The tax authorities issued an assessment of additional taxable income for “D. sp. z o.o.” resulting in additional corporate income tax liability for 2014 in the amount of PLN 2,494,583. The basis for the assessment was the authority’s findings that the company understated its taxable income for 2014 by a total of PLN 49,732,274.05, as a result of the inclusion of deductible expenses interest in the amount of PLN 39,244,375.62, under an intra-group share purchase loan agreements paid to W. S.a.r.l. (Luxembourg) expenses for intra-group services in the amount of USD 2,957,837 (amount of PLN 10,487,898.43) paid to W. Inc. (USA) “D. sp. z o.o.” filed a complaint with the Administrative Court (WSA) requesting annulment of the assessment. In a judgment of 15 September 2020 the Administrative Court dismissed the complaint. In the opinion of the WSA, it was legitimate to adjust the terms of the loan agreement for tax purposes in such a way as to lead to transactions that would correspond to market conditions, thus disregarding the arrangements, cf. the OECD TPG 1995 para. 1.65 and 1.66. Furthermore, according to the court the company did not present credible evidence as to the ‘shareholder’s expenses’ and the fact that significant costs were incurred for analogous services purchased from other entities indicates duplication of expenses. Consequently, it is impossible to verify whether the disputed management services were performed at all. Not satisfied with the decision “D. sp. z o.o.” filed an appeal with the Supreme Administrative Court. Judgement of the Supreme Administrative Court The Supreme Administrative Court set aside the decision of the Administrative Court and the tax assessment and refered the case back to the tax authorities for a reexamination. According to the court, there was no legal basis in Poland in 2014 for the non-recognition or recharacterisation of controlled transactions. The Polish arm’s length principle only allowed the tax authorities to price controlled transactions. The provisions (Articles 119a § 1 and § 2 Op) allowing for the substitution of the effects of an artificial legal act, if the main or one of the main purposes of which was to achieve a tax advantage have been in force only since 15 July 2016. And the possibility provided for the tax authority to determine the taxpayer’s income or loss without taking into account the economically irrational transaction undertaken by related parties (Article 11c(4) of the CIT) came into existence even later, as of 1 January 2019. Excerpts “3.2 The tax authorities relied on section 11(1) of the Income Tax Act (as in force in 2014), under which the tax authorities could determine the taxpayer’s income and the tax due without taking into account the conditions established or imposed as a result of the relationship between the contracting entities. However, this income had to be determined by way of estimation, using the methods described in paragraphs 2 and 3 of Article 11 of the Income Tax Act. This is because these are not provisions creating abuse of rights or anti-avoidance clauses. They only allow a different determination of transaction (transfer) prices. The notion of ‘transaction price’ was defined in Article 3(10) of the Op, which, in the wording relevant to the tax period examined in the case, stated that it is the price of the subject of a transaction concluded between related parties. Thus, the essence of the legal institution stipulated in Article 11 of the CIT is not the omission of the legal effects of legal transactions made by the taxpayer or a different legal definition of those transactions, but the determination of their economic effect expressed in the transaction price, disregarding the impact of institutional links between the counterparties (…) It is therefore a legal institution with strictly defined characteristics and can only have the effects provided for in the provisions defining it (as the law stood in 2014). Meanwhile, the application of any provisions allowing the tax authorities to interfere in the legal relations freely formed by taxpayers must be strictly limited and restricted only to the premises defined in those provisions, as they are of a far-reaching interferential nature. Any broadening interpretation of them, as a result of which legal sanction could be obtained by the interference of public administration bodies going further than the grammatical meaning of the words and phrases used in the provisions establishing such powers, is inadmissible.” “3.3 The structure of the DIAS ruling corresponds to the hypothesis of the standard of Article 11c(4) of the 2019 CIT, which was not in force in 2014. Therefore, there was no adequate legal basis for its application with respect to 2014. This legal basis was not provided by Article 11 of the Corporate Income Tax Act in force at that time. This provision regulated the issue of so-called transfer prices, i.e. transaction prices applied between entities related by capital or personality. In this provision, the legislator emphasised the principle of applying the market price (also known as the arm’s length principle), requiring that prices in transactions between related parties be determined in such a way as if the companies were functioning as independent entities, operating on market terms and carrying out comparable transactions in similar market and factual circumstances. When the transaction under review deviates from those between independent parties, in comparable circumstances, then in the event of the occurrence of also other circumstances indicated in Article 11 of the updopdop, the tax authority may require an adjustment of profit. The legislative solutions adopted in Article 11 of the CIT Act (from 1 January 2019 in Article 11a et seq. of the CIT Act) refer to the recommendations contained in the OECD Guidelines on transfer pricing for multinational enterprises and tax administrations. The Guidelines were adopted by the OECD Committee on Fiscal Affairs on 27 June 1995 and approved for publication by the OECD Council on 13 July 1995 (they have been amended several times, including in 2010 and 2017). While the OECD Transfer Pricing Guidelines do not constitute a source of law in the territory ...

