The OECD has released a public consultation document proposing revisions to Chapter VII of the OECD Transfer Pricing Guidelines, which deals with the transfer pricing treatment of intra-group services. The consultation period runs from 1 June to 22 July 2026, and the OECD states that the work aims to update and modernise Chapter VII, align it more closely with Chapters I, II and III, and add practical examples. The OECD also notes that the proposed revisions are not intended to change the general principles underlying the transfer pricing analysis of intra-group services.

For multinational groups, this raises an important practical question: is the common Cost Plus 5% approach still defensible for headquarters services?

The answer is not that Cost Plus 5% is disappearing. The issue is whether it is being applied too broadly.

The OECD consultation remains a discussion draft, not final guidance. The document states that it does not yet represent the consensus views of the OECD Committee on Fiscal Affairs or its subsidiary bodies, and that taxpayers and tax administrations should not rely on the approaches discussed at this stage.

However, the direction of travel is clear. The OECD is placing renewed emphasis on accurate delineation, the benefit test, arm’s length pricing, allocation keys, and evidence supporting intra-group service charges. This is particularly relevant for headquarters models, where groups often apply broad management service charges across multiple jurisdictions.

Many multinational groups apply a Cost Plus 5% mark-up to a broad range of headquarters services. This approach is often used because it is simple, familiar, and associated with the OECD’s simplified approach for low value-adding intra-group services.

However, the OECD draft confirms that low value-adding intra-group services are services that are supportive in nature and are not part of the group’s core business. The draft also lists activities that would not qualify for the simplified approach, including core business services, research and development, manufacturing and production, sales, marketing and distribution, financial transactions, and certain senior management services.

This matters because many headquarters charges include a mix of routine support, strategic decision-making, commercial oversight, brand-related activities, technology leadership, legal control and financial strategy.

Where these activities are bundled together and priced with one standard 5% mark-up, the transfer pricing position may become more difficult to defend.

One of the strongest messages from the consultation is that intra-group services must first be accurately delineated.

A label such as “management services”, “corporate support” or “head office services” is not enough. Companies need to identify what service was actually provided, who performed it, who benefited from it, and how the service fits within the commercial and financial relations between the parties.

For multinational groups, this means the analysis should start with the actual activity performed, not with the historical mark-up applied.

In practice, this may require groups to separate broad headquarters charges into clearer service categories, such as finance support, HR, legal, IT, tax, commercial strategy, senior management oversight or brand-related support.

The benefit test remains a core part of the intra-group services analysis.

The OECD draft explains that a service should provide economic or commercial value to the recipient. This is assessed by considering whether an independent enterprise in comparable circumstances would have been willing to pay for the activity or perform it in-house.

This is often where disputes arise.

Tax authorities may challenge whether the recipient actually received a benefit, whether the service duplicated local activities, whether it was a shareholder activity, or whether the local entity had a real need for the service.

For headquarters charges, it is therefore not enough to show that central costs were incurred. Groups need to evidence that local entities received a specific and identifiable benefit.

The OECD draft confirms that, under the simplified approach, the mark-up for qualifying low value-adding intra-group services is 5% of the relevant cost base. It also states that this mark-up does not need to be justified by a benchmarking study when the simplified approach applies.

However, the same paragraph makes an important point: the 5% mark-up should not, without further justification and analysis, be used as a benchmark for services outside the definition of low value-adding intra-group services.

This is highly relevant for headquarters models.

Routine administrative support may still fit within the simplified approach. But strategic management, senior executive decision-making, financing strategy, brand direction, commercial policy, technology architecture or value-chain management may require a more specific transfer pricing analysis.

The fact that a service falls outside the simplified approach does not automatically mean that it requires a high return. But it does mean the pricing should be supported by the nature of the service, the functions performed, the value delivered and the evidence available.

The consultation also places emphasis on how intra-group service charges are calculated.

The OECD draft explains that groups may use direct-charge or indirect-charge approaches. A direct-charge approach can make the service and payment basis easier to identify. An indirect-charge approach may be acceptable where services are provided to multiple group entities, but the allocation method must reflect the nature of the service and the expected benefit to the recipient.

This is important because many headquarters charges rely on allocation keys such as turnover, headcount, number of users, number of transactions or operating costs.

These keys may be appropriate in certain cases. But they should be linked to the service being provided and applied consistently. The OECD draft notes that allocation keys should be measurable, relevant to the type of service, easy to verify and, where possible, readily available.

For multinational groups, this means the focus is not only on the mark-up. The cost base, allocation key, benefit evidence and supporting data also need to be defensible.

The consultation reflects a broader trend in transfer pricing enforcement: documentation is no longer only about explaining the policy. It also needs to evidence how the policy works in practice.

The OECD draft notes that contemporaneous evidence can help demonstrate that the benefit test has been met. This may include explanations of expected benefit, communications between provider and recipient, technical documentation, service agreements, reports, IT tickets, cost pool calculations and allocation key support.

For headquarters services, multinational groups should review whether they can evidence:

• the services actually performed;
• the entities that benefited;
• the rationale for the charge;
• the cost base and allocation keys used;
• the separation between routine and higher-value services;
• the reasonableness of applying Cost Plus 5%;
• the link between service charges, accounting data and ERP records.

The key question is no longer only whether a 5% mark-up has been applied. The question is whether the service has been accurately identified, whether the recipient benefited, whether the pricing reflects the actual service, and whether the evidence is available to support the charge under audit.

At TPA Global, we support multinational groups in reviewing and strengthening their intra-group service models.

Our approach combines transfer pricing expertise with practical implementation support, including:

• Intra-group services reviews;
• Benefit test analysis;
• Service catalogue design;
• Cost allocation and mark-up assessment;
• Benchmarking and pricing method support;
• Documentation and evidence packs;
• Management fee and headquarters charge defence;
• Operational transfer pricing alignment.

We work with organizations to ensure that their intercompany service charges are not only documented, but also operationally aligned, economically supportable and defensible under increasing tax authority scrutiny.

Get in touch with our team to discuss how we can support your organisation in reviewing headquarters charges, strengthening benefit evidence and preparing for the evolving expectations around intra-group services.

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