Transfer pricing

OECD approves the revision of Section on safe harbours in the Transfer Pricing Guidelines


21/05/2013 - On 16 May 2013, the OECD Council approved the revision of Section E on safe harbours in Chapter IV of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“TPG”). New guidance on safe harbours provides opportunities for countries to relieve some compliance burdens and to provide greater certainty for cases involving smaller taxpayers or less complex transactions. With that, it provides a basis for countries, especially developing countries, to design a transfer pricing compliance environment that makes optimal use of the limited resources available.

As part of its project to improve the administrative aspects of transfer pricing, the OECD reviewed the guidance on safe harbours in Chapter IV of the TPG.

The previous guidance in the TPG had a somewhat negative tone regarding transfer pricing safe harbours. This negative tone did not accurately reflect the practice of OECD Member countries, a number of which have adopted transfer pricing safe harbour provisions. Also, the previous guidance was largely silent with regard to the possibility of a bilateral agreement establishing a safe harbour, even though some countries have favourable experience with such bilateral agreements.

The OECD developed a draft proposed revision of the guidance which recognises that properly designed safe harbours can help to relieve some compliance burdens and provide taxpayers with greater certainty. It encourages, under the right circumstances, the use of bilateral or multilateral safe harbours as they may provide a significant relief from compliance burdens without creating problems of double taxation or double non-taxation. To facilitate negotiations between tax administrations, it provides sample memoranda of understanding (“MOUs”) for competent authorities to establish bilateral safe harbours for certain classes of transfer pricing cases.

An interim discussion draft which contained the draft proposed revision of the guidance and the associated sample MOUs was released for public consultation in June 2012. Comments received were generally favourable to the proposed revision, and they were further discussed at a public consultation in November 2012. The draft was subsequently revised following this consultation and further discussions within the OECD.


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