allocation of income post-beps...source: oecd, beps webcast - launch of the 2015 final reports, 5...

Allocation of income post-BEPSEMA Tax Summit—London, September 2016

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With you today

Montserrat TrapéViladomatEMEA Lead Global Transfer Pricing Services

John NeighbourDeputy Global LeadGlobal Transfer Pricing Services

Gianni De RobertisItalian Lead, KPMG in Italy Global Transfer Pricing Services


Agenda

1 Introduction

2 Reviewing current transfer pricing policy

3 Documentation and disputes

4 Future environment

5 Conclusions


Introduction


Balancing 3 pillars – substance is fundamental

Source: OECD, BEPS Webcast - Launch of the 2015 Final Reports, 5 October 2015

Measuring BEPS (11)

DisclosureRules (12)

TP Documentation (13)

DisputeResolution (14)

Preventing Tax Treaty Abuse (6)

Avoidance ofPE Status (7)

TP Aspects ofIntangibles (8)

TP/Risks andCapital (9)

TP/High RisksTransactions (10)

Hybrid MismatchArrangements (2)

CFC Rules (3)

Interest Deductions (4)

Harmful TaxPractices (5)

Digital Economy (1)Multilateral Instrument (15)

Requiring a fundamental assessment of existing practices, sustainability

and defence, and planning forfeasible alternatives

Coherence Substance Transparency and Certainty


Reviewing current transfer pricing policy


What has changed post-BEPS?Three key changes are:

Tax authorities want to look at the ‘big picture’ of the whole value chain of a business, not a one sided transaction.

01‘Delineation’ of transactions based on people substance/ functions and noton contracts.

02The change to a more subjective transfer pricing approach could lead to an increase in disputes and a misuse of profit splits.

03


Documentationand disputes


Action 13: Objectives and approach

Aid tax authorities perform a risk assessment

Have taxpayers set prices in line with the arm’s-length principle

Information for tax authority audit

Objectives

Country by Country Report (CbCR)

Master File (MF)

Local File (LF)

The OECD has developed a three-tiered approach for documentation

Approach

Source: OECD


Action 13 country implementation

CbCR Final Legislation

United States

● Implemented● Draft bills/Public discussion draft● Intention to Implement

CbCR/MF/LF Final Legislation

Mexico

CbCRDraft legislation

Canada


Australia

CbCR / MF /LFFinal Legislation

China


Denmark


Poland

Norway

CbCRFinal Legislation

France


IrelandCbCR/MF/LF

Final Legislation

Japan

CbCRDraft

Korea

MF/LF Final

South Africa

CbCRIntentions

Nigeria

CbCR/MF/LFIntentions

New Zealand


Taiwan

CbCRFinal

Portugal

MF/LF Intention

CbCR/MF/LF Draft Legislation

SwedenCbCR/MF/LF

Draft Legislation

Finland


Singapore

Israel

United KingdomCbCR

Final Legislation

Source: KPMG International member firms

CbCRDraft

MF/LF Intention


Chile

Switzerland

CbCRDraft

MF/LF Intention

Russia

CbCRDraft MF Intention

Germany Romania

CbCRIntention

MF/LF Final

CbCRIntentions

Bermuda

Austria

CbCR/MF/LFFinal Legislation

Belgium

CbCR/MF/LFFinal Legislation

CbCR/MF Draft

LF Intention


Italy


Netherlands

CbCRIntentions

Jersey


Luxembourg

CbCR/MF/LFDraft Legislation

Liechtenstein


Malaysia


Indonesia

CbCR Draft Legislation

Slovenia


Spain

IndiaCbCRFinal

MF/LF Draft

CbCRDraft

MF/LF Intention


PeruCbCR/LF

DraftMF

Intention

CbCRDraft

MF/LF Intention

CbCR/MFDraft legislation

Uruguay

Czech Republic


Action 14 – Dispute resolution “The measures developed under Action 14 of the BEPS Action Plan aim to strengthen the effectiveness and efficiency of the MAP process. They aim to minimise the risks of uncertainty and unintended double taxation by ensuring the consistent and proper implementation of tax treaties, including the effective and timely resolution of disputes regarding their interpretation or application through the mutual agreement procedure.”


Future environment


The road ahead…

You are here Certainty?

Action 4 Technical aspects of group wide ratio rule; special rules for banks and insurers; transfer pricing of financial transactions (2016 and 2017)

Action 5Framework to engage non-OECD countries; revisions to criteria for harmful regimes; ongoing monitoring

Action 7Attribution of profit to PE’s paper to be finalised

Actions 8-10Profit split paper to be finalised

Action 14Framework to monitor compliance with minimum standard; mandatory binding arbitration provision

Action 15The multi-lateral instrument is to be delivered by the end of 2016

Implementation Monitoring of country implementation –framework for continuing work to include developing countries

EU Accounting Directive & EU State Aid Rules Source: OECD


Conclusions


Key messages01

Do you have an existing TP

policy covering the transaction?

02Are you satisfied your TP policy remains arm’s

length post-BEPS?

YES

Design TP model

NO

Review TP model

NO

Risk assess / review documentation

YES

Consider

APA to achieve certainty

Consider

Preparing robust BEPS

documentation

Consider wider stakeholders

03


Questions


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Feedback

Fragmentation and controversyTax in a post-BEPS world



© 2016 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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allocation of income post-beps...source: oecd, beps webcast - launch of the 2015 final reports, 5...

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