TPG2017 Chapter IX paragraph 9.12

Category: A. Introduction, OECD Transfer Pricing Guidelines (2017), Part I Arm's length compensation for the restructuring itself, TPG2017 Chapter IX: Transfer Pricing Aspects of Business Restructurings | Tag: , , ,
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The arm’s length principle requires an evaluation of the conditions made or imposed between associated enterprises, at the level of each of them. The fact that a business restructuring may be motivated by sound commercial reasons at the level of the MNE group, e.g. in order to try to derive synergies at a group level, does not answer the question whether it is arm’s length from the perspectives of each of the restructured entities.






Related Guidelines

  1. TPG2022 Chapter IX paragraph 9.13The application of the arm’s length principle to a business restructuring must start, as for any controlled transaction, with the identification of the commercial or financial relations between the associated enterprises involved in the business restructuring and the conditions and economically relevant circumstances...
  2. TPG2022 Chapter IX paragraph 9.60Also in the case where a local operation disposes of the legal ownership of its intangibles to a foreign associated enterprise and continues to use the intangibles further to the disposal, but does so in a different legal capacity (e.g. as a licensee),...
  3. TPG2022 Chapter IX paragraph 9.27The arm’s length principle is based on the notion that independent enterprises, when evaluating the terms of a potential transaction, will compare the transaction to the other options realistically available to them, and they will only enter into the transaction if they see...
  4. TPG2022 Chapter IX paragraph 9.17Where the conditions of a business restructuring have been formalised by the MNE group in writing (e.g. written contractual agreements, correspondence and/or other communications), those agreements provide the starting point for delineating the transactions comprising the business restructuring between the MNEs involved. The...
  5. TPG2022 Chapter IX paragraph 9.39An independent enterprise does not necessarily receive compensation when a change in its business arrangements results in a reduction in its profit potential or expected future profits. The arm’s length principle does not require compensation for a mere decrease in the expectation of...
  6. TPG2022 Chapter IX paragraph 9.38Under Article 9 of the OECD Model Tax Convention, the fact that a business restructuring arrangement is motivated by a purpose of obtaining tax benefits does not of itself warrant a conclusion that it is a non-arm’s length arrangement. The presence of a...
  7. TPG2022 Chapter IX paragraph 9.94Assume a manufacturing contract between two associated enterprises, entity A and entity B, is terminated by A (B being the manufacturer). Assume A decides to use another associated manufacturer, entity C, to continue the manufacturing that was previously performed by B. As noted...
  8. TPG2022 Chapter IX paragraph 9.25For example, a business restructuring may involve the setting up by an MNE group of a central procurement operation that replaces the procurement activities of several associated enterprises. Similar to the guidance at paragraph 1.180 the MNE group has taken affirmative steps to...
  1. United Arab Emirates issues comprehensive Transfer Pricing Guide23 October 2023, the United Arab Emirates issued a comprehensive practical Transfer Pricing Guide. The guide is designed to provide general guidance on the Transfer Pricing regime in the UAE with a view to making the provisions of the Transfer Pricing regulations as...

Related Case Law

  1. France vs SARL Elie Saab France, June 2021, Conseil d’État, Case No 433985The French tax authorities had issued an assessment to SARL Elie Saab France in which they asserted that the French subsidiary had not been sufficiently remunerated for additional expenses and contributions to the value of the SARL Elie Saab trademark. The Supreme Administrative...
  2. Portugal vs A S.A., November 2023, Supreme Administrative Court , Case 0134/10.3BEPRTA S.A. had transferred a dividend receivable to an indirect shareholder for the purpose of acquiring other companies. The tax authorities considered the transfer to be a loan, for which A S.A should have received arm’s length interest and issued an assessment on...
  3. Switzerland vs “Merger-Loss AG”, January 2012, Bundesgericht , Case No 2C-351/2011The deduction of losses resulting from a reorganisation involving a merger with a company in liquidation is not allowed if the sole reason for the merger was the deduction of such losses. In the present case, the Swiss Federal Supreme Court allowed the...
  4. Spain vs COLGATE PALMOLIVE HOLDING SCPA, February 2018, High Court, Case No 568/2014According to Colgate Palmolive, following a restructuring, the local group company in Spain was changed from being a “fully fledged distributor” responsible for all areas of the distribution process to being a “limited risk distributor” (it only performs certain functions). A newly established...