When an associated enterprise consistently realizes losses while the MNE group as a whole is profitable, the facts could trigger some special scrutiny of transfer pricing issues. Of course, associated enterprises, like independent enterprises, can sustain genuine losses, whether due to heavy start-up costs, unfavourable economic conditions, inefficiencies, or other legitimate business reasons. However, an independent enterprise would not be prepared to tolerate losses that continue indefinitely. An independent enterprise that experiences recurring losses will eventually cease to undertake business on such terms. In contrast, an associated enterprise that realizes losses may remain in business if the business is beneficial to the MNE group as a whole.
TPG2022 Chapter I paragraph 1.149
Posted on | By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter I: The arm's length principle | Tag: Beneficial to the group as a whole, Continuous losses
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