22 July 2010
The OECD Council has today approved the 2010 version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Chapters I-III of the Transfer Pricing Guidelines were substantially revised as a result of the review of comparability and profit methods that was undertaken by the OECD, with input from non OECD economies. Building on the experience acquired by tax administrations and taxpayers in the application of the Transfer Pricing Guidelines since they were originally released in 1995, new guidance was developed on the selection of the most appropriate transfer pricing method to the circumstances of the case, the practical application of transactional profit methods (the transactional net margin method and the profit split method) and the performance of comparability analyses.
The review of comparability and profit methods was a seven-year project which benefitted from extensive consultations with the private sector. Open invitations to comment were released on comparability issues in 2003 and on profit methods in 2006. A series of draft issues notes on comparability issues was released for public comment in May 2006 and a series of draft issues notes on transactional profit methods was released for public comment in January 2008. Each of these two series attracted very detailed responses from the business community, which were released by the OECD in December 2006 and May 2008, respectively. A consultation with commentators was held in Paris in November 2008 and proposed revised Chapters I-III were released for public comment in September 2009, again attracting detailed comments from the business community.
Recognising the importance and quality of the contributions received from the business community, the Committee on Fiscal Affairs drafted a response to shed light on how the main comments were dealt with in the final report.
In addition, the 2010 version of the Transfer Pricing Guidelines contains a new Chapter IX on the transfer pricing aspects of business restructurings.
This new Chapter results from the OECD project on business restructurings, which also benefitted from significant input from the business community and non OECD economies. It started with a Roundtable organised by the OECD Centre for Tax Policy and Administration in January 2005. A Business Advisory Group was formed, which met three times with the Secretariat and Member countries in 2006-2007. Meanwhile, interested parties were invited to provide comments to the OECD Secretariat. A discussion draft on the transfer pricing aspects of business restructurings was released for public comment in September 2008 and comments were received from 37 organisations. A two-day consultation meeting between the OECD and commentators took place in Paris in June 2009.
The Committee on Fiscal Affairs also releases a response to the main comments received on the September 2008 discussion draft on the transfer pricing aspects of business restructurings.
Hard copies of the 2010 Transfer Pricing Guidelines will be available in September.