There are two issues in the analysis of transfer pricing for intra¬group services. One issue is whether intra-group services have in fact been provided. The other issue is what the intra-group charge for such services for tax purposes should be in accordance with the arm’s length principle. Each of these issues is discussed below.
TPG2022 Chapter VII paragraph 7.5
Posted on | By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VII: Special Considerations for Intra-group Services | Tag: Intra-group services, Service fee, Services
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- TPG2022 Chapter VII paragraph 7.23 A 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 7.54 As 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 7.43 This 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...
- TPG2022 Chapter VII paragraph 7.55 While low value-adding intra-group services may provide benefits to all recipients of those services, questions may arise about the extent of the benefits and whether independent parties would have been willing to pay for the service or perform it themselves. Where the MNE group has followed the guidance of the...
- TPG2022 Chapter VII paragraph 7.35 Depending 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...
- TPG2022 Chapter VII paragraph 7.50 The 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 7.61 In determining the arm’s length charge for low value-adding intra-group services, the MNE provider of services shall apply a profit mark-up to all costs in the pool with the exception of any pass-through costs as determined under paragraphs 2.99 and 7.34. The same mark-up shall be utilised for all low...
- TPG2022 Chapter VII paragraph 7.2 Nearly every MNE group must arrange for a wide scope of services to be available to its members, in particular administrative, technical, financial and commercial services. Such services may include management, coordination and control functions for the whole group. The cost of providing such services may be borne initially by...