TPG2018 Chapter II paragraph 2.180

Category: C. Transactional profit split method, OECD Transfer Pricing Guidelines (2017), Part III: Transactional profit method, TPG2017 Chapter II: Transfer Pricing Methods | Tag: , , , , ,
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Where one or more of the parties to a transaction for which the transactional profit split method is found to be the most appropriate makes a contribution in the form of intangibles, difficult issues can arise in relation both to their identification and to their valuation. Guidance on the identification and valuation of intangibles is found at Chapter VI of these Guidelines. See also the examples in the Annex to Chapter VI “Examples to illustrate the guidance on intangibles.â€






Related Guidelines

  1. TPG2022 Chapter II paragraph 2.181A profit splitting factor based on expenses may be appropriate where it is possible to identify a strong correlation between relative expenses incurred and relative value contributed. For example, marketing expenses may be an appropriate factor for distributors-marketers if advertising generates unique and...
  2. TPG2022 Chapter II paragraph 2.161In any application of a transactional profit split, care should be exercised to ensure that the method is applied without hindsight. See paragraph 3.74. That is, irrespective of whether a transactional profit split of anticipated or actual profits is used, unless there are...
  3. TPG2022 Chapter II paragraph 2.170Depending on the facts and circumstances of the case, the factor can be a figure (e.g. a 30%-70% split based on evidence of a similar split achieved between independent parties in comparable transactions), or a variable (e.g. relative value of participant’s marketing contributions...
  4. TPG2022 Chapter II paragraph 2.180Where one or more of the parties to a transaction for which the transactional profit split method is found to be the most appropriate makes a contribution in the form of intangibles, difficult issues can arise in relation both to their identification and...
  5. TPG2022 Chapter II paragraph 2.141The relevance of this factor as an indicator for the transactional profit split method will depend in large measure on the extent to which the risks concerned are economically significant such that a share of relevant profits would be warranted for each party....
  6. TPG2022 Chapter II paragraph 2.139A transactional profit split may be found to be the most appropriate method where, according to the accurately delineated transaction, each party to the controlled transaction shares the assumption of one or more of the economically significant risks in relation to that transaction...
  7. TPG2022 Chapter II paragraph 2.131Where each party to the transaction legally owns unique and valuable intangibles that are relevant to the transaction, it will also be necessary to consider whether, under the accurate delineation of the transaction, they each assume the economically significant risks relating to those...
  8. TPG2022 Chapter VI paragraph 6.148In some circumstances, a transactional profit split method can be utilised to determine the arm’s length conditions for a transfer of intangibles or rights in intangibles where it is not possible to identify reliable comparable uncontrolled transactions for such transfers. Section C of...
  1. A Toolkit on the Taxation of Offshore Indirect TransfersThe Platform for Collaboration on Tax (IMF, OECD, UN and the WBG) has published a toolkit on the taxation of Offshore Indirect Transfers. The tax treatment of ‘offshore indirect transfers’ (OITs) – in essence, the sale of an entity owning an asset located...
  2. Peru – report on use of the most appropriate method to determine the market value of servicesIn december 2020 the tax authorities in Peru issued a new administrative ordinance related to use of the most appropriate method to determine the market value of services. Click here for English translation...

Related Case Law

  1. Tokyo District Court, judgment of November 24 2017In this case a Japanese company had entered into a series of controlled transactions with foreing group companies granting services and licences to use intangibles – know-how related to manufacturing and sales, training, and provided support by sending over technical experts. The company...
  2. Spain vs Universal Pictures International Spain SL, December 2022, Audiencia Nacional, Case No SAN 5855/2022 – ECLI:EN:AN:2022:5855Universal Pictures International Spain SL is a distributor of films on the Spanish Market. It distributes films both from related parties (Universal Pictures) and from unrelated parties. Following an audit, the Spanish tax authorities issued an assessment where the remuneration received for distribution...
  3. Portugal vs “A-Contract Manufacturer LDA”, December 2020, CAAD Tax Arbitration, Case No 808/2019-TA-Contract Manufacturer LDA is an entity residing in Portugal, whose main activity is contract manufacturing of coffee machines and irons, as well as spare parts, tools etc. on behalf of its German parent B A.G. Following an audit, the tax authorities found that...
  4. US vs Perkin-Elmer Corp. & Subs., September 1993, United States Tax Court, Case No. T.C. Memo. 1993-414During the years in issue, 1975 through 1981, the worldwide operations of Perkin-Elmer (P-E) and its subsidiaries were organized into five operating groups, each of which was responsible for the research, manufacturing, sales, and servicing of its products. The five product areas were...