UN Releases Draft Transfer Pricing Manual
THE United Nations Practical Manual on Transfer Pricing for Developing Countries is a response to the need, often expressed by developing countries, for clearer guidance on the policy and administrative aspects of applying transfer pricing analysis to some of the transactions of multinational enterprises (MNEs) in particular. Such guidance should not only assist policy makers and administrators in dealing with complex transfer pricing issues, but should also assist taxpayers in their dealings with tax administrations.
While it is for each country to choose its tax system, this Manual is addressed at countries seeking to apply the “arm's length standard" to transfer pricing issues, as the approach which nearly every country seeking to address such issues will decide to take. Such an approach minimises double taxation disputes with other countries, with their potential impact on how a country's investment "climate " is viewed, while combating potential profit-shifting between jurisdictions where a MNE operates.
By showing ways in which the “arm's length" approach to transfer pricing can operate effectively for developing countries, while giving a fair and predictable result to those investing in such countries, the Manual will also help explain why that approach has been found so broadly acceptable, including in both major Model Tax Conventions.
The Subcommittee on Transfer Pricing - Practical Issues was constituted by the Committee of Experts on International Cooperation in Tax Matters at its annual session in 2009. The Committee held meetings in Kuala Lumpur, New Delhi, Tokyo, Johannesburg and Shanghai and submitted its draft report this week, which will be discussed and perhaps approved at the Eighth Session of the Committee of Experts on International Cooperation in Tax Matters at Geneva from 15th through 19th October 2012.