International competition increasingly forces multinational enterprises to reorganize their value chains. As business restructurings involve cross-border redeployment of functions, assets, and risks between associated enterprises, they raise difficult transfer-pricing questions on which the Organization for Economic Co-operation and Development (OECD) seeks to provide additional guidance. While the relevant OECD draft represents an important step toward international consensus on this important topic, we see it as a compromise open to differing interpretations of the arm’s length principle. From a German perspective, the question arises whether the outcome of the new German rules for taxing business restructurings on a transfer-package basis will be acceptable in other OECD countries, effectively avoiding potential double taxation. Against this background, we compare and contrast the core elements of the German regulations and the OECD draft, pointing especially to the treatment of location savings.
Intertax