On 16 September 2014, the OECD published its final and interim revisions in relation to Chapters I, II and VI of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. These revisions have been developed in connection with Action 8 of the Action Plan on Base Erosion and Profit Shifting that is focused on assuring that transfer pricing outcomes with respect to intangibles are in line with value creation activities.
The revisions to the OECD Guidelines (i) clarify the definition of intangibles, (ii) provide guidance on identifying transactions involving intangibles, (iii) provide supplemental guidance for determining arm’s length conditions for transactions involving intangibles and (iv) contain guidance on the transfer pricing treatment of local market features and corporate synergies. Given that some of the transfer pricing issues related to intangibles are closely related to the work that will be performed by the OECD as part of Action 9 (Risks and Capital) and Action 10 (Other high-risk transactions) of the BEPS Action Plan in the course of 2015, key elements of the work on intangibles have not been finalised yet and thus need to be viewed as interim guidance.
Moreover, the OECD has also recognized that with respect to the work to be performed next year related to the transfer pricing treatment of “hard to value” intangibles, it will consider both the application of the arm’s length principle and special measures – beyond the arm’s length principle – in order to identify effective responses to the concerns raised in the BEPS Action Plan.
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