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.
TPG2022 Chapter VIII paragraph 8.24
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By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VIII: Cost Contribution Arrangements | Tag: Balancing payments, CCA/CSA, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Current value, Pre-existing intangibles, Value of contributions
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- TPG2022 Chapter VIII paragraph 8.34A CCA will be considered consistent with the arm’s length principle where the value of each participant’s proportionate share of the overall contributions to the arrangement (taking into account any balancing payments already made) is consistent with the participant’s share of the overall expected benefits to be received under the...
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- 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 Annex example 1a8. The facts are the same as Example 1. In accordance with the guidance in paragraph 8.27, an alternative way to achieve the identical result under Example 1 is through the use of a two-step process as set out below 9. Step 1 (contributions measured at cost): Company A should...
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- TPG2022 Chapter VIII paragraph 8.13The expectation of mutual and proportionate benefit is fundamental to the acceptance by independent enterprises of an arrangement for sharing the consequences of risks materialising and pooling resources and skills. Independent enterprises would require that the value of each participant’s proportionate share of the actual overall contributions to the arrangement...
- TPG2022 Chapter VIII Annex example 315. The facts are the same as Example 1, except that the per-unit value of Service 2 is 120 (that is, both Service 1 and Service 2 are equally valuable, and neither are low-value services). 16. Under the CCA, the value of Company A and Company B’s contributions...