What’s New From the OECD?27th January 2022
Last week, the OECD released 2022’s OECD transfer pricing guidelines, a 600-plus-page book which guides tax authorities and taxpayers on how to approach the most basic and the most complicated transfer pricing transactions. Some chapters will look familiar—comparability analysis, transfer pricing documentation, transfer pricing disputes, and so on. But the new edition also includes guidance on transfer pricing with intangible assets and the profit split method—updates the OECD finalized in 2018. While the profit split method—an accepted transfer pricing method that divides profits based on the contributions of each entity—is revered by tax authorities for its subjectivity, it’s not always embraced by taxpayers—because of that same subjectivity. But disputable or not, the new guidelines declare that there are times when this method is most appropriate—like when companies are forced to value the shares of contributions to profits versus pinning a dollar amount to the value of those contributions. Given that tax authorities are paying such close attention to transfer pricing involving the transfer of intangible assets, it’s only natural that the OECD would step in with a little handholding on the topic, advising tax administrations how to determine if hard-to-value intangibles are priced at fair market value. The new guidance includes other updates, too: pricing of financial transactions and also, the proper application of transfer pricing’s foundation: the arm’s length principle.