On 18 June 2026, the OECD released a Public Consultation Document proposing a revision of Chapter VII of the OECD Transfer Pricing Guidelines (“TP Guidelines”) on intra-group services, which seeks to align the existing guidance with the foundational principles set out in Chapters I-III. The discussion draft covers the accurate delineation of intra-group services, the determination of arm's length charges, documentation requirements and include new examples. The revisions are not intended to change the general principles underlying the TP analysis of intra-group services and the guidance on low value-adding intra-group services (“LVAS”) remains substantially unchanged.
Comments may be submitted until 22 July 2026, with a public consultation scheduled for November 2026.
Accurate delineation at the core of the analysis
The draft introduces the accurate delineation as the first step of the transfer pricing analysis for intra-group services, consistent with Section D.1 of Chapter I.
The guiding principle is that the characterisation of a transaction should be based on its commercial and financial reality rather than on the labels assigned by the parties. Accordingly, the existence of written agreements or service fee descriptions is not, in itself, evidence that services have been rendered. Conversely, the absence of formal arrangements does not preclude a finding that intra-group services have been provided.
The draft also highlights the importance of the functional analysis. The transfer pricing outcome may differ significantly depending on whether the service provider owns relevant assets, makes non-routine contributions and assumes most of the economically significant risks, as compared with a provider performing routine activities under the supervision of another party with limited risk.
Finally, the draft further clarifies that there should be no presumption that a service transaction can be reliably priced using a one-sided method, nor that either the service provider or the service recipient is the tested party. Both determinations should follow from the accurate delineation.
Clarifications on the “Benefit Test”
The benefit test requires an assessment of whether the activity of one group member provides another group member with economic or commercial value that enhances or maintains its business position, having regard to whether an independent enterprise would have been willing to pay for the activity or would have performed it in-house.
The draft provides several clarifications:
- a benefit may take the form of an expected increase in profitability, a reduction in expenses or an improvement in operations. It may arise during or after the period in which the activity is performed, provided that it was reasonably expected at the time of the transaction. Accordingly, a service may be regarded as having been rendered even where the expected benefit is ultimately not realised.
- where the expected benefit does not materialise, multi-year data may be relevant in assessing whether the benefit was reasonably expected.
- the fact that the recipient incurs losses during the years under analysis does not, in itself, mean that no intra-group service has been rendered.
- the benefit test and the determination of the arm's length remuneration remain separate analyses. The existence of an intra-group service should not be denied solely on the grounds that the related charge is not at arm's length.
Further guidance on “Shareholder-activities”, “Incidental benefits” and “On-call services”
Shareholder activities
The draft further develops the distinction between shareholder activities and chargeable intra-group services. Shareholder activities are activities performed by an MNE solely because of its ownership interest in one or more associated enterprises and that benefit only the shareholder itself. As such, they do not justify a charge to other group members.
The OECD also distinguishes shareholder activities from the broader concept of “stewardship activities”, which may include services provided to other group members, such as planning, emergency management or technical advice.
The draft clarifies that the mere fact that an activity is performed by the parent company's personnel, including senior management does not in itself make the activity a shareholder activity.
Where activities are performed by a shareholder other than solely because of its ownership interest, they may constitute chargeable intra-group services provided that the benefit test is satisfied. Where the parent company also benefits from the activity, the portion of costs attributable to that benefit should not be allocated to other group members.
Incidental benefits and passive association
The draft confirms that incidental benefits do not give rise to a chargeable intra-group service. A benefit is incidental where, at the time the activity is performed, any potential benefit is so indirect or remote that an independent enterprise would not be willing to pay for it.
Similarly, benefits arising solely from passive association with an MNE group, rather than from a specific activity performed for the recipient, do not satisfy the benefit test. This should be distinguished from situations where activities are undertaken to actively promote or enhance the MNE group's attributes for the benefit of particular group members.
On-call services
The draft introduces a new subsection addressing on-call services. It recognises that the mere availability of staff, expertise or equipment may itself constitute a service where an independent enterprise would be willing to pay for such availability, even where actual use is limited.
