Impact of certain BEPS transfer pricing measures (in particular actions 8-10 & 13) on multinational enterprises' activities and structure

Abstract

In July 2017, the Organisation for Economic Co-operation and Development (OECD) issued the revised OECD transfer pricing guidelines for multinationals enterprises and tax administrations. This revised vision includes the amendments under actions 8-10 Aligning Transfer pricing Outcomes with Value Creation and on Action 13 regarding Transfer Pricing Documentation. Those actions lead to major amendments and to the incorporation of new sections in the transfer pricing guidelines, especially in chapter I, chapter II, chapter V, chapter VI and chapter VII. Based on an analysis of the before-mentioned actions and on qualitative analysis, this master thesis aims at evaluating the impact of those actions on multinationals enterprises’ activities and structure and further examining the application and implementation of action 8-10 & 13 in the EU and especially in Belgium. The results of this dissertation suggest that transfer pricing guidelines have been strengthened but not all BEPS possibilities caused by gaps in transfer pricing guidelines have been closed. However, due to the complexity it seems to be rather impossible to fill all gips as the arms’ length principle on which transfer pricing is based is a legal fiction and appears to be dysfunctional in some cases. Though, there is currently no realistic alternative to the arms’ length principle meaning that the current guidance on transfer pricing leads to the best approximation of transfer pricing. Moreover, MNE willing to shift profits will probably always find ways to do so, much the same way as an ordinary kitchen knife can turn into a murder weapon in the hands of the wrong person.