OECD issues White Paper on transfer pricing documentation: new requirements for multinationals coming in 2014?

by DLA Piper

The OECD has issued the “White Paper on Transfer Pricing Documentation” outlining ideas for new global standards for the annual transfer pricing documentation exercise required by more than 60 countries.

While this is only a scoping paper that is not self-implementing, given the momentum behind the BEPS Action Plan and its tight deadline, multinationals may face increasing documentation requirements as soon as next year.

Issued just two weeks after the OECD released the “Action Plan on Base Erosion and Profit Shifting,” the White Paper is part of the larger BEPS Action Plan initiative to reduce what the OECD deems to be “double non-taxation” – corporate income that is untaxed by any country – that has led to political outcries in Europe, the US and emerging markets.

The main thrust of the White Paper is to increase the visibility of a multinational’s transfer pricing and tax positions to all relevant tax authorities around the world, enabling tax authorities to more easily identify those transactions that require greater scrutiny.  The White Paper recommendations would place increased burdens on taxpayers, making the transfer pricing documentation process both more expensive and time consuming. While the OECD recommendations are not binding on member (or non-member) countries, the recommendations will likely serve as a blueprint for countries to adopt local rules via legislation or regulations implementing the recommended changes to transfer pricing documentation.


The White Paper notes that transfer pricing documentation requirements have been around for nearly 20 years, being first introduced in the US in 1994.  Since then, numerous countries have implemented transfer pricing documentation requirements, often with differing requirements, creating a labyrinth of annual filing requirements often costing companies several hundred thousand dollars a year to produce.

The White Paper lists several shortcomings of the current global documentation standards, most notably:

  • Documentation requirements vary widely by country
  • Countries have differing deadlines for documentation disclosure
  • Country documentation requirements have different purposes, ranging from identifying potential audit issues to obtaining complete information to performing a thorough review of a multinational’s transfer pricing policies
  • Various initiatives to harmonize documentation standards, by the OECD, EU and others, have been largely ineffective and
  • One-sided analysis of the controlled transaction is common.

The last point is particularly important, because it ties into a major theme of the BEPS Action Plan: to give tax authorities stronger tools so that they may ensure that corporate income is subject to taxation based on the economic activities that give rise to that income, thereby reducing “double non-taxation.”

What the White Paper recommends

Building on the BEPS Action Plan, the White Paper recommends that documentation should


  • transactions with, and income allocated to, related parties in low tax jurisdictions
  • transfers of intangibles to related parties
  • business restructurings
  • types of payments that might erode the tax base, including interest payments and royalties
    year-on-year loss-making.

The key conclusion of the White Paper is that “It seems possible for businesses to provide without undue burden individual country data  …with a general sense as to how their global income is allocated and where pressure points in the transfer pricing arrangements might lie.”

With that in mind, the White Paper recommends that the OECD working group develop a two-tiered approach by the BEPS Action Plan deadline of September 2014.  In particular, the White Paper suggests a global documentation package, or "master file,” accessible to tax authorities in every jurisdiction where a multinational does business.

This master file would include:

  • Overview of the multinational
  • Description of each of the business units
  • Ownership, exploitation and development and tax policies of all intangibles, including principal facilities and management
  • Intercompany financing arrangements and
  • Financial and tax positions, including a schedule showing employee counts in each country.

This master file would be supplemented with local files, similar in nature to existing transfer pricing documentation standards. The local file would list and describe each related party transaction relevant to a particular country and its conformity with the arm’s length standard.

In preparing the White Paper, the OECD Secretariat conducted a few interviews with multinationals to identify key taxpayer issues with documentation.  Notably, several taxpayer issues that would have reduced the compliance burden, including greater use of regional rather than country-specific comparables and relaxing the need for local translation, were rejected.  In addition, the White Paper does not address several other important issues, among them materiality thresholds, timing standards and the role of penalties.

Multinationals will have additional opportunities to comment at a public consultation to be held in Paris in November of this year.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© DLA Piper | Attorney Advertising

Written by:

DLA Piper

DLA Piper on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.