Pharmaceutical and Life Sciences (“PLS”) companies have traditionally set their transfer pricing strategy by trying to manage the expectations of multiple external stakeholders (regulatory bodies, income tax authorities, and customs authorities) and by staying abreast of industry trends. Nowadays, this task has become even more complex given the recent developments in the international tax and transfer pricing environment and the attention allocated by the media to the international tax practices of multinational companies. This news alert addresses some of the key highlights of the draft documents published by the OECD in the recent months and their anticipated impact for PLS companies.
The OECD, through its BEPS project, seeks to address concerns of the governments and general public with respect to reduced tax revenues stemming from tax planning aimed at eroding the taxable income base or artificially shifting profits to locations where they are subject to a more favorable tax treatment. Earlier in July, the OECD published its long awaited Action Plan regarding BEPS, which not only identifies areas of concern, but also provides both concrete actions and timelines to address double non-taxation. The 15 action points can be grouped into four general categories: (i) general actions directed at addressing BEPS, (ii) transparency and disclosure actions, (iii) treaty-related actions, and (iv) permanent establishment and transfer pricing actions. This news alert will focus on the transfer pricing aspects of the Action Plan that would be relevant for PLS companies.