United Nations Practical Manual on Transfer Pricing

1 United Nations Practical Manual on Transfer Pricingfor Developing Countries (2021)Economic &Social AffairsUnited Nations New York, 2021 Department of Economic & Social AffairsUnited NationsPractical Manual on Transfer Pricingfor Developing Countries 2021ST/ESA/377iiiForeword to the Third Edition (2021) Practical Manual ON Transfer Pricing FOR DEVEOPING COUNTRIESThis third edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries (the Manual ) is intended to draw upon the experi-ence of the first edition (2013) and the second edition (2017) including feed-back on the latter version, but it is also intended to reflect developments in the area of Transfer Pricing analysis and administration since that the 15th session of the UN Committee of Experts on International Cooperation in Tax Matters ( the Committee ) in 2017 a new Subcommittee on Article 9 (Associated Enterprises): Transfer Pricing ( the Subcommittee ) was formed, to be Co-Coordinated by Ms.

2 Ingela Willfors and Mr. Stig Sollund, with the following mandate:The Subcommittee is mandated to review and update the United Nations Practical Manual on Transfer Pricing for Developing Countries, based on the following principles: That it reflects the operation of Article 9 of the United Nations Model Convention, and the Arm s Length Principle embodied in it, and is consistent with relevant Commentaries of the United Nations Model; That it reflects the realities for, and the needs of, developing coun-tries, at their relevant stages of capacity development; That special attention should be paid to the experience of develop-ing countries, and the issues and options of most Practical rel-evance to them; and That it draws upon the work being done in other Subcommittee shall give due consideration to the outcome of the OECD/G20 Action Plan on Base Erosion and Profit Shifting as concerns Transfer pric-ing.

3 The Manual shall reflect the special situation of least developed Subcommittee shall report on its progress at the sessions of the Committee and provide its final updated draft Manual for discussion and adoption no later than the 22nd Session in 2021 and preferably in important purpose of this Manual is to contribute to a common under-standing of how the arm s length principle is to be applied in order to avoid ivUnited Nations Practical Manual on Transfer Pricing (2021)double taxation and prevent or resolve Transfer Pricing disputes, as high-lighted in paragraph 4 of the Commentary on Article 9 of the UN Model proposed by the Subcommittee at the 17th Session and approved by the Committee, this third edition of the Manual makes improvements in usabil-ity and Practical relevance, updates and improves the existing text, includ-ing on Country Practices (Part D) and has new content, in particular, on financial transactions, profit splits, centralized procurement functions and comparability issues.

4 Improved capacity development based on the Manual has encouraged and contextualized developing country feedback, helped identify these priority areas for improvement and contributed to better targeting the messages in the Manual and examples Forewords to the first two editions of this Manual , which are retained in the following pages, remain relevant as to their substance. In particular, the Foreword to the First Edition recognizes that: While consensus has been sought as far as possible, it was consid-ered most in accord with a Practical Manual to include some elements where consensus could not be reached, and it follows that specific views expressed in this Manual should not be ascribed to any particu-lar persons involved in its drafting.

5 [Part D] is different from other chapters in its conception, however. It represents an outline of particu-lar country administrative practices as described in some detail by representatives from those countries, and it was not considered feasi-ble or appropriate to seek a consensus on how such country practices were described. [Part D] should be read with that difference in mind. If anything, the share of intra-group trade in global trade is probably higher than estimated in the first editions of the Manual , making the issues dealt with more important than with the Subcommittees involved in drafting the earlier editions of this Manual , the current Subcommittee is comprised of Members from tax admin-istrations and policy-makers with wide and varied experience in dealing with Transfer Pricing , as well as from academia, international organizations and the private sector, including from multinational enterprises and advisers.

