TPG2022 Chapter VII paragraph 7.47

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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VII: Special Considerations for Intra-group Services | Tag: , , , ,
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The following activities would not qualify for the simplified approach outlined in this section:

  • services constituting the core business of the MNE group;
  • research and development services (including software development unless falling within the scope of information technology services in 7.49);
  • manufacturing and production services;
  • purchasing activities relating to raw materials or other materials that are used in the manufacturing or production process;
  • sales, marketing and distribution activities;
  • financial transactions;
  • extraction, exploration, or processing of natural resources;
  • insurance and reinsurance;
  • services of corporate senior management (other than management supervision of services that qualify as low value-adding intra-group services under the definition of paragraph 7.45).

Related Guidelines

TPG2022 Chapter VII paragraph 7.48The fact that an activity does not qualify for the simplified approach, as defined under paragraph 7.45, should not be interpreted to mean that that activity generates high returns. The activity could still add low value, and the determination of the arm’s length charge for such activity, if any, should...
TPG2022 Chapter VII paragraph 7.54As discussed in paragraph 7.6, under the arm’s length principle an obligation to pay for an intra-group service arises only where the benefits test is satisfied, i.e. the activity must provide the group member expected to pay for the service with economic or commercial value to enhance or maintain its...
TPG2022 Chapter VII paragraph 7.52This subsection sets out the elements of a simplified charge mechanism for low value-adding intra-group services. This simplified method is premised on the proposition that all low value-adding service costs incurred in supporting the business of MNE group members should be allocated to those members. The basic benefits of using...
TPG2022 Chapter VII paragraph 7.51The definition of low value-adding intra-group services refers to the supportive nature of such services, which are not part of the core business of the MNE group. The provision of low value-adding intra-group services may, in fact, be the principal business activity of the legal entity providing the service, e.g....
TPG2022 Chapter VII paragraph 7.50The following examples illustrate an important element of the definition of low value-adding intra-group services, namely, that they should not include services which are part of the MNE’s core business. Services that may seem superficially similar in nature (in the example, credit risk analysis) may or may not be low...
TPG2022 Chapter VII paragraph 7.49The following bullet points provide examples of services that would likely meet the definition of low value-adding services provided in paragraph 7.45: accounting and auditing, for example gathering and reviewing information for use in financial statements, maintenance of accounting records, preparation of financial statements, preparation or assistance in operational and...
TPG2022 Chapter VII paragraph 7.46The guidance in this section is not applicable to services that would ordinarily qualify as low value-adding intra-group services where such services are rendered to unrelated customers of the members of the MNE group. In such cases it can be expected that reliable internal comparables exist and can be used...
TPG2022 Chapter VII paragraph 7.45Low value-adding intra-group services for the purposes of the simplified approach are services performed by one member or more than one member of an MNE group on behalf of one or more other group members which are of a supportive nature, are not part of the core business of the...
TPG2022 Chapter VII paragraph 7.44This section discusses the definitional issues related to low value-adding intra-group services for applying the elective, simplified approach discussed under Section D.2. It starts by indicating the characteristics that services must have in order to qualify as low-value-adding intra-group services for applying the elective, simplified approach. It then identifies a...
TPG2022 Chapter VII paragraph 7.43This section provides specific guidance relating to a particular category of intra-group services referred to as low value-adding intra-group services. Section D. 1 contains the definition of low value-adding intra-group services. Section D.2 sets out an elective, simplified approach for the determination of arm’s length charges for low value-adding intra-group...

Supplemental Guidance

Peru – report on use of the most appropriate method to determine the market value of servicesIn december 2020 the tax authorities in Peru issued a new administrative ordinance related to use of the most appropriate method to determine the market value of services. Click here for English translation...
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