SGGE W T is a Spanish branch of SGG that carries out distribution and marketing activities related to the information technology network products and services. SGG is part of the KF group which “is an international group that provides solutions and services in the Information Technology (IT) sector, starting its activity in . .. as a distributor of access and communications networks”. The group “is the result of several corporate operations, mainly company acquisitions and mergers carried out to increase its share in world markets” and “is mainly organized in three divisions (SGG, QR and …) according to the IT areas (Technology, Integration and Consulting) in which they operate”. Following an audit of FY 2015 and 2016 the tax authorities issued assessments of additional income to the Spanish branch. One of the issues identified was SGGE’s remuneration for its sales and marketing activities. According to the tax authorities, the income of the Spanish branch was below the lower quartile of the range established under the TNMM. On this basis, the income was adjusted to the median. The tax authorities had also disallowed deductions for the cost of intra-group services. An appeal was filed by SGGE W T. Judgement of the Court The Court partially upheld and partially dismissed the appeal. Excerpt from the judgement concerning IQR and Median “Thus, this Court only appreciates, from the motivation of the Inspection, that there would be -according to the assessment- some defects of comparability that persist, unavoidable as a consequence of the selection process of comparable elements through databases, and of the limits of the available information, but it is not detailed what errors or circumstances concur in the selection of the comparable elements or what limits the available information has. It should be noted that when the Inspectorate, as transcribed above, refers to the fact that there are still defects in comparability, given that the resulting range does not include relatively equal results, it adds, paraphrasing the Guidelines, that these are defects that cannot be identified and quantified. Rule 3.57 of the OECD Guidelines – also transcribed above – refers to defects in comparability that cannot be identified or quantified and are therefore not susceptible to adjustment. Notwithstanding the foregoing, regardless of the possibility of identifying or quantifying such defects, the choice of the median, provided for in rule 3.62 of the OECD Guidelines, requires – as clearly stated by the Audiencia Nacional and this TEAC – that the Inspectorate must disclose the defects of comparability, and reasons must be given for the defect or defects of comparability that are found to persist and that cause the range not to include very reliable and relatively equal results. We have seen that when section 3.57 of the Guidelines refers to defects that cannot be identified or quantified, it immediately links it to the fact that this makes a specific adjustment impossible. This is perfectly logical, because if they could be concretely identified and quantified, the adjustment would be feasible. It is one thing if they cannot be identified in the sense of being precisely specified and quantified so that they can be adjusted or corrected, and another if elements or areas are detected which, due to their special circumstances or lack of documentation, allow us to conjecture that there is still a deficiency in comparability that cannot be corrected, for which reason there is no other recourse but to resort to the median. Therefore, the mere appeal to this generic reference cannot be considered sufficient; otherwise, the requirement to state reasons that the Audiencia Nacional and this TEAC maintain would be sterile. At the very least, it should be explained what errors or failures in the process of selecting comparables, or what limitations in the information available, determine, as a consequence, that there are such unidentifiable or unquantifiable defects in comparability. In the present case, the reasoning contained in the assessment notification -page 148- only talks about defects that are a consequence of the selection process and the limitations of the available information, but does not detail any aspects that could allow this reviewing body to assess which are the specific circumstances of the selection process that allow to consider that it will lead to unidentifiable or quantifiable defects of comparability; nor the specific circumstances of the available information from which it can be extracted that the limitations of the same (not identified by the Inspection in the aforementioned motivation) will lead to unidentifiable or quantifiable defects of comparability. Likewise, it is striking that the Inspection refers to defects derived from the process of selection of comparables when, in the Fourth Ground of Law of the agreement, in response to allegations, a table is drawn up in which five entities selected by the Inspection, which are the object of allegations by the taxpayer, are eliminated from the comparables, indicating that “the interquartile range derived from the remaining entities would not offer values very different from those resulting from the entities taken by the Inspection”. Also noteworthy is the statement made on page 209 of the contested resolution in which, in response to the allegation that the services of one of the comparable entities (…, S.A.) represent around 40% and 49% of the total income, in 2015 and 2016, respectively, it is stated that this “in no way implies that in all the other entities selected as comparable by the inspection this same circumstance is present”, indicating that in case it were so (that the percentage of 40% or 49% of the income from the provision of services were present in the other entities) “in no way would invalidate the sample of entities selected by the inspection since they are entities that carry out activities similar to those of the obligor and that constitute the best possible comparable”. It is striking that the Inspectorate states that the selected entities “constitute the best possible comparable” and that, nevertheless, the adjustment is based on the choice of the median “as the point in the range that ...

