Transfer Pricing — OECD Framework

Transfer prices are the prices that related companies within a multinational group charge each other for the internal supply of goods, services, intellectual property and financing. The OECD framework ensures these prices conform to the arm’s length principle (ALP) — i.e. the price that independent parties would agree on under comparable circumstances.

• Arm’s Length Principle: Core standard of Article 9 of the OECD Model Tax Convention
• OECD Guidelines: Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations
• BEPS Action Plan: Actions 8–10 and 13 fundamentally revised the Guidelines
• Methods: Comparable Uncontrolled Price (CUP), Resale Price Method, Cost Plus Method, Transactional Net Margin Method (TNMM), Transactional Profit Split Method

The first OECD reports on transfer pricing date to 1979. The current OECD Transfer Pricing Guidelines were first published in 1995 and have been revised multiple times. A significant revision took place in 2010, rewriting Chapters I–III and adding a new Chapter IX on business restructurings. The watershed was the BEPS project (Base Erosion and Profit Shifting, 2013–2015), which led to a comprehensive 2017 update addressing profit shifting through intangibles, risk allocation and other structures. The 2022 consolidated edition incorporates the Financial Transactions guidance (2020). Separately, the Pillar One Amount B guidance was published in February 2024.

The OECD transfer pricing framework is globally applicable and recognised as the standard by over 140 OECD/G20 countries and BEPS Inclusive Framework members. Within the EU, the EU Joint Transfer Pricing Forum (JTPF, established 2002) supplements the OECD Guidelines with practical recommendations. It covers all cross-border transactions between related parties:

• Goods and services
• Use of intangible assets (licences, know-how)
• Intra-group financing (loans, cash pooling)
• Restructurings and business reorganisations

• All intra-group transactions must comply with the arm's length principle
• Selection and application of the most appropriate transfer pricing method
• Preparation and availability of contemporaneous transfer pricing documentation
• Conduct of a comparability analysis (benchmarking)
• Compliance with country-specific documentation and reporting obligations

1 correction:
- 2022 edition cannot contain Amount B guidance from 2024
1 update:
- Official URL deprecated OECD path
5 clarifications.
2 notes.