The potential effect of the receipt of government assistance on the pricing of a controlled transaction will depend on the economically relevant characteristics of the transaction, following an accurate delineation of the controlled transaction and the performance of a comparability analysis. Therefore, it would be contrary to the arm’s length principle to assume that the mere receipt of government assistance would affect the price of the accurately delineated controlled transaction, without performing a careful comparability analysis (including an analysis of how the receipt of government assistance would affect the price of uncontrolled transactions, if at all, and the perspectives of both parties to the transaction).
OECD COVID-19 TPG paragraph 73
Posted on |
By OECD
Category: OECD Transfer Pricing Guidelines (2017) | Tag: COVID-19, Government assistance, Government interventions
« Prev |
Next » Related Guidelines
- OECD COVID-19 TPG paragraph 65The terms and conditions of government assistance programmes related to COVID-19 need to be considered when determining the potential impact of these programmes on controlled transactions and when comparing their effects with those of other pre-existing assistance programmes. For instance, a number of COVID-19 assistance programmes are designed as temporary...
- OECD COVID-19 TPG paragraph 67Economically relevant characteristics that pertain to a controlled transaction should be evaluated: (i) when accurately delineating the controlled transaction; and (ii) to facilitate the comparison between the accurately delineated controlled transaction and comparable uncontrolled transactions, in order to price the controlled transaction.38 38 Paragraph 1.33 of Chapter I of the...
- OECD COVID-19 TPG paragraph 72The analysis of the receipt of government assistance as a local market feature may help to inform an analysis of whether its receipt affects the price of a controlled transaction. It may also be relevant when conducting a comparability analysis. However, the particular nature of the government assistance should always...
- TPG2022 Chapter II Annex I paragraph 1[See Chapter II, Part III, Section B of these Guidelines for general guidance on the application of the transactional net margin method. The assumptions about arm’s length arrangements in the following examples are intended for illustrative purposes only and should not be taken as prescribing adjustments and arm’s length arrangements...
- OECD COVID-19 TPG paragraph 82The comparability of open market transactions or enterprises may be influenced by the receipt of government assistance, affecting both how the parties establish their commercial or financial relations and how they price their transactions. Therefore, when performing a comparability analysis, it may be necessary to take into account the receipt...
- OECD COVID-19 TPG paragraph 70Section D.4 of Chapter I of the OECD TPG elaborates on the effect of government policies noting that, as a general rule, government interventions should be treated as conditions of the market in the particular country. Therefore, the receipt of government assistance may be part of the economic circumstances of...
- OECD COVID-19 TPG paragraph 80The receipt of government assistance may reduce the quantitative negative impact of a risk. For instance, a party assuming credit risk could expect to incur losses from a transaction due to financial difficulties of its counterparty. However, the counterparty may in fact be able to meet its obligations by benefitting...
- OECD COVID-19 TPG paragraph 74The economically relevant characteristics of the accurately delineated controlled transaction will help in determining the potential effect of the receipt of government assistance on the pricing of the controlled transaction, if any. For instance, some of the aspects to consider in analysing the impact, if any, of the receipt of...
- OECD COVID-19 TPG paragraph 75Government assistance programmes may be subject to a number of legal conditions that could limit or even prevent the capacity of the party receiving the assistance from modifying the pricing of its transactions with other parties across the value chain and that should be taken into account in performing a...
- OECD COVID-19 TPG paragraph 76The economic circumstances of the market in which the party receiving government assistance operates could also influence the pricing of the accurately delineated controlled transaction. Subject to the specific facts and circumstances, aspects such as the level of competition, the elasticity of the demand or the availability of the benefits...