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Our approach to transfer pricing

Transfer pricing (TP) refers to the setting of prices for goods and services sold between related entities within a group.

Shell applies the internationally recognised arm’s length principle where profits from the sale of goods or services are allocated to the countries where the relevant economic activity takes place and cannot be artificially taken somewhere else. The arm’s length principle ensures that individual group members are taxed on their transactions with each other just as if they were comparable independent enterprises operating in open markets.

Shell also follows the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP guidelines), as incorporated in applicable local tax laws. The guidelines outline transfer pricing methods that can be used to apply the arm’s length principle in practice. These methods are applied consistently across the Group.

Shell has a structured approach to transfer pricing accountabilities and responsibilities. The responsibility for transfer pricing matters lies with Shell’s Global TP Team and Finance Operations (FO) TP Team. The Global TP Team provides support to Shell businesses, supports any engagement with tax authorities and provides guidance for projects. The FO TP Team focuses on compliance, including the preparation of documents according to OECD recommendations and country regulations.

Shell has a structured approach to transfer pricing.
Arm’s length principle
This valuation principle is commonly applied to commercial and financial transactions between related companies. It says that transactions should be valued as if they had been carried out between unrelated parties, each acting in their own best interests.
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Country
Throughout this report, “country” is used as the primary descriptor for a geographical area because that is the word used by the OECD/G20 Base Erosion and Profit Shifting (BEPS) project in their proposal for country-by-country reporting (CbCR). This is one of the four minimum reporting standards to which over 100 countries have committed, covering the tax residence jurisdictions of nearly all large multinational enterprises (MNEs). In this report “country” may also refer to locations, jurisdictions or territories which have their own tax regimes or discrete rules.
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OECD
OECD stands for the Organisation for Economic Co-operation and Development which is an intergovernmental economic organisation with 38 member countries, founded in 1961 to stimulate economic progress and world trade.
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Transfer pricing
This refers to the setting of the price for goods and services sold between related entities within a group. Transfer pricing should be based on the arm’s length principle. This means that profits are allocated to the countries where the relevant economic activity takes place and cannot be artificially taken somewhere else.
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