Updated OECD transfer pricing guidelines - KPMG United Kingdom
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TMD: Updated OECD transfer pricing guidelines

Updated OECD transfer pricing guidelines

The 2017 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations has been released.


Partner, Corporate Tax

KPMG in the UK


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On 10 July 2017, the OECD released the 2017 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the Guidelines). The Guidelines provide guidance on the application of the ‘arm’s length principle’, which is the international consensus on the valuation, for income tax purposes, of cross-border transactions between associated enterprises. The 2017 edition of the Guidelines mainly reflects a consolidation of the changes resulting from the OECD/G20 base erosion and profit shifting (BEPS) project. Given the way in which the Guidelines are integrated into the domestic law of certain countries, including by direct reference to the OECD Guidelines themselves, this update further clarifies the status of the BEPS changes to the Guidelines. This is emphasised by the inclusion of the revised recommendation of the OECD Council on the Determination of Transfer Pricing between Associated Enterprises. The revised recommendation reflects the relevance to address BEPS and the establishment of the inclusive framework on BEPS.

The chapters on documentation (chapter V), intangible assets (VI), services (VII) and cost contribution arrangements (VIII) have been deleted and replaced in their entirety. Chapters I and II and IV on the arm’s length principle (particularly the treatment of risk), transfer pricing methods and administrative processes to avoid disputes have been partially amended. Changes have also been made throughout the report to maintain consistency between the old and the new language.

The UK is a prominent member of the OECD and prescribes to the OECD Guidelines. Some of the BEPS inspired changes (such as the country by country reporting requirements) have been integrated into national law, others are expected to follow within the next few years. Furthermore, UK transfer pricing legislation explicitly requires that the statutory rules should be interpreted so as to ensure consistency with the Guidelines. Treasury assent is required in order for the UK legislation to incorporate each new edition of the Guidelines.

We note the following initial impressions of the updated Guidelines:

  • There is no new substantive content in the published version of the Guidelines beyond what was already announced in the OECD BEPS Actions 8-10 and Action 13 Final Reports;
  • Formal publication of the Guidelines may enhance the legal standing of the Guidelines in some jurisdictions, depending on how the countries reflect OECD guidelines in local law;
  • The revised Guidelines do not incorporate forthcoming changes to the profit split guidance in Chapter II. A revised discussion draft on this topic was released 22 June 2017;
  • In practice, we are already aware of HMRC referencing the updated guidance.

For further information please contact:

Kirsty Rockall

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