Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines are intended to help tax administrations (of both OECD member countries and non-member countries) and MNEs by indicating ways to find mutually satisfactory solutions to transfer pricing cases, thereby minimizing conflict among tax administrations and between tax administrations and MNEs and avoiding costly litigation.
The Guidelines analyse the methods for evaluating whether the conditions of commercial and financial relations within an MNE satisfy the arm's length principle and discuss the practical application of those methods. They also include a discussion of global formulary apportionment.
Some jurisdictions offer tax incentives when IP assets are owned and managed within that jurisdiction, therefore due to the fact that Intellectual Property (IP) typically represents between 38% – 80% of ‘value-add’ of multi-national enterprises, it is attractive for them to effectively reduce tax rates globally by locating IP in a low tax or tax advantaged 'havens'.
Transfer pricing is one of the most significant challenges faced by multi-nationals that must demonstrate compliance and remain competitive. With significant volumes of complex tax regulation from around the globe, including new regulations associated with the OECD Base Erosion and Profit Sharing (BEPS) project, the details can make a huge difference in terms of resolving a transfer pricing issue efficiently.
More so now than ever before, international organisations require a comprehensive solution to manage each step of their transfer pricing compliance, which is why engaging our services and knowledge base will ensure an efficient and cost effective solution for your business.