OECD (Organisation for Economic Co-operation and Development) Proposes Significant Changes to the Evaluation of Intragroup Services

TAX ALERT | AS Consulting Group | June 2026

Important notice: On June 1, 2026, the OECD released a public consultation discussion draft — not a final guideline — proposing updates to Chapter VII of the OECD TP (Transfer Pricing) Guidelines, which covers intragroup services. Stakeholder comments may be submitted until July 22, 2026; a public discussion session is scheduled for November 2026 in Paris. Companies and tax administrations should not rely on this draft for binding decisions until it is formally adopted.

The proposal restructures Chapter VII around a new starting point: accurate delineation of the transaction. Unlike the current text, which applies the benefit test almost immediately, the revised approach requires first analysing the actual commercial and financial relations between the parties before any pricing or methodological review takes place.

What Is Changing?

The core message of the proposal is clear:

It is no longer sufficient to show that a contract or invoice exists. The key question will be whether the service genuinely took place, whether it generated an identifiable benefit for the recipient, and whether it was priced at arm's length.

The OECD emphasises that before selecting a TP (Transfer Pricing) method or reviewing documentation, the following must be properly understood:

• What activity was performed.
• Who performed it.
• What functions, assets and risks were involved.
• What economic or commercial benefit the recipient entity received.
• How the service relates to the overall business of the group.

Strengthening the Benefit Test

The proposal reinforces the Benefit Test, establishing that an intragroup service exists only when:

• The activity generates economic or commercial value for the recipient.
• An independent company would have been willing to pay for the service or to perform it in-house.
• The benefit can be reasonably expected, even if the final outcome does not fully materialise.

This means that documentation must demonstrate not only the cost or existence of the service, but also the value it created for the local entity.

Less Focus on Costs, More Focus on Substance

The OECD clarifies that intragroup services need not always be analysed using cost-based methodologies. This shift applies particularly to high-value services, which are now distinguished from the simplified treatment already available for LVAS (Low Value-Adding Services).

Method selection must be driven by the actual economic characteristics of the transaction, taking into account:

• Functions performed.
• Assets used.
• Risks assumed.
• Existence of intangibles.
• Degree of integration between the parties.

Shareholder Activities, Duplicated Services and Interconnected Transactions

The proposal also provides deeper guidance on three areas that frequently give rise to disputes in international tax audits:

• Shareholder activities, which benefit only the parent or shareholder and should not be charged down to subsidiaries.
• Duplicated services, where an entity already performs the same function internally or sources it from a third party.
• Passive association benefits, which arise merely from being part of an MNE (Multinational Enterprise) group and do not, on their own, justify intragroup charges.
• Interconnected transactions, with specific guidance for groups where IT (Information Technology), finance, legal or administrative services are highly integrated and cannot be analysed in isolation.

What Should Companies Do?

Multinational companies should begin assessing:

• Whether they hold sufficient evidence of the benefit received.
• Whether their intragroup agreements accurately describe the activities performed.
• Whether corporate and regional charges can withstand a robust functional analysis.
• Whether local documentation clearly demonstrates the economic value received by the Mexican entity.

ASCG (AS Consulting Group) Comment

This proposal confirms a trend we are already observing in international tax audits: authorities are no longer focused solely on verifying contracts, invoices or supporting documents — they are examining the economic substance of the transaction.

Going forward, the most important question will no longer be:

"Do you have documentation?"

But rather: "Can you demonstrate that the service genuinely took place, that it created value, and that an independent company would have been willing to pay for it?"

Impact for ASCG clients: High for multinational groups with corporate charges, management fees, regional services, SSC (Shared Service Centers), IT (Information Technology), finance, HR (Human Resources), legal, compliance and intragroup administrative services.

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We are AS Consulting Group (ASCG), a Mexican firm operating since 1991, specialized in providing comprehensive “all-in-one” services for both domestic and foreign companies in Mexico. Our services include accounting, tax advisory, legal, labor, payroll, electronic invoicing, sustainability, technological development, real estate design and architecture, regulatory compliance, foreign investment, and business consulting. Our approach enables clients to centralize their professional needs within a single team, ensuring compliance, control, and sustainable growth of their operations.ASCG is a member firm of SMS Latinoamérica, an international network of professional firms with presence in more than 21 countries. Member firms of SMS Latinoamérica are independent legal entities that operate under their own local regulations. SMS Latinoamérica does not provide services directly nor does it assume responsibility for the acts or omissions of its member firms.

The information contained in this communication is general in nature and provided for informational purposes only. Neither AS Consulting Group, its affiliates, nor SMS Latinoamérica or its member firms provide professional advice through this publication. Before making decisions that may affect your business, you are advised to consult a qualified professional advisor. None of the aforementioned entities shall be liable for any losses or damages arising from the use of this information.

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