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OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2009

image of OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2009

The 2009 edition of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations was substantially revised in July 2010.

OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations provides guidance on the application of the "arm's length principle" for valuation for tax purposes of cross-border transactions between associated enterprises. In a global economy where multinational enterprises (MNEs) play a prominent role, governments need to ensure that the taxable profits of MNEs are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country reflects the economic activity undertaken therein. For taxpayers, it is essential to limit the risks of economic double taxation that may result from a dispute between two countries on the determination of the arm’s length remuneration for their cross-border transactions with associated enterprises.

 

The OECD Transfer Pricing Guidelines clarifies these issues and were originally approved by the OECD Council in 1995. In this 2009 edition, some amendments have been made to Chapter IV, primarily to reflect the adoption, in the 2008 update of the Model Tax Convention, of a new paragraph 5 of Article 25 dealing with arbitration, and of changes to the Commentary on Article 25 on mutual agreement procedures to resolve cross-border tax disputes. References to good practices identified in the online Manual for Effective Mutual Agreement Procedures (www.oecd.org/ctp/memap) have also been included and the foreword and preface have been updated.

 

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Special Considerations for Intra-Group Services

This chapter discusses issues that arise in determining for transfer pricing purposes whether services have been provided by one member of an MNE group to other members of that group and, if so, in establishing arm’s length pricing for those intra-group services. The chapter does not address except incidentally whether services have been provided in a cost contribution arrangement, and if so the appropriate arm’s length pricing, i.e. where members of an MNE group jointly acquire, produce or provide goods, services, and/or intangible property, allocating the costs for such activity amongst the members participating in the arrangement. Cost contribution arrangements are the subject of Chapter VIII.

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