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This will interest every multi-national company! |
| Breaking News on Intangibles |
23 Sept. 2010 - The OECD received a big response - 44 in total - for its upcoming project on the Transfer Pricing Aspects of Intangibles.
Some of the responses call for: A clear definition of intangible property including, for example, a list of what is, and is not, considered to be intangible.
Guidance on the ownership, transfer and/or license of intangibles.
Guidance on the appropriate transfer pricing and/or valuation methods to use, and what to do in the absence of reliable third party comparables.
Identifying intangibles that generate excess profits, which is not the same as allocating profits to some or all intangibles among related parties.
Specific guidance for R&D, marketing intangibles, workforce-in-place, local intangibles, routine vs. non-routine, goodwill, transferrable vs. non-transferrable, a service vs. intangible or the "bundle" of both, legal vs. economic ownership, discontinued operations, use of hindsight, re-characterization, etc.
Consideration of withholding tax, value for customs, Value Added Tax, etc.
Attached are copies of the 44 responses to the OECD. Click here. |
| Impact on Specific Industries and Groups | |
Responses from the Tax Executive Institute, accounting firms, law firms, etc. will - in most instances - apply to multinational companies of all sizes. Responses from AstraZeneca, TD Bank, Cadbury, etc. might reflect issues that are specific to each of their industry segments.
Attached are copies of the 44 responses to the OECD. Click here. |
| Valuation vs. Transfer Pricing |
It is important to recognize the difference between the sale of an intangible at a point in time using valuation methods to determine their fair market value, and the license of an intangible during a period of time using transfer pricing methods to determine the arm's length price. Currently, this is a significant area of controversy between taxpayers and tax authorities. On this point, it appears Altus Alliance said it best when they wrote:
"Valuation of intangibles - The OECD does not have extensive expertise or a history of dealing with techniques or methodology for valuation of intangibles assets. Altus believes the OECD should avoid seeking to offer detailed valuation guidelines on intangible assets for transfer pricing purposes. Rather, the OECD should provide high level valuation guidance and rely on guidance issued by valuation authorities rather than providing detailed directives to cover valuation methods, issues and approaches."
Attached is the response by Altus Alliance to the OECD. Click here. |
| Impact on the OECD Guidelines |
It is anticipated that the OECD will at some point issue new guidance on intangibles that overlaps with, and might require changes in, the following chapters within the OECD Guidelines on Transfer Pricing:
Chapters I - III on the selection and use of transfer pricing methods.
Chapter VI special considerations for intangible property
Chapter VII special considerations for intra-group services
Chapter VIII cost contribution arrangements
Chapter IX transfer pricing aspects of business restructuring
Attached are the details of the OECD Guidelines. Click here. |
| Concern for all Companies | |
It is reasonable to expect that the Canada Revenue Agency, the Internal Revenue Service and all other tax authorities will consider how these changes might impact their transfer pricing rules and administrative guidance. However, it is not yet known how long it might take for these changes to be introduced, what the impact will be for the taxpayer vs. tax authorities, the first year of implementation, transitional provisions, etc. |
| Transfer Pricing Services |
Please conta ct MDW Consulting Inc. if you have questions about these or other transfer pricing issues that concern you. |
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Matthew Wall CA CBV
Transfer Pricing Expert
416.737.2276 |
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