Action Plan 8-10 - Aligning Transfer Pricing Outcomes with Value Creation

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..... on making and thus exercising control over these risks, Moreover, Action 9 addressees the level of returns to funding provided by a capital-rich MNE group maker, where those returns do not correspond to the level of activity undertaken by the funding company. 10 This action focus on other high-risk areas, which include: The scope for addressing profit allocations resulting from controlled transactions which are not commercially rational. The scope for targeting the use of transfer pricing methods in a way which results in diverting profits from the most economically important activities of the MNE group, and The use of certain types of payments between members of the MNE grou .....

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..... escriptive, clarifies and significantly expands the guidance on when a profit split method may be the most appropriate method. It describes presence of one or more of the following indicators as being relevant: Each party makes unique and valuable contributions; The business operations are highly integrated such that the contributions of the parties cannot be reliably evaluated in isolation from each other; The parties share the assumption of economically significant risks, or separately assume closely related risks. The guidance makes clear that while a lack of comparables is, by itself, insufficient to warrant the use of the profit split method, if, conversely, reliable comparables are available it is unlikely that the me .....

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..... administration on the application of the HTVI approach contained in this document has been incorporated into the Transfer Pricing Guidelines as an annex to Chapter VI. Financial Transactions Transfer pricing guidance on financial transactions In February 2020 under the mandate of BEPS Action 4 and 8-10, the OECD released Transfer Pricing Guidance on Financial Transactions. The guidance is significant because it is the first time the OECD Transfer Pricing Guidelines include guidance on the transfer pricing aspects of financial transactions, which will contribute to consistency in the interpretation of the arm s length principle and help avoid transfer pricing disputes and double taxation. The report includes a number of exam .....

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