When OECD Guidelines meet Domestic Law: Lessons from Tanzania’s Amadeus Case

This raises an important question: where they do not align, which one prevails?

The recent Tanzanian Court of Appeal decision in the Amadeus Global Travel Distribution Limited vs Commissioner General Tanzania Revenue Authority (Civil Appeal No.227 of 2025) court case, provided useful insight into this issue and highlights a challenge faced by multinational taxpayers operating across Africa. 

Background to the case 

The case centred on whether finance costs should be included in the taxpayer’s cost base under the Transactional Net Margin Method (“TNMM”). The taxpayer argued that, in line with their 2015 transfer pricing policy, the TNMM was applied using an Operating Margin as a profit level indicator, and therefore finance costs were treated as non-operating expenses and excluded from the operating profit. Operating Margin is determined by taking the earnings before interest and tax and dividing it by the revenue. 

The Tanzania Revenue Authority took a different view, and argued that all direct and indirect costs attributable to the activity should be included when determining the arm’s length range.  

At the heart of the dispute was not only the interaction between the OECD Guidelines and Tanzanian domestic law, but whether the taxpayer sufficiently substantiated the exclusion of the finance costs under the TNMM. While the taxpayer relied on an OECD-based approach, the Tax Revenue Appeals Tribunal ultimately found that it had failed to demonstrate why the finance costs were not attributable to the relevant activities.  

The Court’s position 

The Court considered Regulation 9(2) of the Tanzanian Income Tax (Transfer Pricing) Regulations, 2014, which provides that the Commissioner “may have regard to” the OECD Guidelines. The wording proved significant. The Court held that this does not incorporate the OECD Guidelines into the Tanzanian law. Instead, the Guidelines are persuasive only and may be used as interpretative tools. The distinction is important because binding law creates enforceable obligations, whereas persuasive authority merely assists in interpretation. The Court found that an alleged failure to apply, or incorrect application of, a specific OECD Guideline does not automatically amount to an error in law. The Court further held that the issue relating to the inclusion of finance costs was mainly factual rather than a legal issue. The decision reinforces the principle that domestic legislation remains the primary legal authority in tax disputes. 

Domestic law remains supreme 

Although the OECD Guidelines provide internationally recognised principles and practical assistance in applying the arm’s length principle, they cannot override statutes, regulations or judicial precedent. This creates a practical challenge for multinational groups. Transfer pricing policies are often developed centrally to ensure consistency across jurisdictions and are largely based on OECD principles. However, during an audit, local tax authorities may apply domestic law differently. As a result, a policy that is OECD-compliant may still be lacking from a domestic law perspective. 

The risk of over-reliance on OECD Guidelines 

The taxpayer also argued that the Tax Revenue Appeals Tribunal incorrectly applied the 2017 OECD Guidelines instead of the 2015 version applicable to the relevant tax year. Interestingly, the Court treated this as a factual issue relating to evidentiary weight rather that a pure question of law.  

This suggests that where OECD Guidelines are merely persuasive, disputes over which version applies may not materially affect the legal outcome unless domestic legislation specifically incorporates a particular version.  

This case also demonstrates the risks of assuming that the OECD Guidelines permit the automatic exclusion of finance costs under TNMM without sufficient factual support. Although the Operating Margin generally excludes financing elements, taxpayers may still be required to demonstrate why specific costs are not attributable to the controlled activity. 

For taxpayers, this serves as a reminder that reliance on OECD Guidelines alone is unlikely to succeed, unless supported by wording of domestic legislation and robust factual evidence. 

Practical lessons for taxpayers 

The Amadeus case offers a number of practical lessons:  

Taxpayers should ensure that their transfer pricing policies align with domestic legislation first, not just the OECD Guidelines; 

Where costs are excluded under TNMM or any other transfer pricing method, there should be robust evidence and analysis showing why those costs are not attributable; and 

Taxpayers operating across multiple jurisdictions should also understand the legal status of the OECD Guidelines in each country in which they operate. 

Conclusion 

As African tax authorities become increasingly advanced in transfer pricing audits and enforcement, taxpayers can no longer assume that adhering to OECD principles means domestic compliance. 

The OECD Guidelines remain influential and continue to shape both taxpayer policies and the practices of tax authority. However, unless expressly incorporated into domestic law, they are not binding law.  

For transfer pricing practitioners, the message is clear: the OECD Guidelines may guide the analysis, but domestic law determines the outcome.