On 1 June 2026 the OECD released a public consultation document on proposed revisions to Chapter VII of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, covering special considerations for intra-group services. The stated objective of the work is to align the guidance on intra-group services with the foundational principles in Chapters I, II and III, to enhance clarity, and to provide practical illustrations through new examples. The revisions are not intended to change the general principles underlying the transfer pricing analysis of intra-group services.
The draft addresses the accurate delineation of intra-group services, the determination of the arm’s length charge and other conditions, and documentation considerations supplementing Chapter V, and adds twenty-one new examples in Annex I. The section on low value-adding intra-group services reproduces the existing approach substantially unchanged.
Comments closed on 22 July 2026, and Working Party 6 will hold a public consultation on the draft at the OECD Conference Centre in Paris in November 2026.
QCG Transfer Pricing filed comments within the consultation period. Our submission is in two parts: general observations on specific sections of the proposed chapter, followed by direct responses to the three matters on which the OECD expressly sought input — shareholder activities, allocation keys, and stock or share-based compensation.
Our positions in summary
A preliminary analytical stage before accurate delineation
Before an intra-group service transaction is accurately delineated, the analysis should identify the business need that gave rise to it and explain why that need was satisfied through an arrangement with an associated enterprise rather than internally or through an independent provider. Such circumstances are generally identifiable within the taxpayer’s own value chain — limitations in internal infrastructure, a lack of specialised personnel, economies of scale, access to specific expertise, the centralisation of particular functions, temporary capacity constraints, or extraordinary business circumstances. The economic rationale is already implicit in any well-developed functional analysis; making it explicit establishes the context on which the remainder of the Chapter VII analysis depends. This does not alter the conceptual framework of the chapter. For ease of reference we describe it as a Step 0.
Delineation through the commercial decision-making process
Accurate delineation should reconstruct the decision that led to the transaction before turning to its contractual terms — identifying the objectives pursued by the recipient, the alternatives realistically available to it, and the reasons why the selected arrangement represented the most reasonable commercial response in the circumstances. Only then does it become possible to evaluate with precision the rights and obligations assumed by each party, how those obligations are expected to be discharged, and whether each participant has the practical capacity to perform the functions it contractually undertook.
A minimum analytical framework for the benefit test
The proposed revisions rightly place greater emphasis on the benefit test, but remain relatively open as to how it should be constructed in practice. Rather than adding documentary requirements, we proposed that the Guidelines establish a minimum analytical framework organised around three questions: why the service was needed, who performed it, and how it was delivered — with the third addressing the circumstances of time, manner and place. Such a framework would standardise the analysis rather than the evidence, and the documentation would follow as the documentary trail resulting from a logical reconstruction of how the service was rendered, rather than serving as the starting point of the test.
Shareholder activities and their ancillary costs
The decisive criterion is not the label attached to an activity but the capacity in which the parent performs it. Ancillary activities to corporate governance under paragraph 7.10(e) are not a standalone category of services: they are accessory to a primary shareholder activity within the meaning of paragraph 7.9, must merely support or facilitate the execution of that primary function, must not confer a specific economic or commercial benefit on subsidiaries, and take the character of the activity they support. They therefore represent accessory costs of shareholder functions and should be borne by the parent company, and should not be allocated to subsidiaries merely because they involve coordination, data compilation or administrative processes.
Allocation keys should follow the service, not the function
Organisational functions frequently comprise several distinct services with different patterns of expected benefit and resource consumption. Within a human resources function, payroll administration, recruitment, executive compensation administration, expatriate administration, labour dispute management and employee training may each justify a different key. Accordingly, the most reliable allocation key cannot generally be determined solely by reference to the department or function providing the service; selection should depend primarily on the characteristics of the service performed and on the economic drivers that best explain its expected consumption by each recipient.
Stock and share-based compensation in the cost base
The draft includes stock-based compensation among the direct costs of a service. In our view a threshold question arises first: whether the compensation economically remunerates functions performed for the benefit of the recipient. Where it instead rewards participation in the ownership, governance or long-term value creation of the group, it lacks sufficient economic nexus with the controlled transaction and should generally remain outside the cost base — in which case the subsequent questions of valuation, timing and accounting treatment do not arise. Stock-based compensation should not be presumed to constitute an allocable service cost solely because it is recognised as an accounting expense; accounting recognition under the applicable financial reporting framework is not equivalent to the economic allocation of cost for transfer pricing purposes.
A permanent technical consultation forum
We also suggested that the OECD consider establishing a permanent technical consultation forum, working from anonymised fact patterns, as a standing channel through which taxpayers, tax administrations, academics and practitioners could discuss the practical interpretation and application of the Guidelines — not to issue binding interpretations, and not to replace domestic dispute resolution mechanisms.
All comments received in this consultation will be made publicly available by the OECD.
