TPG2017 Chapter I paragraph 1.67

Category: D. Guidance for applying the arm's length principle, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter I: The Arm's Length Principle | Tag: , , , , , ,
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References to control over risk should not necessarily be taken to mean that the risk itself can be influenced or that the uncertainty can be nullified. Some risks cannot be influenced, and are a general condition of commercial activity affecting all businesses undertaking that activity. For example, risks associated with general economic conditions or commodity price cycles are typically beyond the scope of an MNE group to influence. Instead control over risk should be understood as the capability and authority to decide to take on the risk, and to decide whether and how to respond to the risk, for example through the timing of investments, the nature of development programmes, the design of marketing strategies, or the setting of production levels.






Related Guidelines

  1. TPG2022 Chapter I paragraph 1.68Risk mitigation refers to measures taken that are expected to affect risk outcomes. Such measures may include measures that reduce the uncertainty or measures that reduce the consequences in the event that the downside impact of risk occurs. Control should not be interpreted...
  2. TPG2022 Chapter I paragraph 1.66The capability to perform decision-making functions and the actual performance of such decision-making functions relating to a specific risk involve an understanding of the risk based on a relevant analysis of the information required for assessing the foreseeable downside and upside risk outcomes...
  3. TPG2022 Chapter I paragraph 1.62Some risk management functions can be undertaken only by the party performing functions and using assets in creating and pursuing commercial opportunities, while other risk management functions can be undertaken by a different party. Risk management should not be thought of as necessarily...
  4. TPG2022 Chapter I paragraph 1.70Assume that an investor hires a fund manager to invest funds on its account. Depending on the agreement between the investor and the fund manager, the latter may be given the authority to make portfolio investments on behalf of the investor on a...
  5. TPG2022 Chapter I paragraph 1.84 (Example 2)Company B manufactures products for Company A. Under step 1 capacity utilisation risk and supply chain risk have been identified as economically significant in this transaction, and under step 2 it has been established that under the contract Company A assumes these risks....
  6. TPG2022 Chapter I paragraph 1.86Carrying out steps 1-3 involves the gathering of information relating to the assumption and management of risks in the controlled transaction. The next step is to interpret the information resulting from steps 1-3 and to determine whether the contractual assumption of risk is...
  7. TPG2022 Chapter I paragraph 1.67References to control over risk should not necessarily be taken to mean that the risk itself can be influenced or that the uncertainty can be nullified. Some risks cannot be influenced, and are a general condition of commercial activity affecting all businesses undertaking...
  8. TPG2022 Chapter I paragraph 1.69The concept of control may be illustrated by the following examples. Company A appoints a specialist manufacturer, Company B to manufacture products on its behalf. The contractual arrangements indicate that Company B undertakes to perform manufacturing services, but that the product specifications and...
  1. German Guidance on Business Restructuring and Valuation issued in October 2010In 2008 German legislation on business restructurings was updated to align with the new chapter XI in the OECD Transfer Pricing Guidelines. § 1 para. 3 AStG and the “Regulation on the application of the arm’s length principle according to §1 para. 1...
  2. OECD releases text of the new MLC to Implement Amount A of Pillar One11 October 2023 the OECD/G20 Inclusive Framework has released the text of a new multilateral convention that updates the international tax framework to co-ordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes.  The Multilateral Convention to...

Related Case Law

  1. 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...
  2. Liechtenstein vs “A-Geothermal Finance AG”, December 2021, Administrative Court, Case No VGH 2021/085“A-Geothermal Finance AG” (A AG) financed geothermal projects developed by the E GmbH. The sole shareholder is af A AG. Since 2012, B has also been the sole shareholder of C AG. C AG holds as a subsidiary E GmbH with developed two...
  3. European Commission vs. Amazon and Luxembourg, May 2021, State Aid – European General Court, Case No T-816/17 and T-318/18In 2017 the European Commission concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million.  Following an in-depth investigation the Commission concluded that a tax ruling issued by Luxembourg in 2003, and prolonged in 2011, lowered the tax paid by...
  4. 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...