The arm’s length pricing for intra-group services – transfer pricing

Lee, Yi Ying
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The purpose of this research report is to identify any improvements that can be made to the South African transfer pricing legislation for intra-group services. South Africa’s transfer pricing legislation for intra-group services will be compared to Aligning Transfer Pricing Outcomes with Value Creation, Action 8-10, 2015 Final Reports, OECD/G20 Base Erosion and Profit Shifting Project (‘BEPS Action Plan’) released by the Organisation for Economic Co-operation and Development (‘OECD’). The Action 10 of the BEPS Action Plan introduces a simplified transfer pricing approach for low value-adding intra-group services. The simplified approach aims to reduce base erosion payments through excessive management fees and head office expenses (OECD, 2015:141). According to Verlinden and Katz (2015:1): ‘… the simplified approach lowers the burden on multinational enterprise groups to demonstrate the beneficial nature of the low value-adding activities for other MNE group members; and allows for an elective approach for reducing the administration involved in the pricing of low value-adding services. The OECD is achieving an appropriate balance between theoretical sophistication and practical application that is commensurate with the tax at stake in the countries paying and receiving the charges … .’ This approach will benefit tax authorities with limited resources in performing transfer pricing audits enabling them to verify the arm’s length nature within the intra-group services charge (Watson, 2015:8). Key words: Anti-avoidance, BEPS Action Plan, Transfer Pricing, Arm’s Length Method, Arm’s Length Price, Intra-Group Services, Low Value-Adding Intra-Group Services, Comparable Uncontrolled Price Method, Resale Price Method, Cost Plus Method, Transactional Net Margin Method, OECD Guidelines, OECD.
A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce in the field of Taxation
Online resource (54 leaves)
Lee, Yi Ying (2017) The arm’s length pricing for intra-group services – transfer pricing, University of the Witwatersrand, Johannesburg, <>