D. Sp. z oo had deducted interest expenses on intra-group loans and expenses related to intra-group services in its taxable income for FY 2015. The loans and services had been provided by a related party in Delaware, USA. Following a inspection, the tax authority issued an assessment where deductions for these costs had been denied resulting in additional taxable income. In regards to the interest expenses the authority held that the circumstances of the transactions indicated that they were made primarily in order to achieve a tax advantage contrary to the object and purpose of the Tax Act (reduction of the tax base by creating a tax cost in the form of interest on loans to finance the purchase of own assets), and the modus operandi of the participating entities was artificial, since under normal trading conditions economic operators, guided primarily by economic objectives and business risk assessment, do not provide financing (by loans or bonds) for the acquisition of their own assets, especially shares in subsidiaries, if these assets generate revenue for them. In regards to support services (management fee) these had been classified by the group as low value-added services. It appeared from the documentation, that services concerned a very large number of areas and events that occurred in the operations of the foreign company and the entire group of related entities. The US company aggregated these expenses and then, according to a key, allocated the costs to – among others – Sp. z o.o. The Polish subsidiary had no influence on the amount of costs allocated or on the verification of such costs. Hence, according to the authorities, requirements for tax deduction of these costs were not met. An appeal was filed by D. Sp. z oo with the Administrative Court requesting that the tax assessment be annulled in its entirety and that the case be remitted for re-examination or that the proceedings in the case be discontinued. Judgement of the Administrative Court The Court dismissed the complaint of D. Sp. z oo and upheld the assessment issued by the tax authorities. Excerpt in regards of interest on intra-group loans “The authorities substantively, with reference to specific evidence and figures, demonstrated that an independent entity would not have agreed to such interest charges without obtaining significant economic benefits, and that the terms of the economic transactions adopted by the related parties in the case at hand differ from the economic relations that would have been entered into by independent and market-driven entities, rather than the links existing between them. One must agree with the authority that a loan granted to finance its own assets is free from the effects of the borrower’s insolvency, the lender does not bear the risk of loss of capital in relation to the subject matter of the loan agreement, since, in principle, it becomes the beneficiary of the agreement. This in turn demonstrates the non-market nature of the transactions concluded. The lack of market character of the transactions demonstrated by the authorities cannot be justified by the argumentation about leveraged buyout transactions presented in the complaint (page 9). This is because the tax authorities are obliged to apply the provisions of tax law, which in Article 15(1) of the A.l.p. outline the limits within which a given expense constitutes a tax deductible cost. In turn, Article 11 of the A.l.t.d.o.p. specifies premises, the occurrence of which does not allow a given expense to be included in tax deductible costs. This is the situation in the present case. Therefore, questioning the inclusion of the above-mentioned interest as a tax deductible cost, the authorities referred to Article 11(1), (2), (4) and (9) of the A.p.d.o.p. and § 12(1) and (2) of the Ordinance of the Minister of Finance of 10 September 2009 and the findings of the OECD contained in para. 1.65 and 1.66 of the “Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations” (the Guidelines were adopted by the OECD Committee on Fiscal Affairs on […] and approved for publication by the OECD Council on […]). According to these guidelines: 1.65. – However, there are two specific situations where, exceptionally, it may be appropriate and justified for a tax administration to consider ignoring the construction adopted by the taxpayer when entering into a transaction between associated enterprises. The first arises when the economic substance of the transaction differs from its form. In this case, the tax administration may reject the parties’ qualification of the transaction and redefine it in a manner consistent with its substance. An example could be an investment in a related company in the form of interest-bearing debt, and according to the principle of the free market and taking into account the economic situation of the borrowing company, such a form of investment would not be expected. In this case, it might be appropriate to define the investment according to its economic substance – the loan could be treated as a subscription to capital. Another situation arises where the substance and form of the transaction are consistent with each other, but the arrangements made in connection with the transaction, taken as a whole, differ from those that would have been adopted by commercially rational independent companies, and the actual structure of the transaction interferes with the tax administration’s ability to determine the appropriate transfer price; 1.66. – In both of the situations described above, the nature of the transaction may derive from the relationship between the parties rather than be determined by normal commercial terms, or it may be so structured by the taxpayer to avoid or minimise tax. In such cases, the terms of the transaction would be unacceptable if the parties were transacting on a free market basis. Article 9 of the OECD Model Convention, allows the terms and conditions to be adjusted in such a way that the transaction is structured in accordance with the economic and commercial realities of the parties operating under the free market principle. Bearing in mind the aforementioned guidelines, in the ...

