The Organization for Economic Cooperation and Development (hereinafter "OECD") released on January 20th, 2022 the new Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations updating the previous version dated July 2017.
A new version of the "Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations" was made available at the beginning of 2022. The aim is to provide a guide for both private multinational operators and tax authorities, making available a shared operational and interpretative basis for settling potential transfer pricing disputes. As a matter of fact, these Guidelines have long been a point of reference for all insiders in the TP field, be they multinational companies, tax authorities and tax judges. The OECD periodically updates such indications to take account of the evolution of economic phenomena and the progressive refinement of the various methods for determining transfer prices.
With reference to the main "new features" mentioned in the latest 2022 version of the Guidelines, the following topics shall be pointed out:
- Transactional Profit Split Method ("Profit Split") - the indications identified within the Report "Revised Guidance on the Transactional Profit Split Method" approved on June 4th, 2018 have been incorporated. Such report changed the provisions of Chapter II, Section C (paragraphs 2.114-2.151) of the 2017 Transfer Pricing Guidelines and related Annexes II and III to Chapter II. In particular, the indications provided are intended to identify the circumstances in which this method may be considered the most appropriate;
- Hard-to-Value Intangibles ("HTVI") - the Guidelines incorporate the principles outlined in the Report “Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles”, published on June 4th, 2018, and incorporated into Annex II to Chapter VI. Several examples are included with the objective of clarifying the practical adoption of the principles related to the application of the approach to hard-to-value intangibles (HTVI) to verify the value attributable to intangibles;
- Financial Transactions - the Guidelines in question include a new chapter (chapter X) in which the contents of the Report "Transfer Pricing Guidance on Financial Transactions" approved in 2020 have been incorporated. The principles contained therein make it possible, among other things, to assess, for example, the circumstances in which a transaction can be considered an intercompany loan rather than a contribution to share capital or to accurately outline those factors that can influence intercompany relations with the aim of identifying which transactions must be considered commercial and which, instead, financial.
The novelties in this latest version of the Guidelines constitute a further incentive for taxpayers and tax administrations to consolidate and/or innovate their TP practices in order to adapt them to the new context; in this context, of particular note is the more careful analysis given by the OECD to financial transactions with a consequently very wide range of interested parties.