§ 1.482-9(e)(2) Determination of arm’s length price –
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-9 Methods to determine taxable income in connection with a controlled services transaction | Tag: Cost of service plus method, Cost plus method, Intra-group services, Services
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- TPG2022 Chapter VII paragraph 7.36For example, it may be the case that the market value of intra-group services is not greater than the costs incurred by the service provider. This could occur where, for example, the service is not an ordinary or recurrent activity of the service provider but is offered incidentally as a...
- TPG2022 Chapter VII paragraph 7.35Depending on the method being used to establish an arm’s length charge for intra-group services, the issue may arise whether it is necessary that the charge be such that it results in a profit for the service provider. In an arm’s length transaction, an independent enterprise normally would seek to...
- TPG2022 Chapter VII paragraph 7.34When an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying a cost based method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves. In...
- TPG2022 Chapter VII paragraph 7.33Where a cost based method is determined to be the most appropriate method to the circumstances of the case, the analysis would require examining whether the costs incurred by the group service provider need some adjustment to make the comparison of the controlled and uncontrolled transactions reliable....
- TPG2022 Chapter VII paragraph 7.31The method to be used to determine arm’s length transfer pricing for intra-group services should be determined according to the guidelines in Chapters I, II, and III. Often, the application of these guidelines will lead to use of the CUP or a cost-based method (cost plus method or cost-based TNMM)...
- TPG2022 Chapter VII paragraph 7.26When an indirect-charge method is used, the relationship between the charge and the services provided may be obscured and it may become difficult to evaluate the benefit provided. Indeed, it may mean that the enterprise being charged for a service itself has not related the charge to the service. Consequently,...
- TPG2022 Chapter VII paragraph 7.21In certain cases, the arrangements made for charging for intra-group services can be readily identified. These cases are where the MNE group uses a direct-charge method, i.e. where the associated enterprises are charged for specific services. In general, the direct-charge method is of great practical convenience to tax administrations because...
- TPG2022 Chapter VII paragraph 7.20To identify the amount, if any, that has actually been charged for services, a tax administration will need to identify what arrangements, if any, have actually been put in place between the associated enterprises to facilitate charges being made for the provision of services between them....
- TPG2022 Chapter VII paragraph 7.19Once it is determined that an intra-group service has been rendered, it is necessary, as for other types of intra-group transfers, to determine whether the amount of the charge, if any, is in accordance with the arm’s length principle. This means that the charge for intra-group services should be that...
- TPG2022 Chapter VII paragraph 7.18The fact that a payment was made to an associated enterprise for purported services can be useful in determining whether services were in fact provided, but the mere description of a payment as, for example, “management fees” should not be expected to be treated as prima facie evidence that such...