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Cross-Border Business Restructuring

Cross-Border Business Restructuring. 23 September 2010. Transfer Pricing aspects of Business Restructurings. Para 164 TIOPA 2010-application of OECD principles Status of 2010 OECD guidelines

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Cross-Border Business Restructuring

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  1. Cross-Border Business Restructuring 23 September 2010

  2. Transfer Pricing aspects of Business Restructurings • Para 164 TIOPA 2010-application of OECD principles • Status of 2010 OECD guidelines • “There is no incorporation of the OECD model in s 770. But it seems to us that in determining the arm’s length price, the approach of the OECD model is a useful aid which we should apply in the absence of any other guidance as they are the best evidence of international thinking on the topic” DSG Retail and others v HMRC

  3. Transfer Pricing aspects of Business Restructurings • Arm’s length principle is unchanged • Ch IX is best evidence of current international thinking • HMRC guidance to be revised to refer to 2010 TPG • Business Restructurings likely to viewed as high risk and challenged

  4. Considerations for Risk • Guidance has wider application than business restructurings • Focus on economically significant risks

  5. Considerations for Risk • What is contractual allocation of risk? • Does conduct conform to contractual allocation? • Is allocation arm’s length? • Control over risk • Financial capacity to assume risk • Consequences

  6. Arm’s length compensation for restructuring and post-restructuring remuneration • Profit potential-identify rights and/or other assets • Options realistically available - relevance? - bargaining power? • No difference in application of transfer pricing principles to pre-/post-restructuring arrangements • Totality of arrangements

  7. Recognition of actual transaction • Non-consensus parts of DD resolved • Emphasis on pricing solutions • Exceptional circumstances-additional guidance at para 9.170-9.194

  8. Future? • Intangibles project at OECD • Role of APAs-draft Statement of Practice (September 2010)

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