Here are some practical considerations and implications that arise for Investment Managers when preparing transfer pricing documentation post BEPS.
The introduction of Country-by-Country (“CbyC”) reporting, Master File, and Local File transfer pricing documentation requirements through Action 13 of the OECD’s1 Base Erosion & Profit Shifting (“BEPS”) Project, as well as other transfer pricing related BEPS Actions (for example, Actions 8-10), raise a number of practical considerations for a multinational Investment Manager (“IMgr”).
Many jurisdictions have introduced legislation requiring all or some of the BEPS 13 documentation elements, whilst many of the principles in Actions 8-10, which focus on the impact of value creation on transfer pricing policies, are reflected in the recently released 2017 edition of the OECD transfer pricing Guidelines2.
This section explores some of the practical considerations and implications that arise for IMgrs when preparing transfer pricing documentation post BEPS.
Careful planning for transfer pricing documentation is advisable given country differences in implementation of the Action 13 requirements for CbyC report, Master File and Local File transfer pricing documentation. Thus, some key questions that multinational IMgrs should explore:
IMgrs may wish to map out the countries in which they operate and the corresponding requirements. Based on this assessment, it is prudent to then identify responsibilities for the preparation of the CbyC reports, Master File, Local Files, or other transfer pricing documentation. These responsibilities could be centralized, performed locally, or a hybrid of both.
Today’s multinational IMgr organizations are increasingly complex and varied, which raises questions on how to approach the structuring and content of transfer pricing documentation. For example, a multinational IMgr may provide asset management services to a Fund and be distinct from the underlying investments, or it may also invest on its own behalf (e.g., alternative IMgrs). Further, it may have a number of different asset classes / business segments. These, amongst other factors, can influence the overall approach to transfer pricing documentation post BEPS; there is no “one-size-fits-all” approach.
Key considerations include:
The structure and operations of an IMgr, along with availability and allocation of its resources, will help determine the optimal strategy for preparation of BEPS 13 documentation.
Automatic information exchange between tax authorities (a work in progress under BEPS), increased public and media scrutiny, and the proliferation of information on the internet has led to an ever increasing need to ensure consistency in how today’s multinationals communicate their activities and policies.
Areas IMgrs may wish to evaluate include the following:
It is important to ensure that all transfer pricing documentation is aligned, as well as consistent with other information available, and that the resulting transfer pricing policies are defensible.
The preparation of transfer pricing documentation under BEPS requires an analysis of requirements across jurisdictions and consideration of efficient approaches to meeting those requirements, based on the structure and business activities of the IMgr as well as available resources. The overriding goal is completeness of transfer pricing documentation, and consistency among the various components as well as with regulatory filings and public information.
1 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations
2 Further information on Action 13 of the OECD’s BEPS Project is contained at the following link: http://www.kpmg-institutes.com/content/dam/kpmg/taxwatch/pdf/2015/beps-in-brief-oct-2015-reports-summary.pdf
3 Or help determine whether a CbyC report is even needed, given the revenue thresholds under BEPS Action 13.