Draft OECD guidance on hard-to-value intangibles released June 4 would permit tax administrations to consider ex post evidence of the actual financial outcome of a transfer of intangibles to determine the appropriateness of the ex ante pricing arrangement, including whether arm’s length parties would have used contingent pricing arrangements.
The guidance, released in response to Action 8 of the OECD/20 base erosion profit shifting (BEPS) plan, would modify Section D.3 of Chapter VI of the OECD Transfer Pricing Guidelines.
The draft states that the information asymmetry between tax administrations and taxpayers regarding taxpayers’ business environments has created the need for special rules.
Under the draft, if a taxpayer provides full details about the ex ante calculation and proves that any significant difference between the financial projections and actual outcomes was due to unforeseeable or extraordinary developments occurring after the price determination, the ex ante price should be respected.
The OECD said that an unexpected bankruptcy of a competitor or natural disaster could be examples of such unforeseen circumstances.
Written comments on the draft are due June 18; a public consultation will be held July 6–7 in Paris.
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