Abstract
In December 2014, OECD issued a Discussion Draft on Transfer Pricing aspects of cross-border commodity transactions through BEPS action 10, where the adoption of the sixth method in the form of the quoted commodity price and its adjustments were primarily driven as a starting point for transfer pricing purpose. In this paper the analysis of the proposed sixth method and the experience with the sixth method in Argentina were used for the consideration whether this method can be used as simplified measurement for SMEs. SMEs are facing tax obstacles mainly in the area of the international taxation which impede in cross border transactions and internationalization of SMEs. One of tax obstacles represent transfer pricing. Its costs can be disproportionately large for SMEs in comparison to LSEs. Moreover, SMEs are not able to bear the high administrative burden to comply with the transfer pricing rules as they do not posses the sufficient human and economic capital. Based on the results of the research, we can concluded, that there are a lot of questions related to the proposed sixth method, notwitstanding, it has a potential to be a new method for SMEs for they need to face lower tax administrative burden in the area of transfer pricing issues.
Highlights
The Committee on Fiscal Affairs, which is the main tax policy body of the OECD, has began to coordinate transfer pricing rules since 1979 by publishing a number of reports relating to the transfer pricing issues
Contrary to the Argentine sixth method, the OECD proposal of the sixth method includes the consideration of the function performed, assets used and risks assumed
6 Conclusion The aim of the paper was, to evaluate and consider whether the sixth method can be used as simplified measurement in case of SMEs, based on the analysis of the proposed sixth method by OECD and experience with the sixth method in Argentina
Summary
The Committee on Fiscal Affairs, which is the main tax policy body of the OECD, has began to coordinate transfer pricing rules since 1979 by publishing a number of reports relating to the transfer pricing issues. From the beginning of existence the OECD TP Guidelines as a guideline for the practical application of the arm’s length principle, significant difficulties with identifying suitable comparables had been identified. This often requires the usage of sophisticated microeconomic techniques, which can produce only a range of possible arm’s length prices that are often significantly broader than good tax policy could ever suggest. In this respect, even small differences can have a significant effect on the attributable profit
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