Editing Transfer pricing (section)

===Services===
Enterprises may engage related or unrelated parties to provide services they need.  Where the required services are available within a multinational group, there may be significant advantages to the enterprise as a whole for components of the group to perform those services.  Two issues exist with respect to charges between related parties for services:  whether services were actually performed which warrant payment,<ref name="PLR8806002">For the U.S., see, ''e.g.'', [http://cases.justia.com/us-court-of-appeals/F2/410/1233/154707/ ''Young and Rubicam'', 410 F.2d 1233 (Ct.Cl., 1969)], PLR 8806002.</ref> and the price charged for such services.<ref>OECD Guidelines 7.5, 26 CFR 1.482-9.</ref>  Tax authorities in most major countries have, either formally or in practice, incorporated these queries into their examination of related party services transactions.

There may be tax advantages obtained for the group if one member charges another member for services, even where the member bearing the charge derives no benefit.  To combat this, the rules of most systems allow the tax authorities to challenge whether the services allegedly performed actually benefit the member charged.  The inquiry may focus on whether services were indeed performed as well as who benefited from the services.<ref name="PLR8806002" /><ref>OECD Guidelines 7.5-7.18</ref>  For this purpose, some rules differentiate stewardship services from other services.  Stewardship services are generally those that an investor would incur for its own benefit in managing its investments.  Charges to the investee for such services are generally inappropriate.  Where services were not performed or where the related party bearing the charge derived no direct benefit, tax authorities may disallow the charge altogether.

Where the services were performed and provided benefit for the related party bearing a charge for such services, tax rules also permit adjustment to the price charged.<ref>OECD Guidelines 7.19 ''et seq''., 26 CFR 1.482-9.</ref>  Rules for testing prices of services may differ somewhat from rules for testing prices charged for goods due to the inherent differences between provision of services and sale of goods.  The OECD Guidelines provide that the provisions relating to goods should be applied with minor modifications and additional considerations.  In the U.S., a different set of price testing methods is provided for services.  In both cases, standards of comparability and other matters apply to both goods and services.

It is common for enterprises to perform services for themselves (or for their components) that support their primary business.  Examples include accounting, legal, and computer services for those enterprises not engaged in the business of providing such services.<ref>Such services may be referred to those not integral to the functioning of the primary business.</ref>  Transfer pricing rules recognize that it may be inappropriate for a component of an enterprise performing such services for another component to earn a profit on such services.  Testing of prices charged in such case may be referred to a cost of services or services cost method.<ref>OECD Guidelines 7.33, 26 CFR 1.482-9(b).</ref>  Application of this method may be limited under the rules of certain countries, and is required in some countries e.g. Canada.{{Citation needed|date=July 2010}}

Where services performed are of a nature performed by the enterprise (or the performing or receiving component) as a key aspect of its business, OECD and U.S. rules provide that some level of profit is appropriate to the service performing component.<ref>OECD Guidelines 7.29 ''et seq''., 26 CFR 1.482-9(b)(2).</ref>  Canada's rules do not permit such profit.{{Citation needed|date=July 2010}}  Testing of prices in such cases generally follows one of the methods described above for goods.  The cost-plus method, in particular, may be favored by tax authorities and taxpayers due to ease of administration.