Where no written terms exist, the actual transaction would need to be deduced from the evidence of actual conduct provided by identifying the economically relevant characteristics of the transaction. In some circumstances the actual outcome of commercial or financial relations may not have been identified as a transaction by the MNE, but nevertheless may result in a transfer of material value, the terms of which would need to be deduced from the conduct of the parties. For example, technical assistance may have been granted, synergies may have been created through deliberate concerted action (as discussed in Section D.8), or know-how may have been provided through seconded employees or otherwise. These relations may not have been recognised by the MNE, may not be reflected in the pricing of other connected transactions, may not have been formalised in written contracts, and may not appear as entries in the accounting systems. Where the transaction has not been formalised, all aspects would need to be deduced from available evidence of the conduct of the parties, including what functions are actually performed, what assets are actually used, and what risks are actually assumed by each of the parties.
TPG2017 Chapter I paragraph 1.49
Category: D. Guidance for applying the arm's length principle, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter I: The Arm's Length Principle | Tag: Comparability analysis, Comparability factors, Conduct of the parties, Contractual terms, Delineation, Know-how, No written terms, Not-identified transactions
« Prev |
Next » Related Guidelines
- TPG2022 Chapter I paragraph 1.50The following example illustrates the concept of determining the actual transaction where a transaction has not been identified by the MNE. In reviewing the commercial or financial relations between Company P and its subsidiary companies, it is observed that those subsidiaries receive services...
- TPG2022 Chapter I paragraph 1.49Where no written terms exist, the actual transaction would need to be deduced from the evidence of actual conduct provided by identifying the economically relevant characteristics of the transaction. In some circumstances the actual outcome of commercial or financial relations may not have...
- TPG2022 Chapter I paragraph 1.43However, the written contracts alone are unlikely to provide all the information necessary to perform a transfer pricing analysis, or to provide information regarding the relevant contractual terms in sufficient detail. Further information will be required by taking into consideration evidence of the...
- TPG2022 Chapter I paragraph 1.47Where there is doubt as to what transaction was agreed between the associated enterprises, it is necessary to take into account all the relevant evidence from the economically relevant characteristics of the transaction. In doing so one must bear in mind that the...
- 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 1.45If the characteristics of the transaction that are economically relevant are inconsistent with the written contract between the associated enterprises, the actual transaction should generally be delineated for purposes of the transfer pricing analysis in accordance with the characteristics of the transaction reflected...
- TPG2022 Chapter I paragraph 1.44The following example illustrates the concept of clarifying and supplementing the written contractual terms based on the identification of the actual commercial or financial relations. Company P is the parent company of an MNE group situated in Country P. Company S, situated in...
- TPG2022 Chapter I paragraph 1.46In transactions between independent enterprises, the divergence of interests between the parties ensures (i) that contractual terms are concluded that reflect the interests of both of the parties, (ii) that the parties will ordinarily seek to hold each other to the terms of...
- Additional guidance on the attribution of profits to permanent establishmentsThe OECD has released additional guidance on the attribution of profits to permanent establishments. This additional guidance sets out high-level general principles for the attribution of profits to permanent establishments arising under Article 5(5), in accordance with applicable treaty provisions, and includes examples...
- EU JTPF, March 2017, Report on the Use of Comparables in the EUIn March 2017 the JTPF agreed the Report on the Use of Comparables in the EU. The report establishes best practices and pragmatic solutions by issuing various recommendations for both taxpayers and tax administrations in the EU and aims at increasing in practice...
Related Case Law
- Ukrain vs PJSC Odesa Port Plant, October 2023, Supreme Court, Case No 826/14873/17Following a tax audit the tax authority conducted a on-site inspection of PJSC Odesa Port Plant on the completeness of tax calculation in respect of controlled transactions on the export of mineral fertilisers to non-resident companies Ameropa AG (Switzerland), “Koch Fertilizer Trading SARL...
- France vs Apex Tool Group SAS, December 2021, Supreme Court, Case No 441357Apex Tool Holding France acquired all the shares of Cooper Industrie France, which has since become Apex Tool France. This transaction was financed by a ten-year vendor loan at a rate of 6%. This claim on Apex Tool Holding France was transferred on...
- Portugal vs “FURNITURE S.A.” No I, November 2021, CAAD, Case No 14/2021-TFurniture S.A is engaged in the production and sale of furniture and had established a US subsidiary to market and sell furniture overseas. The pricing of the controlled transactions with the US subsidiary had been based on a resale price method, which resulted...
- Peru vs. Borrower Branch, June 2021, Tax Court, Case No 05569-1-2021A foreign group had transferred funds to a branch in Peru and claimed that the transfer was a capital contribution – and not a loan. Following an audit the tax authorities issued an assessment, where the funds were considered a loan and withholding...