The UN Committee of Experts on International Cooperation in Tax Matters will hold its 24th session on 4 to 7 April and 11 to 12 April 2022. Ahead of the session, the Transfer Pricing Subcommittee published the Co-Coordinators' Report on its proposed work programme covering the following areas:

Industry / sector guidance for primary products

The work stream on industry guidance on primary products (e.g., agriculture) would contain a description of the value chain of this industry, especially at an international level, including frequently applied business models and contractual terms, as well as an explanation of how functions, risks and assets are commonly arranged. Guidance would distinguish between different sub-sectors, depending on their specific characteristics, such as food (perishable or not), forestry and fishing, among others. Increasing environmental regulation would also be considered given their influence on the industry. With the information gathered, good practices and special guidance would be drafted, for the application of a transfer pricing regime to this industry / sector, including recommendations related to the delineation of the transaction, methods, comparable operations, and potential sources of information. Constant cross references to the UN TP Manual (2021) would complete the guidance to be understood as the UN Manual's application to a specific industry.

Industry / sector guidance for the pharmaceutical industry

This work stream on guidance for the pharmaceutical industry would contain a description of the value chain of the industry and an explanation of how functions, risks and assets are commonly arranged. It would also include an overview of the particularities of the industry, most notably governmental regulations and parallel imports. Based on this background information, recommendations regarding the delineation of transactions, transfer pricing methods, potential sources of information and comparables will be discussed including the challenge to benchmark routine entities in relevant market jurisdictions. Thereafter, common transfer pricing risks would be identified followed by good practices in auditing and containing this risk. Lastly, a section would be devoted to potential changes to the industry stemming from the COVID-19 pandemic (co-operation between third parties, governmental contracting). Constant cross references to the UN TP Manual (2021) would complete the guidance to be understood as a UN Manual's application to a specific industry.

Toolkits to assist developing country tax administrations in conducting efficient and effective transfer pricing risk assessments and audits

This work stream would aim to provide a toolkit or toolkits to assist developing country tax administrations in conducting efficient and effective transfer pricing risk assessments and audits. It is envisaged that the toolkit(s) could provide step-by-step guidance to assist tax administrations with the planning, execution and resolution of transfer pricing risk assessments and examinations:

• In particular the toolkit(s) will provide information on processes to be carried out by a tax administration, starting from effective risk assessment (e.g. sources of data, risk flags, development of risk assessment products, etc.) through to case selection and conduct of a TP audit (e.g. information gathering, including use of EOI, and functional analysis interviews; preparation of position papers, quality assurance processes etc.).
• In addition to increasing effectiveness and efficiency, the toolkit(s) may help harmonizing the way tax administrations perform risk assessments and examinations, which should in turn, result in a more consistent application of the arm's length principle, helping to minimize disputes and double taxation; as well as reducing administrative and compliance costs.
• The work stream would need to link to existing / other guidance, including on dispute prevention/ resolution in order to be comprehensive, and to prevent duplication. It could also act as a 'sourcebook' to link to examples of good practice in tax administrations around the world.

Transfer Pricing Domestic Anti-Abuse Rules

This workstream would entail a "desktop" research and targeted follow-up to gain an overview over existing transfer pricing domestic anti-abuse rules, their effectiveness and efficiency. A report on the analysis of domestic transfer pricing anti-avoidance provisions would be drafted. This report would include:

• A background of the analyzed transfer pricing anti-avoidance provisions undertaken – the scope and parameters;
• An analysis of selected relevant rules;
• Their potential interaction with treaty provisions; and
• A general evaluation providing insights into the challenges and issues connected with their implementation for countries in differing situations.

Developing countries considering the introduction of domestic transfer pricing anti-avoidance rules will be able to benefit from this paper, for a better-informed decision-making process.

CO2 certificates

The purpose of this work stream is to elaborate on the supply chain that is required to generate carbon credits and the transfer thereof to serve as emission offset. Understanding the functions performed, assets used, and risks incurred with respect to the transactions involved will assist with accurately delineating the relevant transactions for transfer pricing purposes.

This work stream intends to look at Certificates or Emission Reduction (CERs) generated from a Clean Development Mechanism (CDM) project activity in developing countries but would also discuss Emission Reduction Units (ERUs) resulting from projects registered under the Joint Implementation (JI) mechanism. Both CERs and ERUs are tradeable units representing one tonne of carbon dioxide-equivalent of emissions abatement or sequestration.

The guidance produce would entail a description of the regulatory framework, a description of CERs and ERUs followed by a description of the supply chain required to generate CERs/ERUs.

Any work performed would be coordinated with the Environmental Taxation Subcommittee.

COVID-19 / economic downturn

A work stream on economic downturns, as evidenced by the COVID-19 pandemics, focuses on the significant issues for MNEs as well as governments resulting from economic downturns. Among these issues, economic downturns have a relevant impact on the application of transfer pricing rules and the functioning of the arm's length principle. Current guidance on this topic is still scarce. Therefore, this work stream aims at analyzing the impact of economic downturns on transfer pricing and identifying possible practical solutions for developing countries.

Dispute avoidance and resolution

The Transfer Pricing Subcommittee proposes to focus on dispute avoidance and resolution in another work stream. In this context, it will discuss risk control mechanisms (such as ICAP), joint audits and advance pricing agreements to avoid and prevent transfer pricing disputes in collaboration with the drafting group working on toolkits (see subs. 7) and with a focus on their appropriateness for developing countries. For these mechanisms as well as for the resolution of transfer pricing disputes, the Subcommittee will, in collaboration with the Small Group on Dispute Avoidance and Resolution, analyze whether further specific guidance for disputes regarding issues on transfer pricing or the allocation of profits to permanent establishments is needed and in what form the Committee should publish it. It will also discuss practical challenges in the application of dispute resolution mechanisms and reflect upon possible future work of the Committee.