Transactional Adjustments in Transfer Pricing.

Cover -- Title Page -- Copyright Page -- Table of Contents -- Acknowledgements -- Abbreviations -- Preface -- Introduction -- Part I: Transactional Adjustments Framework -- Chapter 1: Transactional Adjustments and Their Role within the Arm's Length Principle Framework -- 1.1. Brief remarks on the enforcement of transfer pricing rules -- 1.1.1. Comparability analysis -- 1.1.2. The assessment of comparable references -- 1.1.3. Comparability factors -- 1.1.4. Comparability methods -- 1.1.4.1. Traditional methods -- 1.1.4.2. Profit-based methods -- 1.1.4.3. Other methods -- 1.1.5. Timing and formal issues -- 1.2. The nature and aim of the arm's length principle -- 1.2.1. The arm's length principle as an optimization mandate with a minimum content -- 1.2.2. The arm's length principle as a unit of measurement in the context of the ability-to-pay principle -- 1.2.3. The arm's length principle does not properly reflect the rationale behind MNEs -- 1.2.4. The arm's length principle as a full or limited fiction -- 1.2.5. Complexity derived from the arm's length principle entails an undesirable two-speed system -- 1.2.6. The arm's length principle and tax abuse -- 1.3. Transactional adjustments: Concept and types -- 1.3.1. Definition of the "transactional adjustments" concept -- 1.3.2. Types of transactional adjustments -- 1.4. Brief remarks on the evolution of transactional adjustments -- 1.4.1. Historical background of transactional adjustments since the dawn of transfer pricing rules -- 1.4.1.1. The dawn of transactional adjustments at the domestic level: The United States -- 1.4.1.2. The dawn of transactional adjustments at the international level: The 1979 OECD Report on Multinational Enterprises -- 1.4.2. Transactional adjustments in the 1995 and 2010 versions of the OECD TPG.

1.4.3. Current position of the OECD on the subject matter: The BEPS Project and the 2017 OECD TPG -- 1.5. Interim conclusions -- Chapter 2: The Normative Framework of Transactional Adjustments -- 2.1. The DTC framework: Article 9(1) as a provision that restricts domestic law -- 2.1.1. Article 9(1) determines restrictions on domestic law and cannot be applied autonomously -- 2.1.2. Article 9(1) does not function as an enabling provision vis-à-vis domestic law -- 2.1.3. Article 9(1) is not merely declaratory -- 2.1.4. Article 9(1) does not restrict all of the adjustments that may be enforced through domestic law -- 2.1.5. Article 9(1) is not relevant for DTC income qualification purposes -- 2.1.6. Article 9(1) restricts transactional adjustments contrary to the arm's length principle -- 2.2. Domestic law as a necessary ground to enforce transactional adjustments -- 2.2.1. Authorization and parameters to conduct transactional adjustments present in a legally binding instrument (Australia) -- 2.2.2. Authorization in a law-binding instrument: Parameters defined in regulations (Canada) -- 2.2.3. Authorization present in regulations (United States) -- 2.2.4. Authorization present in a law-binding instrument with the non-existence of specific parameters on how to conduct transactional adjustments (Spain, 2015 CITL) -- 2.2.5. Absence of an explicit authorization to conduct transactional adjustments (Spain, 2006 CITL) -- 2.3. The OECD TPG as an interpretative tool for assessing transactional adjustments -- 2.3.1. Soft law and the interpretative process in tax law -- 2.3.1.1. The coherence of soft law with its own nature -- 2.3.1.2. The role of the OECD TPG in the interpretative process of transfer pricing rules -- 2.3.2. Interpretation proposal applied to the OECD TPG as a relevant transfer pricing soft law instrument -- 2.3.2.1. DTC level: Article 9(1).

2.3.2.2. Domestic level: Transfer pricing domestic rules -- 2.4. Interim conclusions -- Part II: Methodology Proposal to Enforce Transactional Adjustments in Accordance with the Arm's Length Principle -- Chapter 3: Fact Finding and Qualification as Critical Steps Prior to the Assessment of Transactional Adjustments -- 3.1. Transactional adjustments should not be performed in the fact-finding stage -- 3.1.1. Comparability factors: The importance of a correct fact assessment -- 3.1.1.1. Coincidence of the conduct of the parties with respect to agreed contractual terms -- 3.1.1.2. Contracts may not reflect all of the circumstances and conditions of the transaction -- 3.1.1.3. Contracts may wrongly reflect certain features of the transaction -- 3.1.1.4. Complete absence of contracts -- 3.1.2. Criteria alien to the fact-finding stage that are incompatible with the arm's length standard -- 3.2. The relevant distinction between fact-finding instruments and qualification rules -- 3.3. Compatibility of transactional adjustments and requalification measures -- 3.4. Interim conclusions -- Chapter 4: The Definition of Limits to the Scope of Transactional Adjustments and the Consequences Derived from Their Enforcement -- 4.1. Scope of transactional adjustments within the arm's length principle -- 4.1.1. Scope as defined in the OECD TPG10: A double-pronged structure -- 4.1.1.1. First circumstance: Substance over form -- 4.1.1.2. Second circumstance: Commercial rationality and the absence of comparables -- 4.1.2. The single circumstance approach embedded in the OECD TPG17 -- 4.1.3. Scope proposal: The inability to conduct a comparability analysis in an adequate manner -- 4.1.3.1. The non-existence of comparables as a starting point -- 4.1.3.2. The use of non-conventional methods to ascertain the adequacy of the features of the transaction.

4.2. The consequence of transactional adjustments: Minimum possible intervention to comply with the arm's length principle -- 4.2.1. The building of an alternative transaction in the 2010 and 2017 versions of the OECD TPG: As little intervention possible -- 4.2.2. Definition of an adequate alternative transaction based on objective parameters -- 4.2.2.1. Adjustment of conditions that independent parties would never have agreed on -- 4.2.2.2. The most beneficial alternative to the taxpayer -- 4.3. Burden of proof -- 4.4. Interim conclusions -- Chapter 5: Implementation of the Proposed Methodology in Complex Transfer Pricing Scenarios -- 5.1. Attribution of risks -- 5.2. Attribution of intangible-related returns -- 5.2.1. The concept of economic ownership applied in the context of transfer pricing is contrary to the arm's length principle -- 5.2.2. Compensation of risks and functions as a proper means to allocate profits derived from intangible assets -- 5.3. Hard-to-value intangibles (HTVI) -- 5.3.1. United States: Commensurate with income standard -- 5.3.2. Germany: Price adjustment clause due to the transfer of functions -- 5.3.3. OECD: Hindsight derived from the arm's length principle -- 5.4. Business restructurings -- 5.5. Cost contribution arrangements -- 5.6. Interim conclusions -- Chapter 6: Conclusions -- 6.1. The arm's length principle as the theoretical framework for transactional adjustments -- 6.2. The notion of transactional adjustments and their evolving character -- 6.3. The multi-level legal framework of transactional adjustments -- 6.4. The fact assessment stage as a step prior to the analysis of transactional adjustments -- 6.5. The necessary distinction between transactional adjustments, the arm's length principle and qualification rules.

6.6. The scope of transactional adjustments: A unified approach proposal based on the comparability analysis -- 6.7. Consequences of transactional adjustments: A proposal to define suitable alternatives to the controlled transaction -- 6.8. A qualified burden of proof is an essential element in the framework of transactional adjustments -- 6.9. The testing of the model proposal in conflicting transfer pricing scenarios -- Bibliography.

This book examines whether, and to what extent, transactional adjustments may be applied within transfer pricing.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2024. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.