The Effect of the OECD BEPS Project in Danish Enterprises Transfer Pricing Documentations

Tina Slabiak & Theo Hald

Student thesis: Master thesis

Abstract

Globalisation has increased intra-group trade, and differences in local tax rules have enabled multinational enterprises (MNK) to pay little, or no, taxes on profits by engaging in aggressive tax planning. As a result OECD has launched the BEPS project with a 15-point action plan, introducing measures against profit shifting and base erosion. This includes the development of revised standards of OECD’s Transfer Pricing Guidelines (TPG) chapter 5 on transfer pricing (TP) documentation in action point 13, in order to enhance transparency for tax administration, as well as a partly revised chapter 1, in order to assure that TP outcomes are aligned with the value creation within a MNK. The purpose of this thesis is to analyse how the OECD BEPS project will affect the way Danish companies must prepare and submit TP documentation.
The thesis provides an analysis of the development of the new chapter 5 in OECD’s TPG, developed under action point 13, including comments from tax advisors and their affect on the final version of the new chapter 5. The revised standards contain a three-tiered standardised approach to TP documentation, which includes a master file, a local file and a country-by-country report (CbC). Subsequently, an analysis is conducted on how the revised guidelines are implemented in Danish legislation, including how and when TP documentation is to be submitted. To illustrate the extent of the changes in the Danish requirement, a comparative analysis of the old TP documentation requirements and the new ones is conducted.
The TP documentation contains the companies’ explanation of their compliance with the Arm’s Length Principle in the controlled transactions and profit allocation within the group. The thesis therefor provides an analysis of the revised TPG chapter 1, section D developed under the BEPS project action point 8-9-10.
A self-developed business case with two scenarios is introduced, demonstrating the use of the theoretical framework analysed throughout the thesis. Scenario 1 illustrates how a Danish group has prepared TP documentation in accordance with the new Danish requirements, while scenario 2 demonstrates how tax administrations can use the TP documentation in risk assessments and TP analyses.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages130