Don't Miss The EU Joint Transfer Pricing Forum's Guidance On The Profit-Split Method

The EU Joint Transfer Pricing Forum (JTPF) assists and advises the European Commission on transfer pricing tax matters. Recently, it issued a report on the application of the profit-split method (PSM) within the EU. ¹ The report clarifies key concepts and elaborates under which conditions the method is to be used and how to split the profit.

Being complementary to, and supportive of, the OECD guidance, the report expands on two important parts: (i) justification in applying PSM; and (ii) the allocation keys that can be used to split the profit ("splitting factors"). The report addresses these issues with the aim of exploring how the application of the PSM can be simplified. A summary of the guidance provided under the report is set out below.