The following are examples of costs associated with shareholder activities, under the standard set forth in paragraph 7.6: a) Costs relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company, stock exchange listing of the parent company and costs of the supervisory board; b) Costs relating to reporting requirements (including financial reporting and audit) of the parent company including the consolidation of reports, costs relating to the parent company’s audit of the subsidiary’s accounts carried out exclusively in the interest of the parent company, and costs relating to the preparation of consolidated financial statements of the MNE (however, in practice costs incurred locally by the subsidiaries may not need to be passed on to the parent or holding company where it is disproportionately onerous to identify and isolate those costs); c) Costs of raising funds for the acquisition of its participations and costs relating to the parent company’s investor relations such as communication strategy with shareholders of the parent company, financial analysts, funds and other stakeholders in the parent company; d) Costs relating to compliance of the parent company with the relevant tax laws; e) Costs which are ancillary to the corporate governance of the MNE as a whole. In contrast, if for example a parent company raises funds on behalf of another group member which uses them to acquire a new company, the parent company would generally be regarded as providing a service to the group member. The 1984 Report also mentioned “costs of managerial and control (monitoring) activities related to the management and protection of the investment as such in participations”. Whether these activities fall within the definition of shareholder activities as defined in these Guidelines would be determined according to whether under comparable facts and circumstances the activity is one that an independent enterprise would have been willing to pay for or to perform for itself. Where activities such as those described above are performed by a group company other than solely because of an ownership interest in other group members, then that group company is not performing shareholder activities but should be regarded as providing a service to the parent or holding company to which the guidance in this chapter applies ...

