CbCR takes centre stage at TP Week's Global Transfer Pricing Forum

TP Week's Global Transfer Pricing Forum in London hosted speakers from the OECD, HMRC and tax directors from a range of sectors this week. Highlights of the forum were the debates on CbCR, dispute resolution and new TP developments such as ICAP and the equalisation tax.

An international crowd of senior tax and transfer pricing specialists gathered at the Waldorf Hilton in London on Tuesday and Wednesday for the 17th annual Global Transfer Pricing Forum.

The OECD’s BEPS project unsurprisingly featured heavily throughout the two days of the forum. Although many praised the project for giving more clarity and uniformity, differences in implementation across countries were still a big worry for many, as well as the potential increase in disputes arising from the initiative. With filing deadlines looming, many participants said country-by-country reporting (CbCR) and some parts of the master file were the most pressing aspects of the BEPS project at the moment.

An audience poll, conducted with Slido as part of the CbCR panel, showed that 8% of attendees have yet to get started on the CbCR process, while 14% have only recently begun to organise themselves. Panellists urged everyone to start the process as soon as possible. "I was surprised how ill-prepared some companies appear to be," said Chris Lenon, founder of Green Tax. 

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A second audience poll showed that 47% considered the preparation for the CbC report to be intensive in terms of resources involved, out of which 28% deemed it highly intensive.

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“CbCR is a concrete fact at the moment, unlike many other of the BEPS actions, and you have to make very real decisions about what goes in the report. We are seeing a stream of interpretative questions about definitions of revenue, accrued tax and tax paid,” a panel participant said.

However, some thought the challenges surrounding Action 13 were a little exaggerated. Camilla Kiss, tax and TP manager at Aker Solutions, said she did not find Action 13 to be that extensive. “I feel tax advisers were blowing it a bit out of proportion. We didn’t need a lot of guidance from advisers to finish this. We’ve spent time on analysing revenue definitions, shared capital definitions, accrued taxes and made sure we have the right accounts in place,” Kiss told TP Week.

ICAP could increase tax certainty

Forum participants identified the international compliance assurance programme (ICAP) as an emerging trend that could increase tax certainty for taxpayers. The programme, which is being piloted by tax authorities in a few countries such as Italy, UK, US and the Netherlands, is intended to increase coordination around risk assessments for multinationals and minimise cross-border disputes. This could help tax authorities understand where risks are and provide more certainty, but the programme is still in a very early stage. Through discussions with taxpayers and working with other tax authorities to assess companies’ tax risk, the programme aims to prevent disputes.

One taxpayer had been contacted by a Southern European tax authority about entering the programme, and shared the experience with the audience. “You discuss your transfer pricing with the tax authorities, and end up with a risk assessment and an action plan. Then you decide whether you want to comply with. It is sort of a certificate of being a low tax risk, which means your audits will drop off. We’re hoping it will make discussions more efficient,” the panellist said.

A UK multinational wondered if participation in the ICAP programme was by invitation only, but was advised to not ask HMRC about it just yet as the pilot programme and its benefits were still being assessed.

On the note of tax certainty, many participants said the days of the unilateral advance pricing agreement (APA) were over, and expected bilateral and multilateral APAs to become more important going forward.

Equalisation tax

The equalisation tax came up in several different panels as a potentially worrying development in the EU. France, backed by Germany, Italy and Spain, recently proposed to tax digital multinationals in Europe, such as Google and Amazon, on their revenues rather than profits.

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But forum participants were sceptical about the proposal, with 76% saying they felt negatively about it and 10% holding a neutral position. Also, 72% did not think it was likely to materialise in Europe. One panellist said a definition of the digital economy was needed before further action could be taken.

Discussions over IP regimes also featured strongly in the forum. A presentation by international professional services firm Aptis Global, which recently launched its European branch, delved into the details of European IP ecosystems. Managing principal and founder Kathrine Kimball and Sophie Stas, principal and founding member, outlined some of Europe’s most critical IP regimes including those in Luxembourg, Ireland, Belgium and the Netherlands.

More OECD toolkits planned

The forum also featured Jefferson VanderWolk, the head of the tax treaty, transfer pricing and financial transactions division at the OECD’s Centre for Tax Policy and Administration, as a keynote speaker on Tuesday. Attendees were excited to hear that the OECD, UN, World Bank and IMF are planning a new toolkit for developing countries. The new toolkit will discuss transfer pricing documentation and the aim is to put a discussion draft out by the end of 2017.

VanderWolk also announced the publication of another toolkit next year, which will deal with risk assessment. While the toolkits will be aimed at tax administrations rather than taxpayers, they should still be useful for taxpayers looking to anticipate tax authorities’ interpretations of the guidelines.

TP Week would like to thank all attendees, panel participants and sponsors Aptis Global, Fenwick & West, Grant Thornton, Innovate Tax and Valente Associati GEB Partners, for making this a memorable event.