OECD seeks input on transactional profit split method for BEPS guidance

The OECD, in a discussion draft released December 16, announced that it is working on revising OECD transfer pricing guidelines relating to the use of the transactional profit split method and has requested feedback on issues associated with that project.

The guidance was released in connection with action 10 of the OECD/G20 base erosion and profit shifting (BEPS) plan, which mandates that to prevent BEPS, the OECD “clarify the application of transfer pricing methods, in particular profit splits, in the context of global value chains.” The guidance also seeks to address concerns identified in OECD BEPS work on the tax challenges of the digital economy.

In the draft guidance, the OECD described scenarios where the application of a transactional profit split method may be more suitable than a one-sided transfer pricing method. The OECD said it seeks stakeholder input on how to best analyze these scenarios.

The OECD states that it is particularly interested in identifying the circumstances where use of the transactional profit split method is appropriate and the factors that should be used to split profits.

Written comments the discussion draft are due by February 6. The draft will be addressed at a public consultation to be held March 19–20.

See:

• Discussion draft on the use of profit splits in the context of global value chains