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TPS Newsleter – July 2018



In our July 2018 News Alert, we inform on the latest amendments to the OECD Guidelines on Intangible Assets and the Profit-Split Method, ongoing projects of the BEPS Inclusive Framework and the latest  court rulings on transfer pricing




Revised Guidance on the Application of the Transactional Profit Split Method

This past June 21st, the OECD published a report on the results of the work carried out in the inclusive framework from BEPS, on the application of the method of the distribution of the result (PSM). The content of this report replaces the paragraphs for this method in the OECD transfer pricing guidelines.
The new guidelines on PSM provide clearer recommendations on when this method is most appropriate, its strengths and weaknesses, the concepts of “unique and valuable contributions”, “unique and valuable intangibles” and “highly integrated operations”, the calculation of the joint result to be distributed and the distribution criteria.

Guidance on “Hard-to-Value Intangibles”

The OECD has also published a report on the approach to the so-called “hard-to-assess intangibles” that completes the work carried out during the BEPS project on this subject, and which is incorporated as an annex to Chapter VI of the transfer pricing guidelines.

Draft Guidelines on Transfer Pricing in Financial Transactions

On July 3rd, the OECD published a draft of a new chapter of the transfer pricing guidelines relating to the application of the principle of free competition to financial operations.
In one of the first subparagraphs, the draft deals with the correct delimitation of the intragroup financial operations and the application of the comparability analysis to these types of operations.
The subsequent sections discuss the practical aspects of financing operations (Intragroup loans, cash-pooling, hedges), guarantees and captive insurers.

Future Revisions of the Guidelines

During the months of May and June, the OECD invited stakeholders to formulate their proposals on upcoming revisions to the transfer pricing guidelines in relation to:
Chapter IV: Administrative Aspects
Chapter VII: Intragroup Services



Judgement of the CJEU on May 31st, 2018

The Tribunal considers that, although German tax regulations on transfer pricing apply only to operations linked to non-resident entities, it constitutes a discriminatory measure justified by “the need to preserve a Distribution of tax powers between the Member States”.


Spanish courts

Judgement of the National Court on February 26th, 2018

The court dismisses the appeal raised by Microsoft Ibérica and validates the corrections practiced by the tax administration for commission of the sales and services of marketing, calculated by applying the method of the net operating margin. In this correction of the transfer price, the Administration carried out their own search of comparables, which prevails over that provided by the taxpayer in the inspection procedure and over the one carried out by an independent expert.

Supreme Court Order of May 9th, 2018 

Through this order, the Supreme Court has agreed to process an appeal that must clarify if the tax administration is obliged to practice the so-called bilateral adjustment-or correction of the market value in the other linked party-in operations linked to Spanish taxpayers.
To date, such bilateral adjustment is recognised by the rules in the context of a separate tax procedure at the request of the other party involved.

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