The extent and duration of legal protection of the intangibles relevant to a particular transfer can be an important comparability consideration. Legal protections associated with some intangibles can prevent competitors from entering a particular market. For other intangibles, such as know-how or trade secrets, available legal protections may have a different nature and not be as strong or last as long. For intangibles with limited useful lives, the duration of legal protections can be important since the duration of the intangible rights will affect the expectation of the parties to a transaction with regard to the future benefits from the exploitation of the intangible. For example, two otherwise comparable patents will not have equivalent value if one expires at the end of one year while the other expires only after ten years.
TPG2017 Chapter VI paragraph 6.119
Category: D. Determining arm's length conditions in cases involving intangibles, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter VI: Special Considerations for Intangibles | Tag: Comparability of intangibles, Intangibles, Unique and valuable contributions
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- TPG2022 Chapter VI paragraph 6.120The geographic scope of the intangibles or rights in intangibles will be an important comparability consideration. A global grant of rights to intangibles may be more valuable than a grant limited to one or a few countries, depending on the nature of the...
- TPG2022 Chapter VI paragraph 6.128In conducting a comparability analysis involving the transfer of intangibles or rights in intangibles, the existence of risks related to the likelihood of obtaining future economic benefits from the transferred intangibles must be considered, including the allocation of risk between the parties which...
- TPG2022 Chapter VI paragraph 6.117Set out below is a description of some of the specific features of intangibles that may prove important in a comparability analysis involving transfers of intangibles or rights in intangibles. The following list is not exhaustive and in a specific case consideration of...
- TPG2022 Chapter VI paragraph 6.122In conducting a comparability analysis, it will therefore be important to consider the expected useful life of the intangibles in question. In general, intangibles expected to provide market advantages for a longer period of time will be more valuable than similar intangibles providing...
- TPG2022 Chapter VI paragraph 6.124As a general rule, intangibles relating to products with established commercial viability will be more valuable than otherwise comparable intangibles relating to products whose commercial viability is yet to be established. In conducting a comparability analysis involving partially developed intangibles, it is important...
- TPG2022 Chapter VI paragraph 6.18This section provides illustrations of items often considered in transfer pricing analyses involving intangibles. The illustrations are intended to clarify the provisions of Section A. 1., but this listing should not be used as a substitute for a detailed analysis. The illustrations are...
- TPG2022 Chapter VI paragraph 6.119The extent and duration of legal protection of the intangibles relevant to a particular transfer can be an important comparability consideration. Legal protections associated with some intangibles can prevent competitors from entering a particular market. For other intangibles, such as know-how or trade...
- TPG2022 Chapter VI paragraph 6.72The entitlement of any member of the MNE group to profit or loss relating to differences between actual (ex post) and a proper estimation of anticipated (ex ante) profitability will depend on which entity or entities in the MNE group in fact assumes...
- 2018: ATO Taxpayer Alert on Mischaracterisation of activities or payments in connection with intangible assets (TA 2018/2)The ATO is currently reviewing international arrangements that mischaracterise intangible assets[1] and/or activities or conditions connected with intangible assets. The concerns include whether intangible assets have been appropriately recognised for Australian tax purposes and whether Australian royalty withholding tax obligations have been met. Arrangements...
- EU JTPF, March 2017, Report on the Use of Comparables in the EUIn March 2017 the JTPF agreed the Report on the Use of Comparables in the EU. The report establishes best practices and pragmatic solutions by issuing various recommendations for both taxpayers and tax administrations in the EU and aims at increasing in practice...
Related Case Law
- France vs SASU Alchimedics, January 2024, CAA de Lyon, Case No. 21PA04452Since 2012, the French company SASU Alchimedics has been owned by Sinomed Holding Ltd, the holding company of a group of the same name set up by a Chinese resident domiciled in the British Virgin Islands. SASU Alchimedics was engaged in the manufacture...
- India vs. Maruti Suzuki India Ltd.Maruti Suzuki India manufactures and sells cars and spare parts. A license agreement had been entered with the group parent for use of licensed information and trademark for the manufacture and sale of the products. Hence, Maruti Suzuki paid royalties to the parent for trademark...
- US vs GlaxoSmithKline Holdings, September 2006, IR-2006-142In September 2006 the Internal Revenue Service announced that it has successfully resolved a transfer pricing dispute with Glaxo SmithKline. Under the settlement agreement, GSK will pay the Internal Revenue Service approximately $3.4 billion, and will abandon its claim seeking a refund of...
- US vs TBL LICENSING LLC, January 2022, U.S. Tax Court, Case No. 158 T.C. No 1 (Docket No. 21146-15)A restructuring that followed the acquisition of Timberland by VF Enterprises in 2011 resulted in an intra-group transfer of ownership to valuable intangibles to a Swiss corporation, TBL Investment Holdings. The IRS was of the opinion that gains from the transfer was taxable....