OECD Proposed Revisions to Chapter VII of the Transfer Pricing Guidelines: Special Considerations for Intra-Group Services

The OECD’s Working Party No. 6 (WP6) of the Committee on Fiscal Affairs has released a public consultation document proposing substantive revisions to Chapter VII of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the OECD TPG). The consultation period runs from 1 June to 22 July 2026, with a public consultation event planned for November 2026 in Paris.

The proposed revisions modernize the existing framework for transfer pricing of intra-group services, aligning it more closely with the foundational principles set out in Chapters I, II and III of the OECD TPG. Importantly, the OECD states that the revisions are not intended to change the general principles underlying the transfer pricing analysis of intra-group services, but rather to enhance clarity and provide practical illustrations through new worked examples.

This bulletin: (i) briefly introduces the concept of intra-group services in transfer pricing, (ii) summarizes the key changes introduced by the proposed revisions relative to the 2022 OECD TPG, and (iii) highlights practical considerations for multinational groups.

1. Intra-Group Services in Transfer Pricing: A Conceptual Overview

Nearly every multinational enterprise (MNE) group provides a wide range of services among its member entities. These may include administrative, technical, financial, legal, and commercial services, as well as strategic management and coordination functions. When such services are provided across national borders between associated enterprises, they give rise to transfer pricing issues: specifically, whether a service has actually been provided and, if so, what arm’s length charge should apply.

The transfer pricing analysis of intra-group services rests on two foundational questions:

• Has an intra-group service actually been rendered? This is assessed by applying the “benefit test”: whether the activity provides the recipient with economic or commercial value such that an independent enterprise in comparable circumstances would have been willing to pay for it, or would have performed the activity in-house.
• If a service has been rendered, what is the arm’s length charge? This requires selecting the most appropriate transfer pricing method and determining a price consistent with what independent parties would have agreed under comparable conditions.

These questions must be answered after performing an accurate delineation of the controlled transaction, that is, by carefully analyzing the commercially and financially relevant characteristics of the arrangement, including the functions performed, assets used, and risks assumed by the parties.

The OECD TPG also recognizes a specific sub-category: low value-adding intra-group services (LVAS). These are supportive, non-core services that do not involve unique and valuable intangibles or significant risk. For LVAS, an elective simplified approach is available, involving a standardized cost pooling mechanism and a 5% profit mark-up.

2. Overview of Key Changes in the Proposed Revision

The proposed revision restructures and expands Chapter VII significantly. The table below provides a high-level comparison of the structure of the 2022 OECD TPG Chapter VII and the proposed revised version:

3. Accurate Delineation of Intra-Group Services

One of the most significant structural changes in the proposed revision is the elevation of “accurate delineation” as a standalone section (Section B) governing the analysis of intra-group services. In the 2022 OECD TPG, the concept of accurate delineation was addressed less prominently, largely through cross-references to the general principles of Chapter I. The revised chapter now explicitly requires that the first step of any intra-group services analysis is to accurately delineate the transaction.

• What Does Accurate Delineation Mean for Services?

Accurate delineation requires identifying the commercial and financial relations between the associated enterprises and the conditions and economically relevant circumstances of those relations. For intra-group services, this means:

• Labels and descriptions do not determine the analysis: The mere existence of a contract labelled a “service fee” or “administrative services” is not sufficient evidence that a service has been rendered. Conversely, the absence of a written agreement does not automatically mean no service exists.
• Functional analysis is central: The outcomes of the delineation will differ materially depending on whether the service provider owns relevant assets, makes key decisions, and assumes economically significant risks, or whether it acts as a routine performer under the supervision of the recipient.
• Interdependencies matter: The delineation must account for the interplay between the intra-group service and other controlled transactions within the group.

• Provision of Services in Connection with Other Transactions

The proposed revision introduces a new subsection (B.3) dealing with intra-group services that are provided in connection with other controlled transactions. For example, the licensing of intangibles alongside technical support services. This reflects increasing real-world complexity and reinforces that the analysis of each component of a bundled arrangement must be assessed separately unless aggregation leads to a more reliable result.

A notable development in this area is the explicit recognition that the repeated provision of services involving proprietary know-how may, as a practical matter, result in a transfer of intangibles. This is illustrated by new Example 16, which concerns the provision of technology-enabled healthcare services: through the repeated provision of such services, the recipient may gain the ability to independently apply the underlying methodologies, effectively resulting in a transfer of know-how.

4. The Benefit Test: Enhanced Guidance and New Nuances

The benefit test, the cornerstone of determining whether an intra-group service has been rendered, is substantially elaborated in the proposed revision. While the core standard remains unchanged (i.e. whether an independent enterprise would have been willing to pay for the activity or perform it in-house), the proposed text introduces important clarifications.

• Expanded Definition of Benefit

The proposed text explicitly articulates what constitutes a “benefit” for purposes of the test, providing that a benefit may include:

• An expected increase in the recipient’s profitability by enhancing its revenues or the quality of its products;
• An expected reduction in the recipient’s expenses or losses; or
• An improvement in operations, such as enhanced efficiency or optimized resource allocation.

