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Transfer pricing
Whakarere rawa

OECD transfer pricing guidelines (July 2010)

The OECD's transfer pricing guidelines for multinational enterprises and tax administrations provide guidance on the application of the "arm's-length principle", which is the international agreement on the assessment for tax purposes of cross-border transactions between associated parties. Consistent application of the arm's-length principle helps to ensure that the taxable profits reported by MNEs reflect the economic activity undertaken there. Taxpayers can avoid the risk of double taxation that may result from a dispute between two countries about the outcome of the arm’s-length fee for their cross-border transactions.

The 2010 revision to the transfer pricing guidelines is the first major revision to this document since they were first released in 1995. It contains new, more detailed guidance on how to:

  • perform comparability analyses in practice to compare the conditions of transactions between associated enterprises and independent enterprises
  • select the most appropriate transfer pricing method to the circumstances of the case
  • apply in practice two of the OECD-approved transfer pricing methods, referred to as "transactional profit methods", namely the transactional net margin method and the transactional profit split method.

This update also includes a new chapter providing detailed guidance on the transfer pricing aspects of business restructurings.