On January 20th, 2022 the Organisation for Economic Cooperation and Development (OECD) issued an update to the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (Transfer Pricing Guidelines) of 2017.
The OECD has made three significant additions and revisions to the guidelines for multinational enterprises and tax administrations, in respect of the transactional profit split method, hard-to-value intangibles and the aspects financial transactions reflecting the several enhancements developed over the last few years. These updates expand the document of Transfer Pricing Guidelines from 612 pages in 2017 to 658 pages.
The most significant change in the 2022 edition of the TP Guidelines is the addition of a new Chapter X that includes updated guidelines and illustrative examples, based on the OECD 2020 reports on Transfer Pricing Guidelines on Financial Transactions: Base Erosion and Profit-Shifting (BEPS) Actions 4, 8, 9 and 10.
Chapter VI now includes a new Annex II that incorporates the OECD Guidance Report for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles, under BEPS Action 8, of 2018. Similarly to the above, Annex II includes illustrative examples to help clarify the application of the hard to value intangibles approach in different scenarios.
In addition, Chapters I and II have included the updated guidance on the application of the transactional profit split method, under BEPS Action 10, that was issued in 2018. The aim is to clarify the instances when the transactional profit split method may be applied, with numerous illustrative examples on the transactional profit split method.
For further information relating to the Transfer Pricing Guidelines updates, please contact Constantinos Pavlou, Advocate/Legal Consultant.
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