Tag: Capability to make decisions

TPG2022 Chapter VIII paragraph 8.15

/ Capability to make decisions, CCA/CSA, Control over risk, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Decision making functions, Financial capacity, Funding, Funding risk vs Operational risk, OECD Transfer Pricing Guidelines (2022), Participation in a CCA, Prudent business management, Risk mitigation, TPG2022 Chapter VIII: Cost Contribution Arrangements
A party would also not be a participant in a CCA if it does not exercise control over the specific risks it assumes under the CCA and does not have the financial capacity to assume these risks, as this party would not be entitled to a share in the output that is the objective of the CCA based on the functions it actually performs. The general principles set out in Chapter I of these guidelines on the assumption of risks apply to situations involving CCAs. Each participant makes particular contributions to the CCA objectives, and contractually assumes certain risks. Guidance under Section D. 1 of Chapter I on delineating the actual transaction will apply to the transfer pricing analysis in relation to these risks. This also means that a party assuming risks under a CCA based on an analysis under step 4(i) of the framework for analysing risks in paragraph 1.60 (“assumes the risk under the CCA”) must control the ... Read more

TPG2017 Chapter VIII paragraph 8.15

/ Capability to make decisions, CCA/CSA, Control over risk, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Decision making functions, Financial capacity, Funding risk vs Operational risk, OECD Transfer Pricing Guidelines (2017), Participation in a CCA, Prudent business management, Risk mitigation
A party would also not be a participant in a CCA if it does not exercise control over the specific risks it assumes under the CCA and does not have the financial capacity to assume these risks, as this party would not be entitled to a share in the output that is the objective of the CCA based on the functions it actually performs. The general principles set out in Chapter I of these guidelines on the assumption of risks apply to situations involving CCAs. Each participant makes particular contributions to the CCA objectives, and contractually assumes certain risks. Guidance under Section D. 1 of Chapter I on delineating the actual transaction will apply to the transfer pricing analysis in relation to these risks. This also means that a party assuming risks under a CCA based on an analysis under step 4(i) of the framework for analysing risks in paragraph 1.60 (“assumes the risk under the CCA”) must control the ... Read more