If an arrangement covers multiple activities, it will be important to take this into account in choosing an allocation method, so that the value of contributions made by each participant is properly related to the relative benefits expected by the participants. One approach (though not the only one) is to use more than one allocation key. For example, if there are five participants in a CCA, one of which cannot benefit from certain services activities undertaken within the CCA, then in the absence of some form of set-off or reduction in contribution, the contributions associated with those activities might be allocated only to the other four participants. In this case, two allocation keys might be used to allocate the contributions. Whether any particular allocation key or keys are appropriate depends on the exact nature of the CCA activity and the relationship between the allocation key(s) and the expected benefits. The guidance in Chapter VII on the use of indirect methods of determining an arm’s length charge for services (paragraphs 7.23-7.26) may be helpful in this regard. In contrast, the three enterprises operating production sites in the illustration of a CCA in paragraph 8.8 are all anticipated to benefit from the multiple projects to improve production processes, and may adopt an allocation key based on, for example, relative size of production capacity. If one of the enterprises chooses not to implement the outcome of a particular project, this should not affect the relative share of benefits or the allocation key used. However, in such circumstances careful consideration should be given to the reason the enterprise chose not to implement the outcome, whether it ever had any reasonable intention of so doing, whether the expected benefits should have been adapted as the CCA arrangement developed and when its intention changed.
TPG2022 Chapter VIII paragraph 8.21
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VIII: Cost Contribution Arrangements | Tag: Allocation key, CCA/CSA, Contribution proportionate to expected benefits, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Implement the outcome of a CCA
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