On January 30, 2014, the Organization for Economic Cooperation and Development (OECD) issued a Discussion Draft on Transfer Pricing Documentation and Country by Country (CbC) Reporting for public consultation. This is one of the 15 action plans recognized by OECD for mitigating the Base Erosion and Profit Shifting (BEPS) practices adopted by “Multinational Enterprises (MNEs)”.
The Discussion Draft has been issued with the objective of providing access to the relevant tax information of an MNE to all the tax authorities in jurisdictions across the world wherever the MNE has a presence to enable the authorities to make an informed decision regarding Transfer Pricing (TP) risk assessment. The Discussion Draft provides standard forms and questions (Reporting Templates) that may be used in all the jurisdictions for collating the necessary information in an efficient manner and promotes transparency and simplification. Its sets out a two tier approach requiring preparation of (1) Master File providing information applicable to all the entities of the MNE including CbC reporting template and (2) Local file requiring reporting of material transactions of the local taxpayer.