Thursday, 15 January 2015

BEPS Action 10: Discussion Draft on the Transfer Pricing Aspects of Cross-Border Commodity Transactions

The OECD on December 16, 2014, released BEPS Action 10: Discussion Draft on the Transfer Pricing Aspects of Cross-Border Commodity Transactions. The document outlines Working Party Number 6’s considerations of transfer pricing issues that may arise from crossborder commodity transactions that may lead to base erosion and profit shifting.
The review is part of the Base Erosion and Profit Shifting (BEPS) Action Plan #10, which states that “work needs to be undertaken 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 … (iii) provide protection against common types of base eroding payments.’”
In the discussion draft, Working Party Number 6 has proposed:
  1. Insertion of additional guidance in Chapter II of the OECD’s transfer pricing guidelines related to the appropriateness and application of the comparable uncontrolled price (CUP) method to analyze related-party commodity transactions; and
  2. Research to be undertaken by the Tax and Development Program to identify common adjustments to quoted commodity prices to improve the reliability of quoted prices for use with the CUP method. The research will initially cover iron ore, copper, and gold.
The deadline for submitting comments on the discussion draft is February 6, 2015, and a public consultation regarding the discussion draft (and other topics) will be held March 19-20. The deadline for completion of Action Item #10 is September 2015.
Source & more info: Deloitte