The revised discussion draft on transfer pricing aspects of intangibles shows the direction in which the OECD had been travelling even before the BEPS Action Plan was published. We discuss here how action 8 of the Plan will help to focus the remaining work on this project.
14 November 2013
The public consultation on transfer pricing at the OECD on 11/12 November, including the Revised Discussion Draft containing proposed revisions to the OECD Transfer Pricing Guidelines...
included discussion on the following BEPS-related issues which Working Party 6 (WP6) need to focus on.
Finishing the intangibles draft
Finishing other issues on intangibles such as hard to value intangibles and cost contribution arrangements
2 September 2013
The language used in the Action Plan reflects some of what we’ve seen recently regarding countries interpreting or revising transfer pricing rules …
to “align profits with value creation”. This has often meant focusing more on where ‘important people functions’ are performed, so that the location of a particular intangible should be commensurate with people who created, interpret or (in the case of litigation and legal protection) defend it as well as applying appropriate governance and controls over it (rather than merely by reference to the legal ownership). Countries may begin adopting rules similar to the US ‘commensurate with income’ rules or other special measures to price hard-to-value intangibles (on which latter topic the OECD is carrying out further work).
Existing guidance on cost contribution arrangements at the OECD and among member countries may also soon be updated to reflect current thinking in this area. We think that it should adopt principles that apply to similar arrangements which are economically equivalent, such as those involving the licensing of rights by a party incurring the full cost of development of the intangible from which they derive.
We also believe that allowing for ex-post-valuation rules is inconsistent with the arm’s length principle and should be resisted.
15 August 2013
The OECD’s 30 July 2013 Revised discussion draft on transfer pricing aspects of intangibles shows the direction in which the OECD had been travelling...
on this even before the Action Plan was published; the Plan will help to focus the remaining work on this project. Arguably there has sometimes been too much of a focus from tax administrations on defining novel intangibles in order to justify large returns in their jurisdictions. The revised discussion draft, for example, considers things like features of the local market, location savings, the availability of an assembled workforce and corporate synergies, concluding they should not be intangibles but comparability factors for this purpose.
19 July 2013
Rules are to be developed to prevent BEPS by moving intangibles amongst group members. The work will involve...
adopting a broad and clearly delineated definition of intangibles; ensuring appropriate allocation of profits in accordance with value creation; developing transfer pricing rules or special measures for transfers of hard-to-value intangibles and updating the guidance on cost contribution arrangements. The work is scheduled to be completed within two years.