On July 4, 2016, OECD released a discussion draft concerning the revised guidance for profit split method.

The Final Report on Actions 8-10 of the BEPS Action Plan (“Assure that transfer pricing outcomes are in line with value creation”) sets out the scope of the work in relation to the application of transfer pricing methods. This related discussion draft, which does not yet represent a consensus position of the Committee on Fiscal Affairs or its subsidiary bodies, aims at continuing the work by clarifying and strengthening the guidance on the transactional profits split method in the context of global value chains. In particular, it elaborates on two different approaches to splitting profits: transactional profit splits of actual profits and transactional profit splits of anticipated profits. It also proposes further draft guidance on the appropriate application of transactional profit split methods.

Based on the discussion draft, commentators are encouraged to respond to the questions included in the text, as well as the direction of the draft more generally. Examples of scenarios in which a transactional profit split is found to be the most appropriate transfer pricing method are also invited.

A public consultation on the discussion draft is organized on October 11-12, 2016 at the OECD Conference Centre in Paris.

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