In assessing the benefit provided, the draft outlines that consideration may be given to the extent to which the service has been used over a period of several years.
Services provided in connection with other transactions
The draft provides additional guidance on situations where intra-group services are connected with other controlled transactions and where the service element may need to be evaluated separately.
For example, activities relating to the administration and enforcement of intellectual property rights should be distinguished from the development, enhancement, maintenance, protection or exploitation (DEMPE) of the underlying intangibles.
The draft also recognises that, in certain circumstances, it may be difficult to distinguish between the provision of services and a transfer of intangibles or rights in intangibles. For example, where a parent company provides strategic advice using proprietary know-how, frameworks or methodologies, the recipient may acquire the ability to independently apply that know-how. In such cases, the arrangement may involve a transfer of know-how rather than the provision of a service.
The characterisation of the transaction is relevant in determining the appropriate transfer pricing analysis and the most appropriate transfer pricing method.
Determination of the arm's length charge
Selection of the most appropriate method
The draft confirms that the most appropriate transfer pricing method should be selected in accordance with the guidance in Chapters I-III. It should not be assumed that a cost-based method is always appropriate for intra-group services. Instead, the method selection should be based on the economically relevant characteristics of the transaction, including the functions performed, risks assumed and the use of unique or valuable intangibles. The cost-plus and transaction net margin method (TNMM) remain an appropriate method, where supported by the facts and circumstances.
Pass-through costs
The draft provides additional guidance on pass-through costs. Whether a cost should be recharged with or without a mark-up depends on the facts and circumstances. A recharge without a mark-up may be appropriate where the provider acts solely as a paying entity and the recipient would otherwise have incurred the cost directly. Where the provider contributes value beyond that of a paying entity, a mark-up may be granted.
Transactional profit split method
For the first time, Chapter VII includes dedicated guidance on the transactional profit split method (“TPSM”). The draft mentions that TPSM may be appropriate where both parties make unique and valuable contributions, where operations are highly integrated, or where economically significant risks are shared.
Arm's length price and profit
The draft confirms that an arm's length outcome does not necessarily require the service provider to earn a profit. In certain circumstances, a recharge of relevant costs without a mark-up may be appropriate, although this is unlikely where the service provision constitutes the principal activity of the entity or where direct charging is feasible.
Documentation guidance
The draft introduces a dedicated documentation section supplementing Chapter V. While no mandatory minimum documentation requirement is established, the OECD identifies contemporaneous evidence supporting both the benefit test and the pricing analysis as potentially relevant, including service agreements, deliverables, allocation methodologies, cost calculations and supporting third-party invoices.
Low value-adding intra-group services
The draft leaves the existing LVAS framework largely unchanged, including the definition, the 5% mark-up, the cost pool methodology and the associated documentation requirements. It also reiterates that the 5% mark-up should not be used as a benchmark for services falling outside the LVAS regime.
Key takeaways
- Benefit test documentation: whether the documentation supports the expected benefit at the time the service was entered into, including in cases where the expected benefit did not materialise.
- Allocation keys: whether the allocation keys under the indirect-charge approaches are measurable, relevant to the service, verifiable and applied consistently.
- On-call arrangements: whether on-call or retainer arrangements have been appropriately characterised and whether the charge reflects the value of availability, assessed over multiple years where relevant.
- Service/intangible characterisation: whether service arrangements involving IP or methodologies confirm the applicable characterisation.
- Method selection: whether the choice of TP method and the identification of the tested party follow from the accurate delineation of the transaction (i.e., no particular method, including cost-based methods, is presumed to be the most appropriate for intra-group services).
- Pass-through costs: whether on a case-by-case basis the costs recharged without a mark-up are appropriately treated as pass-throughs (i.e., assess whether the intermediary contributes value).
- LVAS mark-up: whether the 5% LVAS mark-up is applied only for in-scope services and is not used as a general benchmark for services outside that scope.
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