While some separately contracted transactions between associated enterprises may need to be evaluated together in order to determine whether the conditions are arm’s length, other transactions contracted between such enterprises as a package may need to be evaluated separately. An MNE may package as a single transaction and establish a single price for a number of benefits such as licences for patents, know-how, and trademarks, the provision of technical and administrative services, and the lease of production facilities. This type of arrangement is often referred to as a package deal. Such comprehensive packages would be unlikely to include sales of goods, however, although the price charged for sales of goods may cover some accompanying services. In some cases, it may not be feasible to evaluate the package as a whole so that the elements of the package must be segregated. In such cases, after determining separate transfer pricing for the separate elements, the tax administration should nonetheless consider whether in total the transfer pricing for the entire package is arm’s length.
TPG2017 Chapter III paragraph 3.11
Category: A. Performing a comparability analysis, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter III: Comparability Analysis | Tag: Aggregated transactions, Combined transactions, Comparability analysis, Comparability analysis - 9 step process, Package deal
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- TPG2022 Chapter III paragraph 3.12Even in uncontrolled transactions, package deals may combine elements that are subject to different tax treatment under domestic law or an income tax convention. For example, royalty payments may be subject to withholding tax but lease payments may be subject to net taxation....
- TPG2022 Chapter III paragraph 3.13An intentional set-off is one that associated enterprises incorporate knowingly into the terms of the controlled transactions. It occurs when one associated enterprise has provided a benefit to another associated enterprise within the group that is balanced to some degree by different benefits...
- TPG2022 Chapter III paragraph 3.10Another example where a taxpayer’s transactions may be combined is related to portfolio approaches. A portfolio approach is a business strategy consisting of a taxpayer bundling certain transactions for the purpose of earning an appropriate return across the portfolio rather than necessarily on...
- TPG2022 Chapter VI paragraph 6.101In other situations, the provision of a service and the transfer of one or more intangibles may be so closely intertwined that it is difficult to separate the transactions for purposes of a transfer pricing analysis. For example, some transfers of rights in...
- TPG2022 Chapter III paragraph 3.11While some separately contracted transactions between associated enterprises may need to be evaluated together in order to determine whether the conditions are arm’s length, other transactions contracted between such enterprises as a package may need to be evaluated separately. An MNE may package...
- TPG2022 Chapter III paragraph 3.56In some cases, not all comparable transactions examined will have a relatively equal degree of comparability. Where it is possible to determine that some uncontrolled transactions have a lesser degree of comparability than others, they should be eliminated....
- TPG2022 Chapter I paragraph 1.82In this step the functions in relation to risk of the associated enterprises that are parties to the transaction are analysed. The analysis provides information about how the associated enterprises operate in relation to the assumption and management of the specific, economically significant...
- TPG2022 Chapter III paragraph 3.17A taxpayer may seek on examination a reduction in a transfer pricing adjustment based on an unintentional over-reporting of taxable income. Tax administrations in their discretion may or may not grant this request. Tax administrations may also consider such requests in the context...
- 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...
- South African Revenue Service releases comprehensive Interpretation Note on intra-group loansThe South African Revenue Service (SARS) has published a comprehensive Interpretation Note on intra-group loans. The note provides taxpayers with guidance on the application of the arm’s length principle in the context of the pricing of intra-group loans. The pricing of intra-group loans...
Related Case Law
- Italy vs Burckert Contromatic Italiana S.p.A., November 2021, Corte di Cassazione, Sez. 5 Num. 1417 Anno 2022Burkert Contromatic Italiana s.p.a. is engaged in sale and services of fluid control systems. The italian company is a subsidiary of the German Bürkert Group. Following a tax audit, the Italian tax authorities issued a notice of assessment for FY 2007 on the...
- Tokyo District Court, judgment of November 24 2017In this case a Japanese company had entered into a series of controlled transactions with foreing group companies granting services and licences to use intangibles – know-how related to manufacturing and sales, training, and provided support by sending over technical experts. The company...
- Israel vs Medtronic Ventor Technologies Ltd, June 2023, District Court, Case No 31671-09-18In 2008 and 2009 the Medtronic group acquired the entire share capital of the Israeli company, Ventor Technologies Ltd, for a sum of $325 million. Subsequent to the acquisition various inter-company agreements were entered into between Ventor Technologies Ltd and Medtronics, but no...
- Italy vs Prinoth S.p.A., December 2022, Supreme Administrative Court, Case No 36275/2022Prinoth S.p.A. is an Italian manufacturer of snow groomers and tracked vehicles. For a number of years the parent company had been suffering losses while the distribution subsidiaries in the group had substantial profits. Following an audit the tax authorities concluded that the...