The document summarizes guidance from the OECD/G20 BEPS project on aligning transfer pricing and value creation. It provides six sections of guidance: (1) applying the arm's length principle, (2) commodity transactions, (3) transactional profit splits, (4) intangibles, (5) low-value services, and (6) cost contribution arrangements. It also outlines requirements for transfer pricing documentation under Action 13. The guidance establishes frameworks for delineating transactions and evaluating economically relevant characteristics to determine appropriate transfer pricing in intercompany arrangements.

1. OECD/G20 BEPS
PROJECT:
ALIGNING TAXATION
WITH VALUE CREATION

2. 1869

3. Profit
Tax Base
Shifting
Base Erosion
1890192019501980201020131869

4. February 2013 July 2013 October 2015

6. The Report, Aligning Transfer Pricing
Outcomes with Value Creation, contains 6 interlinked
sections
• Guidance for Applying the Arm’s Length Principle
• Guidance on Commodity Transactions
• Further work on Transactional Profit Split is
scoped
• Guidance on Intangibles
• Guidance on Low Value-adding Intra-group
Services
• Guidance on Cost Contribution Arrangements
• In addition, the Report on Action 13 sets out the
revised standard for Transfer Pricing
Documentation
6
Overview

7. I. Careful delineation of the actual
transaction between associated enterprises
Economically relevant characteristics
II. Compare conditions and the other
economically relevant characteristics of
the controlled transactions
HQ
Sub1
SubSub
Sub2
1. Contractual terms
2. Functions performed, taking into account
assets used and risks assumed
3. Characteristics of property/service
4. Economic circumstances
5. Business strategies

8. HQ
Sub1
1. Identify risk
2. Determine how risk are contractually
assumed
3. Functional analysis
4. Determine whether contractual
assumption of risk is consistent with
the conduct of the associated
enterprises and other facts of the
case
Contract
__ ______
____ ___
___ _ __
Sub 1 -
____ __
!

9. HQ
Sub1
5. Apply guidance for allocation of
the risk
Allocation to party that exercises
control and has the financial
capacity to assume the risk
Taxablepr
ofit
o Does not exercise control over the
risk?; or
o Does not have the financial capacity
to assume the risk
Taxablepr
ofit
Contract
__ ______
____ ___
___ _ __
Sub 1 -
____ __
!

10. HQ
Sub1
Guidance on Intangibles
• Follows framework Chapter 1
• Funder without performing important functions
related to intangible and without assuming the risks
related to the intangible:
risk-adjusted financial return
• Funder without control over financial risk:
no more than risk free financial return
Development
EnhancementExploitation
MaintenanceProtection
Sub2
PATENT
______
_____ _
__ Sub 1 -
____ __
!
Control over
financial risk

11. HQ
Sub1
Guidance on Intangibles
Hard-to-Value Intangibles
• Allows taxpayer to demonstrate proper
transfer pricing analysis
• Addressing information asymmetries
• Ex post outcomes
PATENT
______
_____ _
__ Sub 1 -
____ __
?
TP
doc
• Ex ante pricing agreements
presumptive evidence for
appropriateness

12. Country by Country
Reporting
Mandatory disclosure
Exchange
of rulings MAC
Membership
FHTP

13. Large MNE Group
HQ
SubSub
Sub1 Sub2
MNE Group
Master file Local File CbC Report
cbccbccbc
LF
LFMF
LF
MF
MF
Overview of MNE
group business
More detailed information
on intercompany
transactions affecting local
jurisdiction
Aggregate tax
jurisdiction wide
information

14. Further revised
guidance (transactional
profit splits, financial
transactions and
consolidation of other
parts of the TPG with the
new guidance)
Implementation
HTVI and Low Value
Adding Services
Work mandated by the
G20 Development
Working Group on TP
toolkits for Low
Income Countries
14
Follow up work

15. Monitoring
Legal certainty and
dispute resolution
Transparency
New and
revised rules

16. Keep in touch
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Contact: CTP.BEPS@oecd.org
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www.oecd.org/ctp/tax-news.htm
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