§ 1.482-9(i)(2)(i) General requirements –
Category: (i) Contingent-payment contractual terms for services, 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: Contingent payments, Intra-group services, Services
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- TPG2022 Chapter VII paragraph 7.24In some cases, an indirect-charge method may be necessary due to the nature of the service being provided. One example is where the proportion of the value of the services rendered to the various relevant entities cannot be quantified except on an approximate...
- TPG2022 Chapter VII paragraph 7.22An MNE group may be able to adopt direct charging arrangements, particularly where services similar to those rendered to associated enterprises are also rendered to independent parties. If specific services are provided not only to associated enterprises but also to independent enterprises in...
- TPG2022 Chapter VII paragraph 7.21In certain cases, the arrangements made for charging for intra-group services can be readily identified. These cases are where the MNE group uses a direct-charge method, i.e. where the associated enterprises are charged for specific services. In general, the direct-charge method is of...
- TPG2022 Chapter VII paragraph 7.20To identify the amount, if any, that has actually been charged for services, a tax administration will need to identify what arrangements, if any, have actually been put in place between the associated enterprises to facilitate charges being made for the provision of...
- TPG2022 Chapter VII paragraph 7.19Once it is determined that an intra-group service has been rendered, it is necessary, as for other types of intra-group transfers, to determine whether the amount of the charge, if any, is in accordance with the arm’s length principle. This means that the...
- TPG2022 Chapter VII paragraph 7.18The fact that a payment was made to an associated enterprise for purported services can be useful in determining whether services were in fact provided, but the mere description of a payment as, for example, “management fees” should not be expected to be...
- TPG2022 Chapter VII paragraph 7.17These services may be available on call and they may vary in amount and importance from year to year. It is unlikely that an independent enterprise would incur stand-by charges where the potential need for the service was remote, where the advantage of...
- TPG2022 Chapter VII paragraph 7.16Another issue arises with respect to services provided “on call”. The question is whether the availability of such services is itself a separate service for which an arm’s length charge (in addition to any charge for services actually rendered) should be determined. A...
Related Case Law
- France vs. Eduard Kettner, March 2012, Administrative Court of Appeals of Paris, No. 10PA04193Kettner was a French distributor of hunting products. Kettner was charged service fees by it’s German parent company for a range of services including packaging, warehouse and inventory management, IT, management fees etc. The tax administration was of the opinion that the fees...
- Peru vs “Copper Corporation S.A.”, July 2011, Tax Tribunal, Case No 12609-8-2011“Copper Corporation S.A.” had deducted intra-group service payments in it’s taxable income. The Peruvian tax authorities determined that the documentation provided by the company did not sufficiently support the actual provision of these services. Hence, tax deductions for the expenses was denied. The...