Importantly, the proposed revision introduces a key timing principle: the benefit should be identified and reasonably expected at the time of the transaction. A service is considered to have been provided even if the expected benefit is not ultimately realized, provided the expectation was reasonable at the outset. This principle already existed in the 2022 OECD TPG but is now elaborated with much greater clarity and supported by examples.

• Benefit Test vs. Arm’s Length Remuneration: Separated Analyses

The proposed revision explicitly and emphatically separates the benefit test from the determination of the arm’s length remuneration. This is a significant clarification. Under the 2022 OECD TPG, the two analyses were less clearly delineated. The proposed text now states in Paragraph 7.19:

“The benefit test and the determination of the arm’s length remuneration for the intra-group services are separate analyses and should not be conflated, as the benefit test is not concerned with the amount that group members would be willing to pay. Therefore, the existence of an activity that has met the benefit test under the guidance in this chapter should not be ignored solely on the grounds that the intra-group charge for that activity is not arm’s length. Whether the remuneration is arm’s length should be addressed separately by applying the guidance in Chapters II and III, as well as the guidance contained in Section C.”

• Benefit Test Applied at the Level of Each Recipient

Where a service is performed for multiple group members, the proposed revision clarifies that the benefit test must be applied separately at the level of each entity. This is illustrated by a new example involving a centralized market research service: the manufacturing entities of the group do not benefit from the market research (since they make no changes to their production activities), while the distribution entities do. As a result, only the distribution entities are proper service recipients.

• Clarified Treatment of Shareholder Activities

The revised guidance on shareholder activities introduces several important developments compared to the 2022 OECD TPG:

• Terminology clarification: The proposed text expressly distinguishes “shareholder activities” (which do not satisfy the benefit test) from the broader concept of “stewardship activities” (which may include genuine services). This distinction existed in the 2022 text but is now articulated more prominently.
• Category (e) clarified, not new: Category (e) – “ancillary activities to the corporate governance of the MNE as a whole” – already existed in the 2022 OECD TPG (para. 7.10(e)). What is new is that the OECD is inviting public comments (Box 1) on the precise scope of this category, acknowledging that further development is required.
• Senior management clarification: The mere fact that an activity is undertaken by senior management (e.g. the CEO) does not in itself make it a shareholder activity, and the difficulty of quantifying the benefit does not mean a charge should be denied.
• Dual-benefit activities: Where a parent company performs activities that benefit both itself (as shareholder) and its subsidiaries, those activities satisfy the benefit test for the subsidiaries, and an appropriate portion of costs should be charged out, subject to safeguards that prevent the parent’s own share from being passed on to subsidiaries.

• Duplication, Incidental Benefits, and On-Call Services

The proposed revision provides updated and more structured guidance on three additional benefit-test scenarios that were addressed in the 2022 OECD TPG but are now more clearly delineated:

• Duplication: As a general rule, no intra-group service exists if an activity merely duplicates what another group member already performs for itself or obtains from a third party. However, the proposed text emphasizes that duplication must be assessed on a case-by-case basis, having regard to the nature, goals, scope, customization, and duration of the activities. What appears to be duplication may in fact be an intentional redundancy, for example, where regulations require certain functions to be performed both locally and on a consolidated basis (e.g. compliance and risk management). The fact that two entities each perform activities labelled “marketing” does not automatically establish duplication; the underlying activities must be examined (illustrated by new examples in Annex I).
• Incidental benefits: Where a group member performs an activity that directly benefits itself or certain group members but also incidentally benefits others, those incidental benefits do not give rise to an intra-group service. A benefit is incidental when, at the time the activity is performed, the potential benefit to other parties is so indirect or remote that an independent enterprise would not be willing to pay for it. Examples include benefits flowing to other group members as a by-product of a corporate reorganization, an acquisition, or the divestment of a division (illustrated by new examples in Annex I). Benefits arising purely from passive association, meaning from being part of a larger MNE group without any deliberate concerted action, similarly do not constitute an intra-group service.
• On-call services: The proposed revision retains and clarifies the existing guidance on “on-call” services, i.e. services that are made available to group members at any time. The availability of such services may itself constitute a service for which a stand-by or retainer charge is appropriate, provided that an independent enterprise in comparable circumstances would also incur such charges. Whether a stand-by charge is justified depends on the realistic probability that the service will be needed, the benefit of assured availability, and whether the service could be readily obtained elsewhere without a retainer. Benefits from on-call services may vary year to year, and a multi-year view of actual usage may be relevant to assessing the arm’s length charge.

5. Determining the Arm’s Length Charge: Updated Guidance on Methods

Section C of the proposed revision significantly expands the guidance on arm’s length charges. Key developments are summarized below.

