Strategizing International Tax Best Practices – by Keith Brockman

The OECD has released guidance on its BEPS Action Plan item 10: Transfer Pricing Guidelines re: Low Value-Adding Intra-Group Services.  Comments should be submitted by 14 January 2015.  A copy of the guidance is attached for reference:

http://www.oecd.org/ctp/transfer-pricing/discussion-draft-action-10-low-value-adding-intra-group-services.pdf

The Guidance, in summary:

  • Defines low value-adding intra-group services
  • Clarifies the meaning of duplicative activities and shareholder costs
  • Provides a 2-5% range for mark-up
  • Addresses cost allocation methodologies
  • Discusses a simplified benefit test
  • Discusses documentation to support the simplified approach

This guidance is required reading for all interested parties working with transfer pricing methodologies addressing intra-group services, noting the fact that simplification in one area of such services may introduce further complexities and ambiguities.

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