Transfer pricing guidelines refer to non-binding rules or recommendations issued by tax authorities providing framework principles and methodologies for taxpayers to establish arm’s length transfer prices for controlled transactions.
Key Types of Guidelines:
- OECD Transfer Pricing Guidelines represent an international consensus and are often adopted domestically.
- UN Model Double Taxation Convention addresses attribution of taxing rights between jurisdictions.
- Bilateral APAs promote certainty through agreed transfer pricing arrangements between tax administrations.
Example:
The U.S. publishes extensive Transfer Pricing Regulations incorporating the latest OECD chapter on intangibles to outline
qualifying transactions warranting special consideration.
Takeaways:
While flexible rather than prescriptive, adherence to periodically updated guidelines enhances planning and reduces discretion during audits. Comprehensive coverage promotes globally consistent approaches mitigating double taxation and disputes over differing interpretations.