International Chamber of Commerce issued Statement on Substance Requirements for Transfer Pricing

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS Convention) was signed by 68 governments not long ago. The concept of “economic substance” has attracted attention in a number of countries, because of the absence of definition of the concept. This fact may lead to uncertainty and misunderstandings between subject to legal relations.

The International Chamber of Commerce prepared Statement on Substance Requirements for Transfer Pricing, which contains an overview of problems and obstacles caused by different interpretations of the concept, at the same time emphasizing the importance of applying existing legislation.

“Economic substance” is the concept, in which a transaction can be considered valid only if it has certain economic purpose and solely serves as a mean to reduce tax liability.

To avoid uncertainty governments have to adequately estimate business situation of multinational companies, namely to take into account point of view of the government-partners.

Source: https://cdn.iccwbo.org/content/uploads/sites/3/2017/05/ICC-Policy-Statement-on-substance-requirements-for-transfer-price.pdf