The OECD Action Plan on Base Erosion and Profit Shifting (BEPS), published in July 2013, identifies 15 actions to address BEPS in a comprehensive manner and sets deadlines to implement these actions.

BEPS Action 10 directs the OECD to develop transfer pricing rules to provide protection against common types of base eroding payments, such as management fees and head office expenses.

The discussion draft presents a re-written version of Chapter VII Special Considerations for Intra-Group Services of the OECD Transfer Pricing Guidelines to replace the existing chapter.

It proposes an approach which identifies a wide category of common intra-group services commanding a very limited profit mark-up on costs, applies a consistent allocation key for all recipients, and provides greater transparency through specific reporting requirements.

The re-written chapter includes:

•  a standard definition of low value-adding intra-group services;
• clarifications of the meaning of shareholder activities and duplicative costs;
• guidance on appropriate mark-ups for low value-adding intra-group services;
• guidance on appropriate cost allocation methodologies to be applied in the context of low value-adding intra-group services;
• guidance on the satisfaction of a simplified benefit test with regard to low value-adding services; and
• guidance on documentation that taxpayers should prepare and submit in order to qualify for the simplified approach.

The closing date for the consultation is 14 January 2015.

The OECD discussion draft is available at http://www.oecd.org/ctp/transfer-pricing/discussion-draft-action-10-low-value-adding-intra-group-services.pdf