25 January 2022
OECD releases the latest edition of the Transfer Pricing Guidelines

On 20 January 2022, the Organisation for Economic Co-operation and Development (OECD) released the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (TP Guidelines).
In the new TP Guidelines, released after a span of five years, the OECD has consolidated the following three reports developed over the last couple of years to the 2017 TP Guidelines.
  • The report, Revised Guidance on the transactional Profit Split Method, was approved on 4 June 2018. This report has replaced the Guidance in Chapter II, Section C (paragraphs 2.114-2.151) found in the 2017 Transfer Pricing Guidelines and Annexes II and III to Chapter II.
    This Guidance aims to clarify when the transactional Profit Split Method is the Most Appropriate Method (MAM) to apply. It also explains how the Profit Split Method should be applied and includes several examples illustrating the principles discussed.
  • The report Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles, approved on 4 June 2018, has been incorporated as Annex II to Chapter VI.
    This Guidance is intended to help tax administrations in applying the approach to Hard-to-value Intangibles (HTVI) under the Base Erosion and Profit Shifting (BEPS) Action 8. The Guidance contains three main components: (i) an outline of principles underlying the application of the HTVI approach; (ii) a number of examples clarifying the application of the HTVI approach; and (iii) specifics on the interaction between the HTVI approach and access to the mutual agreement procedure.
  • The report Transfer Pricing Guidance on Financial Transactions, adopted on 20 January 2020, has been incorporated into Chapter I (new Section D.1.2.2) and in a new Chapter X.
    This was the first specific Guidance from the OECD focused on transfer pricing aspects of financial transactions, and it includes illustrative examples. The Guidance covers the accurate delineation of financial transactions, in particular with respect to capital structures of multinational enterprises. The Guidance also addresses specific issues related to the pricing of financial transactions such as treasury functions, intra-group loans, cash pooling, hedging, guarantees, and captive insurance.
Apart from the above consolidation, the OECD has made consistency changes to the rest of the TP Guidelines to align with the added reports. 
Our Comments
In a global economy where MNEs play a prominent role, Transfer Pricing continues to be high on the agenda of the taxpayers and country’s tax administrations.
The OECD transfer pricing guidelines, first issued in 1995, analyze and illustrate various methods and principles for satisfying the arm’s length requirements and are intended to guide the resolution of transfer pricing issues.
The OECD, since then, has been updating the TP Guidelines to align with the global business and economic scenarios. The previous update to the TP Guidelines in the 2017 edition included substantial changes related to the 2015 OECD BEPS action plans, including aligning transfer pricing outcomes with value creation and transfer pricing documentation and country-by-country reporting​.
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