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An Analysis Of The International Transfer Pricing Regime For Intangibles

Posted on:2014-02-03Degree:MasterType:Thesis
Country:ChinaCandidate:Y M SunFull Text:PDF
GTID:2246330395494287Subject:International law
Abstract/Summary:PDF Full Text Request
Transfer pricing is undoubtedly an international tax issue of topical interest tomultinational enterprise.The latter,in particular,have acknowledged that some of themost difficult transfer pricing issues have always involved the area of intangibles.It isimportant to recognise that identifying intangibles,identification of parties entitled tointangible related return,transactions involving the use or transfer of intangibles anddetermining arm’s length conditions in cases involving intangibles have been keyissues in transfer pricing of intangible. This thesis is based on the Discussion Draft“Revision of the Special Considerations for Intangibles in Chapter VI of the OECDTransfer Pricing Guidelines and Related Provisions”which is published by OECD,on6June2012.In the Discussion Draft intangible is intended to address something which is nota physical asset or a financial asset,and which is capable of being owned or controlledfor use in commercial activities.Intangibles that are important to consider for transferpricing purposes are not always recognised as intangible assets for accountingpurpose.Group synergies,market specific characteristics and legal,contractual.or otherforms of protection are not intangibles for transfer pricing purposes.Patent,know-howand trade secrets,trademarks,trade names and brands,goodwill,ongoing concern valueand assembled workforce are intangibles for transfer pricing purpose.Identification ofthe member of members of an MNE group that are entitlement to intangible relatedreturn in arm’s length transaction is the second threshold in transfer pricinganalysis.Legal registrations and contractual arrangements are the starting point fordetermining which members of an MNE group are entitled to intangible relatedreturns.Where the conduct of the parties is not aligned with the terms of legalregistrations and contracts,it may be appropriate to allocate all or part of theintangible related returns to the entity or entities that perform the functions,bear therisks,and bear the costs that related to intangibles.Transactions involving the use of intangibles in connection with sales of goods or services and transactions involving transfers of intangibles are two general typesof transactions where the identification and examination of intangibles will berelevant for transfer pricing purpose.Determining arm’s length conditions in casesinvolving intangibles should conducting a comparability analysis in a matterinvolving intangibles.Selecting the most appropriate transfer pricing method in amatter involving the use or transfer of intangibles is important.Some valuationtechniques drawn from financial valuation practice may have application in casesinvolving intangibles.Accuracy of financial projections,assumptions regarding growthrates, discount rates,useful life of intangibles and terminal values and assumptionregarding tax rates are important in evaluating the reliability of the particularapplication of a valuation technique. When valuation is highly uncertain at the time ofthe transaction, the question should be resolved,both by taxpayers and taxadministrations,by reference to what independent enterprises would have done incomparable circumstances.
Keywords/Search Tags:Transfer pricing, Intangibles, Valuation techniques, Comparability analysis
PDF Full Text Request
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