TP intangibles
Intangible property is in many cases one of the most valuable aspects of a business
o Accordingly, it is central for TP purposes to take into account the intangibles owned by a group
when determining the transfer prices of cross-border intercompany transactions
For this reason, in practice it is important to determine:
(i) The existence of an intangible for TP purposes
(ii) Identifying the parties entitled to the return attributable to the intangible upon
its use or transfer, assuming such a return exists (the economic ownership of
the intangible is determined by carrying out a functional analysis) 1.
The party(ies) entitled to the returns attributable to the intangibles will
be the party(ies) performing
(i) the DEMPE functions (as described below)
(ii) Provides funding and other assets
(iii) Controls and bears the various risks associated to the intangible
The lack of one or more of these criteria is likely to preclude a full
entitlement to the return attributable to the intangible!!
The ALP applies irrespectively of the categorisation of the asset
o This means that in instances where intangibles are involved in the transactions between related
companies, the ALP is applied as with any other asset
Hence, the comparability analysis will entail that the five comparability factors will have
to be assessed
Definitional issues:
Intangibles refer to: ‘something that is not a physical asset or a financial asset, which is capable of
being owned or controlled for use in commercial activities, and whose use or transfer would be
compensated had it occurred in transactions between independent enterprises in comparable
circumstances’.
Two definitional elements of intangibles are that:
1
It can also be the case that multiple entities are entitled to the return attributable to an intangible. This would be the
case when two or more companies have been involved in activities resulting in intangibles (for example by sharing
functions, risks or costs as part of a costs contribution arrangement).
Intangible property is in many cases one of the most valuable aspects of a business
o Accordingly, it is central for TP purposes to take into account the intangibles owned by a group
when determining the transfer prices of cross-border intercompany transactions
For this reason, in practice it is important to determine:
(i) The existence of an intangible for TP purposes
(ii) Identifying the parties entitled to the return attributable to the intangible upon
its use or transfer, assuming such a return exists (the economic ownership of
the intangible is determined by carrying out a functional analysis) 1.
The party(ies) entitled to the returns attributable to the intangibles will
be the party(ies) performing
(i) the DEMPE functions (as described below)
(ii) Provides funding and other assets
(iii) Controls and bears the various risks associated to the intangible
The lack of one or more of these criteria is likely to preclude a full
entitlement to the return attributable to the intangible!!
The ALP applies irrespectively of the categorisation of the asset
o This means that in instances where intangibles are involved in the transactions between related
companies, the ALP is applied as with any other asset
Hence, the comparability analysis will entail that the five comparability factors will have
to be assessed
Definitional issues:
Intangibles refer to: ‘something that is not a physical asset or a financial asset, which is capable of
being owned or controlled for use in commercial activities, and whose use or transfer would be
compensated had it occurred in transactions between independent enterprises in comparable
circumstances’.
Two definitional elements of intangibles are that:
1
It can also be the case that multiple entities are entitled to the return attributable to an intangible. This would be the
case when two or more companies have been involved in activities resulting in intangibles (for example by sharing
functions, risks or costs as part of a costs contribution arrangement).
