However, business restructuring situations involve change, and the arm’s length principle must be applied not only to the post-restructuring transactions, but also to additional transactions that comprise the business restructuring. The application of the arm’s length principle to those additional transactions is discussed in Part I of this chapter.
TPG2022 Chapter IX paragraph 9.100
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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter IX: Transfer Pricing Aspects of Business Restructurings | Tag: Business restructuring, Post Restructuring Remuneration
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- TPG2022 Chapter IX paragraph 9.10 A business restructuring may involve cross-border transfers of something of value, e.g. of valuable intangibles, although this is not always the case. It may also or alternatively involve the termination or substantial renegotiation of existing arrangements, e.g. manufacturing arrangements, distribution arrangements, licences, service agreements, etc. The first step in analysing...
- TPG2022 Chapter IX paragraph 9.21 A second example relates to the purported transfer of credit risk as part of a business restructuring. The analysis under Section D. 1.2.1 of Chapter I would take into account the contractual terms before and after the restructuring, but would also examine how the parties operate in relation to the...
- TPG2022 Chapter IX paragraph 9.13 The application of the arm’s length principle to a business restructuring must start, as for any controlled transaction, with the identification of the commercial or financial relations between the associated enterprises involved in the business restructuring and the conditions and economically relevant circumstances attaching to those relations so that the...
- TPG2022 Chapter IX paragraph 9.120 That being said, in business restructurings, before-and-after comparisons could play a role in understanding the restructuring itself and could be part of a before-and-after comparability (including functional) analysis to understand the changes that accounted for the changes in the allocation of profit/loss amongst the parties. In effect, information on the...
- TPG2022 Chapter IX paragraph 9.108 The selection and application of a transfer pricing method to post-restructuring controlled transactions must derive from the analysis of the economically relevant characteristics of the controlled transaction as accurately delineated. It is essential to understand what the functions, assets and risks involved in the post-restructuring transactions are, and what party...
- TPG2022 Chapter IX paragraph 9.37 There can be group-level business reasons for an MNE group to restructure. However, it is worth re-emphasising that the arm’s length principle treats the members of an MNE group as separate entities rather than as inseparable parts of a single unified business (see paragraph 1.6). As a consequence, it is...
- TPG2022 Chapter IX paragraph 9.15 Restructurings can take a variety of different forms and may involve two or more members of an MNE group. For example, a simple pre-restructuring arrangement could involve a full-fledged manufacturer producing goods and selling them to an associated full-fledged distributor for on-sale into the market. The restructuring could involve a...
- TPG2022 Chapter IX paragraph 9.9 This chapter starts from the premise that the arm’s length principle and these Guidelines do not and should not apply differently to restructurings or post-restructuring transactions than to transactions that were structured as such from the beginning. The relevant question under Article 9 of the OECD Model Tax Convention and...