TPG2022 Chapter VIII paragraph 8.37

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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VIII: Cost Contribution Arrangements | Tag: , , , , , ,
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In 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, tax administrations should generally refrain from making an adjustment based on the results of a single fiscal year. Consideration should be given to whether each participant’s proportionate share of the overall contributions is consistent with the participant’s proportionate share of the overall expected benefits from the arrangement over a period of years (see paragraphs 3.75-3.79). Separate balancing payments might be made for pre-existing contributions and for current contributions, respectively. Alternatively, it might be more reliable or administrable to make an overall balancing payment relating to pre-existing contributions and current contributions collectively. See Example 4 in the Annex to this chapter.

Related Guidelines

TPG2022 Chapter VIII paragraph 8.34 A 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...
TPG2022 Chapter VIII paragraph 8.50 8.50 Generally, a CCA between controlled parties should meet the following conditions: a) The participants would include only enterprises expected to derive mutual and proportionate benefits from the CCA activity itself (and not just from performing part or all of that activity). See paragraph 8.14. b) The arrangement would specify...
TPG2022 Chapter VIII Annex example 4 17. 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...
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TPG2022 Chapter VIII paragraph 8.5 A key feature of a CCA is the sharing of contributions. In accordance with the arm’s length principle, at the time of entering into a CCA, each participant’s proportionate share of the overall contributions to a CCA must be consistent with its proportionate share of the overall expected benefits to...
TPG2022 Chapter VIII paragraph 8.33 Company 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 8.36 Balancing payments may also be required by tax administrations where the value of a participant’s proportionate contributions of property or services at the time the contribution was made has been incorrectly determined, or where the participants’ proportionate expected benefits have been incorrectly assessed, e.g. where the allocation key when fixed...
TPG2022 Chapter VIII Annex example 1a 8. 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...