Research On The Legal Regulation Of The Transfer Pricing Of Intangible Assets

Using transfer pricing to transfer profits is the most important means for multinational corporations to evade taxation.With the increasing value of intangible assets,the multinational companies transfer intangible assets within the group more frequently,they transfer profits to affiliates in low-tax countries,and transfer costs to affiliates in high-tax countries,so as to minimize the tax burden on a global scale.Since the transfer pricing of intangible assets has become an important tax avoidance means for multinational companies,in order to safeguard national tax benefits and to combat the tax avoidance through the transfer pricing of intangible assets,many countries have strengthened the legal regulation of the tax avoidance,the same is true in China,but there are still some imperfections with it.Therefore,in-depth study of legal regulation of the intangible assets transfer pricing problem has important practical significance.The multinational companies transfer intangible assets within the group is a means of tax avoidance,but also an inevitable means of enterprise management.In order to judge whether a related party transaction is reasonable,we need to judge whether it conforms to the principle of Arm's Length.Therefore,it is need to assess the valuation of intangible assets which mainly based on their expected profit.Thus,the first part of this paper first studied the basic theory of intangible assets,including the definition,scope and the range classification of intangible assets,in order to determine the object of transfer pricing of intangible assets;Secondly,as the ownership problem is the starting point of the profit attribution,this paper then discusses the dispute between legal ownership and economic ownership and their advantages and disadvantages in regulating tax evasion,then introduces the problem of tax evasion in the transfer pricing of intangible assets,analyzes the causes and effects of frequent tax evasion problems.In order to reduce tax evasion behavior,we need to regulate the transfer pricing of intangible assets.The application of principle of Arm's Length focus on the comparative analysis,but intangible assets tend to have unique characteristics that lead to troubles in the search of comparable independent transactions,but the principle of Arm's Length is the basic principle of comparability analysis of transfer pricing.The second part of this paper discusses the regulation of transfer pricing of intangible assets,including the basic principles and methods of regulation;Only after determining whether the conditions of related transaction conform to the Arm's Length principle,can we decide whether to adjust the conditions of controlled transaction.However,it may lead to new international double taxation if the affiliated transaction is adjusted after the tax authorities judge that it does not conform to the principle of Arm's Length.In order to reduce the burden of tax authorities and taxpayers,pre-adjustment methods such as advance pricing agreement and cost contribution arrangement have also gradually emerged,which have become powerful supplements of the principle of Arm's Length to adjust the transfer pricing of intangible assets.Adjusting methods of transfer pricing include traditional transactional methods and profit-based methods.Traditional transactional methods,for example,the comparable uncontrolled price method pay attention to the similarity of the product,it is difficult to find comparable independent transactions,people begin to pay attention to profit-based methods,which has a relatively low dependence on independent transaction data.The third part of this paper carries on the discussion of the principle of Arm's Length in the second part and discusses the traditional transactional methods and profit-based methods.Due to the unique characteristics of intangible assets,it is necessary to balance the specific methods to be adjusted according to the specific situation.Especially for the unique and high-value nonrountine intangible assets,due to the lack of comparable transactions,how to determine the profits of controlled transactions must be analyzed in a specific case based on the study of advanced legislative examples.China's regulation on transfer pricing of intangible assets basically derives from the experience of OECD,The United States and other major economies.However,China's status as a developing country,and in terms of international investment we are both a host nation and an invest nation determines,it is not enough for us to merely copy advanced legislation.In this paper,the fourth part discusses the present situation of transfer pricing of the intangible assets in China and the improvement measures;Since the release of the OECD BEPS action plans in 2013,China has been strengthening its regulation on transfer pricing of intangible assets.In order to effectively solve transfer pricing of the intangible assets which could lead to tax base erosion,China not only needs to participate in the BEPS action to deal with the difficult problems in the transfer pricing of intangible assets to maintain the tax base from being eroded,but also needs to improve its own transfer pricing system to effectively safeguard China's tax interests,and strive to improve the voice of China in the international tax field.