TPcases

Database of Transfer Pricing Case Laws

TPG2022 Chapter VII paragraph 7.14

Posted on January 20, 2022 | By OECD

Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VII: Special Considerations for Intra-group Services | Tag: Centralised services, Intra-group services, Service fee, Services

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Other activities that may relate to the group as a whole are those centralised in the parent company or one or more group service centres (such as a regional headquarters company) and made available to the group (or multiple members thereof). The activities that are centralised depend on the kind of business and on the organisational structure of the group, but in general they may include administrative services such as planning, coordination, budgetary control, financial advice, accounting, auditing, legal, factoring, computer services; financial services such as supervision of cash flows and solvency, capital increases, loan contracts, management of interest and exchange rate risks, and refinancing; assistance in the fields of production, buying, distribution and marketing; and services in staff matters such as recruitment and training. Group service centres also often carry out order management, customer service and call centres, research and development or administer and protect intangible property for all or part of the MNE group. These types of activities ordinarily will be considered intra-group services because they are the type of activities that independent enterprises would have been willing to pay for or to perform for themselves.

Related Guidelines

TPG2022 Chapter VII paragraph 7.39One example involves debt-factoring activities, where an MNE group decides to centralise the activities for economic reasons. For example, it may be prudent to centralise the debt-factoring activities to better manage liquidity, currency and debt risks and to provide administrative efficiencies. A debt-factoring centre that takes on this responsibility is...

TPG2022 Chapter VII paragraph 7.15In considering whether a charge for the provision of services would be made between independent enterprises, it would also be relevant to consider the form that an arm’s length consideration would take had the transaction occurred between independent enterprises dealing at arm’s length. For example, in respect of financial services...

TPG2022 Chapter VII paragraph 7.13Similarly, an associated enterprise should not be considered to receive an intra-group service when it obtains incidental benefits attributable solely to its being part of a larger concern, and not to any specific activity being performed. For example, no service would be received where an associated enterprise by reason of...

TPG2022 Chapter VII paragraph 7.26When an indirect-charge method is used, the relationship between the charge and the services provided may be obscured and it may become difficult to evaluate the benefit provided. Indeed, it may mean that the enterprise being charged for a service itself has not related the charge to the service. Consequently,...

TPG2022 Chapter VII paragraph 7.25The allocation should be based on an appropriate measure of the usage of the service that is also easy to verify, for example turnover, staff employed, or an activity based key such as orders processed. Whether the allocation method is appropriate may depend on the nature and usage of the...

TPG2022 Chapter VII paragraph 7.24In some cases, an indirect-charge method may be necessary due to the nature of the service being provided. One example is where the proportion of the value of the services rendered to the various relevant entities cannot be quantified except on an approximate or estimated basis. This problem may occur,...

TPG2022 Chapter VII paragraph 7.23A direct-charge method for charging for intra-group services can be difficult to apply in practice. Consequently, some MNE groups have developed other methods for charging for services provided by parent companies or group service centres. In such cases, MNE groups may find they have few alternatives but to use cost...

TPG2022 Chapter VII paragraph 7.22An MNE group may be able to adopt direct charging arrangements, particularly where services similar to those rendered to associated enterprises are also rendered to independent parties. If specific services are provided not only to associated enterprises but also to independent enterprises in a comparable manner and as a significant...

TPG2022 Chapter VII paragraph 7.21In certain cases, the arrangements made for charging for intra-group services can be readily identified. These cases are where the MNE group uses a direct-charge method, i.e. where the associated enterprises are charged for specific services. In general, the direct-charge method is of great practical convenience to tax administrations because...

TPG2022 Chapter VII paragraph 7.20To identify the amount, if any, that has actually been charged for services, a tax administration will need to identify what arrangements, if any, have actually been put in place between the associated enterprises to facilitate charges being made for the provision of services between them....

Supplemental Guidance

Peru vs “Copper Corporation S.A.”, July 2011, Tax Court, Case No 12609-8-2011A Peruvian copper mining company deducted intra-group service payments from its taxable income, but the tax authority disallowed the deductions after finding the supporting documentation insufficient to prove the services were actually rendered. The company appealed to the Tax Court, which dismissed the appeal and upheld the assessment in favour...

Poland vs “H. LVAS Sp. z oo”, September 2022, Administrative Court, Case No I SA / Go 234/22A Polish subsidiary deducted expenses for management and support services provided by its German parent, classified as low value-adding services. The tax authority disallowed the deductions due to insufficient documentation linking specific services to the invoiced amounts. The Administrative Court found the assessment flawed and remanded the case for re-examination,...

Bulgaria vs Archer Daniels Midland Europe B. V., July 2020, Supreme Administrative Court, Case No 8989 (2675/2020)Following a 2015 restructuring, Amilum Bulgaria EAD was re-invoiced by parent Archer Daniels Midland Europe B.V. for integration costs including a new accounting system. Bulgarian tax authorities denied deductions, treating the payments as a hidden profit distribution and issuing withholding tax assessments. The Supreme Administrative Court upheld the Administrative Court's...

Peru vs “Metal S.A.”, February 2023, Tax Court, Case No 01428-1-2023A Peruvian mining distributor faced tax authority adjustments challenging its arm's length remuneration for distribution activities and the pricing of intra-group low value-adding services, which local rules cap at a 5% margin. The Peru Tax Court in February 2023 overturned the adjustment on distribution remuneration in favour of the taxpayer...

Peru vs “Airline S.A.”, September 2024, Tax Court, Case No 08970-8-2024A Peruvian airline claimed deductions for intra-group aircraft leasing and related costs passed down from a group parent. The tax authority disallowed the deductions, finding insufficient documentation to prove the services were actually rendered to the taxpayer, including missing block hour records and per-entity billing. The Tax Court upheld the...

Peru vs “Airline S.A.”, March 2025, Tax Court, Case No 02374-4-2025A Peruvian airline claimed deductions for intra-group service payments, arguing they were necessary within the corporate group and subject to OECD transfer pricing principles. The tax authority disallowed the deductions due to insufficient documentation proving the services were actually rendered. Peru's Tax Court dismissed the appeal in March 2025, ruling...

Peru vs “P Services”, July 2020, Tax Court, Case No 03052-5-2020A Peruvian service provider entered an interest-free loan agreement with a local consortium, offsetting 2013 service payments against loan proceeds. The tax authority recharacterised the loan as advances for services rendered, arguing the structure was designed to avoid VAT. The Peru Tax Court ruled in favour of the tax authority...

Poland vs “W.W.P.H. sp. z o. o”, January 2024, Administrative Court, Case No I SA/Bd 614/23A Polish company was denied deductions for intra-group loan interest and management fees following a tax authority audit, which deemed the loan economically irrational and the services unsubstantiated. The Administrative Court ruled in favour of the taxpayer in January 2024, finding that Polish arm's length rules provided no legal basis...