TPG2022 Chapter VIII paragraph 8.24

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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VIII: Cost Contribution Arrangements | Tag: , , , , , ,
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Contributions to a CCA may take many forms. For services CCAs, contributions primarily consist of the performance of the services. For development CCAs, contributions typically include the performance of development activities (e.g. R&D, marketing), and often include additional contributions relevant to the development CCA such as pre-existing tangible assets or intangibles. Irrespective of the type of CCA, all contributions of current or pre-existing value must be identified and accounted for appropriately in accordance with the arm’s length principle. Since the value of each participant’s relative share of contributions should accord with its share of expected benefits, balancing payments may be required to ensure this consistency. The term “contributions” as used in this Chapter includes contributions of both pre-existing and current value made by participants to a CCA.

Related Guidelines

TPG2022 Chapter VIII paragraph 8.10Two types of CCAs are commonly encountered: those established for the joint development, production or the obtaining of intangibles or tangible assets (“development CCAs”); and those for obtaining services (“services CCAs”). Although each particular CCA should be considered on its own facts and circumstances, key differences between these two types...
TPG2022 Chapter VIII Annex example 417. Company A and Company B are members of an MNE group and decide to undertake the development of an intangible through a CCA. The intangible is anticipated to be highly profitable based on Company B’s existing intangibles, its track record and its experienced research and development staff. Company A...
TPG2022 Chapter VIII paragraph 8.33Company A based in country A and Company B based in country B are members of an MNE group and have concluded a CCA to develop intangibles. Company B has entitlement under the CCA to exploit the intangibles in country B, and Company A has entitlement under the CCA to...
TPG2022 Chapter VIII paragraph 8.15A party would also not be a participant in a CCA if it does not exercise control over the specific risks it assumes under the CCA and does not have the financial capacity to assume these risks, as this party would not be entitled to a share in the output...
TPG2022 Chapter VIII paragraph 8.26In valuing contributions, distinctions should be drawn between contributions of pre-existing value and current contributions. For example, in a CCA for the development of an intangible, the contribution of patented technology by one of the participants reflects a contribution of pre-existing value which is useful towards the development of the...
TPG2022 Chapter VIII paragraph 8.28Whereas it cannot be assumed that the value of pre-existing contributions corresponds to costs, it is sometimes the case that cost could be used as a practical means to measure relative value of current contributions. Where the difference between the value and costs is relatively insignificant, for practical reasons, current...
TPG2022 Chapter VIII paragraph 8.37In the case of development CCAs, variations between a participant’s proportionate share of the overall contributions and that participant’s proportionate share of the overall expected benefits may occur in a particular year. If that CCA is otherwise acceptable and carried out faithfully, having regard to the recommendations of Section E,...
TPG2022 Chapter VIII paragraph 8.14Because the concept of mutual benefit is fundamental to a CCA, it follows that a party may not be considered a participant if the party does not have a reasonable expectation that it will benefit from the objectives of the CCA activity itself (and not just from performing part or...
TPG2022 Chapter VIII Annex example 11. Example 1 illustrates the general principle that contributions should be assessed at value (i.e. based on arm’s length prices) in order to produce results that are consistent with the arm’s length 2. Company A and Company B are members of an MNE group and decide to enter into a...
TPG2022 Chapter VIII paragraph 8.20To the extent that a material part or all of the benefits of a CCA activity are expected to be realised in the future and not solely in the year the costs are incurred, most typically for development CCAs, the allocation of contributions will take account of projections about the...