Legal Study On The International Taxation Of Transfer Prcing Of Intangibles

With the advent of the era of knowledge economy,the value-driven role of intangibles in international economic trade has become increasingly prominent.Based on the professionalism and complexity of its research and development,maintenance and promotion,the value contribution of all parties involved in an intangibles and value segmentation has naturally unquantifiable uncertainty.In addition,the current international transfer pricing tax system is imperfect in the field of intangibles,making intangibles trading has become an important means for tax planning and even tax avoidance in multinational enterprises in the world today.Multinational enterprises transfer the group's global profits to low-tax areas or tax havens using intangibles as a medium through unfair intangibles development cost-sharing and value-added revenue sharing,which has brought a huge impact on the traditional international tax system and international tax administration.As stated by the Organisation for Economic Co-operation and Development(OECD)in the Report on Resolving Base Erosion and Profit Shifting(BEPS Report)issued in 2013,“The current international tax standards may have lagged behind the changes in global business practices,especially in the development of intangibles and the digital economy".Therefore,to effectively regulate and manage the taxation on intangibles transactions,to prevent multinational enterprises from transferring profits through the intangibles transactions and erosion of the tax base are of paramount importance to maintain national tax sovereignty and tax benefits.This paper firstly delineates the relevant concepts of the intangibles in the transfer pricing area,and then introduces in detail the provisions on the adjusting principle-arm's length principle and methods of intangibles transfer pricing – cost sharing agreement.Based on the fact that the issue of ownership to intangibles and return on value contributions is the precondition of scientific application of arm's length principle and is attracting more attention compared with the arm's length principle,this paper discusses the legal issues related to the said area,which leads to the legal analysis on the Economic Substance Doctrine under U.S.law and OECD guideline.Finally this paper briefly analyzes the relevant taxation on transfer pricing of intangibles in China and hopes to make useful suggestions on cost sharing agreement and Economic Substance Doctrine.