For many years, pricing an intra-group service has meant applying a mark-up on costs. The OECD’s draft revision of Chapter VII, released for public consultation in June 2026, does not replace that approach. However, it returns the cost-plus approach to its proper place as one option among many, to be selected on the facts rather than applied by default.
Where the default approach originates
The 2022 Guidelines never mandated cost-plus as an automatic default. Paragraph 7.31 directs the reader to Chapters I, II, and III, observing that applying that guidance will often lead to a comparable uncontrolled price (CUP) or a cost-based method. Crucially, however, the Guidelines establish a double condition for this “likelihood,” stating that a cost-based method would likely be the most appropriate method only where the nature of the activities involved, assets used, and risks assumed are comparable to those undertaken by independent enterprises, and where no CUP exists. This is conditional suitability based on a functional analysis, not an absolute default.
What the draft proposes
The consultation document restructures the chapter and makes the method question explicit. Services are described as taking place along a spectrum, from low value-adding support at one end to arrangements of greater complexity, integration, and risk exposure. Along that spectrum, the draft contemplates the profit split approach in appropriate cases. Under the 2022 Guidelines, one-sided methods (such as the cost-plus method or the transactional net margin method) are only reliable if the tested party is the less complex entity and does not make unique and valuable contributions. If both parties perform highly integrated operations or share the assumption of closely related, economically significant risks, a one-sided cost-plus approach is unlikely to be reliable, and a two-sided method such as the profit split will generally be the most appropriate.
The draft also confirms that pass-through costs may, where appropriate, be recharged without a mark-up. This is fully consistent with the current Guidelines, and it requires a comparability and functional analysis to prove that independent parties in similar circumstances would have agreed to forgo a profit element on those specific expenses. Meanwhile, the low value-adding services framework still applies, with a 5% mark-up and no benchmarking study required for services within its definition.
Key takeaway
A diagnostic review is highly recommended. Where service charges are based on cost-plus by default, rather than on documented method selection, it is critical to review whether this aligns with current OECD standards and, more broadly, whether the choice of method is supported by a documented functional analysis that justifies the characterization.
Reach out to paul.valdivieso@basefirma.com for more information.
The document can be found here: https://www.oecd.org/en/events/public-consultations/2026/06/public-consultation-on-taxation-revisions-to-chapter-vii-of-the-oecd-transfer-pricing-guidelines.html.