Tax & Assurance Guidance

New Global Transfer Pricing Guidelines Issued – Higher Standards for All

Posted on August 29, 2017 by

Clayton & Mckervey

Clayton & McKervey

Share This

Share on facebook
Share on twitter
Share on linkedin
Share on email

The Organization for Economic Co-operation & Development (OECD) recently released the latest version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines). These guidelines establish substantially higher standards for transfer pricing compliance in an effort to curb profit-shifting. With this change, tax auditors will expect a greater amount of comprehensive transfer pricing support to reduce the risk of tax adjustments and transfer pricing penalties imposed on companies.    

Why Are the New Guidelines Important?

The new guidelines serve as the international transfer pricing rulebook for tax authorities and multinationals worldwide, with respect to the arm’s-length principal. Many countries specifically reference the OECD Guidelines in domestic tax law and international tax treaties. Interpretations of these guidelines can vary by jurisdiction, however, the key expectation is that multinationals will have a well thought out explanation of their cross-border pricing results. From a practical perspective, the US transfer pricing regulations and documentation standards under IRC 482 and 6662 are largely consistent with the OECD Guidelines.

The new guidelines form part of a comprehensive global strategy to crack down on companies utilizing aggressive tax schemes under the OECD’s Base Erosion and Profit Shifting (BEPS) program. It is anticipated that companies of all sizes will be affected by these developments.

Some Clarity, Some Confusion

From Clayton & McKervey’s perspective, these guidelines provide more specific guidance on how tax authorities and companies should apply the arm’s-length principle. Some of the changes will help streamline compliance by simplifying service charge rules and comparable benchmarking updates.

Conversely, the guidelines also grant governments more latitude in claiming a greater share of profits due to special market factors. For example, it is anticipated that low-cost labor countries will expect a greater share of taxable profits by claiming that their location savings are a special market factor.  These positions may create additional uncertainty for day-to-day business planning purposes.

Next Steps and Recommendations

While these transfer pricing developments are driven by global outrage over aggressive tax planning by large multinationals, companies of all sizes are increasingly questioned about transfer pricing – globally.  These new guidelines provide a more sophisticated toolbox for tax auditors to challenge cross-border pricing.

Taxpayers of all sizes should revisit their transfer pricing documentation strategy with a particular focus on whether the explanations included are current, relevant and convincing. The OECD’s 2017 Transfer Pricing Guidelines can be found at

Clayton & McKervey

Related Insights

Tax & Assurance Guidance

Foreign Tax Withholding: What You Need to Know

Posted on April 26, 2022 by

Rob Cheyne
Making service payments to a foreign person is a common cross-border transaction. U.S. taxpayers need to be aware of the applicability of withholding tax and related reporting requirements to ensure they comply and avoid unintended consequences. A U.S. payor must collect withholding tax and remit it to the IRS in the case it is applicable.

Tax & Assurance Guidance

SALT Relief for Partners and S Corps

Posted on February 23, 2022 by

Miroslav Georgiev
With small businesses supporting nearly 47% of U.S. employees, states have been advocating for pass-through entities, operating partnerships and S corporations that have been harshly impacted by the Tax Cuts and Job Act ‘s state and local taxes deduction limit. Recent legislative activity is finally providing relief for many of these businesses. 

Tax & Assurance Guidance

IRS Provides Relief on K-2 and K-3

Posted on February 17, 2022 by

Margaret Amsden
In an attempt to provide more transparency with regard to reporting of foreign activity and/or information to foreign owners, the IRS came out with two new forms: Schedule K-2 (an addendum to the Schedule K) and Schedule K-3 (an addendum to the Schedule K-1). Learn about the latest K-2 and K-3 reporting requirements issued by the IRS.

Sign up for our newsletters

Get general business and industry-specific news and knowledge straight from our accounting specialists.

The Sound of Automation Podcast

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Insights & Perspectives

The Sound of Automation: Looking ahead to CSIA 2022

In this episode we talk with Lisa Richter, Director of Industry Outreach and Growth at Control System Integrators Association (CSIA) . Lisa and Bryan look ahead to the CSIA Executive conference taking place in Denver, CO on June 27-30, 2022 and share with listeners what to expect, who will be there, and the discussion panel topics focusing on this years’ theme “The Future of Work”. 

Read More

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

Skip to content