OECD releases draft handbook on transfer-pricing risk assessment

As part of its on-going efforts to help countries conduct transfer-pricing risk assessments, the Organisation for Economic Co-operation and Development (OECD) released a draft of a new transfer-pricing risk-assessment handbook on Tuesday. According to its introduction, the Draft Handbook on Transfer Pricing Risk Assessment is designed to provide “clear and detailed steps countries can take to assess the transfer pricing risk presented by an individual taxpayer’s operations.” While aimed at countries’ tax authorities, the handbook provides insights for companies engaged in transfer-pricing transactions as to what those tax authorities will be focusing on.

Transfer-pricing risk identification and assessment are used by tax authorities in deciding which transfer pricing cases to audit. Since no country has sufficient resources to audit every possible transfer-pricing case, to make the most effective use of the resources they do have, they must strategically assess which cases to pursue.

Tax authorities need to be able to accurately tell which taxpayers and transactions involve a high degree of transfer-pricing risk, because a thorough transfer-pricing audit can require a large amount of time and effort and involve numerous auditors. The tax authorities are up against some taxpayers who try to shift income into low-tax jurisdictions and who may try to avoid providing complete information about their related-party transactions. Even compliant taxpayers may engage in complex transactions that require a complicated analysis to determine whether their transfer prices are at arm’s length or that require detailed investigation to confirm transfer-pricing compliance.

The handbook is designed to help tax authorities decide:

  1. What questions the transfer-pricing risk assessment process should answer;
  2. How to evaluate whether a taxpayer presents sufficient transfer-pricing risk to justify a detailed audit;
  3. Where they can obtain the necessary information to identify and assess transfer-pricing risk;
  4. How to organise themselves to carry out an effective risk assessment; and
  5. How to most effectively interact with taxpayers in assessing transfer-pricing risk.

The OECD is inviting comments on the handbook by September 13th 2013. Comments should be emailed to

Alistair Nevius ( is editor-in-chief, tax for CGMA Magazine.