![]() ![]() Transfer prices are significant for taxpayers and tax administrations as they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions. Transfer pricing principles apply also to the transfer of costs (ie cash pooling, recharging of costs for centralised functions to other entities of the MNE). Transfer prices are the prices at which an enterprise transfers physical goods, intangible property or provides services to associated enterprises, and which should be in line with the arm’s length principle. Key to ensuring this are the methods set out in the OECD Guidelines for establishing arm’s length transfer prices. 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 any country reflects the economic activity undertaken in that country. Finally, consistency changes have been made to the rest of the OECD Transfer Pricing Guidelines. The 2022 edition includes the revised guidance on the application of the transactional profit method and the guidance for tax administrations on the application of the approach to hard-to-value intangibles agreed in 2018, as well as the new transfer pricing guidance on financial transactions approved in 2020. The OECD Transfer Pricing Guidelines provide guidance on the application of the “arm’s length principle”, which is the international consensus on the valuation of cross-border transactions between associated enterprises. However, it is an opportune moment to remind ourselves as to the overall content and purpose of the publication. ![]() The 2022 Edition is largely a consolidation into one publication of a number of separate guidelines produced over recent years and does not contain anything substantially new. ![]() On 20 January 2022, the Organisation for Economic Cooperation and Development ( OECD) released its updated edition of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. ![]()
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