Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles INCLUSIVE FRAMEWORK ON BEPS: ACTION 8. Action 8 of the Action Plan on Base Erosion and Profit Shifting mandated the development of transfer pricing rules or special measures for transfers of hard-to-value intangibles (HTVI) aimed at preventing base erosion and profit shifting by moving intangibles among group members. The outcome of that work is the approach to hard-to-value intangibles, which is found in the 2015 Final Report for Actions 8-10, “Aligning Transfer Pricing Outcomes with Value Creation” (BEPS TP Report) and it was formally incorporated into the Transfer Pricing Guidelines, as Section D.4 of Chapter VI. The HTVI approach protects tax administrations from the negative effects of information asymmetry by ensuring that tax administrations can consider ex post outcomes as presumptive evidence about the appropriateness of the ex-ante pricing arrangements. At the same time, the taxpayer has the possibility to rebut such presumptive evidence by demonstrating the reliability of the information supporting the pricing methodology adopted at the time the controlled transaction took place. The BEPS TP Report also mandated the development of guidance for tax administrations on the application of the HTVI approach. Under this mandate, the Committee on Fiscal Affairs issued a public discussion draft in May 2017, inviting interested parties to submit comments on the proposed guidance for tax administration on the application of the HTVI approach. The guidance contained in this report aims at reaching a common understanding and practice among tax administrations on how to apply adjustments resulting from the application of the HTVI approach. This guidance should improve consistency and reduce the risk of economic double taxation. In particular, the new guidance: · Presents the principles that should underlie the application of the HTVI approach by tax administrations; · Provides a number of examples clarifying the application of the HTVI approach in different scenarios; and · Addresses the interaction between the HTVI approach and the access to the mutual agreement procedure under the applicable tax treaty. The guidance for tax administration on the application of the HTVI approach contained in this document has been incorporated into the Transfer Pricing Guidelines as an annex to Chapter VI. June 2018.
OECD (2018), Guidance for Tax Administrations on the Application of the Approach to Hard-toValue
Intangibles – BEPS Actions 8-10, OECD/G20 Base Erosion and Profit Shifting Project, OECD,
Paris. www.oecd.org/tax/beps/guidance-for-tax-administrations-on-the-application-of-the-approach-tohard-to-value-intangibles-BEPS-action-8.pdf