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Intra-group services are quite common in transfer pricing practiceServices such as administration information technology finance andcommerce are typical intra-group services which are provided either byparent to subsidiary or by a centralized group service center to othermembers in the multinational enterprises MNEs Transfer pricing issuesmatter in intra-group services because the highly interrelated featureof intra-group services gives opportunity for MNEs to price theintra-group services at the value deviating from the arms length valuetherefore MNEs can easily manipulate the allocation of taxable incomeSo it is necessary to have guidelines on the transfer pricing issues inintra-group services for both taxpayers and tax authorities TheOrganization for Economic Cooperation and Development hereinafter OECDissued the OECD Transfer Pricing Guidelines for MultinationalEnterprises and Tax Administration 2010 for its member states and inchapter VII of this guideline there are two main issues discussed Thefirst one is to determine whether intra-group services have beenrendered and the second one is to determine the arms length charge ofthe rendered services With regard to the second issue there are twomethods can be used the direct charge method ie where the associatedenterprises are charged for specific services and the indirect chargemethod ie the cost allocation and apportionment methods which oftennecessitate some degree of estimation or approximation Because the indirect cost or reductions can hardly be identified with aparticular activity or service the allocation key such as the turnoveror staff employed is needed to allocate such cost between or amongservice recipients and the appropriate allocation key is largelydependent on the nature and the usage of the service Therefore thepaper will focus on analyzing and comparing the different indirectcharges specifically on the different application standards acrossdifferent jurisdictions Firstly five representative countries will be selected The UnitedStates Australia and New Zealand are developed countries withcomprehensive and rigid transfer pricing rules while Hong Kong andSingapore are famous for being tax havens with comparativelyunderdeveloped and loose transfer pricing rules The author will firstlycompare the standards applied in those three countries with maturetransfer pricing regulations
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