The OECD is considering novel transfer pricing issues that have cropped up during the coronavirus crisis and is looking for input for potential guidance on those topics, the OECD’s tax chief said.
The OECD’s Centre for Tax Policy and Administration (CTPA) has received many questions about new transfer pricing issues for taxpayers and tax administrations alike, according to CTPA Director Pascal Saint-Amans. He was speaking during the 15th edition of the OECD Tax Talks webcast series on May 4.
Some are wondering what should happen when a company, which set up low-risk distributors in several countries, is faced with significant losses in those jurisdictions because of the pandemic. In those cases, the company's country of residence “may not be keen on” allowing it to keep profits in those jurisdictions to offset the losses, according to Saint-Amans. “If we want to do something meaningful, and even more importantly, useful to you all to limit the exposure to tax uncertainty, we need consensus among the members" of the inclusive framework, he added.
Working Party 6, a subsidiary body of the OECD’s Committee on Fiscal Affairs that focuses on transfer pricing, has started discussing how and when to handle several questions the OECD has already received about these novel issues, Saint-Amans said.
Although some companies want responses before they are set to file their tax returns this summer, members of the inclusive framework on base erosion and profit shifting said they need more time to explore the questions and agree on answers, Saint-Amans added.
The inclusive framework, which comprises nearly 140 jurisdictions, is responsible for standard setting on issues that the original BEPS project did not address.
The OECD secretariat issued guidance on the tax treaty implications of the pandemic on April 3 because it had a clear interpretation of tax treaties and was therefore able to issue guidance on its own, according to Saint-Amans. However, that’s not the case with transfer pricing, he said.
Working Party 6 will set out a process for the work, which means the OECD is not likely to deliver guidance before the end of the year, Saint-Amans said. “But we’ll try to go as fast as possible and when we do that, we will be consulting,” he said, encouraging webcast attendees to email their transfer-pricing-related questions to the CTPA.
Other Developments
On the tax transparency front, the OECD is also in the final stages of drafting model tax rules that will ensure greater tax compliance among sellers on sharing and gig economy platforms, according to Achim Pross, head of the international cooperation and tax administration division at the CTPA.
Governments will be able to adopt those rules to ensure that sharing and gig economy platform operators report seller details in a consistent manner to tax administrations, according to a public consultation document released by the CTPA in February. Pross said the CTPA expects to release the model rules before the summer.
Pross noted the rescheduling of a public consultation on the review of BEPS action 13, which will now take place as a virtual meeting on May 12-13.
The consultation, announced February 6, elicited input on action 13 (transfer pricing documentation and country-by-country reporting), one of the four minimum standards of the BEPS project. It follows up on a mandate in the final action 13 report for a review by the end of 2020 covering such issues as implementation, operation, and scope.
The OECD is focusing on transparency and tax compliance regarding cryptocurrency, Pross added. To that end, the OECD is working on a due diligence, reporting, and information exchange network, based on the common reporting standard for automatic information exchange and the work of the Financial Action Task Force, he said.
Saint-Amans also announced during the webcast that the inclusive framework’s July 1-2 plenary session in Berlin was rescheduled for early October.