The OECD is looking to set global principles for attributing profits to a permanent establishment, a move away from a more prescriptive approach, as part of its Base Erosion and Profit Shifting (BEPS) project
In the OECD’s latest Tax Talks webinar, it provided updates for progress on its BEPs Inclusive Framework, including details on transfer pricing.
Mayra Lucas, an OECD transfer pricing adviser, said that a new discussion draft has been opened to discuss the attribution of profits to permanent establishments. The draft sets a focus on developing ‘high-level principles’ to govern profit attribution. ‘It’s a different approach,’ said Lucas. ‘We’re moving away from more numerical and prescriptive examples provided in our previous discussion draft.’
Among these principles are making sure there is no double taxation in the source country; and local administrations can approach look to simplify compliance. These principles have already been agreed by countries globally, Lucas added.
In summarising the direction of travel, Pascal Saint-Amans, director, Centre for Tax Policy and Administration, OECD, said 2017 was a ‘year of implementation’ of tax transparency and BEPs, and that tax remains ‘high on the list’ of priorities for the G20.
Along with Vietnam becoming the 100th member of the inclusive framework, Saint-Amans added that more than 95% were committed and implementing BEPs.
The first peer reviews for those implementing BEPs will be released at the start of 2018, with a yearly continuous process to bring more countries into the review schedule.
Interpretative guidance on country-by-country (CBC) reporting was issued in April, covering areas such as the definition of revenues and the definition of related parties. Details on exchange relationships were released in May.
Achim Pross, head of international co-operation and tax administration, OECD, said it was very important that the CBC project ‘starts consistently, we continue consistently, and end on a consistent basis, so when the information comes in the tax administration understands it, and the same information comes in from different MNEs from around the world’.
Some 55 jurisdictions have taken steps to implement a CBC filing obligation on multinational entity groups, with 30 having a full legal framework for CBC reporting in place. The total number of signatories is now 64. ‘It’s proceeding extremely well and extremely fast,’ Pross added.
Report by Kevin Reed