The report contains revisions to the OECD Transfer Pricing Guidelines to align transfer
pricing outcomes with value creation. The revised guidance focuses on the following
key areas: transfer pricing issues relating to transactions involving intangibles;
contractual arrangements, including the contractual allocation of risks and corresponding
profits, which are not supported by the activities actually carried out; the level
of return to funding provided by a capital-rich MNE group member, where that return
does not correspond to the level of activity undertaken by the funding company; and
other high-risk areas. The report also sets out follow-up work to be carried out on
the transactional profit split method which will lead to detailed guidance on the
ways in which this method can appropriately be applied to further align transfer pricing
outcomes with value creation.
Base Erosion and Profit Shifting (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.