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Global Transfer Pricing Conference Master file/local file documentation strategies October 2016 www.pwc.com/transferpricing The new normal – full TransParency
Global Transfer Pricing ConferenceMaster file/local file documentation strategies
October 2016
www.pwc.com/transferpricing
The new normal – full TransParency
Global Transfer Pricing Conference │ October 2016
Agenda
PwC │ 2
Increasing TP documentation requirements globally 1
Strategy for 2015/2016 -transition to master file, local files 2
Resources4
Key takeaways 5
Global Transfer Pricing Conference │ October 2016
Strategy for Master file, local files content 3
Global Transfer Pricing Conference │ October 2016
Today’s presenters – session 1
PwC │ 3
Xavier Van VlemBelgium
Cecilia LeeHong Kong, China
Matias PedevillaUS
Annabel RealfUS
Michael WalterSpain
Global Transfer Pricing Conference │ October 2016
Kati FiehlerGermany
Michael PolashekJapan
Matias PedevillaUS
Michael WalterSpain
Ogniana TodorovaUS
Today’s presenters – session 2
PwC │ 4
Global Transfer Pricing Conference │ October 2016
Annabel RealfUS
Michael WalterSpain
Cecilia LeeHong Kong, China
Ogniana TodorovaUS
Today’s presenters – session 3
PwC │ 5
Kevin Jenkinson UK
Global Transfer Pricing Conference │ October 2016
In-session polling
When requested, select the current session from the Agenda (main menu), tap on Participate and Polling.
PwC │ 6
Global Transfer Pricing Conference │ October 2016
The accelerated path of Action 13 - October 2015
PwC │ 7
USA
Treasury department
announcements
UK
Enacting legislation for
CBCR
Mexico
Reform
package presented to
Congress
Finalised legislation
enacted
Spain
Poland
Draft legislation
released
Netherlands
Draft legislation– in
line with OECD
recommendations
Singapore
Updated two tiered
legislation
China
Three tier approach –
master file, local file
and special issues file.
S. Korea
Master file and
local file requirement
proposed
Draft legislation going
through consultation
Australia
Global Transfer Pricing Conference │ October 2016
The accelerated path of Action 13 – October 2016
PwC │ 8
USA
Final CbC regulations
(effective for
accounting periods
beginning on or after 1
July 2016
UK
Final CBCR
regulations released
Mexico
Final legislation
enacted
Finalised legislation
enacted (with
secondary
mechanism)
Spain
Poland
Final legislation for
both CBCR and
MF/LF
Netherlands
Final legislation
reconfirmed by the
Dutch senate in Dec
Singapore
Updated two tiered
(MF/LF) TP
documentation
China
Three tier approach –
master file, local file
and special issues file.
S. Korea
Master file and local
file requirement +
CbCR expected in
2017
Final legislation for
both CBCR and
MF/LF
Australia
Draft legislation – CBCR & MF/LF
Final legislation - both
Final legislation – MF/LF
Draft CBCR legislation only
Final legislation – CBCR only
Global Transfer Pricing Conference │ October 2016
The accelerated path of Action 13 – October 2016
PwC │ 9
USA
Final CbC regulations
(effective for
accounting periods
beginning on or after 1
July 2016
UK
Final CBCR
regulations released
Mexico
Final legislation
enacted
Finalised legislation
enacted (with
secondary
mechanism)
Spain
Poland
Final legislation for
both CBCR and
MF/LF
Netherlands
Final legislation
reconfirmed by the
Dutch senate in Dec
S. Korea
Master file and local
file requirement +
CbCR expected in
2017
Draft legislation – CBCR & MF/LFFinal legislation - both
Final legislation – MF/LF Draft CBCR legislation only
Final legislation – CBCR only
Announcement
Draft legislation – CBCR & MF/LF
Final legislation - both
Final legislation – MF/LF
Draft CBCR legislation only
Final legislation – CBCR only
Canada
Draft CBCR legislation
Bermuda
Signed up CbC MCAA
– finance ministry
confirmed as final
Portugal
Final CBCR legislation
Ireland
Final legislation for
CBCR
Belgium
Final legislation for
both CBCR and
MF/LF – Local forms
CBCR consultation
including draft legislation
Norway
Denmark
Final legislation
released with
secondary mechanism
Luxembourg
Two tier approach in
line with Action 13 +
draft CBCR legislation
Switzerland
CBCR from 2018
(voluntary filing from
2016)
EU
Council agrees on
Action 13 CBCR
directive
Sweden
Draft legislation released
Liechtenstein
Commitment to
implement BEPS
Action 13
Italy
CBCR legislation
approved by Parliament
Romania
Master file / Local file
included in final
legislation
Finland
Draft legislation released
Austria
Three tiered
documentation proposedFrance
CBCR legislation
approved by Parliament
Germany
Draft legislation released
Russia
CBCR draft legislation
released for public
discussion
Three tiered documentation
requirement announced in
February budget
IndiaChina
Three tier approach –
master file, local file
and special issues file.
