TPG2022 Chapter IX paragraph 9.38

Category: C. Recognition of the accurately delineated transactions | Tag: ,
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Under Article 9 of the OECD Model Tax Convention, the fact that a business restructuring arrangement is motivated by a purpose of obtaining tax benefits does not of itself warrant a conclusion that it is a non-arm’s length arrangement. The presence of a tax motive or purpose does not of itself justify non-recognition of the parties’ characterisation or structuring of the arrangement. However, tax benefits at a group level do not determine whether the arm’s length principle is satisfied at the entity level for a taxpayer affected by the restructuring (see previous paragraph). Moreover, as indicated in paragraph 1.142, the fact that a MNE group as a whole is left worse off on a pre-tax basis may be a relevant pointer in determining the commercial rationality of the restructuring.






Related Guidelines

  1. TPG2022 Chapter IX paragraph 9.39An independent enterprise does not necessarily receive compensation when a change in its business arrangements results in a reduction in its profit potential or expected future profits. The arm’s length principle does not require compensation for a mere decrease in the expectation of...
  2. TPG2022 Chapter IX paragraph 9.13The application of the arm’s length principle to a business restructuring must start, as for any controlled transaction, with the identification of the commercial or financial relations between the associated enterprises involved in the business restructuring and the conditions and economically relevant circumstances...
  3. TPG2022 Chapter IX paragraph 9.25For example, a business restructuring may involve the setting up by an MNE group of a central procurement operation that replaces the procurement activities of several associated enterprises. Similar to the guidance at paragraph 1.180 the MNE group has taken affirmative steps to...
  4. TPG2022 Chapter IX paragraph 9.117A relevant question is the role if any of comparisons that can be made of the profits actually earned by a party to a controlled transaction prior to and after the restructuring. In particular, it can be asked whether it would be appropriate...
  5. TPG2022 Chapter IX paragraph 9.36In assessing the commercial rationality of a restructuring under the guidance for non-recognition under Section D.2 of Chapter I, the question may arise whether to look at one transaction in isolation or whether to examine it in a broader context, taking account of...
  6. TPG2022 Chapter IX paragraph 9.43General guidance on the transfer pricing aspects of risks is found in Section D. 1.2.1 of Chapter I, and the reallocation of risk following a business restructuring should be analysed under the framework set out in that Section in order to determine whether...
  7. TPG2022 Chapter IX paragraph 9.75Section F addresses the question of whether the restructured entity, at arm’s length, should receive compensation, in the form of indemnification, upon the termination or substantial renegotiation of its existing arrangements, which may or may not involve a transfer of something of value...
  8. TPG2022 Chapter IX paragraph 9.110There are cases where comparables (including internal comparables) are available, subject to possible comparability adjustments being performed. One example of a possible application of the CUP method would be the case where an enterprise that used to transact independently with the MNE group...
  1. 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.  ...
  2. IRS – APA Study Guide issued in early 2000sIn the early 2000s the IRS issued a “APA study guide” where guidance is provided in relation to various practical issues in the area of transfer pricing. The study guide is part of a large collection of IRS practices and statistics from working...

Related Case Law

  1. Netherlands vs “Tobacco B.V.”, December 2023, North Holland District Court, Case No AWB – 20_4350 (ECLI:NL:RBNHO: 2023:12635)A Dutch company “Tobacco B.V.” belonging to an internationally operating tobacco group was subjected to (additional assessment) corporate income tax assessments according to taxable amounts of €2,850,670,712 (2013), €2,849,204,122 (2014), €2,933,077,258 (2015) and €3,067,630,743 (2016), and to penalty fines for the year 2014...
  2. Denmark vs Engine branch, January 2020, Tax Tribunal, Case No SKM2020.30.LSRThe main activity in a Danish branch of a German group was development, licensing and services related to engines that were being produced by external licensees. Under a restructuring of the group, it was decided that royalty income for a particular engine type...
  3. 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...
  4. 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...