United Nations Practical Manual on Transfer Pricing for Developing Countries (2017). This second edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries (the Manual) is intended to draw upon the experience of the first edition (2013) including feedback on that version, but it is also intended to reflect developments in the area of transfer pricing analysis and administration since that time. At the Ninth Session of the United Nations Committee of Experts on International Cooperation in Tax Matters in October 2013, a Subcommittee was formed with the task, among others, of updating this Manual. The mandate of the reconstituted Subcommittee on Article 9 (Associated Enterprises): Transfer Pricing in relation to this Manual was as follows: Update and enhancement of the United Nations Practical Manual on Transfer Pricing for Developing Countries, The Subcommittee as a Whole is mandated to update the United Nations Practical Manual on Transfer Pricing for Developing Countries, based on the following principles: ¾ That it reflects the operation of Article 9 of the United Nations Model Convention, and the Arm’s Length Principle embodied in it, and is consistent with relevant Commentaries of the U.N. Model; ¾ That it reflects the realities for developing countries, at their relevant stages of capacity development; ¾ That special attention should be paid to the experience of developing countries; and ¾ That it draws upon the work being done in other fora. In carrying out its mandate, the Subcommittee shall in particular consider comments and proposals for amendments to the Manual and provide draft additional chapters on intra-group services and management fees and intangibles, as well as a draft annex on available technical assistance and capacity building resources such as may assist developing countries. The Subcommittee shall give due consideration to the outcome of the OECD/Group of Twenty (G20) Action Plan on Base Erosion and Profit Shifting as concerns transfer pricing and the Manual shall reflect the special situation of less developed economies. The Subcommittee shall report on its progress at the annual sessions of the Committee and provide its final updated draft Manual for discussion and adoption at the twelfth annual session of the Committee in 2016. The Committee at its twelfth session recognized that the Subcommittee’s mandate had been met and approved the proposed update to the Manual. The Manual is improved, and made more responsive to issues of current country concern and also more in tune with rapid developments in this area, including those relating to the OECD/ G20 Action Plan on Base Erosion and Profit Shifting mentioned in the Subcommittee mandate. It was decided by the Subcommittee, and agreed by the Committee, that the Manual was not the best place for a draft annex on available technical assistance and capacity building resources such as may assist developing countries, as mentioned in the mandate. This was considered better addressed by a webpage updated and managed by the UN Secretariat. The changes in this edition of the Manual include: ¾ A revised format and a rearrangement of some parts of the Manual for clarity and ease of understanding, including a reorganization into four parts as follows: h Part A relates to transfer pricing in a global environment; h Part B contains guidance on design principles and policy considerations; this Part covers the substantive guidance on the arm’s length principle, with Chapter B.1. providing an overview, while Chapters B.2. to B.7. provide detailed discussion on the key topics. Chapter B.8. then demonstrates how some countries have established a legal framework to apply these principles; h Part C addresses practical implementation of a transfer pricing regime in developing countries; and h Part D contains country practices, similarly to Chapter 10 of the previous edition of the Manual. A new statement of Mexican country practices is included and other statements are updated; ¾ A new chapter on intra-group services; ¾ A new chapter on cost contribution arrangements; ¾ A new chapter on the treatment of intangibles; ¾ Significant updating of other chapters; and ¾ An index to make the contents more easily accessible The Foreword to the First Edition of this Manual, which is included below, remains relevant as to its substance. In particular, its recognition that: “While consensus has been sought as far as possible, it was considered most in accord with a practical manual to include some elements where consensus could not be reached, and it follows that specific views expressed in this Manual should not be ascribed to any particular persons involved in its drafting. [Part D]1 is different from other chapters in its conception, however. It represents an outline of particular country administrative practices as described in some detail by representatives from those countries, and it was not considered feasible or appropriate to seek a consensus on how such country practices were described. [Part D] should be read with that difference in mind.” As with the Subcommittee involved in drafting the first edition of this Manual, the current Subcommittee is comprised of Members from tax administrations with wide and varied experience in dealing with transfer pricing as well as Members from academia, international organizations and the private sector, including from multinational enterprises and advisers. The Subcommittee met successfully in New York (thrice), Santiago de Chile, Rome, and Bergamo, Italy, with the three last-mentioned meetings being made possible by the generosity of the host countries. The support of the European Commission’s Directorate General for International Cooperation and Development (DEVCO) and especially its Budget Support and Public Finance Management Unit, was especially important in ensuring a successful meeting in Bergamo. The members of the Subcommittee and their countries (in the case of government officials) or affiliations (in other cases) contributing to this updated version of the Manual at various times, were, although membership is assumed on a personal capacity: Stig Sollund (Norway—Coordinator); Joseph Andrus; Ganapati Bhat (India); Melinda Brown (OECD); Hafiz Choudhury (The M Group); Giammarco Cottani (Ludovici & Partners, Italy); Johan de la Rey (South Africa); Nishana Gosai (Baker & McKenzie, South Africa); Noor Azian Abdul Hamid (Malaysia); Toshiyuki Kemmochi (Japan); Michael Kobetsky (Australian National University and Melbourne University, Australia); Michael McDonald (USA); Toshio Miyatake (Adachi, Henderson, Miyatake and Fujita, Japan); T.P. Ostwal (TP Ostwal & Associates, India); Christoph Schelling (Switzerland); Jolanda Schenk (Shell, Netherlands); Carlos Perez-Gomez Serrano (Mexico) Caroline Silberztein (Baker & McKenzie, France); Monique van Herksen; Marcos Valadão (Brazil); Xiaoyue Wang (China) Ingela Willfors (Sweden) and Ying Zhang (China). The assistance to the Subcommittee is also acknowledged of Mr. Cao Houle (China) and Mr. Marc Bochsler and Mr. Basil Speyer (both from Switzerland). The additional special role of Subcommittee Member Mr. Hafiz Choudhury as technical coordinator is recognized with thanks. The assistance of the Secretariat, including Michael Lennard in particular, as well as Ilka Ritter and Tatiana Falcão, in this work is also acknowledged.