TPG2017 Chapter VII paragraph 7.26

Category: B. Main issues, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter VII: Special Considerations for Intra-Group Services | Tag: , , ,
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When an indirect-charge method is used, the relationship between the charge and the services provided may be obscured and it may become difficult to evaluate the benefit provided. Indeed, it may mean that the enterprise being charged for a service itself has not related the charge to the service. Consequently, there is an increased risk of double taxation because it may be more difficult to determine a deduction for costs incurred on behalf of group members if compensation cannot be readily identified, or for the recipient of the service to establish a deduction for any amount paid if it is unable to demonstrate that services have been provided.






Related Guidelines

  1. TPG2022 Chapter VII paragraph 7.26When an indirect-charge method is used, the relationship between the charge and the services provided may be obscured and it may become difficult to evaluate the benefit provided. Indeed, it may mean that the enterprise being charged for a service itself has not...
  2. TPG2022 Chapter VII paragraph 7.24In some cases, an indirect-charge method may be necessary due to the nature of the service being provided. One example is where the proportion of the value of the services rendered to the various relevant entities cannot be quantified except on an approximate...
  3. TPG2022 Chapter VII paragraph 7.23A direct-charge method for charging for intra-group services can be difficult to apply in practice. Consequently, some MNE groups have developed other methods for charging for services provided by parent companies or group service centres. In such cases, MNE groups may find they...
  4. TPG2022 Chapter VII paragraph 7.17These services may be available on call and they may vary in amount and importance from year to year. It is unlikely that an independent enterprise would incur stand-by charges where the potential need for the service was remote, where the advantage of...
  5. TPG2022 Chapter VII paragraph 7.16Another issue arises with respect to services provided “on call”. The question is whether the availability of such services is itself a separate service for which an arm’s length charge (in addition to any charge for services actually rendered) should be determined. A...
  6. TPG2022 Chapter VII paragraph 7.15In considering whether a charge for the provision of services would be made between independent enterprises, it would also be relevant to consider the form that an arm’s length consideration would take had the transaction occurred between independent enterprises dealing at arm’s length....


Related Case Law

  1. Peru vs “Copper Corporation S.A.”, July 2011, Tax Tribunal, Case No 12609-8-2011“Copper Corporation S.A.” had deducted intra-group service payments in it’s taxable income. The Peruvian tax authorities determined that the documentation provided by the company did not sufficiently support the actual provision of these services. Hence, tax deductions for the expenses was denied. The...
  2. Peru vs “Airline S.A.”, September 2024, Tax Court, Case No 08970-8-2024The case concerns a number of expenses claimed by “Airline S.A.” as deductible payments for intra-group services, in particular aircraft leasing and related costs, which the company argued should be deductible under the transfer pricing rules. “Airline S.A.” claimed that these costs were...
  3. Peru vs “Airline S.A.”, March 2025, Tax Court, Case No 02374-4-2025“Airline S.A.” claimed various expenses as deductible payments for intra-group services, arguing that these costs were essential and necessary within the corporate group. However, the tax authorities determined that “Airline S.A.” had not provided sufficient documentation to demonstrate that the services were actually...
  4. Peru vs “Metal S.A.”, February 2023, Tax Court, Case No 01428-1-2023Following an audit, the tax authorities found that “Metal S.A.” had not been remunerated at arm’s length for its distribution activities. In addition, the intra-group services received by “Metal S.A.” were considered to be low value-added services for which the margin could not...
  5. Italy vs KAI S.r.l. (Shell Italia Aviazione), March 2026, Supreme Court, Case No 5753/2026KAI S.r.l. (formerly Shell Italia Aviazione s.r.l.) is an Italian company operating in the oil sector, specifically in the marketing of aviation fuel (jet fuel) for the Shell Italia group. It was wholly owned by Shell Italia Holding S.p.A. The dispute concerned the...