The OECD has published a draft update to Chapter VII of the OECD Transfer Pricing Guidelines, focusing on intra-group services. While the draft does not fundamentally alter existing rules, it confirms a long-term trend in the field of transfer pricing: an increasing emphasis on demonstrating the economic substance of intra-group services and the associated documentation requirements.
Specifically, the draft provides a more detailed description of the application of the "benefit test"—the assessment of whether a service provides an economic benefit to the recipient and whether an independent party would be willing to pay for such a service. This benefit may consist, for example, of increased revenue, reduced costs, or streamlined processes. Simultaneously, the OECD stresses that the mere existence of a contract, invoice, or payment does not automatically prove that a service was actually rendered.
A significant portion of the draft is also dedicated to the documentation of intra-group services. The OECD recommends retaining not only contracts but also evidence of the actual provision of services and their benefits, such as internal communication, project documentation, or specific deliverables (e.g., reports, expert opinions, resolved IT tickets, etc.). At the same time, it emphasizes the need to document the method used to determine the transfer price, including the cost base and the allocation keys applied.
In conclusion, the draft is also consistent with the case law of the Supreme Administrative Court regarding the requirement to prove the economic substance of intra-group services. Companies must be able to demonstrate not only the existence of a service but also its actual benefit to the recipient. We therefore recommend conducting a timely review of the quality of your supporting documentation, upon which the tax deductibility of costs incurred for intra-group services depends. Should you be interested, we would be happy to assist you in preparing this documentation, which can significantly facilitate the substantiation of services during a tax audit.
This text was translated by AI.
