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Considering Group Synergies for Applying the Arm’s Length Principle
In this article, the authors provide an overview of the development of the OECD’s guidance on group synergies and their implications for the application of transfer pricing methods to achieve arm’s length outcomes, thereby differentiating between one-sided methods and the profit split method.
1. Introduction
One of the main objectives pursued by the OECD with the BEPS project is the alignment of transfer pricing outcomes with value creation. As a result of these efforts, various revisions and additions have been made to the OECD Transfer Pricing Guidelines (OECD TPG). Among these is a dedicated section on multinational enterprise (MNE) group synergies that forms part of the OECD’s “Guidance for applying the arm’s length principle” in Chapter I of the guidelines. This addition offers welcome new guidance, where previous versions of the guidelines barely addressed the role of group synergies in transfer pricing.
In this article, we take an overarching view on the development of the OECD’s guidance on group synergies in the course of the subsequent updates of its guidelines (from the 1995 version to the current 2022 version). We also draw conclusions on the implications for different typ...