TPG2017 Chapter IX paragraph 9.78

Category: F. Indeminification of the restructured entity for the termination of existing arrangements, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter IX: Transfer Pricing Aspects of Business Restructurings | Tag: , , ,
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There should be no presumption that all contract terminations or substantial renegotiations should give a right to indemnification at arm’s length, as this will depend on the facts and circumstances of each case. The analysis of whether an indemnification would be warranted at arm’s length should be made on the basis of the accurate delineation of the arrangements before and after the restructuring (based on the guidance in Section D. 1 of Chapter I and Section B. 1 of this Part) and the options realistically available to the parties.






Related Guidelines

  1. TPG2022 Chapter IX paragraph 9.79Once the restructuring arrangements have been accurately delineated and the options realistically available to the parties have been assessed, the following aspects should be considered: Whether commercial law supports rights to indemnification for the restructured entity under the facts of the case as...
  2. TPG2022 Chapter IX paragraph 9.95There can be situations where A would be willing to bear the indemnification costs at arm’s length, for instance because it expects that the termination of its agreement with B will make it possible for it to derive costs savings through its new...
  3. TPG2022 Chapter IX paragraph 9.85Another aspect that may be necessary to examine in assessing whether the conditions of an arrangement in relation to an indemnification clause are arm’s length, is the remuneration of the transactions that are the object of the arrangement and the financial conditions of...
  4. TPG2022 Chapter IX paragraph 9.80In the assessment of whether the conditions of the termination or non-renewal of an existing arrangement are arm’s length, the possible recourse that may be offered by the applicable commercial law might provide some helpful insights. The applicable commercial legislation or case law...
  5. TPG2022 Chapter IX paragraph 9.121The analysis of the business before and after the restructuring may reveal that while some functions, assets and risks were transferred, other functions may still be carried out by the “stripped” entity. Typically, as part of the restructuring the entity may have been...
  6. TPG2022 Chapter IX paragraph 9.82As noted at paragraph 1.46, in transactions between independent enterprises, the divergence of interests between the parties ensures that: (i) contractual terms are concluded that reflect the interest of both parties, (ii) the parties will ordinarily seek to hold each other to the...
  7. TPG2022 Chapter IX paragraph 9.15Restructurings can take a variety of different forms and may involve two or more members of an MNE group. For example, a simple pre-restructuring arrangement could involve a full-fledged manufacturer producing goods and selling them to an associated full-fledged distributor for on-sale into...
  8. TPG2022 Chapter IX paragraph 9.76Terminations or renegotiations of arrangements generally involve changes in the risk and functional profiles of the parties, with consequences for the allocation of profit potential between them. In addition, the termination or renegotiation of contractual relationships in the context of a business restructuring...
  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...
  2. Report on the Use of Comparables in the EU (2017)In 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

  1. Netherlands vs Restructuring BV, September 2017, Rechtbank ZWB, No BRE 15/5683A Dutch company was engaged in smelting of zinc. The business was then restructured, for which the company received a small compensation payment. Dutch tax authorities disagreed with both the amount of compensation payment and the arm’s-length remuneration of the post restructuring manufacturing activities. Until 2003 the Dutch...
  2. Portugal vs “B Restructuring LDA”, February 2021, CAAD, Case No 255/2020-TB Restructuring LDA was a distributor within the E group. During FY 2014-2016 a number of manufacturing entities within the group terminated distribution agreements with B Restructuring LDA and subsequently entered into new Distribution Agreements, under similar terms, with another company of the...
  3. Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3S GmbH was an Austrian trading company of a group. In the course of business restructuring, the real estate division of the Austrian-based company was initially separated from the “trading operations/brands” division on the demerger date of 31 March 2007. The trademark rights...
  4. Israel vs Broadcom, December 2019, Lod District Court, Case No 26342-01-16Broadcom Semiconductors Ltd is an Israeli company established in 2001 under the name Dune Semiconductors Ltd. The Company is engaged in development, production, and sale of components to routers, switches etc. The shares in Dune Semiconductors were acquired by the Broadcom Corporation (a...