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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.

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Traditional Transaction Methods

This chapter provides a detailed description of traditional transaction methods that are used to apply the arm's length principle. These methods are the comparable uncontrolled price method or CUP method, the resale price method, and the cost plus method.

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