19/01/2021 - The Platform for Collaboration on Tax (PCT)—a joint initiative of IMF, OECD, UN and the World Bank—has released the final version of the Practical Toolkit to Support the Successful Implementation by Developing Countries of Effective Transfer Pricing Documentation Requirements.
The PCT's new toolkit serves as a sourcebook of guidance on implementing transfer pricing documentation requirements for developing countries. The toolkit compiles essential information on transfer pricing documentation and analyses policy choices and legislative options. Readers can find sample legislation as well as examples and practices from over 30 countries and additional approaches to transfer pricing documentation in the toolkit.
Transfer pricing continues to be one of the most challenging issues for tax administrations even during the COVID-19 crisis. The successful enforcement of transfer pricing rules depends on robust transfer pricing documentation requirements. The toolkit aims to help countries implement effective transfer pricing documentation requirements so that they can protect their tax bases, reduce profit shifting and raise much-needed revenues for the recovery phase.
Transfer pricing refers to the mechanism to price cross-border, intra-firm transactions. When it is practiced in compliance with internationally applicable rules, transfer pricing is a necessary and legitimate part of the global transactions of multinational enterprises (MNEs), involving the transfer of property or services. However, MNEs may exploit differences in tax systems between countries through manipulative and abusive transfer pricing, shifting profits from high to low tax jurisdictions and denying countries essential tax revenues.
Transfer pricing documentation requirements are measures that tax administrations use to require taxpayers to document all stages of their transfer pricing analysis. Tax administrations examine a large amount of information from external and internal sources to assess taxpayers’ compliance with the transfer pricing rules. By providing real-life examples and practices, the toolkit shows that a robust and clear transfer pricing documentation regime helps tax administrations collect the necessary information to ensure compliance while minimising compliance burdens on business.
This is the fourth toolkit published by the PCT—a collective effort of the PCT Partners to help countries address challenges in international taxation. The toolkit takes into account extensive comments received from countries and stakeholders during the public consultation process in 2019.
Following the launch, the transfer pricing documentation toolkit will be presented by an expert panel at a webinar in February 2021. French and Spanish versions of the toolkit will be available in the coming days, as well as virtual learning opportunities based on the toolkit.
The Platform for Collaboration on Tax is a joint initiative of the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank Group (WBG). The PCT Secretariat is generously supported by the governments of Japan, Luxembourg, the Netherlands, Norway, Switzerland, and the United Kingdom. For more information, please visit: www.tax-platform.org
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