All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

OECD transfer pricing meetings: Grant Thornton’s take

Grant Thornton’s Wendy Nicholls spoke about categorising intangible assets at the OECD transfer pricing drafts consultation last week. Here she provides her overall impressions of the discussion.

Key areas of the debate

There was a significant amount of debate around the meaning of paragraph 40, in particular the reference to the performance of functions: "It is expected ... the entity claiming entitlement to intangible related returns will physically perform, through its own employees, the important functions related to the development, enhancement, maintenance and protection of the intangibles."

Many delegates had taken this statement at face value and had assumed that outsourcing of functions would not constitute performance of a function by the owner of the intangible.

In a welcome set of comments, Joe Andrus, the head of the OECD's transfer pricing unit, confirmed the OECD WP6 had assumed that controlling or managing an outsourced function was akin to the performance of a function. Joe put his comments in the context of CROs (contract research organisations), where the IP owner frames the terms of reference for the service provider who nevertheless has to be independent and have autonomy in the conduct of clinical trials.

There was also a degree of acceptance by the attendees that when considering the options realistically available to the parties, there was no need to consider an exhaustive list of all and every available alternative.

Contentious issues

The desirability and possibility of closely defining the term intangible remains an area where business and advisers appear to have a difference of opinion with WP6. The latter (for example, the IRS) generally suggested that any definition needed to be very broad to combat potentially abusive behaviour whereas business and advisers wanted clear definitions to ensure certainty and avoid double taxation.

One further example was the position noted by the representative of the Indian tax authority. India considers, where a local Indian company has built up a local market, it is entitled to the intangible returns arising from doing business in that market. Delegates around the table were generally of a different view.

Overall, Grant Thornton strongly welcomed the opportunity for business to participate in the debate while the draft is still being fine-turned and trusts that the final version will be improved as a result of the more open process that Joe Andrus and WP6 engaged in.

By principal TPWeek correspondents for the UK, Wendy Nicholls (wendy.nicholls@uk.gt.com) and Elizabeth Hughes (Elizabeth.Hughes@uk.gt.com) of Grant Thornton.


More coverage:

How the OECD can improve its consultation process in tax policy
  • Valuation is biggest bugbear in OECD intangibles work
  • Critics round on vague anti-abuse provisions in OECD intangibles draft
  • Why business wants multilateral safe harbours and why they must be optional

    More from across our site

    Japan reports a windfall from all types of taxes after the government revised its stimulus package. This could lead to greater corporate tax incentives for businesses.
    Sources at Netflix, the European Commission and elsewhere consider the impact of incoming legislation to regulate tax advice in the EU – if it ever comes to pass.
    This week European Commission officials consider legal loopholes to secure minimum corporate taxation, while Cisco and Microsoft shareholders call for tax transparency.
    The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
    The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
    Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
    Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
    In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
    But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
    EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
    We use cookies to provide a personalized site experience.
    By continuing to use & browse the site you agree to our Privacy Policy.
    I agree