The OECD is considering revising the guidance in Chapter VII (intragroup services) of the transfer pricing guidelines. A consultation has been held, for which the closing date for comments was 20 June 2018, and the comments from interested parties are to be made publicly available in due course.

Although Chapter VII of the OECD transfer pricing guidelines was updated in 2017 to incorporate the simplified approach to determine the arm’s length charges for low value-adding intra-group services, the chapter has not yet been reviewed to incorporate any other guidance resulting from the recommendations of BEPS Actions 8 to 10 on aspects of transfer pricing. Further changes are likely to be made ensure that the chapter is aligned with the guidance in Chapter I of the guidelines and with the latest guidance on intangibles and cost contribution arrangements. The OECD is also considering how to incorporate the ongoing work on the use of profit split methods and financial transactions into the guidance.

Difficulties in establishing transfer pricing for intragroup services include the need to demonstrate that a service has been rendered and that the service rendered provides benefits to the related party receiving the service. There is also a need to distinguish between activities which do or do not benefit the local affiliates; benefits that arise only as a result of membership of a group of companies; and benefits that arise from a deliberate concerted action by related parties. Shareholder activities and stewardship activities also need to be identified as these are related to the group as a whole and are not services for a particular group member. the OECD aims at practical guidance to help with transfer pricing in real situations.

Other issues in transfer pricing for intragroup services that may need further guidance include the identification in practice of duplicated activities; finding an appropriate allocation key for charging intra-group services; and determining the cost base of the remuneration for the provision of intragroup services. Further guidance may also be required in relation to assessing the arm’s length conditions for services connected with the use of intangibles; services that are highly integrated with value creation by the group; and provision of services where significant risks are involved.