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Examination of Cost Cost Contribution Arrangements
Contribution Agreements
(CCAs) in terms of transfer Company
Parent
pricing

A CCA is a contractual arrangement among business Subsidary A Subsidary B Subsidary C
enterprises to share the contributions and risks involved
in the joint development, production or the obtaining of Provision of Services
intangibles, tangible assets or services with the understanding Allocation of Costs
that such intangibles, tangible assets or services are expected
to create benefits for the individual businesses of each of the Intra-group Services
participants.
Parent
A CCA is a contractual arrangement rather than necessarily Company
a distinct juridical entity or fixed place of business of all the
participants. A CCA does not require the participants to
combine their operations in order, for example, to exploit
any resulting intangibles jointly or to share the revenues or Subsidary A Subsidary B Subsidary C
profits. Rather, CCA participants may exploit their interest in
the outcomes of a CCA through their individual businesses. Provision of Services
Management Fees
The transfer pricing issues focus on the commercial
or financial relations between the participants and the CCAs on services not creating IP Intra-group services
contributions made by the participants that create the
opportunities to achieve those outcomes. Intra-group services are limited
to the provision or acquisition
Agreement to share costs, risks of a service by members of
The contractual agreement provides the starting point and benefits where all participants the MNE Group. The risk of
for delineating the actual transaction. In this respect, no contribute in cash or in kind. not successfully and efficiently
difference exists for a transfer pricing analysis between a CCA providing the service is generally
borne by the service provider.
and any other kind of contractual arrangement where the
division of responsibilities, risks, and anticipated outcomes as If participants join or leave a Terminating or extending the
service agreement to other
determined by the functional analysis of the transaction is the CCA, shares should be adjusted/ participants has generally no
same. rebalanced in accordance with the implication on other service
2
ALP .
recipients.
A key feature of a CCA is the sharing of contributions. In In practice, formal contracts
accordance with the arm’s length principle, at the time of Written agreements are highly are not always available. The
entering into a CCA, each participant’s proportionate share recommended for reasons of agreement often is limited to
the direct relationship between
of the overall contributions to a CCA must be consistent with having the CCA accepted or the provider and the recipient of
its proportionate share of the overall expected benefits to recognised by tax administrations. the service. It should be feasible
They are even compulsory in some
be received under the arrangement. Further, in the case of MS. A written agreement and/ to demonstrate that from the
CCAs involving the development, production or obtaining of or appropriate documentation is perspective of the provider the
service has been rendered and
intangibles or tangible assets, an ownership interest in any important for the reviewer when from the perspective of the
intangibles or tangible assets resulting from the activity of the examining the implementation/ recipient the service provides
performance of the CCA.
CCA, or rights to use or exploit those intangibles or tangible economic or commercial value to
assets, is contractually provided for each participant. For enhance his commercial position.
CCAs for services, each participant is contractually entitled to As all participants are contributing The profit element charged by
receive services resulting from the activity of the CCA. to a common activity and share the provider of the service is
costs and the contributions usually a key element as the
reflect the expected benefits,
In practice it is sometimes difficult to differentiate between contributions are usually valued provider will not share profits
with the recipients.
(shared) intra-group services - including cost pools - and CCAs at costs.
on services not creating IP. The following figures is intended The allocation of the costs is The allocation key is based on
to help reviewers to differentiate between the two concepts. 1 based on the expected benefits for the extent each company has
each participant from the CCA. requested/received or is entitled
to the service.

1 EU Joint Transfer Pricing Forum, Report on Cost Contribution Arrangements on Services not creating Intangible Property (IP),
7 Haziran 2012
2 Arm’s Length Principle

10 March 2023