This 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 elective, simplified approach. It then identifies a series of activities that do not qualify as low value-adding intra-group services for the elective, simplified approach. Finally it contains a list of examples of services that likely would have the characteristics to qualify as low value-adding intra-groups services for the application of the simplified approach.
TPG2022 Chapter VII paragraph 7.44
Category: D. Low value-adding intra-group services | Tag: Intra-group services, Low value-adding services (LVAS), Service fee, Services, Simplified approach
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- 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...
- 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 7.53Where a tax administration has not adopted the simplified approach, and as a consequence the MNE group complies with the local requirements in that jurisdiction, such compliance would not disqualify the MNE group from the application of the simplified approach to other jurisdictions....
- TPG2022 Chapter VII paragraph 7.48The fact that an activity does not qualify for the simplified approach, as defined under paragraph 7.45, should not be interpreted to mean that that activity generates high returns. The activity could still add low value, and the determination of the arm’s length...
- TPG2022 Chapter VII paragraph 7.54As discussed in paragraph 7.6, under the arm’s length principle an obligation to pay for an intra-group service arises only where the benefits test is satisfied, i.e. the activity must provide the group member expected to pay for the service with economic or...
- TPG2022 Chapter VII paragraph 7.64An MNE group electing for application of this simplified methodology shall prepare the following information and documentation and make it available upon request to the tax administration of any entity within the group either making or receiving a payment for low value-adding intra-group...
- TPG2022 Chapter VII paragraph 7.47The following activities would not qualify for the simplified approach outlined in this section: services constituting the core business of the MNE group; research and development services (including software development unless falling within the scope of information technology services in 7.49); manufacturing and...
- 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,...
- 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. ...
- 2017: ATO transfer pricing issues related to centralised operating modelsThe Practical Compliance Guideline (Guideline) sets out the Australian Taxation Office’s (ATO’s) compliance approach to transfer pricing issues related to the location and relocation of certain business activities and operating risks into a centralised operating model. The type of activities commonly centralised include...
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...
- Zimbabwe vs Delta Beverages Ltd., Supreme Court, Judgement No. SC 3/22Delta Beverages Ltd, a subsidiary of Delta Corporation, had been issued a tax assessment for FY 2009, 2010, 2011, 2012, 2013 and 2014 where various fees for service, technology license of trademarks, technology and know-how paid to a group company in the Netherlands...
- 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...