Introduction
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Introduction

Dear readers,

The global transfer pricing practice of Deloitte Touche Tohmatsu Limited is pleased to present a collection of articles on different aspects of transfer pricing particularly focused on intangibles.

As OECD's transfer pricing guidance in Actions 8, 9 10 and 13, issued as part of the Base Erosion and Profit Shifting (BEPS) Project, continue to take centre stage in transfer pricing planning and documentation, in this guide, we provide valuable insights into some of the most significant challenges that multinational corporations (MNCs) face with respect to transfer of intangibles and, in particular, in identifying and assigning value to intangibles.

In the first article, Applying the profit split method, Alan Shapiro, Eunice Kuo and Anis Chakravarty, discuss the OECD's non-consensus discussion draft on proposed changes to the transactional profit split method. They observe that the tone of the discussion draft suggested the broad applicability of profit splits to integrated value chains. Their main takeaway, however, from the supplemental guidance on value chain analyses provided in the discussion draft is the casting of a value chain analysis as a delineation tool for a specific transaction, rather than as a justification to apply a profit split on every integrated MNE operating through a global value chain. This is a significant change in direction from the non-consensus draft on profit splits, which suggested the latter rather than the former.

In the second article, The OECD hard-to-value intangible guidance, Philippe Penelle attempts to understand where the concepts in the hard-to-value intangible (HTVI) guidance came from, and explains what the views of the US government have historically been in connection with the arm's-length nature of such concepts. That discussion will encompass a simple theoretical discussion of the use of ex post results to assess the arm's-length nature of ex ante pricing as a means to set up one commonly cited reason to believe that the HTVI guidance may, in fact, go beyond the arm's-length principle, as commonly understood or interpreted. Ultimately, the article provides useful insights as to what to expect from the OECD HTVI guidance, based on lessons learned from the US experience with the commensurate income standard and the periodic adjustment rules.

The third article focuses on OECD guidance on transfer pricing documentation (Action 13) which requires multinational corporations to identify where and how value is created in business operations. In their article, Value chain analysis, Shanto Ghosh and Arindam Mitra outline the key approach to a value chain analysis and how one may apply economic principles to determine the ex post split of the consolidated contribution margin in a global value chain taking into consideration the economic risks being borne by the various entities within an MNC. Their novel methodology allocates the ex post contribution margin (or revenue) among the sub-units of an integrated supply chain based on the relative modified operating leverage of the sub units. The result is a reasonable arm's-length approximation of the allocation of profits within an MNC that are aligned by the creation of value within the MNC's integrated supply chain.

Although the guidance in the non-consensus discussion draft on proposed changes to the transactional profit split method provides a reasonable foundation on which the OECD member states can build upon in the next release, which is expected in the next few months, it is hoped that OECD will provide additional clarification in a number of areas, including better coordination with its valuation guidance on intangibles.

Navigating the world of transfer pricing is not easy. We hope this guide provides you with useful insights into the transfer pricing of intangibles. If you have any questions, or would like to engage in a discussion, please contact the Deloitte transfer pricing professionals featured in this guide.

Mark Nehoray

Partner

more across site & bottom lb ros

More from across our site

Nusetti, global tax head at pharmaceutical company Lupin, tells ITR about being a tax magician, military aspirations and what makes tax cool
The UK tax agency unsuccessfully argued that a software company was not entitled to R&D tax relief
Pillar two anticipation may have led to stable international corporation tax rates according to the OECD; in other news, A&M has continued its lateral hiring spree
Singapore faces controversies with many trade partners and needs to constantly keep tax guidelines up to date, a local tax expert told ITR
With HMRC’s renewed enforcement focus, it’s as important as ever for UK companies to get their NRD compliance affairs in order, writes Lewin Higgins-Green of FTI Consulting
Senator Richard Colbeck’s remarks follow news that PwC Australia CEO Kevin Burrowes receives a salary of A$4 million, more than previously disclosed
Adam Frais will assume his new role on October 1 and will lead BDO’s 1,000-strong UK tax business
It comes after a decree which introduced a qualified domestic minimum top-up tax last year
The UK Upper Tribunal’s pragmatic approach to anti-abuse provisions will be welcomed by the secondary debt market, say Matthew Greene and Guy Bud of Stewarts
The party should aim to reduce corporation tax from 25% to 15%, one partner told ITR
Gift this article