Transfer pricing guidelines should be interpreted consistently with BEPS changes, OECD says

Countries that integrate the OECD transfer pricing guidelines into their national laws should now begin to apply not only the recently approved OECD/G20 base erosion profit shifting (BEPS) plan transfer pricing changes, but should also interpret all chapters of the transfer pricing guidelines consistently with those changes, the OECD has advised.

In a June 15 statement, the OECD noted that the OECD Council on May 23 formally approved the BEPS plan amendments. As a result, the transfer pricing work under BEPS actions 8–10 and 13 became applicable in countries that adopt those guidelines into their domestic laws.

It will take some time though, the OECD said, to conform the rest of the transfer pricing guidelines with the new BEPS changes.

“The conforming changes are expected to be approved later in 2016. Until then, it is stipulated that the provisions of the Transfer Pricing Guidelines should be interpreted to be consistent with those provisions of the Transfer Pricing Guidelines which have been amended by the 2015 BEPS Report on Actions 8-10 and 2015 BEPS Report on Action 13 and, in case of perceived inconsistencies, the modified provisions prevail,” the OECD advised.

At a Washington DC conference last week, Andrew Hickman, who heads the transfer pricing unit at the OECD Centre for Tax Policy and Administration, said that the transfer pricing guidelines must in particular be updated to conform to the new analytical framework in Chapter I on delineating transactions and allocating risk.

Noting the recent approval by the OECD Council of the BEPS work, Hickman said the OECD intends to publish a new edition of transfer pricing guidelines by year end, after all the conforming amendments are complete. Hickman spoke at a conference sponsored by the OECD, USCIB, and BIAC.

The notice also confirms statements made by Hickman last week reporting that work conforming the BEPS changes to Chapter IX of the transfer pricing guidelines on business restructuring is almost complete. A draft will soon be released seeking public feedback.

The notice lists the changes to the transfer pricing guidelines that were introduced by the BEPS work, as follows:

• The current provisions of Chapter I, Section D of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.

• Paragraphs are added to Chapter II of the Transfer Pricing Guidelines, immediately following paragraph 2.16.

• A new paragraph is inserted following paragraph 2.9.

• The current provisions of Chapter V of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance and annexes.

• The current provisions of Chapter VI of the Transfer Pricing Guidelines and the annex to this Chapter are deleted in their entirety and replaced by new guidance and annex.

• The current provisions of Chapter VII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.

• The current provisions of Chapter VIII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.

See:

• Notice

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