Every effort should be made to determine pricing for the actual transaction as accurately delineated under the arm’s length principle. The various tools and methods available to tax administrations and taxpayers to do so are set out in the following chapters of these Guidelines. A tax administration should not disregard the actual transaction or substitute other transactions for it unless the exceptional circumstances described in the following paragraphs 1.122-1.125 apply.
TPG2017 Chapter I paragraph 1.121
Category: D. Guidance for applying the arm's length principle, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter I: The Arm's Length Principle | Tag: Actual transaction, Delineation, Disregarding the transaction, Every effort to determine pricing, Exceptional circumstances, Non-recognition and re-characterisation, Recognition of actual transaction, Substance over form
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- TPG2022 Chapter I paragraph 1.141Every effort should be made to determine pricing for the actual transaction as accurately delineated under the arm’s length principle. The various tools and methods available to tax administrations and taxpayers to do so are set out in the following chapters of these...
- TPG2022 Chapter I paragraph 1.144The structure that for transfer pricing purposes, replaces that actually adopted by the taxpayers should comport as closely as possible with the facts of the actual transaction undertaken whilst achieving a commercially rational expected result that would have enabled the parties to come...
- TPG2022 Chapter I paragraph 1.143The key question in the analysis is whether the actual transaction possesses the commercial rationality of arrangements that would be agreed between unrelated parties under comparable economic circumstances, not whether the same transaction can be observed between independent parties. The non-recognition of a...
- TPG2022 Chapter I paragraph 1.142This section sets out circumstances in which the transaction between the parties as accurately delineated can be disregarded for transfer pricing purposes. Because non-recognition can be contentious and a source of double taxation, every effort should be made to determine the actual nature...
- TPG2022 Chapter I paragraph 1.147Under the guidance in this section, the transaction should not be recognised. S1 is treated as not purchasing insurance and its profits are not reduced by the payment to S2; S2 is treated as not issuing insurance and therefore not being liable for...
- TPG2022 Chapter I paragraph 1.146Company S1 carries on a manufacturing business that involves holding substantial inventory and a significant investment in plant and machinery. It owns commercial property situated in an area prone to increasingly frequent flooding in recent years. Third-party insurers experience significant uncertainty over the...
Related Case Law
- South Africa vs Sasol, 30 June 2017, Tax Court, Case No. TC-2017-06 – TCIT 13065The taxpayer is registered and incorporated in the Republic of South Africa and carries on business in the petrochemical industry. It has some of its subsidiaries in foreign jurisdictions. Business activities include the importation and refinement of crude oil. This matter concerns the...
- Norway vs. Exxonmobil Production Norway Inc., January 2018, Lagsmanret no LB-2016-160306An assessment was issued by the Norwegian tax authorities for years 2009 2010 and 2011 concerning the interest on a loan between Exxonmobil Production Norway Inc. (EPNI) as the lender and Exxon Mobile Delaware Holdings Inc. (EMDHI) as the borrower. Both EPNI and...
- Indonesia vs PT Nanindah Mutiara Shipyard Ltd, December 2020 Supreme Court, Case No. 4446/B/PK/Pjk/2020PT Nanindah Mutiara Shipyard Ltd reported losses for FY 2013. The tax authorities issued an assessment where the income of the company was increased by a substantial amount referring to applicable transfer pricing regulations. Nanindah Mutiara Shipyard Ltd filed a complaint with the...
- Poland vs “OLD-GAAR”, May 2004, Constitutional Court, K 4/03On 17 February 2003, the President of the Polish Supreme Administrative Court and the Ombudsman requested the Constitutional Court to declare that Article 24b par. 1 of the Tax Ordinance of 29 August 1997 – by giving the tax authorities and fiscal control...
- Sweden vs Pandox AB, February 2022, Administrative Court, Case No 12512-20, 12520–12523- 20 and 13265-20Pandox AB is the parent company of a hotel group active in northern Europe. Pandox AB’s business concept is to acquire hotel property companies with associated external operators running hotel operations. Pandox AB acquires both individual companies and larger portfolios, both in Sweden...