2016 handbook for Dispute Avoidance and Resolution after BEPS

Lead Authors (TPA Global): Steef Huibregtse, Louan Verdoner, Avisha Sood, Maria Grigoryeva. (Refer to the document for the full list, including co-authors).

Multinational enterprises (MNE) have been facing disputes on tax and/or transfer pricing with tax authorities since their very inception. Over the course of time, a wide variety of tools have been developed in order to address these disputes. In the light of Base Erosion and Profit Shifting (BEPS) Action Plan the importance of such tools has increased as Action plans proposed substantial amendments to the OECD TP Guidelines and to the transfer pricing system as a whole. These changes will beyond doubt lead to a vast amount of tax disputes because MNEs will need to align current intercompany transactions with the proposed framework. In addition, BEPS is primarily aimed at combating tax evasion and not simplifying or clarifying dispute resolution framework. As BEPS will soon have impact on MNEs’ intercompany transactions, they need to decide on how to resolve arising

issues.

TPA suggests multinational corporations to spend 20% time on compliance with various TP rules so that their tax professionals can focus 80% of the time on risk management and communication with external and internal stakeholders. Fair and transparent communication should be an essential part of a good corporate governance model of any enterprise in order to avoid any surprise impacts of BEPS or of regulations formed as a result thereof. Mere compliance with the obligations is not enough to keep the companies from avoiding disputes with tax authorities; in fact, mere compliance and no proactive prevention of disputes can result in the effective tax rate of the company being raised by 10%-

20%. Hence, in order to avoid the heavy- 30%-50% -increases in the effective tax rate due to transfer pricing adjustments applied by tax authorities especially under BEPS, taxpayers need to assume a more pro-active role in designing their dispute avoidance set-up. This book is targeted at high level tax professionals in those multinational corporations, which have dealt with completing the stages of compliance and risk management so as to be in a better position to handle disputes relating to transfer pricing.

The primary aim of this booklet is to answer one essential question: how should businesses be addressing the increased level of disputes? For this purpose, it provides an outline of all possible dispute avoidance and dispute resolution tools as well as their adoption and availability per country.

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