In these circumstances, the tax administration can consider ex post outcomes as presumptive evidence about the appropriateness of the ex ante pricing arrangements. However, the consideration of ex post evidence should be based on a determination that such evidence is necessary to be taken into account to assess the reliability of the information on which ex ante pricing has been based. Where the tax administration is able to confirm the reliability of the information on which ex ante pricing has been based, notwithstanding the approach described in this section, then adjustments based on ex post profit levels should not be made. In evaluating the ex ante pricing arrangements, the tax administration is entitled to use the ex post evidence about financial outcomes to inform the determination of the arm’s length pricing arrangements, including any contingent pricing arrangements, that would have been made between independent enterprises at the time of the transaction, considering the guidance in paragraph 6.185. Depending on the facts and circumstances of the case and considering the guidance in Section B.5 of Chapter III, a multi-year analysis of the information for the application of this approach may be appropriate.
TPG2022 Chapter VI paragraph 6.192
Category: D. Determining arm’s length conditions in cases involving intangibles | Tag: Contingent payments, Ex post evidence, Ex post outcomes, Hard-to-value intangibles (HTVI), Intangibles, Multi-year data, Presumptive evidence
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- TPG2022 Chapter VI paragraph 6.188In response to the considerations discussed above, this section contains an approach consistent with the arm’s length principle that tax administrations can adopt to ensure that tax administrations can determine in which situations the pricing arrangements as set by the taxpayers are at...
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- TPG2022 Chapter VI Annex II – Hard To Value Intangibles – 2. Examples2. Examples (1) 18. The following examples are aimed at illustrating the practical application of a transfer pricing adjustment arising from the application of the HTVI guidance. The assumptions made about arm’s length arrangements and transfer pricing adjustments determined in the examples are...
Related Case Law
- Netherlands vs “X B.V.”, August 1998, Supreme Court, Case No 32997, ECLI:NL:HR:1998:AA2288In a situation where a new intangible asset has been developed and is transferred to an affiliate at a time when its success is not yet sufficiently apparent, for example, because the intangible asset has not yet generated revenues and there are significant...