In some cases CCAs can provide helpful simplification of multiple transactions (bearing in mind that the tax consequences of transactions are determined in accordance with applicable local laws). In a situation where associated enterprises both perform activities for other group members and simultaneously benefit from activities performed by other group members, a CCA can provide a mechanism for replacing a web of separate intra-group arm’s length payments with a more streamlined system of netted payments, based on aggregated benefits and aggregated contributions associated with all the covered activities (see also paragraphs 3.9 to 3.17 of these Guidelines). A CCA for the sharing in the development of intangibles can eliminate the need for complex cross-licensing arrangements and associated allocation of risk, and replace them with a more streamlined sharing of contributions and risks, with ownership interests of the resulting intangible(s) shared in accordance with the terms of the CCA. However, the streamlining of flows that may result from the adoption of a CCA does not affect the appropriate valuation of the separate contributions of the parties.
TPG2017 Chapter VIII paragraph 8.7
Category: B. Concept of a CCA, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter VIII: Cost Contribution Arrangements | Tag: CCA/CSA, Eliminate need for cross-licensing arrangements, Simplification of multiple transactions, Streamlined system of netted payments
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- TPG2022 Chapter VIII paragraph 8.8As an illustration of a CCA, take the example of an MNE group which manufactures products through three enterprises which each operate a production site and have their own R&D teams engaged in various projects to improve production processes. Those three enterprises enter...
- TPG2022 Chapter VIII paragraph 8.25Under the arm’s length principle, the value of each participant’s contribution should be consistent with the value that independent enterprises in comparable circumstances would have assigned to that contribution. That is, contributions must generally be assessed based on their value at the time...
- TPG2022 Chapter VIII Annex example 521. The facts are the same as in Example 4 except that the functional analysis indicates Company A has no capacity to make decisions to take on or decline the risk-bearing opportunity represented by its participation in the CCA, or to make decisions...
- TPG2022 Chapter VIII paragraph 8.6Some benefits of the CCA activity can be determined in advance, whereas others will be uncertain. Some types of CCA activities will produce current benefits, while others have a longer time frame or may not be successful. Nevertheless, in a CCA there is...
- TPG2022 Chapter VIII paragraph 8.29Since contributions are based on expected benefits, this generally implies that where a cost reimbursement basis for valuing current contributions is permitted, the analysis should initially be based on budgeted costs. This does not necessarily mean fixing the costs, since the budget framework...
- TPG2022 Chapter VIII paragraph 8.34A CCA will be considered consistent with the arm’s length principle where the value of each participant’s proportionate share of the overall contributions to the arrangement (taking into account any balancing payments already made) is consistent with the participant’s share of the overall...
- TPG2022 Chapter VIII paragraph 8.27While all contributions should be measured at value (but see paragraph 8.28 below), it may be more administrable for taxpayers to pay current contributions at cost. This may be particularly relevant for development CCAs. If this approach is adopted, the pre-existing contributions should...
- TPG2022 Chapter VIII paragraph 8.32The following scenario illustrates the guidance on determining participants, the share of benefits, and the value of contributions....
- Additional guidance on the attribution of profits to permanent establishmentsThe OECD has released additional guidance on the attribution of profits to permanent establishments. This additional guidance sets out high-level general principles for the attribution of profits to permanent establishments arising under Article 5(5), in accordance with applicable treaty provisions, and includes examples...
- Guidance on the application of the HTVI approachThis June 2018 report contains guidance for tax administrations on the application of the approach to hard-to-value intangibles (HTVI). The HTVI approach was adopted as part of the Actions 8-10 Report in 2015 and it was subsequently incorporated in Chapter VI of the OECD Transfer...
Related Case Law
- US vs Medtronic, August 2018, U.S. Court of Appeals, Case No: 17-1866In this case the IRS was of the opinion, that Medtronic erred in allocating the profit earned from its devises and leads between its businesses located in the United States and its device manufacturer in Puerto Rico. To determine the arm’s length price...
- Spain vs EPSON IBÉRICA S.A.U., Feb 2018, High Court, Case No 314/2016EPSON IBÉRICA S.A.U. had deducted the full employee pension costs of a CEO that had worked both for the HQ in the Netherlands and the local Spanish Company. The tax authorities issued an assessment where 90% of the pension costs had been disallowed...
- European Commission vs Amazon and Luxembourg, December 2023, European Court of Justice, Case No C‑457/21 PIn 2017 the European Commission concluded that Luxembourg had granted undue tax benefits to Amazon of around €250 million. According to the Commission, a tax ruling issued by Luxembourg in 2003 – and prolonged in 2011 – lowered the tax paid by Amazon...
- Denmark vs Maersk Oil and Gas A/S (TotalEnergies EP Danmark A/S), September 2023, Supreme Court, Case No BS-15265/2022-HJR and BS-16812/2022-HJRMaersk Oil and Gas A/S (later TotalEnergies EP Danmark A/S) continued to make operating losses, although the group’s combined oil and gas operations were highly profitable. Following an audit of Maersk Oil, the tax authorities considered that three items did not comply with...