement of business representatives March 2011 Meeting with private sector representatives on valuation issues November 2011 Meeting with private sector representatives / / End of 2013 (target date) Discussion draft for public comment 20

Q & A

Thank You