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UN tax committee to update to key transfer pricing manual for developing countries

By Julie Martin, Editor, MNE Tax

The next edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries will include a new chapter on financial transactions, substantial revisions current guidance on the transactional profit-split method, and new material on centralized procurement functions, according to a newly-released UN document that summarizes the most recent meeting of the Committee of Experts on International Cooperation in Tax Matters.

According to the UN document, members of a subcommittee responsible for updating the UN transfer pricing manual said at the October 16-19 Committee of Experts meeting that the new financial transactions chapter will cover intragroup loans and financial guarantees.

The chapter will address the importance of corporate financing decisions among multinational groups and how those decisions could lead to tax base erosion, said subcommittee member, Monique van Herksen.

The draft chapter should be available for review at the next Committee of Experts meeting, van Herksen said.

Ingela Willfors, who co-coordinates the subcommittee responsible for updating the transfer pricing manual with Stig Sollund, said that the UN transfer pricing manual’s guidance on the transactional profit split method will be updated to better align the manual with work done by the OECD-led “Inclusive Framework on BEPS.”

The revised provisions will include practical examples and will explain when and how to use the profit-split method, Willfors said.

Sollund said that the UN transfer pricing subcommittee also intends to provide broad and updated guidance on centralized procurement and sales functions.

The subcommittee will also update UN manual chapters that cover transfer pricing in a global community, the general legal environment, audits and risk assessment, and establishing transfer pricing capability in developing countries.

The manual’s chapter on comparability analysis will also be updated to further address how to handle the lack of comparables, subcommittee members said.Further, the transfer pricing subcommittee is discussing updates to part D of the UN transfer pricing manual on country practices and is considering the relationship between transfer pricing and customs valuation, the UN document reports.