TaxTMI 
TaxTMI 
Action Plan 8-10 - Aligning Transfer Pricing Outcomes with Value Creation
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....ed by a capital-rich MNE group maker, where those returns do not correspond to the level of activity undertaken by the funding company. 10 This action focus on other high-risk areas, which include: * The scope for addressing profit allocations resulting from controlled transactions which are not commercially rational. * The scope for targeting the use of transfer pricing methods in a way which results in diverting profits from the most economically important activities of the MNE group, and * The use of certain types of payments between members of the MNE group (such as management fees and head office expenses) to erode tax base in the absence of alignment with the value creation. BEPS Actions 8-10 address transfer pricing guidance....
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....Each party makes unique and valuable contributions; * The business operations are highly integrated such that the contributions of the parties cannot be reliably evaluated in isolation from each other; * The parties share the assumption of economically significant risks, or separately assume closely related risks. The guidance makes clear that while a lack of comparables is, by itself, insufficient to warrant the use of the profit split method, if, conversely, reliable comparables are available it is unlikely that the method will be the most appropriate. Moreover, the revised text expands the guidance on how the profit split method should be applied, including determining the relevant profits to be split, and appropriate profit splitti....
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....ons In February 2020 under the mandate of BEPS Action 4 and 8-10, the OECD released Transfer Pricing Guidance on Financial Transactions. The guidance is significant because it is the first time the OECD Transfer Pricing Guidelines include guidance on the transfer pricing aspects of financial transactions, which will contribute to consistency in the interpretation of the arm's length principle and help avoid transfer pricing disputes and double taxation. The report includes a number of examples to illustrate the principles discussed in the report. Section B provides guidance on the application of the principles contained in Section D.1 of Chapter I of the OECD Transfer Pricing Guidelines to financial transactions. In particular, Section B.....