Volume 46 (2018) / Issue 3

Filip Majdowski, Katarzyna Bronzewska, 'Revolutionary Changes to the Arm’s Length Principle under the OECD BEPS Project: Have CFC Rules Become Redundant?' (2018) 46 Intertax, Issue 3, pp. 210–224


Title question of the article is deliberately provocative. The subject of interactions between Controlled Foreign Company (CFC) regulations and transfer pricing (TP) regulations is a complex topic that has been bringing divergent opinions over many decades (In United States, from where both CFC regime and TP regime originated, the literature on this subject has been present at least since 1969, being no more than one year after the introduction of detailed US TP regulations (1968). CFC regulations – Subpart F – was introduced therein in 1962. See for instance: L. Kauder, Taxation of Domestically Controlled Foreign Corporations: A Comparative Study of Subpart F and Section 482, 14(2) Villanova L. Rev. (1969)). The polemic in this regard has, however, acquired a new dimension together with the OECD’s adoption of modifications to the arm’s length principle as referred to in Article 9 of the OECD Model Convention under the Base Erosion and Profit Shifting (BEPS) project, which led to publishing the 2017 TP Guidelines for Multinational Enterprises and Tax Administration (OECD, 2017 TP Guidelines for Multinational Enterprises and Tax Administration, available at http://www.oecd.org/tax/transfer-pricing/oecdtransfer- pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm). These amendments, which involve the expansion of the guidelines on the relationship between (1) the legal title to the asset, and (2) the eligibility of a cross-border group of related entities to recognize the corresponding income generated by that asset, has led to an unobservable earlier approximation of the scope of CFC and TP regimes. It is therefore the study question of this article to verify whether the enhanced TP regulations are capable of replacing CFC regulations.

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ISSN: 0165-2826
ID: TAXI2018023