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Revisions to the OEC D Transfer Pricing Guidelines and Their Implications for Transfer Pricing Analysis

As more countries adopt transfer pricing rules and as others continue to enforce them with increasing vigour, the need for international convergence on key matters of transfer pricing is becoming critical. The Organisation for Economic Co-operation and Development (OECD) plays a pivotal role in this respect. The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD Guidelines) were first published in 1979 and subsequently revised in 1995.2 The Guidelines represent the OECD interpretation of Article 9 of the OECD Model Tax Convention. Article 9 is adopted in most double tax agreements made between countries, and not only OECD member countries; the Guidelines are therefore the de facto rules for interpreting double tax treaties. The United Nations model treaty closely adopts the OECD Guidelines in most respects. The Guidelines have also been the de facto regulation of choice for many countries that lack formal guidelines of their own. In these (and many other) instances, transfer pricing approaches and principles are governed by those laid down by the OECD. Many tax professionals and tax authorities across the globe have traditionally relied heavily on the OECD viewpoint when applying transfer pricing rules.