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At the end of 2016 the OECD explained in one of their webcasts the status quo of the BEPS Project. The most relevant aspects from a Transfer Pricing perspective are amongst others Country-by-Country Reporting (“CbC Reporting”), the BEPS multilateral instrument ("MLI") and the area of tax certainty. Amongst others, the latter includes the status of the OECD drafts on profit splits and attribution of profits to permanent establishments.
The CbC Reporting, as part of BEPS Action 13, is at the forefront of the concrete measures directly and immediately affecting tax payers around the globe. Next to the updated guidance regarding filing date and voluntary parent filing, the OECD published also a list, which is regularly updated and provides information on the current implementation status of the legislation regarding the particularities of CbC Reporting for the single countries.
Action 15 of the BEPS Project, the development of a multilateral instrument involving more than 100 countries and jurisdictions, represents a milestone in the field of international tax collaboration. It allows to update bilateral tax treaties in a synchronized way and, therefore, represents a swift tool for addressing issues that show a broad consensus for the need for coordinated action. As the MLI will be “sitting on top” of existing bilateral treaties it will provide a very efficient way of modifying existing tax treaties. Once implemented, it will be able to transpose results from the BEPS Action Plan into more than 2,000 tax treaties worldwide. Subsequent to the planned signing ceremony on June 5th 2017 the single countries have to work on the ratification of the MLI under domestic law.
Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, addressed some current issues regarding the ongoing work in the transfer pricing area. The recently published drafts led to different views amongst the stakeholders of the inclusive framework. Vivid discussions were created by the publication of the OECD Drafts concerning Permanent Establishments and Profit Splits. Stakeholders argue that the OECD's draft contains a very low threshold with respect to the creation of a Permanent Establishment. Furthermore, for the time being, significant tax risks may arise from the attribution of profits to Dependent Agent Permanent Establishments ("DAPE"). With respect to BEPS Actions 8-10, amongst others the stakeholder's need for a more precise wording, in order to increase tax certainty emerged. The OECD recognized the necessity for further discussion and work on these topics, which will possibly lead to outputs from the OECD that might differ from the drafts published at the time being. Consequently, the delay of the publication of the final outputs as well as the possible deviation on a content level will lead to a certain degree of uncertainty in this area and makes it even more vital to closely monitor the developments within this part of the BEPS Project.
Similar to the previous years, the pace of the BEPS Project has been high in 2016. With the upcoming milestones, such as the official signing procedure of the MLI in June 2017 as well as the first time filing of the CbC Reporting for many MNE’s in many jurisdictions, it becomes evident that the developments on the BEPS Project are moving ahead and more importantly bring direct implications for MNE’s and their global activities.
Hans Röll
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