Takeaways from the latest edition of the OECD Transfer Pricing Guidelines

Takeaways from the latest edition of the OECD Transfer Pricing Guidelines

Thu 03 Mar 2022

On 20 January 2022, the Organisation for Economic Co-operation and Development (OECD) released the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TPG).

This blog provides a summary of the revised Chapters of the OECD TPG, and highlights what tax advisors and taxpayers need to know.

The revised guidelines integrate the OECD’s Base Erosion and Profit Shifting (BEPS) further work on transfer pricing completed in 2018 and 2020. In short, the changes to the 2017 edition of the Transfer Pricing Guidelines result from:

  • The Revised Guidance on the Transactional Profit Split Method, approved by the OECD/G20 Inclusive Framework on BEPS on 4 June 2018, which replaced the Guidance in Chapter II, Section C (paragraphs 2.114-2.151) found in the 2017 Transfer Pricing Guidelines and Annexes II and III to Chapter II.
  • The Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles, approved by the OECD/G20 Inclusive Framework on BEPS on 4 June 2018, which has been incorporated as Annex II to Chapter VI.
  • The Transfer Pricing Guidance on Financial Transactions, adopted by the OECD/G20 Inclusive Framework on BEPS on 20 January 2020, which has been incorporated into Chapter I (new Section D.1.2.2) and in a new Chapter X.
  • The consistency changes to the rest of the OECD TPG needed to produce this consolidated version approved by the OECD/G20 Inclusive Framework on BEPS on 7 January 2022.

Revised sections can be grouped under three main areas (see below). The common approach of the new Guidelines is centred around one main concept: the accurate delineation of the controlled transaction. The Guidelines frequently reinforce the requirement that to apply the arm’s length principle to any type of transaction (intangibles, financial transactions, etc.), the controlled transaction should be accurately delineated by understanding all the commercial and financial relations that affect the transaction.

Update on the application of the transactional profit split method

The transactional profit split method is one of the most discussed and studied transfer pricing methods due to its complexity in terms of application. On the other hand, this method is also promising and seen as a solution for complex and integrated transactions in the changing world of digital economy and trade. The OECD TPG includes an expanded section (Chapter II) including practical recommendations and examples (Annex II to chapter II) of how and when to use the transactional profit split method.

Guidance update on hard-to-valuate intangibles (HTVI) for tax administrations

The term hard-to-value intangibles (HTVI) covers intangibles for which the valuation techniques do not yield a reliable result due to commercial or economic reasons. Therefore, when transferring HTVI’s between related parties, taxpayers may need to use some estimations and predictions. This may give rise to differences of opinion between taxpayers and tax administrations. For this reason, the revised OECD TPG have added an additional chapter (Annex II to Chapter VI) permitting tax administrations to consider ex-post outcomes as presumptive evidence about the appropriateness of the ex-ante pricing arrangements. While this approach can provide a significant benefit to tax administrations, the Guidelines also underline the need for a sensitive and fair evaluation of ex-post assessments and any resulting adjustments to avoid double taxation as much as possible.

Guide to financial transactions

The global economy is experiencing difficult times. Amongst other things, rising energy prices and supply disruption has resulted in more broad-based inflation than previously anticipated. Therefore, it is not hard to predict that the financing of debt will constitute a significant factor in transfer pricing considerations. In this respect, the 2022 OECD TPG, for the first time, a section on financial transactions. Additions to Chapter 1 and the whole of Chapter X discusses all aspects of arm’s length pricing of treasury functions and common treasury transactions such as intra-group loans, cash pooling, hedging and specific transactions such as financial guarantees and captive insurance.


Some jurisdictions accept the OECD TPG as their domestic legislation, so every revision made in the Guidelines is automatically taken into account as an update in the domestic legislation. However, other jurisdictions follow the OECD approach through the adoption of transfer pricing regulations that need to be updated when OECD guidelines change. For this reason, it would not be correct to assume that the updates and explanations made in the 2022 Edition will automatically change the view in every local tax jurisdiction. However, multinational companies are recommended to review their related party transactions under the light of the 2022 Edition to be in a safer position to avoid BEPS related challenges.

To read full version of the 2022 Edition, you can follow the link here.

To listen to Mazars’ recent webinar on this topic, click here.