New developments in the transfer pricing guidelines ('OECD Guidelines')
04 February 2022
On 20 January 2022, the Organisation for Economic Cooperation and Development ('OECD') published a new edition of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022 Guidelines).
This new guidance is available in English and French on the OECD website and consolidates the changes made to the previous edition dating from 2017 by the following three reports:
- The report 'Revised Guidance on the Application of the Transactional Profit Split Method', published on 21 June 2018
- The report 'Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles', published on 21 June 2018
- The report 'Transfer Pricing Guidance on Financial Transactions', published on 11 February 2020.
Therefore, the new features of this consolidated edition consist of :
- Revised guidance on the implementation of the profit split method
- New guidance on the application of the 'hard to value intangibles' approach
- New guidance on financial transactions;
- Formal adjustments.
The transactional profit split method
With regard to the transactional profit split method, the revised instructions aim to clarify when this method should be considered the most appropriate. The guidelines also explain how the transactional profit split method should be applied (determination of the profits to be split and the appropriate allocation factors).
Hard to value intangibles
These instructions set out the principles of the hard-to-value intangible approach and various examples in order to provide a clearer framework for tax authorities to reduce the risk of economic double taxation for taxpayers.
These principles precisely delineate the different financial transactions and deal with the pricing of these transactions (intra-group loans, cash pooling, hedging, guarantees, etc.).
Transfer pricing remains a complex issue and the OECD regularly launches initiatives and reports to reflect their evolving positions on the subject, as the majority of countries adhere to the OECD principles. A regular update of the OECD guidelines to formalise these positions can therefore only be welcomed.
If you have any questions or if you would like to be assisted by one of our experts, please do not hesitate to contact the BDO Transfer Pricing team or your regular BDO contact.