There has been plenty of discussion and public comment on proposed changes to the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Now that the changes have been approved, what does this mean for your business? In the first of a new series of Global Tax Alerts, we help you to understand the changes to chapters I-III and the impacts we think they will have on global businesses in the industrial sectors.
The 2010 update is the most significant revision of the Transfer Pricing Guidelines since 1995 when Chapters I-III were first published. Tax authorities are not bound by the principles, but the principles set out in the new Guidelines do represent the consensus view of the OECD member countries as to how the arm's length principle is to be applied. Since the updated principles are in force now as a matter of law in the many countries that refer to the OECD Guidelines in their transfer pricing legislation, that means they must be reflected in transfer pricing documentation utilized on a cross border basis.