§ 1.482-9(b)(7)(ii)(C) Documentation.

Category: (b) Services cost method, Transfer Pricing Guidelines, US IRC Section 482 on Transfer Pricing, § 1.482-9 Methods to determine taxable income in connection with a controlled services transaction | Tag: , , ,
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The taxpayer must maintain sufficient documentation to establish that the requirements of this paragraph (b)(7) are satisfied, and include –

(1) A statement evidencing the taxpayer’s intention to apply the services cost method to evaluate the arm’s length charge for covered services pursuant to a shared services arrangement;

(2) A list of the participants and the renderer or renderers of covered services under the shared services arrangement;

(3) A description of the basis of allocation to all participants, consistent with the participants’ respective shares of reasonably anticipated benefits; and

(4) A description of any aggregation of covered services for purposes of the shared services arrangement, and an indication whether this aggregation (if any) differs from the aggregation used to evaluate the median comparable markup for any low margin covered services described in paragraph (b)(3)(ii) of this section.






Related Guidelines

  1. TPG2022 Chapter VII paragraph 7.61In determining the arm’s length charge for low value-adding intra-group services, the MNE provider of services shall apply a profit mark-up to all costs in the pool with the exception of any pass-through costs as determined under paragraphs 2.99 and 7.34. The same...
  2. TPG2022 Chapter VII paragraph 7.60The examples of allocation keys provided in the previous paragraph are not intended to be an exhaustive list. Depending on the facts and circumstances more sophisticated allocation keys might be used. However, a balance should be struck between theoretical sophistication and practical administration,...
  3. TPG2022 Chapter VII paragraph 7.1This 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...
  4. TPG2022 Chapter VII paragraph 7.56The initial step in applying the simplified approach to low value-adding intra-group services is for the MNE group to calculate, on an annual basis, a pool of all costs incurred by all members of the group in performing each category of low value-adding...
  5. TPG2022 Chapter VII paragraph 7.65The levying of withholding taxes on the provision of low value-adding intra-group services can prevent the service provider recovering the totality of the costs incurred for rendering the services. When a profit element or mark-up is included in the charge of the services,...
  6. TPG2022 Chapter VII paragraph 7.57As a second step, the MNE group should identify and remove from the pool those costs that are attributable to services performed by one group member solely on behalf of one other group member. In creating a pool of payroll costs, for example,...
  7. TPG2022 Chapter VII paragraph 7.53Where a tax administration has not adopted the simplified approach, and as a consequence the MNE group complies with the local requirements in that jurisdiction, such compliance would not disqualify the MNE group from the application of the simplified approach to other jurisdictions....
  8. TPG2022 Chapter VII paragraph 7.52This subsection sets out the elements of a simplified charge mechanism for low value-adding intra-group services. This simplified method is premised on the proposition that all low value-adding service costs incurred in supporting the business of MNE group members should be allocated to...
  1. OECD’s Manual on Effective Mutual Agreement Procedures (MEMAP)The OECD Manual on Effective Mutual Agreement Procedures (MEMAP) is part of a broader project to improve the functioning of existing international tax dispute procedures and to develop supplementary dispute resolution mechanisms. More information about the project, the proposed supplementary dispute resolution mechanism,...
  2. IRS – APA Study Guide issued in early 2000sIn the early 2000s the IRS issued a “APA study guide” where guidance is provided in relation to various practical issues in the area of transfer pricing. The study guide is part of a large collection of IRS practices and statistics from working...

Related Case Law

  1. Panama vs “Pharma Distributor S.A.”, July 2021, Administrative Tax Court, Case No TAT-RF-066An adjustment for FY 2013 and 2014 had been issued to a pharmaceutical company in Panama “Pharma Distributor S.A” that resulted in an income adjustment of 19.5 million dollars, which in turn resulted in additional taxes of 2.4 million dollars. The resale price...
  2. Poland vs “H. LVAS Sp. z oo”, September 2022, Administrative Court, Case No I SA / Go 234/22“H. LVAS Sp. z oo” had deducted expenses related to intra-group services in its taxable income. The services had been provided by its German parent company, H. GmbH. The services (supervision and management support, coordination of projects, support in accounting, controlling, IT and...
  3. Finland vs Corp, September 2017, HFD:2017:145Ruling by the Finnish Supreme Administrative Court on enterprise resource planning and intra-group services arrangements. A Oyj had provided its subsidiaries with supply chain services, marketing and brand management services as well as personnel and computer services. The services offered by A Plc...
  4. Poland vs D. Sp. z oo, April 2022, Administrative Court, Case No I SA/Bd 128/22D. Sp. z oo had deducted interest expenses on intra-group loans and expenses related to intra-group services in its taxable income for FY 2015. The loans and services had been provided by a related party in Delaware, USA. Following a inspection, the tax...