When an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying a cost based method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves. In such a case, it may not be appropriate to determine arm’s length pricing as a mark-up on the cost of the services but rather on the costs of the agency function itself. For example, an associated enterprise may incur the costs of renting advertising space on behalf of group members, costs that the group members would have incurred directly had they been independent. In such a case, it may well be appropriate to pass on these costs to the group recipients without a mark-up, and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function.
TPG2022 Chapter VII paragraph 7.34
Posted on | By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VII: Special Considerations for Intra-group Services | Tag: Cost base, Cost plus method, Intra-group services, Pass through costs, Service fee, Services
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- TPG2022 Chapter VII paragraph 7.35Depending on the method being used to establish an arm’s length charge for intra-group services, the issue may arise whether it is necessary that the charge be such that it results in a profit for the service provider. In an arm’s length transaction, an independent enterprise normally would seek to...
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- TPG2022 Chapter VII paragraph 7.64An MNE group electing for application of this simplified methodology shall prepare the following information and documentation and make it available upon request to the tax administration of any entity within the group either making or receiving a payment for low value-adding intra-group services. A description of the categories of...
- TPG2022 Chapter VII paragraph 7.10The following are examples of costs associated with shareholder activities, under the standard set forth in paragraph 7.6: a) Costs relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company, stock exchange listing of the...