TPG2022 Chapter VII paragraph 7.49

Category: D. Low value-adding intra-group services | Tag: , , , ,
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The following bullet points provide examples of services that would likely meet the definition of low value-adding services provided in paragraph 7.45:

  • accounting and auditing, for example gathering and reviewing information for use in financial statements, maintenance of accounting records, preparation of financial statements, preparation or
  • assistance in operational and financial audits, verifying authenticity and reliability of accounting records, and assistance in the preparation of budgets through compilation of data and information gathering;
  • processing and management of accounts receivable and accounts payable, for example compilation of customer or client billing information, and credit control checking and processing;
  • human resources activities, such as:
  • staffing and recruitment, for example hiring procedures, assistance in evaluation of applicants and selection and appointment of personnel, on-boarding new employees, performance evaluation and assistance in defining careers, assistance in procedures to dismiss personnel, assistance in programmes for redundant personnel;
  • training and employee development, for example evaluation of training needs, creation of internal training and development programmes, creation of management skills and career development programmes;
  • remuneration services, for example, providing advice and determining policies for employee compensation and benefits such as healthcare and life insurance, stock option plans, and pension schemes; verification of attendance and timekeeping, payroll services including processing and tax compliance;
  • developing and monitoring of staff health procedures, safety and environmental standards relating to employment matters;
  • monitoring and compilation of data relating to health, safety, environmental and other standards regulating the business;
  • information technology services where they are not part of the principal activity of the group, for example installing, maintaining and updating IT systems used in the business; information system support (which may include the information system used in connection with accounting, production, client relations, human resources and payroll, and email systems); training on the use or application of information systems as well as on the associated equipment employed to collect, process and present information; developing IT guidelines, providing telecommunications services,
  • organising an IT helpdesk, implementing and maintaining of IT security systems; supporting, maintaining and supervising of IT networks (local area network, wide area network, internet);
    internal and external communications and public relations support (but excluding specific advertising or marketing activities as well as development of underlying strategies);
  • legal services, for example general legal services performed by in-house legal counsel such as drafting and reviewing contracts, agreements and other legal documents, legal consultation and opinions, representation of the company (judicial litigation, arbitration panels, administrative procedures), legal research and legal as well as administrative work for the registration and protection of intangible property;
  • activities with regard to tax obligations, for example information gathering and preparation of tax returns (income tax, sales tax, VAT, property tax, customs and excise), making tax payments, responding to tax administrations’ audits, and giving advice on tax matters;
  • general services of an administrative or clerical nature.





Related Guidelines

  1. 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...
  2. TPG2022 Chapter VII paragraph 7.15In 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....
  3. TPG2022 Chapter VII paragraph 7.3Intra-group arrangements for rendering services are sometimes linked to arrangements for transferring goods or intangibles (or the licensing thereof). In some cases, such as know-how contracts containing a service element, it may be very difficult to determine where the exact border lies between...
  4. TPG2022 Chapter VII paragraph 7.56The initial step in applying the simplified approach to low value-adding intra-group services is for the MNE group to calculate, on an annual basis, a pool of all costs incurred by all members of the group in performing each category of low value-adding...
  5. 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,...
  6. TPG2022 Chapter VII paragraph 7.17These services may be available on call and they may vary in amount and importance from year to year. It is unlikely that an independent enterprise would incur stand-by charges where the potential need for the service was remote, where the advantage of...
  7. TPG2022 Chapter VII paragraph 7.52This subsection sets out the elements of a simplified charge mechanism for low value-adding intra-group services. This simplified method is premised on the proposition that all low value-adding service costs incurred in supporting the business of MNE group members should be allocated to...
  8. TPG2022 Chapter VII paragraph 7.12There 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...
  1. OECD’s Manual on Exchange of Information and on Conducting Simultaneous Tax ExaminationsThe purpose of the Manual is to provide tax officials dealing with exchange of information for tax purposes with an overview of the operation of exchange of information provisions and some technical and practical guidance to improve the efficiency of such exchanges. The...
  2. 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

  1. 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...
  2. 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...
  3. France vs. Eduard Kettner, March 2012, Administrative Court of Appeals of Paris, No. 10PA04193Kettner was a French distributor of hunting products. Kettner was charged service fees by it’s German parent company for a range of services including packaging, warehouse and inventory management, IT, management fees etc. The tax administration was of the opinion that the fees...
  4. Peru vs “Copper Corporation S.A.”, July 2011, Tax Tribunal, Case No 12609-8-2011“Copper Corporation S.A.” had deducted intra-group service payments in it’s taxable income. The Peruvian tax authorities determined that the documentation provided by the company did not sufficiently support the actual provision of these services. Hence, tax deductions for the expenses was denied. The...