post Wednesday May 2, 2012
The Organisation for Economic Co-operation and Development (OECD) has undertaken a project to rewrite the chapters in their Transfer Pricing Guidelines (TPG) pertaining to intangibles. The OECD’s Working Party No.6 taskforce seeks to provide better transfer pricing guidelines that take intangible assets into account, as they have become an increasingly important source of value-added for businesses.
After the 2010 update of Chapters I through III of the Transfer Pricing Guidelines, which provides guidance on comparability and methods, and Chapter IX on business restructurings, there was discussion that the most difficult business restructuring issues involve intangibles, where guidance is inadequate. Therefore, the OECD set off to rewrite the chapters in their TPG that relate to intangibles.
The two chapters that relate to intangibles in the TPG are Chapter VI, which contains special considerations for intangibles, and Chapter VIII, which contains guidance on cost contribution arrangements. Given that transfer pricing issues pertaining to intangibles are a key area of concern to governments and taxpayers, the OECD found that updating these chapters has become an increasingly important issue in the evolution of transfer pricing regulation.
What Working Party No. 6 seeks to take into account when rewriting these chapters are definitional aspects of intangibles; ownership issues; identifying and characterizing transactions involving intangibles; and valuation, or identifying arm’s length prices for transactions involving intangibles.
Working Party No. 6 is also working on an administrative simplification project that intends to revise TPG Chapter IV’s language on safe harbors, simplify documentation requirements, improve guidance on headquarters costs /low value added services, and simplify APA processes.
Other work that the OECD is currently engaged in involves capacity building efforts of the Task Force on Tax and Development; transfer pricing work of the Forum on Tax Administration; involvement of non-OECD countries in the work of Working Party No. 6; transfer pricing work of the Global Forum on Treaties and Transfer Pricing; cooperation with UN work on transfer pricing; and outreach and training activities.
[Source: OECD]
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