LG Electronic India has incurred advertisement and AMP expenses aggregating to Rs.6,89,60,79,670/- for the purpose of its business. The tax authorities undertook benchmarking analysis of AMP expenses incurred by LG Electronic India applying bright line test by comparing ratio of AMP expenses to sale of LG Electronic India with that of the comparable companies and holding that any expenditure in excess of the bright line was for promotion of the brand/trade name owned by the AE, which needed to be suitably compensated by the AE. By applying bright line test, the tax authorities compared AMP expenditure incurred by LG Electronic India as percentage of total turnover at 8.01% with average AMP expenditure of 4.93% of comparable companies. Since AMP expenses incurred by LG Electronic India  as percentage of sales was more than similar percentage for comparable companies, LG Electronic India had incurred such AMP expenditure on brand promotion and development of marketing intangibles for the AE. The tax authorities also made an adjustment to the royalty rate paid to the parent for use of IP. Finally tax deductions for costs of intra-group services had been disallowed. The decision of the INCOME TAX APPELLATE TRIBUNAL In regards to the AMP expences the court states: “we are of the view that the Revenue has failed to demonstrate by bringing tangible material evidence on record to show that an international transaction does exist so far as AMP expenditure is concerned. Therefore, we hold that the incurring of expenditure in question does not give rise to any international transaction as per judicial discussion hereinabove and without prejudice to these findings, since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment is warranted.” In regards to the royalty rate the court states: “we direct the TPO to determine the Arm’s Length royalty @ 4.05%” In regards to intra group services the court states: “we are of the opinion that once the assessee has satisfied the TNMM method i.e. the operating margins of the assessee are higher than those of the comparable companies [as mentioned elsewhere], no separate adjustment is warranted.” ...

“B-Production” is a subsidiary in a US multinational group and engaged in production and sales. “B-Production” pays services fees and royalties to its US parent. Following an audit, the tax authorities issued an assessment where deductions for these costs had been reduced which in turn resulted in additional taxabel income. An appeal was filed by “B-Production” with the Administrative court which in a judgement of June 2015 was rejected. An appeal was then filed by “B-Production” with the Supreme Administrative Court. In the appeal “B-Production” contested the findings of the Administrative Court that there was a hidden distribution of profits by means of the payment of management fees and duplication (overlapping) of the services at issue under the management contract and the other two agreements between the B-Production and the parent company. B-Production further argued that the evidence in the case refutes the conclusions in the tax assessment and the contested decision that the services rendered did not confer an economic benefit and in addition argues that the costs of royalties and the costs of engineering and control services under the other two contracts are not a formative element of the invoices for management services, a fact which was not considered by the court. Judgement of the Supreme Administrative Court The Supreme Administrative Court decided in favour of the tax authorities and dismissed the appeal of B-Production as unfounded. Excerpts “The dispute in the case concerned the recognition of expenses for intra-group services. The NRA Transfer Pricing Manual (Fact Sheet 12) states that intra-group services in practice refers to the centralisation of a number of administrative and management services in a single company (often the parent company), which serves the activities of all or a number of enterprises of a group of related parties selected on a regional or functional basis. The provision of such services is common in multinational companies. The concept of intra-group services covers services provided between members of the same group, in particular technical, administrative, financial, logistical, human resource management (HRM) and any other services. In the present case, the costs in question relate to a contract for the provision of management services dated 26.11.2002, paid by the subsidiary [company], registered in the Republic of Bulgaria, to the parent company, [company], registered in the USA. The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (‘the OECD Guidelines’) should therefore be taken into account in the analysis of those costs and, accordingly, in the interpretation and application of the substantive law. According to paragraph 7.5 of the OECD Guidelines, the analysis of intra-group services involves the examination of two key questions: 1/ whether the intra-group services are actually performed and 2/ what the remuneration within the group for those services should be for tax purposes. In the present case, the dispute in the case relates to the answer to the first question, since it is apparent from the reasoning of the audit report, the revenue authorities and the ultimate conclusion of the court of first instance that the services did not confer an economic benefit on the domestic company and constituted a disguised distribution of profits within the meaning of section 1(5)(b) of the Act. “a” of the Tax Code. Therefore, the arguments in the cassation appeal for material breaches of the rules of court procedure – lack of instructions concerning the collection of evidence related to the amount of the price of the intra-group service and the allocation of the burden of proof to establish this fact – are irrelevant to the subject matter of the dispute. Paragraph 7.6 of the OECD Guidelines states that, according to the arm’s length principle, whether an intra-group service is actually performed when an activity is carried out for one or more group members by another group member will depend on whether the activity provides the group member concerned with an economic or commercial advantage to improve its commercial position. This can be determined by analysing whether an independent undertaking would, on comparable terms, be willing to pay for the activity if it were carried out for it by an independent undertaking or whether it would only have carried it out with its own funds. It is correct in principle, as stated in the appeal in cassation, that the analysis of intra-group services and their recognition for tax purposes is based on the facts and circumstances of each particular case. For example, the OECD Guidelines lists activities which, according to the criterion in point 7.6, constitute shareholding activities. According to paragraph 7.10, b. “b” of the OECD Guidance, expenses related to the accounting requirements of the parent company, including consolidation for financial statements, are defined as such. The evidence in this case established beyond a reasonable doubt that the management services covered by the contract at issue in this case included the compensation of a responsible financial and accounting manager, including cash flow planning and reporting, preparation of monthly, quarterly and annual reports (American Accounting Standards accounting. These activities, which there is no dispute that they were performed, fall within the definition of Section 7.10 for “shareholder activities.” The remaining activities included in management services, including the costs associated with the use of the software programs referred to in the expert report, are imposed by the parent company’s requirements for control and accountability of the subsidiary under the three sets of activities – managing director, production and finance. There is no merit in the objection in the cassation appeal that the management contract services do not duplicate the costs of the other two contracts. It is established from the conclusion of the FTSE that the costs of engineering and control services and royalties (know-how and patent) are not a formative element of the invoices for management services. The conclusion of the experts was based only on the fact that separate contracts had been concluded for the individual costs and not on an analysis of the elements that formed the fees. According to Annex 6 to the expert report, ...

