The transactional profit split method can also provide a solution for highly integrated operations in cases for which a one-sided method would not be appropriate. See section C.2.2.2, below.
TPG2018 Chapter II paragraph 2.120
Category: C. Transactional profit split method, OECD Transfer Pricing Guidelines (2017), Part III: Transactional profit method, TPG2017 Chapter II: Transfer Pricing Methods | Tag: Highly integrated, Methods - strength and weaknesses, Profit split method, Transfer pricing methods
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- TPG2022 Chapter II paragraph 2.121Another strength of the transactional profit split method is that it can offer flexibility by taking into account specific, possibly unique, facts and circumstances of the associated enterprises that may not be present in independent enterprises. Moreover, where there is a high degree...
- TPG2022 Chapter II paragraph 2.120The transactional profit split method can also provide a solution for highly integrated operations in cases for which a one-sided method would not be appropriate. See Section C.2.2.2, below....
- TPG2022 Chapter II paragraph 2.137Where a party contributes to the control of economically significant risk, but that risk is assumed by the other party to the transaction, this may, in some cases, demonstrate that it is appropriate for the first party to share in the potential upside...
- TPG2022 Chapter II paragraph 2.5However, it is not appropriate to apply a transactional profit method merely because data concerning uncontrolled transactions are difficult to obtain or incomplete in one or more respects. The same criteria listed in paragraph 2.2 that were used to reach the initial conclusion...
- TPG2022 Chapter II Annex II example 734. Company L, a resident of Country L, and Company M, a resident of Country M, are part of an MNE group, LM Corporation. Companies L and M offer international trade facilitation, freight forwarding and customs broking services to unrelated customers. Together, Companies...
- TPG2022 Chapter II paragraph 2.126The existence of unique and valuable contributions by each party to the controlled transaction is perhaps the clearest indicator that a transactional profit split may be appropriate. The context of the transaction, including the industry in which it occurs and the factors affecting...
- TPG2022 Chapter II Annex II example 838. Company A is the parent company of M Group, an MNE group engaged in the manufacturing and distribution of electronic devices. Company A has the exclusive right to sell the devices in all territories. 39. Company A decides to subcontract the manufacturing...
- TPG2022 Chapter VI paragraph 6.150It is also sometimes suggested that a profit split analysis can be applied to transfers of partially developed intangibles. In such an analysis, the relative value of contributions to the development of intangibles before and after a transfer of the intangibles in question...
- EU Report on Improving the Functioning of the Arbitration Convention (2015)In April 2015 the Forum agreed on a Report on Improving the Functioning of the Arbitration Convention including a revised Code of Conduct for the effective implementation of the Arbitration Convention. The report and the revised Code of Conduct are the result 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...
Related Case Law
- Luxembourg vs L SARL, January 2020, Luxembourg Administrative Tribunal, Case No 41800In 2013, L SARL requested in writing an “advance tax agreement†regarding the tax treatment of Mandatory Redeemable Preference Shares (MRPS) which generated a preferred dividend for its sole shareholder. L SARL wanted confirmation that the MRPS would be characterised as debt and...
- Spain vs Universal Pictures International Spain SL, December 2022, Audiencia Nacional, Case No SAN 5855/2022 – ECLI:EN:AN:2022:5855Universal Pictures International Spain SL is a distributor of films on the Spanish Market. It distributes films both from related parties (Universal Pictures) and from unrelated parties. Following an audit, the Spanish tax authorities issued an assessment where the remuneration received for distribution...
- Japan vs “Banana Corp”, April 2009, Tokyo District CourtThe “Banana Group” is based in Ecuador and is engaged in the business of exporting Ecuadorian bananas. The Japanese distributor was part of the Banana Group. An Ecuadorian group company purchases bananas produced on plantations in Ecuador, exports and sells them to another...
- Poland vs “Cans Corp”, September 2019, Provincial Administrative Court i Szczecin, Case no SA/Sz155/19At issue in this case was the remuneration of a Polish manufacturing subsidiary in an international group dealing in the production and sale of metal packaging for food products, including beverage cans, food cans, household cans and metal closures. The tax authorities had...