Public Consultation on Transfer Pricing Matters

Paris, France
29 September 2014
Hosted By: the Organisation for Economic Co-operation and Development (OECD)

NERA Economic Consulting was asked to contribute to the two-day Public Consultation on Transfer Pricing Matters, held at the OECD in Paris on 12-13 November 2013. The Consultation covered the following subjects: implementation of country-by-country reporting; white paper on transfer pricing documentation; revised discussion draft on transfer pricing aspects of intangibles; and transfer pricing aspects of the Base Erosion Profit Shifting (BEPS) action plan. More specifically, NERA was asked to provide its views on "Value Chain Analysis and Profit Split in the Context of BEPS." NERA Affiliated Consultant Pim Fris and Vice President Sébastien Gonnet gave a speech on 13 November highlighting the relevance of relational transfer pricing and the need to understand how value is created in a multinational enterprise as a start to a serious transfer pricing analysis. They also discussed the links between value chain analyses and profit split methods.

In addition, Mr. Fris and Mr. Gonnet gave the following recommendations to the OECD in the context of the BEPS project:

  • Broaden the transaction and entity-outcome-based implementation focus towards a relationship-based interpretation of the arm's length principle. To that end, insert some revisions to Chapters I - III of the Guidelines so as to cover the definition of value, define and describe the concept of value creation, and introduce the perspective of value chain analysis.
  • Assess the relative bargaining positions of parties (whether or not related) vis-à-vis their long-term, cooperative relationship and their respective contributions to joint value creation.
  • Recognize the limits of one-sided-only transfer pricing analyses: profit split can serve both as a primary price-setting method and as a complement to other methods, testing the case-specific relevance of outcomes.

Their presentation, "Value Chain Analysis and Profit Split in the Context of BEPS," can be downloaded here.

For more information, please visit the OECD website.

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