jueves, 15 de enero de 2015

BEPS Action 10: Discussion Draft on the Use of Profit Splits in the Context of Global Value Chains

The OECD on December 16th issued a non-consensus discussion draft on the use of profit splits in the context of global value chains in connection with Action 10 of the Action Plan on Base Erosion and Profit Shifting (BEPS) to develop “rules to prevent BEPS by engaging in transactions which would not, or would only very rarely, occur between third parties. This will involve adopting transfer pricing rules or special measures to…(ii) clarify the application of transfer pricing methods, in particular profit splits, in the context of global value chains.”
The discussion draft does not contain specific proposed modifications to the OECD’s transfer pricing guidelines, but rather, presents eight scenarios whereby the profit split method could potentially be applicable, and solicits comments from interested parties to elaborate on these scenarios regarding the relative reliability of such methods. The eight scenarios reflect many of the themes in the proposed changes to Chapter VI of the OECD’s transfer pricing guidelines on intangibles and Chapter I on risk. The discussion draft is an attempt to define an applicable transfer pricing method, if rights to intangible returns are split between the developer and others under Chapter VI or the multinational enterprise’s operations are determined to be integrated and interdependent, which creates valuable synergies, as suggested in the proposed revisions to Chapter I.
To date, taxpayers’ unilateral use of profit splits has been confined for the most part to a narrow set of circumstances or to situations in which taxpayers obtain government agreement as part of an advance pricing agreement or mutual agreement procedure. The fact that no language has been proposed may suggest that governments are struggling to find an approach that would enable profit splits to be reliably applied in a broader, more general context. It also may reflect the concerns of some countries regarding the direction of the changes in Chapters I and VI.
The discussion draft contains several scenarios in which the parties appear to have intended to share the operations and risks of the business, but leaves unanswered the question whether taxpayers in similar situations could have structured their business in a different way so that profit split is not the most reliable method. In the past few years, many businesses have structured their business using principal companies, or have employed cost sharing or other arrangements to avoid some of the perceived difficulties in applying the profit split method.
Importantly, the discussion draft does not suggest specific solutions to many of the issues that made profit splits challenging for MNEs to apply, including:

  • The lack of comparable or transactional profit splits;
  • Allocation keys to split profits that do not end up being simply a form of formulary apportionment;
  • Determining the income and expenses to derive the profits to be split;
  • Treatment of losses;
  • Creation of partnerships for tax and commercial purposes;
  • Reduction in the protection of the rights afforded to separate entities with respect to creditors;
  • Splitting profits between more than two entities and the impact of transfer pricing adjustments to routine entities on participants splitting profits. 

Source & more info: Deloitte

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