Friday, 8 May 2015

OECD discussion draft on cost contribution arrangements released

The OECD, as part of its work on the action plan to address base erosion and profit shifting
(BEPS), released a discussion draft on 29 April 2015 proposing revisions to Chapter VIII of the
Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations on cost
contribution arrangements (CCAs). The proposed changes would update and expand
guidance for ensuring that the application of a CCA within a multinational group is consistent
with the arm’s length principle.
As with other discussion drafts on BEPS actions, the proposals do not represent a consensus
view from the G20/OECD governments involved, but are designed to provide preliminary but
substantive proposals for public analysis and comment.
The discussion draft proposes a significant change to the transfer pricing of CCAs by
stipulating that contributions made by participants would need to be assessed, in almost all
cases, by reference to “value.” This is a change from the current guidance, which leaves open
the question of whether cost or value should be used. This change is proposed to ensure that
the transfer pricing outcomes under CCAs are consistent with those relating to intangibles
developed outside CCAs and with developments in relation to the control and management of
risk, presumably relating to concerns about minimally functional entities that provide funding
for the development of intangibles.
Most CCAs to date have been based on costs, in part because of the accessibility of similar
arrangements between third parties that are based on costs (e.g. joint ventures in the oil and
gas and pharmaceutical industries).
The discussion draft does not make any reference to transitional arrangements, so businesses
may need to apply a value-based assessment of contribution in relation to existing multi-year

Source & more info: Deloitte