Tax Notes Quotes Patricia Lewis Regarding New OECD Transfer Pricing Safe Harbor Guidelines

Tax Notes quoted Patricia G. Lewis regarding the new OECD transfer pricing safe harbor guidelines. Former OECD rules discouraged tax authorities from adopting transfer pricing safe harbors but the new guidelines endorse bilateral and multilateral safe harbors. The guidance states that transfer pricing safe harbors provide opportunities for countries to relieve some compliance burdens and provide greater certainty for cases involving smaller taxpayers or less complex transactions. For the complete article, please visit Tax Notes' website. 

Excerpt taken from the article.

Patricia Gimbel Lewis of Caplin & Drysdale said, "The key thing is that countries be encouraged to get going on developing safe harbor regimes." Lewis, a longtime advocate of transfer pricing safe harbors, said the OECD's prompt finalization of the guidance is a "major, commendable step" in furtherance of that goal.

Lewis said that most of the changes in the final version of the new OECD guidance are to the bilateral MOU framework, not to the safe harbor principles, objectives, and bilateral solution. "The OECD clearly took to heart the suggestions of many commentators regarding the need for more flexibility in the MOU framework in view of business realities," she said. "Despite the introductory statement that countries are free to modify the sample MOUs, improving the starting point should prove helpful."

Lewis added that she hopes countries will seize the opportunity for further customization to enable corrective post-year-end adjustments, enterprise-based (as opposed to qualified-transaction-based) testing, multiyear testing, and even additional types of covered transactions. "A streamlined advance eligibility determination process could also minimize future controversy," she said.

Lewis further noted that draft provisions dealing with the controversial concept of "presumptive" safe harbors have been revised. Rather than considering those systems as "possible" safe harbor formulations, the final guidelines state that they "would not fully meet the foregoing description of a safe harbor." Lewis said the changed language suggests that the taxpayer should have the right to demonstrate that its pricing is consistent with arm's-length principles.