Research On Profits Attribution Of Intangibles Under Transfer Pricing Tax System

In recent years,it is more and more common that multinational companies transfer profit and escape from taxes burdens by intangibles transfer pricing.The ownership of intangibles and the ownership of its profit are important issues of transfer pricing tax system.The paper starts with the practice of intangibles transfer pricing,and summarizes the mode of contractual research and development,the mode of direct licensing,and the mode of cost allocation,and analyzes how the three modes cause inconsistency of value creation and profits attribution in the practice,thus resulting in base erosion and profit shifting.Then,the paper deeply discusses the ownership of intangibles and value contribution issues.Specifically,the paper argues that the ownership of the intangibles can be divided into legal ownership and economic ownership,and the tax authorities should pay attention to the coordination of intangibles' legal forms and economic values when determining the essence of transfer pricing.In addition,functions performed,assets used,and risks assumed by affiliated companies in the development,enhancement,maintenance,protection and exploitation of intangibles play the most important roles when deciding the ownership of intangibles'profit,and the process should be in keeping with the the arm's length principle.The final report released by OECD,Aligning Transfer Pricing Outcomes with Value Creation,provides guidance for intangibles transfer pricing.This paper summarizes the regulations relating to the definition of intangibles,the ownership and value contribution issues,as well as the regional special factors in the final report.And based on above analysis,the paper provides some suggestions to perfect China's existing tax system of intangibles transfer pricing.