TRANSFER PRICING DISPUTES
CD: Could you provide an overview of key developments impacting the transfer pricing (TP) landscape in recent months? What trends highlight the complexity of TP regulations?
Bektas: The UK has recently passed legislation which implements new transfer pricing (TP) documentation requirements, marking the first time that the UK has had prescriptive documentation requirements for TP. This came into force for corporation tax purposes for accounting periods beginning on or after 1 April 2023 and impacts multinational groups with at least €750m revenue in a given period. The legislation requires a master file and local files to be prepared, and updated annually, which demonstrate consistency with the arm’s length principle. Furthermore, the UK has recently widened the scope of formal information-gathering powers to obtain TP records with penalties for non-compliance. Outside of the UK, the European Union (EU) has recently introduced a directive which aims to introduce a common framework in the EU for applying the arm’s length principle and may add a layer of complexity to UK-headed multinationals with operations within the EU.
Ussing: The most significant developments affecting the TP landscape continue to be the Organisation for Economic Co-operation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) initiatives, including BEPS 2.0 – the Pillar One and Pillar Two proposals – and the adoption of the BEPS initiatives, whether by change in law or the application of existing law, by countries around the world. BEPS 1.0 actions 8-10 principally affected the relative importance of a multinational’s operations and assets with respect to the allocation of income under the arm’s length standard.
Jan-Mar 2024 issue
Ashurst LLP
Gibson, Dunn & Crutcher LLP