OECD Transfer Pricing Guidelines

OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations

On June 27, 1995 the first draft of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (“OECD Guidelines”) was published. These Guidelines are a revision of the OECD Report Transfer Pricing and Multinational Enterprises that was published in 1979. Since then, the OECD Guidelines have been continually developed and updated which resulted in the current OECD Guidelines. They have been approved for publication by both the Committee of Fiscal Affairs and the OECD Council on July 22, 2010.

OECD Transfer Pricing GuidelinesThe OECD Guidelines provide guidance on the application of the “arm’s length principle” for the valuation, for tax purposes, of cross-border transactions between associated enterprises. In a global economy where multinational enterprises (“MNEs”) play a prominent role, governments need to ensure that the taxable profits of MNEs are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country reflects the economic activity undertaken therein. For taxpayers, it is essential to limit the risks of economic double taxation that may result from a dispute between two countries on the determination of the arm’s-length remuneration for their cross-border transactions with associated enterprises.

The OECD Guidelines are considered to be soft law for the OECD member states, which means that it is only binding for the collective goal to be achieved. OECD member states may incorporate the OECD Guidelines into national law. However, each member state is allowed to treat the OECD Guidelines in the way it is preferred and consequently, not all OECD members have accepted the OECD Guidelines as such. Some countries have adopted the OECD Guidelines almost unchanged in their national regulations while others only adopted certain parts of the OECD Guidelines or simply using different terminology.

An overview of the table of contents of the OECD Guidelines is provided below

  • Chapter I: The Arm’s Length Principle
  • Chapter II: Transfer Pricing Methods
  • Chapter III: Comparability Analysis
  • Chapter IV: Administrative Approaches to Avoiding and Resolving Transfer Pricing Disputes
  • Chapter V: Documentation
  • Chapter VI: Special Considerations for Intangible Property
  • Chapter VII: Special Considerations for Intra-Group Services
  • Chapter VIII: Cost Contribution Arrangements
  • Chapter IX: Transfer Pricing Aspects of Business Restructuring
  • Seven Annexes
  • Council Recommendation on the Determination of Transfer Pricing between Associated Enterprises

On December 14, 1960, 20 countries originally signed the Convention on the Organisation for Economic Co-operation and Development. Since then, 14 countries have become members of the Organisation. A list of the current (2014) Member countries of the OECD is provided below:

Australia Hungary Norway
Austria Iceland Poland
Belgium Ireland Portugal
Canada Israel Slovak Republic
Chile Italy Slovenia
Czech Republic Japan Spain
Denmark Korea Sweden
Estonia Luxembourg Switzerland
Finland Mexico Turkey
France Netherlands United Kingdom
Germany New Zealand United States


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