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OECD releases new Transfer Pricing Guidelines

January 26, 2022

Authored by RSM Canada LLP

Cleo L. Melanson, CPA, CA, CMA shared this article


On Jan. 20, 2022, the Organisation for Economic Co-operation and Development (the OECD) released the 2022 edition of the Transfer Pricing Guidelines (the 2022 Guidelines), modifying its previous guidelines issued in 2017 (the 2017 Guidelines). 

The following are the key revisions made to the 2017 Guidelines:

1. Revisions to Chapter II relating to the application of the transactional profit split method:

a. The OECD has significantly expanded the guidance on when a profit split method may be the most appropriate. It describes presence of one or more of the following indicators as being relevant: 

i. Each party makes unique and valuable contributions. 

ii. The business operations are highly integrated such that the contributions of the parties cannot be reliably evaluated in isolation from each other. 

iii. The parties share the assumption of economically significant risks, or separately assume closely related risks. 

b. The OECD clarified that corporations should consider the relative merits and shortcomings of each transfer pricing method and the presence or absence of one or more of the indicators will not necessarily lead to the conclusion that the transactional profit split method will (or will not be) the most appropriate method.

2. Revisions to Chapter VI relating to the approach to hard-to-value intangibles (HTVI):

a. The HTVI approach allows tax administrations to recharacterize transactions relating to the transfers of intangibles using ex post outcomes to determine the ex ante value. This may lead to uncertainty, particularly for taxpayers, and may even result in tax disputes between taxpayers and tax authorities or between tax authorities.

b. The OECD has introduced Annex II to Chapter VI to provide guidance on the application of adjustments resulting from the application of the HTVI approach. This guidance should improve consistency and reduce the risk of economic double taxation.

c. The guidance also includes examples to clarify the application of the HTVI approach in different scenarios and encourages the use of dispute resolution mechanism, e.g., advance pricing arrangements (APA) or mutual agreement procedures (MAP), to reduce uncertainty and instances of double taxation. 

3. Introduction of new guidance on financial transactions:

a. Further to the BEPS Action 4 (Limiting base erosion involving interest deductions and other financial payments) and Actions 8-10 (Aligning Transfer Pricing Outcomes with Value Creation), the OECD introduced Chapter X in the 2022 Guidelines that provides guidance on determining the arm’s length conditions for treasury activities including intra-group loans, cash pooling, hedging, financial guarantees and captive insurance transactions.

More transparency in the international tax community

The 2022 Guidelines reiterate the OECD’s commitment to equip governments with domestic and international rules and instruments to address tax avoidance, ensuring that profits are taxed where economic activities generating the profits are performed. In addition, the OECD is committing to reduce the scope of double economic taxation and lengthy tax disputes. Multinationals should review the 2022 Guidelines to adapt their intercompany arrangements because some, if not all, of the OECD’s recommendations are commonly adopted in domestic tax legislation. 

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This article was written by Nakul Kohli and originally appeared on 2022-01-26 RSM Canada, and is available online at

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