Welcome to International Tax Review's guide to intangible assets, published in association with Deloitte. In today's digital revolution, intangible assets are as central to the business function as steam-powered machines were during Industrial Revolution.
Despite the evolution of businesses since the 18th century, modern business is still governed by historic tax laws.
With the onset of the BEPS project, no sector or business is immune from the tax burdens of intangibles. New technologies and automation, a changing regulatory landscape, and the entry of new market players are reshaping the way we work. Businesses need to be strategic in the way they manage their intangibles and perform DEMPE functions in line with the BEPS Action Plan and the way governments are implementing and interpreting these measures.
It is unlikely that the BEPS project will clear up all the confusion over how to tax intangibles, but substantive guidelines and practical examples are offering some clarity.
However, analysing the most effective approach to dealing with the international taxation of intangibles remains a particularly challenging area.
In the case of transfer pricing, identifying and determining the value of intangible assets is difficult enough. Add to this a merger or acquisition and you have a host of additional matters to consider – the ownership structure of the intangible asset must be reconsidered, for example.
Brands are another complex area. One author in our guide writes that robust valuations and royalty opinions should incorporate analysis of the legal rights underpinning the brand, together with the associated reputational stock that drives purchase behaviour.
Despite increasingly harmonised international tax rules, complying with the tax rules for intangibles in one country will not guarantee your safety from audit in another. Already we are seeing judgments emerging on how tax authorities and the courts are determining the appropriate transfer pricing method for such assets.
Wading through the numerous laws and OECD guidance can be tough. It is through guides such as this one, that tax directors and tax practitioners can understand the wider issues of the debate, learn from case studies and examples and apply these arguments to their situations.
We hope you enjoy the guide and find the articles useful and informative.
Managing editor, International Tax Review