Intangibles that are important to consider for transfer pricing purposes are not always recognised as intangible assets for accounting purposes. For example, costs associated with developing intangibles internally through expenditures such as research and development and advertising are sometimes expensed rather than capitalised for accounting purposes and the intangibles resulting from such expenditures therefore are not always reflected on the balance sheet. Such intangibles may nevertheless be used to generate significant economic value and may need to be considered for transfer pricing purposes. Furthermore, the enhancement to value that may arise from the complementary nature of a collection of intangibles when exploited together is not always reflected on the balance sheet. Accordingly, whether an item should be considered to be an intangible for transfer pricing purposes under Article 9 of the OECD Model Tax Convention can be informed by its characterisation for accounting purposes, but will not be determined by such characterisation only. Furthermore, the determination that an item should be regarded as an intangible for transfer pricing purposes does not determine or follow from its characterisation for general tax purposes, as, for example, an expense or an amortisable asset.
TPG2017 Chapter VI paragraph 6.7
Category: A. Identifying intangibles, OECD Transfer Pricing Guidelines (2017), TPG2017 Chapter VI: Special Considerations for Intangibles | Tag: Aggregation of intangibles, Identifying intangibles, Intangibles, Self-developed intangibles, Valuation, Valuation on aggregate basis
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Next » Related Guidelines
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Related Case Law
- Germany vs. License GmbH, January 2016, Supreme Tax Court, Case No I R 22/14The Supreme Tax Court has held that a parent company cannot be deemed to have earned income from allowing its Polish subsidiary to register locally in the group name. A German business was active in a field of patented technology associated with its...
- 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...
- 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...
- 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...