Base Erosion and Profit Shifting (BEPS)
The tax landscape is changing internationally. As base erosion and profit shifting (BEPS) leads to worldwide revenue losses, governments together with the Organization for Economic Co-operation and Development (OECD) take ongoing efforts to close gaps for BEPS.
BEPS refers to the tax avoidance strategies that exploit gaps in international tax rules. By these, profits can artificially be « shifted » from higher-tax locations to lower-tax locations. Because of the potential for cross-border controlled transactions to distort taxable income, there are now over 100 countries and jurisdictions collaborating to implement the OECD/ G20 Base Erosion and Profit Shifting (BEPS) Package.
To counter BEPS, the OECD recommends e.g. intragroup pricing rules based on the so-called arm’s-length principle (see below).
Transfer Pricing and the arm’s length principle
Transfer pricing are rules and methods for pricing transactions within and between enterprises under common ownership or control.
The arm’s length principle then states that a transfer price should be the same as if two companies involved were indeed two independents and not part of the same corporate structure. The OECD has put together guidelines on how to apply this principle in a bid to avoid BEPS.
Updates from Dutch decree
On the 18th of May 2018 Dutch tax authorities published a new transfer pricing decree which replaces the decree of 14th November 2013. The update provides additional advice on the application of the arm’s length principle and guidance regarding intangible assets and business restructurings.
Please contact us to hear what GCA can do for you and your business in regard to BEPS and Transfer Pricing. GCA makes a continuous effort to inform their clients on the latest developments within the OECD BEPS package and the necessary filing.
Sources (last viewed on 19th June 2018):
OECD.org: About the Inclusive Framework on BEPS