6 The Subcommittee met productively on many occasions: New York (February 2018 and May 2018); Quito (October 2018); Vienna University of Economics and Business (February 2019 and February 2020); IBFD, Amsterdam (July 2019); and Nairobi (December 2019). Short meetings were also held in the side-lines of some Committee sessions. The generosity of country and vForewordinstitutional hosts of Subcommittee meetings is warmly acknowledged, as is the valued support of the European Commission for some of these meetings and of the Norwegian Government in this and other Committee members of the Subcommittee and their countries (in the case of govern-ment officials) or current affiliations (in other cases) bearing in mind that membership is assumed on a personal capacity, contributing to this updated version of the Manual at various times were,: Ingela Willfors (Sweden Co-Coordinator); Stig Sollund (Norway Co-Coordinator); Joseph Andrus (independent consultant); Rajat Bansal (India); Melinda Brown (OECD).

7 Hafiz Choudhury (The M Group Inc., USA); Mathew Gbonjubola (Nigeria); Stefan Greil (Germany); Andrew Hickman (independent consult-ant); Mitsuhiro Honda (University of Tsukuba, Japan); Michael Kobetsky (Australian National University and Melbourne University, Australia); Michael McDonald (EY, USA); Toshio Miyatake (Adachi, Henderson, Miyatake and Fujita, Japan); George Obell (Kenya); Emily Muyaa (IBFD); Ostwal ( Ostwal & Associates LLP, India); Raffaele Petruzzi (WU Transfer Pricing Center, Vienna University of Economics and Business, Austria); Christoph Schelling (Switzerland); Jolanda Schenk (Shell, Netherlands); Carlos Perez-Gomez Serrano (Royalty Range, Mexico).

8 Caroline Silberztein (Baker & McKenzie, France); Monique van Herksen (Simmons & Simmons, Netherlands); Jos I. Troya Gonz lez (Ecuador); Marcos Valad o (Getulio Vargas Foundation, Bras lia, Brazil); Xiaoyue Wang (KPMG, China); Zhang Ying (China); and Sing Yuan Yong (Singapore). The assistance to the Subcommittee is also acknowledged of Marc Bochsler and Basil Peyer (both from Switzerland).The additional special role of Subcommittee Member Mr. Hafiz Choudhury as a consultant is recognized with thanks. The assistance of the Secretariat, including especially Michael Lennard, Irving Ojeda Alvarez and Ilka Ritter, in this work is also gratefully on paragraph numbering: To improve readability of this Third Edition of the Manual , a four-digit paragraph numbering system has been intro-duced.

9 It is however, recognized that there is some transitional difference in numbering across chapters due to the amount of content under particular headings and sub-headings, which results in some very limited inconsisten-cies. The old numbers are however used when cross-referencing is made to the previous edition, usually in footnotes. A letter identification ( , Part A ) has been retained to identify parts of the Manual , but is no longer used in the paragraph to the Second Edition (2017)This second edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries (the Manual ) is intended to draw upon the experience of the first edition (2013) including feedback on that version, but it is also intended to reflect developments in the area of Transfer Pricing anal-ysis and administration since that the Ninth Session of the United Nations Committee of Experts on International Cooperation in Tax Matters in October 2013, a Subcommittee was formed with the task, among others, of updating this mandate of the reconstituted Subcommittee on Article 9 (Associated Enterprises): Transfer Pricing in relation to this Manual was as follows.

10 Update and enhancement of the United Nations Practical Manual on Transfer Pricing for Developing CountriesThe Subcommittee as a Whole is mandated to update the United Nations Practical Manual on Transfer Pricing for Developing Countries, based on the following principles: That it reflects the operation of Article 9 of the United Nations Model Convention, and the Arm s Length Principle embod-ied in it, and is consistent with relevant Commentaries of the UN Model; That it reflects the realities for developing countries, at their relevant stages of capacity development; That special attention should be paid to the experience of devel-oping countries; and That it draws upon the work being done in other carrying out its mandate, the Subcommittee shall in particular consider comments and proposals for amendments to the Manual and provide draft additional chapters on intra-group services and manage-ment fees and intangibles, as well as a draft annex on available tech-nical assistance and capacity-building resources such as may assist developing countries.