Transfer pricing

OECD releases a proposed revision of Chapters I-III of the Transfer Pricing Guidelines


From 9-Sep-2009 to 9-Jan-2010


On 9 September 2009, the OECD released for public comment a proposed revision of Chapters I-III of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereafter “TPG”). This follows from the release in May 2006 of a discussion draft on comparability issues and in January 2008 of a discussion draft on transactional profit methods, and from discussions with commentators during a two-day consultation that was held in November 2008.


This represents an important update of the existing guidance on comparability and profit methods which dates back to 1995. The main proposed changes are as follows:


-- Hierarchy of transfer pricing methods: In the existing TPG, there are two categories of OECD-recognised transfer pricing methods: the traditional transaction methods (described at Chapter II of the TPG) and the transactional profit methods (described at Chapter III). Transactional profit methods (the transactional net margin method and the profit split method) currently have a status of last resort methods, to be used only in the exceptional cases where there are no or insufficient data available to rely solely or at all on the traditional transaction methods. Based on the experience acquired in applying transactional profit methods since 1995, the OECD proposes removing exceptionality and replacing it with a standard whereby the selected transfer pricing method should be the “most appropriate method to the circumstances of the case”. In order to reflect this evolution, it is proposed to address all transfer pricing methods in a single chapter, Chapter II (Part II for traditional transaction methods, Part III for transactional profit methods).


-- Comparability analysis: The general guidance on the comparability analysis that is currently found at Chapter I of the TPG was updated and completed with a new Chapter III containing detailed proposed guidance on comparability analyses.


-- Guidance on the application of transactional profit methods: Proposed additional guidance on the application of transactional profit methods was developed and included in Chapter II, new Part III.


-- Annexes: Three new Annexes were drafted, containing practical illustrations of issues in relation to the application of transactional profit methods and an example of a working capital adjustment to improve comparability.

Interested parties are invited to submit comments (in Word format only) by 9 January 2010 to Jeffrey Owens, Director, CTPA (

Proposed revision of Chapters I-III of the Transfer Pricing Guidelines

Also available: Proposition de révision des chapitres I-III des Principes en matière de prix de transfert


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