• Direct vs. indirect charges: Direct charges remain preferred where attribution to a specific recipient is feasible. Where services benefit multiple entities, indirect (cost allocation) approaches are permitted, with allocation keys required to be measurable, relevant, consistent, and proportionate to expected benefit. Total allocated costs must not differ from the total costs actually incurred by the group in providing the service.
• No presumption in favor of cost-based methods: The revision explicitly rejects any assumption that cost-plus or TNMM is automatically the most appropriate method. Method selection must be driven by the economically relevant characteristics of the service, including the use of unique intangibles, risk profiles, and degree of integration. The CUP method is preferred where a genuinely comparable uncontrolled transaction exists, though its strict comparability standard means it will often be unreliable without reliable adjustments.
• Pass-through costs: New guidance clarifies that where a service provider acts merely as a paying intermediary, costs the recipient would have incurred directly should be recharged without a mark-up. A mark-up is only appropriate where the provider contributes value beyond its intermediary function.
• Cost categorization and stock-based compensation: The proposed revision, for the first time in Chapter VII, expressly defines direct costs, indirect costs, and operating expenses for purposes of the cost-plus method and TNMM. It also opens a dedicated public consultation on whether and how stock- or share-based compensation should be included in the cost base for intra-group services – a question the 2022 OECD TPG did not address at all. This is particularly relevant for groups whose Turkish subsidiaries receive services from foreign parent entities with equity-based remuneration schemes.
• Profit split method: A new subsection addresses the profit split method for services where both parties make unique and valuable contributions, operations are highly integrated, or economically significant risks are jointly or closely assumed.
• Profit element: An arm’s length price need not always yield a profit for the provider, particularly where the service is incidental or non-recurrent. Conversely, independent enterprises ordinarily seek a profit margin, and the appropriate outcome depends on the facts.

6. Other Notable Changes

The following further changes in the proposed revision are worth highlighting for MNE groups:

• New standalone documentation section (Section D): The proposed revision introduces dedicated documentation guidance for intra-group services for the first time within Chapter VII. The section supplements the general Chapter V requirements and emphasizes proportionality. Key items include: contemporaneous evidence that the benefit test has been met (e.g. communications between provider and recipient, deliverables, service agreements); cost base construction details; justification of allocation keys; and a breakdown of pass-through versus marked-up costs.
• Low Value-Adding Intra-Group Services (LVAS) substance unchanged: The LVAS regime (elective simplified approach, 5% mark-up, cost pooling) is reproduced without substantive change. Importantly, the 5% mark-up remains a safe harbour for qualifying services only and must not be used as a benchmark or floor for non-LVAS services. A separate arm’s length analysis is required regardless of whether the resulting mark-up is above or below 5%.
• 21 new worked examples (Annex I): The proposed revision adds 21 practical examples covering a broad range of scenarios, including: benefit test where expected benefit does not materialize; shareholder vs. service activities; duplication and incidental benefits; CUP method reliability deficiencies; profit split method in pharma R&D; pass-through cost treatment; and documentation adequacy. These examples significantly improve the practical utility of the guidance.
• Open consultation questions: The discussion draft contains three dedicated “Questions to public commentators” boxes on which WP6 is specifically seeking input: (i) the scope of shareholder-activity category (e); (ii) whether further guidance on allocation keys is needed; and (iii) the treatment of stock- or share-based compensation in the cost base. Clients wishing to submit comments should note the deadline of 22 July 2026, submission by email to taxpublicconsultation@oecd.org, and the requirement that submissions be in Word format.
• Content not carried forward: A few elements of the 2022 OECD TPG text do not appear to have a direct counterpart in the discussion draft, including the standalone guidance on the “form of the remuneration” for financial and procurement services (bundled pricing via spreads or commissions) and the debt-factoring example. Groups relying on this earlier guidance in their intercompany agreements should monitor the final text to confirm whether these points are addressed elsewhere or omitted.

7. Conclusion and Practical Takeaways

The proposed revision to Chapter VII represents a meaningful modernization of the OECD’s guidance on intra-group services transfer pricing. While the foundational principles are preserved, the revision introduces significant structural changes, conceptual clarifications, and practical tools that will affect how MNE groups document and defend their intra-group service arrangements.

Key Practical Takeaways for MNE Groups

• Start with accurate delineation. Review service arrangements holistically, because functional analysis of the provider’s role, assets, and risks is now the mandatory starting point rather than contractual labels.
• Separate the benefit test from pricing. Both analyses are required independently: the existence of a service (benefit test) and the arm’s length price are distinct questions.
• Check for duplication and incidental benefits. Ensure that services charged within the group are not merely duplicative of activities already performed by the recipient, and that incidental or passive-association benefits are not being charged for.
• Review documentation. The new Section D checklist should be used to assess whether existing master file and local file documentation adequately covers intra-group service transactions.
• Reconsider method selection. The explicit rejection of a cost-based method presumption means TNMM or cost-plus must be justified, not assumed, particularly for services involving intangibles.
• Address pass-through cost and LVAS policies. Mark-ups should only apply where the intermediary contributes value; and the 5% LVAS mark-up is not a floor for non-LVAS services.
• The final revised Chapter VII is expected following the November 2026 public consultation. MNE groups should begin assessing the impact of these changes on existing structures and documentation well in advance of final adoption.

Note on status: The OECD expressly states that this discussion draft does not represent the consensus views of the CFA or its subsidiary bodies, and that taxpayers and tax administrations should not rely on the approaches discussed in it. The analysis above should accordingly be read as an overview of a proposal under consultation, not as settled OECD guidance, until a final version is adopted.

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