The arm’s length principle requires an evaluation of the conditions made or imposed between associated enterprises, at the level of each of them. The fact that centralisation of legal ownership of intangibles may be motivated by sound commercial reasons at the level of the MNE group does not answer the question whether the conditions of the transfer are arm’s length from the perspectives of both the transferor and the transferee.
TPG2017 Chapter IX paragraph 9.59
Category: E. Transfer of something of value, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter IX: Transfer Pricing Aspects of Business Restructurings | Tag: Business restructuring, Centralisation of legal ownership of intangibles, Perspective of both parties, Transfer of value
« Prev |
Next » Related Guidelines
- TPG2022 Chapter IX paragraph 9.60Also in the case where a local operation disposes of the legal ownership of its intangibles to a foreign associated enterprise and continues to use the intangibles further to the disposal, but does so in a different legal capacity (e.g. as a licensee),...
- TPG2022 Chapter IX paragraph 9.13The application of the arm’s length principle to a business restructuring must start, as for any controlled transaction, with the identification of the commercial or financial relations between the associated enterprises involved in the business restructuring and the conditions and economically relevant circumstances...
- TPG2022 Chapter IX paragraph 9.59The arm’s length principle requires an evaluation of the conditions made or imposed between associated enterprises, at the level of each of them. The fact that centralisation of legal ownership of intangibles may be motivated by sound commercial reasons at the level of...
- TPG2022 Chapter IX paragraph 9.61Where the business restructuring provides for a transfer of an intangible followed by a new arrangement whereby the transferor will continue to use the intangible transferred, the entirety of the commercial arrangement between the parties should be examined in order to accurately delineate...
- TPG2022 Chapter IX paragraph 9.58MNE groups may have sound business reasons to centralise ownership of intangibles or rights in intangibles. An example in the context of business restructuring is a transfer of legal ownership of intangibles that accompanies the specialisation of manufacturing sites within an MNE group....
- TPG2022 Chapter IX paragraph 9.62Difficulties can arise in the context of business restructuring where the valuation of an intangible or rights in an intangible at the time of the transaction is highly uncertain. In these cases, the question arises as to how arm’s length pricing should be...
- TPG2022 Chapter IX paragraph 9.94Assume a manufacturing contract between two associated enterprises, entity A and entity B, is terminated by A (B being the manufacturer). Assume A decides to use another associated manufacturer, entity C, to continue the manufacturing that was previously performed by B. As noted...
- TPG2022 Chapter IX paragraph 9.66Contractual rights can be valuable intangibles. Where valuable contractual rights are transferred (or surrendered) between associated enterprises, they should be remunerated at arm’s length, taking account of the value of the rights transferred from the perspectives of both the transferor and the transferee....
- United Arab Emirates issues comprehensive Transfer Pricing Guide23 October 2023, the United Arab Emirates issued a comprehensive practical Transfer Pricing Guide. The guide is designed to provide general guidance on the Transfer Pricing regime in the UAE with a view to making the provisions of the Transfer Pricing regulations as...
- Australia finalises compliance guideline on intangibles migration arrangements – PCG 2024/117 January 2024 the Australian Taxation Office published the final version of its Practical Compliance Guideline PCG 2024/1 Intangibles migration arrangements. The PCG has previously been released in drafts as PCG 2021/D4 and PCG 2023/D2 Intangibles arrangements. The final version sets out ATO’s...
Related Case Law
- Switzerland vs “Merger-Loss AG”, January 2012, Bundesgericht , Case No 2C-351/2011The deduction of losses resulting from a reorganisation involving a merger with a company in liquidation is not allowed if the sole reason for the merger was the deduction of such losses. In the present case, the Swiss Federal Supreme Court allowed the...
- Portugal vs “B Restructuring LDA”, February 2021, CAAD, Case No 255/2020-TB Restructuring LDA was a distributor within the E group. During FY 2014-2016 a number of manufacturing entities within the group terminated distribution agreements with B Restructuring LDA and subsequently entered into new Distribution Agreements, under similar terms, with another company of the...
- Poland vs R. Group, September 2018, Administrative Court, Case No III SA/Wa 263/18R. Sp. z o.o. had requested a binding ruling/interpretation regarding tax deduction for the price paid to a related entity under restructuring. The request was denied by the tax authorities, as the question – according to the authorities – could only be answered...
- Israel vs Medtronic Ventor Technologies Ltd, June 2023, District Court, Case No 31671-09-18In 2008 and 2009 the Medtronic group acquired the entire share capital of the Israeli company, Ventor Technologies Ltd, for a sum of $325 million. Subsequent to the acquisition various inter-company agreements were entered into between Ventor Technologies Ltd and Medtronics, but no...