United Nations Committee of Experts on International Cooperation in Tax Matters: Transfer Pricing Compliance Assurance Toolkit; Transfer Pricing during the COVID-19 economic downturn 

The United Nations Committee of Experts on International Cooperation in Tax Matters, commonly referred to as "the Committee," is globally recognized for its critical role in shaping tax norms and policies. Its work provides essential guidance for governments, tax administrators, and taxpayers worldwide, aiming to strengthen tax systems and mobilize financing for sustainable development.

The Committee's mission is to prevent "double (or multiple) taxation" and "non-taxation," assisting countries in broadening their tax base, strengthening tax administrations, and curbing international tax evasion and avoidance. Special attention is given to least developed countries and those in unique situations, such as small island states and landlocked countries. The Committee operates as a subsidiary body of the UN’s Economic and Social Council and comprises twenty-five members nominated by governments. These experts, drawn from the fields of tax policy and administration, reflect diverse geographical and tax system backgrounds. The current membership, appointed by the Secretary-General, serves a four-year term from July 1, 2021, to June 30, 2025.

KEY INITIATIVES AND SUBCOMMITTEE ON TRANSFER PRICING

In its 23rd Session in 2021, the Committee prioritized transfer pricing due to the relevance of intragroup trade and its impact on corporate income taxes. This led to the formation of a Subcommittee on Transfer Pricing, tasked with considering, reporting on, and proposing guidance on transfer pricing issues. The Subcommittee's mandate includes:

• Reflecting article 9 of the United Nations Model Convention and the arm’s length principle.

• Identifying relevant transfer pricing topics.

• Considering the needs of developing countries.

• Acknowledging work in other forums, such as the Inclusive Framework on Base Erosion and Profit Shifting.

Ambitious Work Plan and Guidance Documents

During its 24th Session, the Committee approved an ambitious work plan for the Subcommittee, which includes six guidance documents:

• Transfer Pricing during the COVID-19 Economic Downturn

• Transfer Pricing Compliance Assurance – An End-to-End Toolkit

• Transfer Pricing of Carbon Offsets and Carbon Credits

• Transfer Pricing Aspects of Agricultural Products

• Transfer Pricing in the Pharmaceutical Industry

• Dispute Avoidance and Bilateral Advance Pricing Agreement/Arrangement Programs

ADVANCE GUIDANCE ON TRANSFER PRICING COMPLIANCE ASSURANCE AND COVID-19 IMPACT

The United Nations recently released advance, unedited versions of two new transfer pricing guidance documents: "Transfer Pricing Compliance Assurance – An End-to-End Toolkit" and "Transfer Pricing during the COVID-19 Economic Downturn." These publications are part of the Subcommittee's comprehensive efforts to provide practical and development-focused guidance.

TRANSFER PRICING COMPLIANCE ASSURANCE TOOLKIT

The "Transfer Pricing Compliance Assurance – An End-to-End Toolkit" discusses the development of a comprehensive compliance assurance program. It covers population and individual taxpayer-level risk assessments, comprehensive audits, and examinations. The Toolkit emphasizes the importance of incorporating feedback loops for continuous improvement and adopting good practices in transfer pricing risk assessment and audit. The aim is to reduce the incidence of costly and time-consuming transfer pricing disputes.

The Toolkit provides detailed roadmaps for transfer pricing risk assessments and audits, serving as templates for countries to develop their own processes, manuals, or standard operating procedures tailored to their specific needs and capacities. It references processes developed by various tax administrations worldwide and includes recommendations from international or regional organizations.

ADDRESSING COVID-19 ECONOMIC DOWNTURN

The second Toolkit addresses the challenges faced by tax administrations in applying the arm's length principle during the economic downturn caused by the COVID-19 pandemic. It focuses on the fundamental application of the arm's length principle in line with the UN TP Manual, providing practical examples on:

• Accurate delineation and recognition of actual controlled transactions.

• Selection and application of the most appropriate transfer pricing methods.

• Effective approaches to dispute avoidance and resolution to enhance tax certainty.

• Potential approaches to improve standardization and simplification during the pandemic-affected years.

SOURCES/RECOMMENDED READ:

Download Reports here:

• Transfer Pricing Compliance Toolkit (Advanced Unedited Version) | Financing for Sustainable Development Office

• Interstitial Guidance on Transfer Pricing during the COVID-19 economic downturn (Advanced Unedited Version) | Financing for Sustainable Development Office