The following are examples of costs associated with shareholder activities, under the standard set forth in paragraph 7.6: a) Costs relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company, stock exchange listing of the parent company and costs of the supervisory board; b) Costs relating to reporting requirements (including financial reporting and audit) of the parent company including the consolidation of reports, costs relating to the parent company’s audit of the subsidiary’s accounts carried out exclusively in the interest of the parent company, and costs relating to the preparation of consolidated financial statements of the MNE (however, in practice costs incurred locally by the subsidiaries may not need to be passed on to the parent or holding company where it is disproportionately onerous to identify and isolate those costs); c) Costs of raising funds for the acquisition of its participations and costs relating to the parent company’s investor relations such as communication strategy with shareholders of the parent company, financial analysts, funds and other stakeholders in the parent company; d) Costs relating to compliance of the parent company with the relevant tax laws; e) Costs which are ancillary to the corporate governance of the MNE as a whole. In contrast, if for example a parent company raises funds on behalf of another group member which uses them to acquire a new company, the parent company would generally be regarded as providing a service to the group member. The 1984 Report also mentioned “costs of managerial and control (monitoring) activities related to the management and protection of the investment as such in participations”. Whether these activities fall within the definition of shareholder activities as defined in these Guidelines would be determined according to whether under comparable facts and circumstances the activity is one that an independent enterprise would have been willing to pay for or to perform for itself. Where activities such as those described above are performed by a group company other than solely because of an ownership interest in other group members, then that group company is not performing shareholder activities but should be regarded as providing a service to the parent or holding company to which the guidance in this chapter applies ...

In 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. For example, in respect of financial services such as loans, foreign exchange and hedging, remuneration would generally be built into the spread and it would not be appropriate to expect a further service fee to be charged if such were the case ...

