Transfer Pricing

Transfer Pricing

1. State Practices

   • US: (i) extensive guidelines. (ii) Best method rule. (iii) CPM widely used
   • UK: (i) follows OECD (ii) BEPS leader
   • Germany: (i) OECD Generally (ii) best method based on comparability (iii) limitation on TNMM
   • Brazil: (i) Does not follow OECD (ii) safe harbour rates (iii) may use secret comparables

2. DTCs

   • Art. 7 Branch apportionment
   • Art 9 Adjustments
   • Art 25 MAP for TP disputes / or EU Arbitration convention

3. Thin Cap.

   • State Practices
     • KVR summaries
   • DTCs

4. Approaches

   • Global Formulary Apportionment
     • (1) measuring income of MNC as a whole (2) useful in Federal States (3) Problem of partial adoption (4) common tax bases and apportionment factors
   • Arm's Length Principle
     • (1) Objective (2) widely accepted (3) absence of comparables (4) States optionality and resulting conflicts (5) documentation burden

5. History

   • Transfer Pricing Notes
   • 1933 Carrol Report LoN 1935 Draft Conv. 1995-2013 TP Guidelines 2008 Attribution to PEs

6. APA's

7. Importance of: Without it MNCs could (more) easily manipulate prices to erode tax bases from higher tax jurisdictions to low