OECD transfer pricing chapter seven rewrite: modernisation or more disputes?
October 2026 | SPECIAL REPORT: CORPORATE TAX
Financier Worldwide Magazine
October 2026 Issue
In June 2026, the Organisation for Economic Co-operation and Development (OECD) released a Public Consultation for the Revisions to Chapter VII of the Transfer Pricing Guidelines (TPG). The stated objective is straightforward: to align the guidance on intragroup services with the analytical framework already embedded in chapters one, two and three of the TPG. Chapter seven has remained basically unchanged since 1996, whereas most of the other chapters have undergone significant revisions, particularly because of the base erosion and profit shifting project.
The deadline for submitting comments expired on 22 July 2026. Certain commentators have already made their observations publicly available, including Business at OECD, whose comments identified a number of areas where further clarification would be beneficial. The draft contains several important and welcome clarifications, but it may not fully resolve the practical issues that taxpayers and multinational groups frequently encounter during audits involving intragroup services. In this respect, the key question is whether the revised guidance, and its closer alignment with chapter one, will ultimately provide greater certainty and reduce disputes.
Against this background, three themes appear particularly relevant: the survival of the benefit test and its interaction with chapter one, the expansion of documentation expectations, and the potential implications for transfer pricing (TP) method selection.
The benefit test survives and remains unique
Although, during previous rounds of consultation, some commentators suggested that the benefit test might become redundant if chapter seven were fully aligned with chapter one, it seems that the OECD decided nevertheless to keep it at the centre of the chapter eight framework. Unlike transactions involving, for example, the sale of tangible goods, intragroup services continue to be subject to a specific apparent additional layer of analysis. Taxpayers must still demonstrate that the recipient of the service has received, or could reasonably have expected to receive, an economic or commercial benefit from the activity performed.
The OECD deserves credit for several welcome clarifications. In particular, the draft confirms that the benefit test should be assessed from an ex-ante perspective and that expected benefits do not need to ultimately materialise. It also confirms that the absence of a market comparable does not automatically mean that a service fails the benefit test. These clarifications should help reduce hindsight-based challenges that have historically generated significant controversy.
The draft also clarifies that tax administrations should not dictate how multinational groups source services. This is an important statement because it reinforces the principle that business decisions regarding operating models and service delivery structures should remain within management’s discretion.
However, the consultation has also raised a deeper conceptual issue: how exactly the benefit test interacts with the broader framework of chapter one. The draft indicates that where the benefit test fails, no intragroup service transaction exists. In principle, the TPG treat transaction disregarding as an exceptional measure, subject to the safeguards contained in section D.2 of chapter one. Yet chapter seven appears capable of producing a similar outcome without expressly referring to those safeguards, and it seems that tax authorities are using it as such.
A legitimate question therefore arises: is the benefit test simply a component of the accurate delineation exercise, or does it effectively create an additional route to disregarding transactions without the procedural protections normally associated with non-recognition?
At first glance, this distinction may appear theoretical or even philosophical in nature. However, it could have significant practical implications, particularly in disputes concerning the legitimacy of tax authority challenges. If a failed benefit test effectively leads to the denial of a deduction or the disregard of a transaction, the boundary between accurate delineation and non-recognition becomes more than a technical debate. It becomes a question of legal certainty and the safeguards available to taxpayers when TP adjustments are proposed.
Documentation may become the real story
The OECD repeatedly states that the examples included in paragraphs 7.71 to 7.73 do not establish mandatory documentation requirements. This statement is welcome. Unfortunately, many taxpayers have learned through experience that examples contained in OECD guidance often become practical audit expectations. The draft contains extensive illustrations of evidence that may be relevant to demonstrate the existence of services and satisfaction of the benefit test. These include business justifications, expected-benefit analyses, communications between service providers and recipients, meeting minutes, project documentation, deliverables, cost-pool support, invoices and underlying accounting records.
When taking such examples collectively, they raise a legitimate concern. Large multinational groups may have hundreds or thousands of service arrangements operating across multiple jurisdictions. Maintaining detailed centralised documentation demonstrating anticipated benefits, service uptake, communications and cost allocations for every service transaction could quickly become a compliance exercise of extraordinary scale.
The concern is not hypothetical. Several tax authorities already request increasingly granular evidence during audits. Discussions on the benefit test frequently extend into questions concerning the provision of extensive documentation, for example project records and operational data. The draft may unintentionally reinforce this trend.
The debate becomes particularly acute in the context of indirect charging arrangements. The OECD correctly recognises that direct charging may not always be practical and that indirect allocations are often necessary. However, some elements of the draft may be interpreted as demanding very detailed evidence regarding cost-pool construction and the reconciliation of incurred and allocated costs. The level of proof required remains unclear. Taxpayers may view auditor-certified reconciliations and allocation schedules as sufficient, while tax authorities may seek transaction-level accounting data visibility.
The practical risk is a substantial increase in evidentiary expectations and resources dedicated by multinationals in collecting such data which in most of the cases is not readily available but requires manual efforts across the organisation to be retrieved.
Are services becoming the next frontier for profit split?
The third major theme emerging from the consultation concerns TP methods. The draft places significant emphasis on accurate delineation, functional analysis and the possibility that some service arrangements may involve unique and valuable contributions, economically significant risks or highly integrated operations. As a matter of principle, this is difficult to dispute. TP outcomes should follow the facts. Nevertheless, there is a fear that the revised language could be interpreted as encouraging broader use of the transactional profit split method.
The concern is not that profit split is wrong. Rather, the concern is that taxpayers and tax authorities may be tempted to move too quickly from identifying specialist expertise, centralised capabilities or operational autonomy to concluding that one-sided methods are no longer reliable. Whether that concern ultimately proves justified will depend largely on how the examples included in the final version are interpreted. Ideally, the examples should be framed as illustrations of possible outcomes rather than signals that more integrated or higher-value services necessarily require profit split analyses.
Conclusion
The benefit test survives. Alignment with the accurate delineation framework is now formally articulated. Low value-adding services continue to benefit from a simplified framework, albeit one that appears somewhat less simplified than before. Yet the first publicly available consultation responses suggest that practitioners are concerned about something quite different.
Questions surrounding the potential misuse of the benefit test as a basis for an automatic disallowance, increasing evidentiary burdens and the growing role of profit split methodologies all carry the risk of increasing controversy rather than reducing it.
For policymakers, the challenge is therefore clear. The success of the revised chapter seven will ultimately be measured by its ability to increase legal certainty, reduce disputes and promote consistent outcomes across jurisdictions. If, instead, it becomes the foundation for more expansive audit practices and greater documentation expectations, the modernisation of chapter eight may inadvertently create the very uncertainty it was intended to eliminate.
Marco Orlandi is a transfer pricing lead at Shell. He can be contacted on +31 6 1540 7736 or by email: marco.orlandi@shell.com.
© Financier Worldwide