Notwithstanding that some have commented that the reallocation of taxing rights under Pillar One is a move towards global formulary apportionment, the 2022 Transfer Pricing Guidelines continue to reject that idea: “Global formulary apportionment would not be acceptable in theory, implementation, or practice.” (♡.15) Moreover, even as the implementation rules for Pillar One take shape, the OECD Guidelines will continue to be relevant in determining profit attributable to marketing and distribution as well as Amount B (see our alert on this topic).Ĭhapter X of the 2022 Transfer Pricing Guidelines incorporates the new guidance released in February 2020 on financial transactions. Similarly, the 2022 Transfer Pricing Guidelines continue to acknowledge that comparable uncontrolled transactions should be used to analyze controlled transactions (the comparability analysis), but that difficulties may arise in getting the information necessary to perform a comparability analysis. The 2022 Transfer Pricing Guidelines further confirm that the arm’s length principle works in the vast majority of cases, but is challenging to apply in highly specialized goods, unique intangibles, and specialized services. This includes new Chapter X on financial transactions, which among other guidance incorporates proposed and controversial changes to the Commentary on Article 9 of the OECD Model Tax Convention.ĭespite the pressure that the arm’s length principle has been under in recent years, the 2022 Transfer Pricing Guidelines reaffirm that the arm’s length principle is the international standard as set forth in paragraph 1 of Article 9 of the OECD Model Tax Convention. Although there is no completely new guidance in the 2022 Transfer Pricing Guidelines, some of the previously released guidance now formally incorporated in the Guidelines is quite significant. The 2022 Transfer Pricing Guidelines update the 2017 edition by incorporating guidance released by the OECD over the past few years on the transactional profit split method, hard-to-value intangibles, and financial transactions. On January 20, 2022, the OECD released the latest version of its OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
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