THE OECD has released the Discussion Draft for
Additional Guidance on Action 7 of
the BEPS Action Plan ("Preventing the
Artificial Avoidance of Permanent Establishment Status") which mandates
follow-up work to develop additional guidance on the issue of attribution of
profits to permanent establishments. This work is intended to provide guidance
on how the rules of Article 7 would apply to permanent establishments resulting
from the changes in the Report on Action 7 of the BEPS Action plan to Article
5, as well as take account of the results of the work on other parts of the
BEPS Action Plan dealing with transfer pricing, in particular the work related
to intangibles, risk and capital.
This discussion draft, which does not yet represent a consensus position of
the Committee on Fiscal Affairs or its subsidiary bodies, presents the two
fact-patterns that would particularly benefit from additional guidance concerning
attributions of profits to permanent establishments, which are: a) dependent
agent permanent establishments, including those created through commissionnaire
and similar arrangements; and b) warehouses as fixed place of business permanent
establishments. For each fact-pattern, and through the use of examples, a number
of questions are identified on which comments are sought from commentators.
This discussion draft also includes a final section exploring whether there
are mechanisms that could ensure additional co-ordination of the application
of Article 7 and Article 9 to determine the profits of a permanent establishment
without providing opportunities for the re-emergence of BEPS risks that the
changes under Actions 7 and 8-10 were designed to reduce.
Discussion Draft on the Revised Guidance on Profit Splits
The Final Report on Actions 8-10 of the BEPS Action Plan ("Assure that
transfer pricing outcomes are in line with value creation") sets out the
scope of the work mandated under Action 10 of the BEPS Action Plan in relation
to the application of transfer pricing methods.
The discussion draft, which does not yet represent a consensus position of
the Committee on Fiscal Affairs or its subsidiary bodies, aims at clarifying
and strengthening the guidance on the transactional profits split method in
the context of global value chains. In particular, it elaborates on two different
approaches to splitting profits: transactional profit splits of actual profits
and transactional profit splits of anticipated profits. It also proposes further
draft guidance on the appropriate application of transactional profit split
methods.
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