721.8 kB - Poledna | Boss | Kurer

OECD Section E – Redraft On Safe HarborsRevised Section E On Safe Harbors InChapter IV Of The Transfer PricingGuidelines For Multinational EnterprisesAnd Tax Administrationsby Matthew Vold (Chicago)Revised Section E on Safe Harbors in Chapter IVof the Transfer Pricing Guidelines for MultinationalEnterprises and Tax Administrations, approved bythe OECD Council on May 16, 2013, encourages,under the right circumstances, the use of bilateralor multilateral safe harbors. The discussion considersthe benefits of, and concerns regarding, safeharbor provisions and provides guidance regardingthe circumstances in which safe harbors may be appliedin a transfer pricing system based on the arm'slength principle.Key areas of discussion include:Benefits of safe harbors – Safe harbors providebenefits to taxpayers through simplified complianceand reduced compliance costs and certaintythat the price charged or paid on the coveredcontrolled transaction will be accepted by the taxadministrations. They also permit tax administrationsto focus administrative resources fromsmaller taxpayers and less complex transactionsto more complex, higher-risk cases.Concerns over safe harbors – Adverse consequencesof safe harbors may include reporting oftaxable income that is not in accordance with thearm's length principle, the risk of double taxationor double non-taxation when adopted unilaterally,the potential for inappropriate tax planning,and issues of equity and uniformity.Recommendations on the use of safe harbors– The OECD developed guidance encourages,under the right circumstances, the use of bilateralor multilateral safe harbors, but notes thatwhether adopted on a unilateral or bilateral basis,safe harbors do not bind or limit in any way anytax administration other than the tax administrationthat has expressly adopted the safe harbor.The OECD's recommendations on the use of safeharbors include the following:Unilateral safe harbors may lead to thepotential for double taxation or double nontaxation,among other issues. For example,when a taxpayer reports income above thearm's length level due to the safe harbor,more income will be reported by the domesticaffiliate and less taxable income will bereported in the foreign tax jurisdiction of thecounterparty to the transaction. In the eventthe other tax administration challenges theprice of the transaction, the taxpayer may facedouble taxation. On the other hand, doublenon-taxation could occur when the taxpayerelects application of a unilateral safe harborbelow the arm's length level in the countryadopting the safe harbor. In such a case, therewould be no assurance that the taxpayer wouldreport income above the arm's length level inother countries on a consistent basis, and it isunlikely other administrations could requirethe income to be reported above arm's length31