Other activities that may relate to the group as a whole are those centralised in the parent company or a group service centre (such as a regional headquarters company) and made available to the group (or multiple members thereof). The activities that are centralised depend on the kind of business and on the organisational structure of the group, but in general they may include administrative services such as planning, coordination, budgetary control, financial advice, accounting, auditing, legal, factoring, computer services; financial services such as supervision of cash flows and solvency, capital increases, loan contracts, management of interest and exchange rate risks, and refinancing; assistance in the fields of production, buying, distribution and marketing; and services in staff matters such as recruitment and training. Group service centres also often carry out research and development or administer and protect intangible property for all or part of the MNE group. These type of activities ordinarily will be considered intra-group services because they are the type of activities that independent enterprises would have been willing to pay for or to perform for themselves ...

Similarly, an associated enterprise should not be considered to receive an intra-group service when it obtains incidental benefits attributable solely to its being part of a larger concern, and not to any specific activity being performed. For example, no service would be received where an associated enterprise by reason of its affiliation alone has a credit-rating higher than it would if it were unaffiliated, but an intra-group service would usually exist where the higher credit rating were due to a guarantee by another group member, or where the enterprise benefitted from the group’s reputation deriving from global marketing and public relations campaigns. In this respect, passive association should be distinguished from active promotion of the MNE group’s attributes that positively enhances the profit- making potential of particular members of the group. Each case must be determined according to its own facts and circumstances ...

There are some cases where an intra-group service performed by a group member such as a shareholder or coordinating centre relates only to some group members but incidentally provides benefits to other group members. Examples could be analysing the question whether to reorganise the group, to acquire new members, or to terminate a division. These activities could constitute intra-group services to the particular group members involved, for example those members who will make the acquisition or terminate one of their divisions, but they may also produce economic benefits for other group members not involved in the object of the decision by increasing efficiencies, economies of scale, or other synergies. The incidental benefits ordinarily would not cause these other group members to be treated as receiving an intra-group service because the activities producing the benefits would not be ones for which an independent enterprise ordinarily would be willing to pay ...

In general, no intra-group service should be found for activities undertaken by one group member that merely duplicate a service that another group member is performing for itself, or that is being performed for such other group member by a third party. An exception may be where the duplication of services is only temporary, for example, where an MNE group is reorganising to centralise its management functions. Another exception would be where the duplication is undertaken to reduce the risk of a wrong business decision (e.g. by getting a second legal opinion on a subject) ...

“The following examples (which were described in the 1984 Report) will constitute shareholder activities, under the standard set forth in paragraph 7.6:a) Costs of activities relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company and costs of the supervisory board;b) Costs relating to reporting requirements of the parent company including the consolidation of reports;c) Costs of raising funds for the acquisition of its participations.In contrast, if for example a parent company raises funds on behalf of another group member which uses them to acquire a new company, the parent company would generally be regarded as providing a service to the group member. The 1984 Report also mentioned “costs of managerial and control (monitoring) activities related to the management and protection of the investment as such in participations”. Whether these activities fall within the definition of shareholder activities as defined in these Guidelines would be determined according to whether under comparable facts and circumstances the activity is one that an independent enterprise would have been willing to pay for or to perform for itself.” ...

A more complex analysis is necessary where an associated enterprise undertakes activities that relate to more than one member of the group or to the group as a whole. In a narrow range of such cases, an intra- group activity may be performed relating to group members even though those group members do not need the activity (and would not be willing to pay for it were they independent enterprises). Such an activity would be one that a group member (usually the parent company or a regional holding company) performs solely because of its ownership interest in one or more other group members, i.e. in its capacity as shareholder. This type of activity would not justify a charge to the recipient companies. It may be referred to as a “shareholder activity”, distinguishable from the broader term “stewardship activity” used in the 1979 Report. Stewardship activities covered a range of activities by a shareholder that may include the provision of services to other group members, for example services that would be provided by a coordinating centre. These latter types of non-shareholder activities could include detailed planning services for particular operations, emergency management or technical advice (trouble shooting), or in some cases assistance in day-to-day management ...