OECD issues discussion drafts on permanent establishment status and transfer pricing action plans
November, 06th 2014
The OECD has released two discussion drafts. The first responds to Action 7 of the BEPS Action Plan, which addresses issues related to the artificial avoidance of permanent establishment (PE) status. Action 7 calls for the development of changes to the definition of PE to prevent the artificial avoidance of PE status in relation to BEPS, including through the use of commissionaire arrangements and specific activity exemptions.
The second OECD discussion draft responds to Action 10 of the BEPS Action Plan. Action 10 calls for transfer pricing rules to provide protection against common types of base eroding payments, such as management fees and head office expenses. This discussion draft proposes to do this by identifying a wide category of common intra-group services commanding a very limited profit mark-up on costs, applying a consistent allocation key for all recipients, and providing greater transparency through specific reporting requirements