On 3 November 2014, the OECD invited comments from interested parties on the discussion draft of proposed modifications to Chapter VII of the Transfer Pricing Guidelines covering low value-adding intra-group services relating to Action 10 of the BEPS Action Plan.

NERA transfer pricing experts Dr. Stuart Harshbarger, Dr. Vladimir Starkov, and Guillaume Madelpuech submitted their comments on 14 January 2015.  Intra-group services of the kind that do not contribute significantly to fundamental risks of success and failure of a business (“low value-adding” services) tend to be some of the most scrutinized categories of intercompany transactions in some jurisdictions and are responsible for many instances of double taxation. Yet, based on the fact that—due to their very nature—charges for these types of services tend to be close to the costs incurred to provide these services, the authors do not believe that intercompany transactions involving such low value-adding services constitute a significant opportunity for BEPS. As such, the authors support the OECD’s position not to have developed specifically an action for service transactions under the BEPS Action Plan, even though certain member states or observing states were in favor of such an initiative. On the contrary, they believe that the current Transfer Pricing Guidelines and the arm’s length principle are sufficient, if properly applied, to impede any such BEPS.