TPG2022 Chapter IX paragraph 9.35

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Business restructurings often lead MNE groups to implement global business models that are hardly if ever found between independent enterprises, taking advantage of the very fact that they are MNE groups and that they can work in an integrated fashion. For instance, MNE groups may implement global supply chains or centralised functions that may not be found between independent enterprises. This lack of comparables does not mean that the implementation of such global business models is not arm’s length. Every effort should be made to determine the pricing for the restructured transactions as accurately delineated under the arm’s length principle. A tax administration should not disregard part or all of the restructuring or substitute other transactions for it unless the exceptional circumstances described in paragraph 1.142 are met. In those cases, the guidance in Section D.2 of Chapter I may be applicable. The structure that for transfer pricing purposes, replaces that actually adopted by the taxpayers should comport as closely as possible with the facts of the actual transaction undertaken whilst achieving a commercially rational expected result that would have enabled the parties to come to a price acceptable to both of them at the time the arrangement was entered into. For example, where one element of a restructuring arrangement involves the closing down of a factory, the structure adopted for transfer pricing purposes cannot ignore the reality that the factory no longer operates. Similarly, where one element of a restructuring involves the actual relocation of substantive business functions, the structure adopted for transfer pricing purposes cannot ignore the fact that those functions were actually relocated.

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