The initial step in applying the simplified approach to low value-adding intra-group services is for the MNE group to calculate, on an annual basis, a pool of all costs incurred by all members of the group in performing each category of low value-adding intra-group services. The costs to be pooled are the direct and indirect costs of rendering the service as well as, where relevant, the appropriate part of operating expenses (e.g. supervisory, general and administrative). The costs should be pooled according to category of services, and should identify the accounting cost centres used in creating the pool. Pass-through costs in the cost pool should be identified for the purposes of applying paragraph 7.61. The cost pool should exclude costs that are attributable to an in-house activity that benefits solely the company performing the activity (including shareholder activities performed by the shareholding company).
TPG2017 Chapter VII paragraph 7.56
Category: D. Low value-adding intra-group services, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter VII: Special Considerations for Intra-Group Services | Tag: Application of the simplified approach, Intra-group services, Low value-adding services (LVAS), Pass through costs, Pool of cost, Service fee, Services, Shareholder activity
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Next » Related Guidelines
- TPG2022 Chapter VII paragraph 7.57As a second step, the MNE group should identify and remove from the pool those costs that are attributable to services performed by one group member solely on behalf of one other group member. In creating a pool of payroll costs, for example,...
- TPG2022 Chapter VII paragraph 7.62Subject to the provisions of paragraph 7.55, the charge for services to any member of the electing MNE group shall be the sum of (i) the costs incurred by another group member in providing services specifically to the member under the second step...
- TPG2022 Chapter VII paragraph 7.58At this stage in the calculation, the MNE group has identified a pool of costs associated with categories of low value-adding services which are provided to multiple members of the MNE group....
- TPG2022 Chapter VII paragraph 7.56The initial step in applying the simplified approach to low value-adding intra-group services is for the MNE group to calculate, on an annual basis, a pool of all costs incurred by all members of the group in performing each category of low value-adding...
- TPG2022 Chapter VII paragraph 7.44This section discusses the definitional issues related to low value-adding intra-group services for applying the elective, simplified approach discussed under Section D.2. It starts by indicating the characteristics that services must have in order to qualify as low-value-adding intra-group services for applying the...
- TPG2022 Chapter VII paragraph 7.60The examples of allocation keys provided in the previous paragraph are not intended to be an exhaustive list. Depending on the facts and circumstances more sophisticated allocation keys might be used. However, a balance should be struck between theoretical sophistication and practical administration,...
- TPG2022 Chapter VII paragraph 7.52This subsection sets out the elements of a simplified charge mechanism for low value-adding intra-group services. This simplified method is premised on the proposition that all low value-adding service costs incurred in supporting the business of MNE group members should be allocated to...
- TPG2022 Chapter VII paragraph 7.45Low value-adding intra-group services for the purposes of the simplified approach are services performed by one member or more than one member of an MNE group on behalf of one or more other group members which are of a supportive nature, are not...
- Spain releases report on application of their General Anti-Abuse Rule.The Spanish tax authorities have published a report on the applicability of their domestic General Anti-Abuse Rule (GAAR). In the report, a conduit arrangement aimed at benefiting from an exemption at source on the payment of interest to EU residents is described. ...
- Marketing and Procurement Hubs – Tax AvoidanceThe Australian Taxation Office has issued new guidance for multinational groups using offshore marketing- and procurment hubs for tax avoidance purposes. The guidance adresses tax schemes where MNEs uses offshore hubs to shift profits and thereby avoid Australian taxes. Offshore hub arrangements are...
Related Case Law
- Poland vs “H. LVAS Sp. z oo”, September 2022, Administrative Court, Case No I SA / Go 234/22“H. LVAS Sp. z oo” had deducted expenses related to intra-group services in its taxable income. The services had been provided by its German parent company, H. GmbH. The services (supervision and management support, coordination of projects, support in accounting, controlling, IT and...
- Italy vs Rohm and Haas Italia s.r.l, February 2020, Supreme Court, Case No 3599 13/02/2020At issue was deduction of VAT on purported costs incurred for intra-group services, which had been deemed non-deductible for tax as well as VAT purposes by the Italien Tax Authorities, as the taxpayer had not been able to prove the effectiveness and relevance...
- Romania vs A. Romania S.R.L., April 2021, Supreme Administrative Court, Case No 2644/2021A. Romania S.R.L. had purchased services from A. Nederland BV and A. CZ Holding sro, and the costs of the services had been deducted for tax purposes. At issue was whether these services had actually been provided to the benefit of A. Romania...
- India vs. Gemplus India Pvt. Ltd. March 2009, ITA case no. 352Gemplus India Pvt. Ltd. is a part of the Gemplus group, engaged in providing smart card solutions for the telecommunications industry, financial services industry and other e-businesses. The company entered into a intra group management services agreement for receipt of services in marketing...