How does Transfer Pricing Affect Cost Contribution Arrangements?

Entities carrying out transactions with associated enterprises that are covered by a cost contribution arrangement (CCA) need to make sure that their transfer pricing analysis is in line with the arm’s length principle.

Transfer pricing involves setting prices for transactions between associated enterprises operating in different tax jurisdictions. MNEs need to ensure that transactions between these entities should be priced as if they were conducted between unrelated parties in an open market.

Transfer pricing analysis for transactions involving CCAs can be tough for businesses. However, transfer pricing advisers in Dubai can assist in navigating such complexities.

This blog provides you with an overview of the key transfer pricing considerations affecting CCAS. Read ahead for more insights:

What are Cost contribution Arrangements?

Business enterprises may often engage in joint activities with the expectation of creating benefits for the individual businesses of each of the participants. Such types of joint ventures include development, production or the obtaining of intangibles, tangible assets or services.

A CCA is a contractual agreement between such companies to share the contributions and risks involved in such joint activities. Consult with transfer pricing consultants in Dubai to learn more in this regard.

Types of Cost Contribution Arrangements

The OECD Guidelines are the two types of CCAs that are common across the world. They are:

  1. Development CCAs: CCAs created for the joint development, production or the obtaining of intangibles or tangible assets.
  2. Services CCAs: CCAs created for obtaining services

Key Features of a Cost Contribution Arrangement

The key features of a CCA include the following:

Sharing of contributions

Each participant’s proportionate share of the overall contributions to a CCA must be consistent with its proportionate share of the overall expected benefits to be received under the arrangement.


There is always an expected benefit in a CCA. Some benefits may be available immediately and others in the future.


CCAs can provide simplification of multiple transactions and can provide a mechanism for replacing a web of separate intra-group arm’s length payments with a more streamlined system of netted payments.

Key Issues to be Analysed in a CCA

Participants in a CCA are not required to combine their operations to exploit any resulting intangibles jointly or to share the revenues or profits.

However, they can exploit their interest in the outcomes of a CCA through their individual businesses. The transfer pricing issues focus on the following aspects of the CCA:

  • Commercial or financial relations between the participants
  • Contributions of the participants that create the expected outcomes

Application of the arm’s length principle in CCAs

The following steps need to be considered for applying the arm’s length principle on transactions covered under CCAs:

  • Analyze the commercial and financial relationships of each participant
  • Calculate the value of each participant’s contribution to the joint activity
  • Determine whether the allocation of CCA contributions (as adjusted for any balancing payments) corresponds to the shares of expected benefits

Information to be included in a CCA

The following are the general information to be included in CCAs and the reporting of information on CCAs:

  • List of CCA participants
  • Scope of the activities and specific projects covered by the CCA
  • Duration of the arrangement
  • The manner in which proportionate shares of expected benefits are measured
  • Form and value of each participant’s initial contributions
  • The anticipated allocation of responsibilities and tasks

Transfer Pricing Consultants in Dubai can help you with CCAs

Transfer pricing in CCA is a complex field that requires careful planning, adherence to the arm’s length principle, and transparent documentation. Navigating this intricate landscape can be challenging, but with the right expertise and commitment to compliance, businesses can optimize their CCA operations while staying on the right side of tax regulations.

Transfer Pricing Advisers in Dubai such as Tax Gian can help MNEs navigate the complex transfer pricing issues related to CCAs. Tax Gian is a brand of Jitendra Tax Consultants (JTC) consisting of a team of highly experienced tax experts. Since 2001, Jitendra Chartered Accountants, an associate of JTC, has been providing end-to-end advisory services including tax solutions in Dubai, UAE to its clients globally. We can help you navigate the complex provisions of transfer pricing. Call us today to avail yourself of comprehensive corporate tax advisory services in Dubai, UAE.

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