1. The Transfer Pricing Changes Introduced by the BEPS Action Plan
Dr. Raffaele Petruzzi, LL.M.
Managing Director, WU Transfer Pricing Center
Transfer Pricing Advisor

2. The BEPS timeline BEPS Action Plan February 2013 July 2013
October 2015

3. BEPS Action Plan July 2013 Realities in MNE are better understood
BEPS Action Plan July 2013 Realities in MNE are better understood
As the economy became more globally integrated, so did corporations…
Multi-national enterprises (MNE) represent a large proportion of global GDP, intra-firm trade represents a growing proportion of this overall trade.
Globalisation has resulted in a shift from country-specific operating models to global models based on matrix management organisations and integrated supply chains that centralise several functions at a regional or global level.
The growing importance of the service component of the economy, and of digital products that often can be delivered over the Internet, has made it much easier for businesses to locate many productive activities in geographic locations that are distant from the physical location of their customers.
These developments have been accompanied by an increasing sophistication of tax planners in identifying and exploiting the legal arbitrage opportunities and the boundaries of acceptable tax planning, thus providing MNEs with more opportunities/confidence in taking aggressive tax positions….

4. BEPS and transfer pricing
Coherence
Hybrid Mismatch Arrangements (2)
Harmful Tax Practices (5)
Interest Deductions (4)
CFC Rules (3)
Substance
Preventing Tax Treaty Abuse (6)
Avoidance of PE Status (7)
TP Aspects of Intangibles (8)
TP/Risk and Capital (9)
TP/High Risk Transactions (10)
Transparency
Methodologies and Data Analysis (11)
Disclosure Rules (12)
TP Documentation (13)
Dispute Resolution (14)
Digital Economy (1)
Multilateral Instrument (15)
Linked to TP

5. The 2017 OECD Transfer Pricing Guidelines
Aligning transfer pricing outcomes with value creation
Approved by OECD Council on 23 May 2016
This link to value creation is achieved by modifying the 3 core elements of the ALP:
Entity-by-entity approach (vs group impacts)
Contractual arrangements (vs actual conduct)
Comparability (vs hypothetical behaviour)

6. The 2017 OECD Transfer Pricing Guidelines
The arm’s length principle
Transfer pricing methods
Comparability analysis
Administrative approaches
Documentation
Intangibles
Intra-group services
Cost Contribution Arrangements
Transfer pricing of business restructurings
Annexes: Guidelines for Advance Pricing Agreements (...)
2017 updates

7. The 2017 UN Transfer Pricing Manual
A.1. Introduction A.2. Theory of the Firm and Development of Multinational Enterprises A.3. Legal Structure A.4. Managing the Transfer Pricing Function in a Multinational Enterprise B.1. Introduction to transfer pricing B.2. Comparability Analysis B.3. Methods B.4. Intra-Group Services B.5. Transfer Pricing Considerations on Intangible Property B.6. Cost Contribution Arrangements B.7. Transfer Pricing Aspects of Business Restructurings B.8 General Legal Environment
C.1. Establishing and Updating Transfer Pricing Regimes C.2. Documentation C.3. Audits and Risk Assessment C.4. Dispute Avoidance and Resolution C.5. Establishing Transfer Pricing Capability in Developing Countries D.1. Brazil Country Practices D.2. China Country Practices D.3. India Country Practices D.4. Mexico Country Practices D.5. South Africa Country Practices
2017 updates

8. The changes introduced
Identifying the commercial or financial relations
Recognition of the accurately delineated transaction
Location savings and other local market features
Assembled workforce
MNE group synergies
Commodity transactions
Intangibles
Low value-adding intra-group services
Cost Contribution Arrangements
Raffaele Petruzzi

9. What’s next? Hard-to-value intangibles (HTVI) (Discussion draft)
Attribution of profits to permanent establishments (Discussion draft)
Transactional profit splits (Discussion draft)
The toolkit for addressing difficulties in accessing comparables data for transfer pricing analyses (Final)
Further guidance on country-by-country reporting
Transfer pricing aspects of financial transactions (?)
Raffaele Petruzzi

10. Key message 1 Apply properly the arm’s length principle!
4. Application of the most appropriate transfer pricing method
3. Selection of the most appropriate transfer pricing method
2. Recognition of the accurately delineated transaction
1. Identification of the commercial or financial relations

11. Key message 2 No risk, no fun!HQ
R&D Centre
Group operating companies
License of IP
Royalties
Cost+ remuneration
Contract R&D services
Sale of products
Management services
Management services
Management fees
Management fees
IP owner
CEO, CFO, CTO
VP Marketing
VP Business Development
VP Sales
VP R&D
VP Engineering
Legal director
Supply Chain Director
IT and finance teams
Patent lawyers
Trademark ownership
Patent ownership
R&D funding
R&D Director
Scientists
Engineers
Application specialists
Production plant
Plant management
Sales force
Sales director
Marketing director
Logistics manager …
Substance?
Substance?
Substance?
Substance?
Substance?
Substance?
Substance?
Substance?

12. Key message 3 Document everything!

13. Conclusions
Time to change!

14. Contact details Dr. Raffaele Petruzzi, LL.M.
Department of Public Law and Tax Law
Institute for Austrian and International Tax Law
Welthandelsplatz 1, Building D3, 1020 Vienna, Austria T