Singapore
Updated two tiered
(MF/LF) TP
documentation
South Africa
CBCR draft regulations
released with
comments required by
3 May 2016
Final legislation for
both CBCR and
MF/LF
Australia
Japan
Cabinet approved
changes in line with
OECD recommendations
Malaysia
Announced intention
to implement three
tiers in 2017
Turkey
Equivalent of three tier
approach announced
Global Transfer Pricing Conference │ October 2016
Polling question - additional requirements
A. Yes
B. Some of them – we have started to analyse the specific local requirements
C. No
Are you aware of the additional
submission requirements
(Information returns / related party
transaction forms) in each country?
PwC │ 10
Global Transfer Pricing Conference │ October 2016
Additional local requirements
PwC │ 11
• Nuances to Master file requirements
• Additional Master file requirements
• Local file has 2 layers – regular Local file & special issues file
• 22 related party transaction forms
• New Local file contemporaneous preparation requirement
• Group revenue threshold for Master file
Transactions with related parties and/or with entities subject to a more favorable tax regime
Nature of the operation
1 Sales, services rendered and other income
Non Resident
Entities
Permanent
Establishments
Entities located
in Tax Havens
1.1 Sales of stocks and other productsH01
1.2 Sales of tangible and intangible fixed assetsH02
Free translation to English
Transfer Pricing, Entities subject to a more favorable tax regime and Thin-capitalisation
COMPANY NAME
Annual
declaration of
tax and
accounting
information
Annex HTransaction with non-resident entities
Fiscal Number Year
Q03
Q031 (Amounts higher than EUR 5,000)
Fourth Tier – additional requirements
Global Transfer Pricing Conference │ October 2016
Polling question - master file approach
A. Detailed
B. High-level
C. Something in between
D. Not yet decided
Are you planning to prepare a detailed Master file, or one that is more high
level?
PwC │ 12
Global Transfer Pricing Conference │ October 2016
How to structure your global documentation
PwC │ 13
We consider that groups have some flexibility in the way that they structure their transfer pricing documentation package in line with the new Action 13 and we have identified the following three potential approaches:
Follow the mandated list in its entirety in compiling the Master File (“MF”) and Local File (“LF”).
For large or complex groups, the MF will include a large amount of information covering global operations on several business lines.
A modular approach, where the content of the OECD’s MF is split between the MF and separate business line (“BL”) documents:
• a ‘group’ document explains the entirety at a high level;
• business line documents – only the relevant business line modular would be included as part of each local company’s document set; and
• LFs information tailored to local operations in line with Action 13 requirements and content.
A locally focused approach with the MF containing limited information.
Content of the OECD’s MF is included in the LF to give very detailed LFs (e.g. to meet local documentation rules).
A B CLocalModularOECD Classic
Master file
LF LF
Country-By-Country
Local information forms
Master file
LF LF
Country-By-Country
Local information forms
Master file
LFBL1
Country-By-Country
Local information forms
LFBL1
Global Transfer Pricing Conference │ October 2016
Polling question - master file approach
A. Drafted based on our 10k/Annual Report
B. Drafted following strategic discussions centrally on what to include/exclude
C. Drafted using a modular approach by Business Unit
D. Not yet decided
What is your approach to the
Master file?
PwC │ 14
Global Transfer Pricing Conference │ October 2016
OECD Content of the Master File
PwC │ 15
Org. structure Description of MNE’s business
MNE’s intangibles MNE’s financial activities
MNE’s financial & tax positions
Chart showing legal & ownership structure & geo. location of operating entities.
Important drivers of business profit.
Overall strategy: Development, over-sight, & exploitation, including location of R&D facilities & management.
Description of how the MNE is financed, includ-ing arrangements with third-party lenders.
Annual consolidated financial statement for FY.
Description of supply chain for material products & services.
List of IP and entities that own IP.
Financial transfer pricing policies.
List & description of unilateral APAs & other tax rulings relating to allocation of income.
List & description of service arrangements among MNE members other than R&D, including policies.
Agreements related to IP, including CSAs.
ID central financial function, country of org. & management of entity providing function.
Main geographic markets for products and services.
IP and R&D transfer pricing policies.
Functional analysis describing contributions to value creations by individual entity.
Material transfers of IP among MNE members during FY, including details.
Business restructurings, acquisitions, divestitures in FY.
Highlighted cells identify elements that likely go beyond information included in annual financial reporting
Global Transfer Pricing Conference │ October 2016
Polling question - resources
A. Centralised at HQ
B. Regionally
C. Decentralised
D. Mix
How centralised is your tax
function/TP function and how is TP documentation
currently prepared?
PwC │ 16
Global Transfer Pricing Conference │ October 2016
Resources
PwC │ 17
Human Resources
• Companies are recruiting or deploying additional staff
• Outsourcing
Technology
• Technology tools have been developed specifically to help companies with the tasks necessary to comply with the new requirements:
− Information gathering tools
− Project Management tools
o E.g. Tax Engagement Centre
− Report writing tools
o E.g. GCD Reporter
Global Transfer Pricing Conference │ October 2016
Key takeaways
Determine how technology can help you prepare your documentation
This is the new normalStrike a balance between centralisation& localisation
Ensure all tiers of documentation have a consistent fact pattern
Develop a strategic approach to preparing all tiers of your documentation
Monitor the adoption of new rules in countries relevant to you
PwC │ 18
Global Transfer Pricing Conference │ October 2016
What did you think?
PwC │ 19
At the end of the session, tap Session Survey and provide your rating on any or all survey questions. Tap submit response.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the
information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the
accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability,
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for any decision based on it.
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