TPG2022 Chapter VI paragraph 6.148

Category: D. Determining arm’s length conditions in cases involving intangibles | Tag: , , , , ,
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In 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 Chapter II contains guidance to be considered in applying transactional profit split methods. That guidance is fully applicable to matters involving the transfer of intangibles or rights in intangibles. In evaluating the reliability of transactional profit split methods, however, the availability of reliable and adequate data regarding the relevant profits to be split, appropriately allocable expenses, and the reliability of factors used to divide the relevant income should be fully considered.






Related Guidelines

  1. TPG2022 Chapter VI paragraph 6.211In applying a profit split method in a case involving the use of intangibles, care should be taken to identify the intangibles in question, to evaluate the manner in which those intangibles contribute to the creation of value, and to evaluate other income...
  2. TPG2022 Chapter VI paragraph 6.150It is also sometimes suggested that a profit split analysis can be applied to transfers of partially developed intangibles. In such an analysis, the relative value of contributions to the development of intangibles before and after a transfer of the intangibles in question...
  3. TPG2022 Chapter VI paragraph 6.132In applying the principles of paragraphs 2.1 to 2.12 to matters involving the transfer of intangibles or rights in intangibles, it is important to recognise that transactions structured in different ways may have similar economic consequences. For example, the performance of a service...
  4. TPG2022 Chapter VI paragraph 6.146Where reliable comparable uncontrolled transactions can be identified, the CUP method can be applied to determine the arm’s length conditions for a transfer of intangibles or rights in intangibles. The general principles contained in paragraphs 2.14 to 2.26 apply when the CUP method...
  5. TPG2022 Chapter VI paragraph 6.210Section C in Part III of Chapter II contains guidance to be considered in applying transactional profit split methods. That guidance is fully applicable to matters involving the use of intangibles in connection with the sale of goods or the provision of services...
  6. TPG2022 Chapter VI paragraph 6.147In some situations, intangibles acquired by an MNE group from independent enterprises are transferred to a member of the MNE group in a controlled transaction immediately following the acquisition. In such a case the price paid for the acquired intangibles will often (after...
  7. TPG2022 Chapter VI paragraph 6.153In situations where reliable comparable uncontrolled transactions for a transfer of one or more intangibles cannot be identified, it may also be possible to use valuation techniques to estimate the arm’s length price for intangibles transferred between associated enterprises. In particular, the application...
  8. TPG2022 Chapter VI paragraph 6.136Depending on the specific facts, any of the five OECD transfer pricing methods described in Chapter II might constitute the most appropriate transfer pricing method to the circumstances of the case where the transaction involves a controlled transfer of one or more intangibles....
  1. Guidance on the application of the HTVI approachThis June 2018 report contains guidance for tax administrations on the application of the approach to hard-to-value intangibles (HTVI). The HTVI approach was adopted as part of the Actions 8-10 Report in 2015 and it was subsequently incorporated in Chapter VI of the OECD Transfer...
  2. 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...

Related Case Law

  1. Luxembourg vs L SARL, January 2020, Luxembourg Administrative Tribunal, Case No 41800In 2013, L SARL requested in writing an “advance tax agreement” regarding the tax treatment of Mandatory Redeemable Preference Shares (MRPS) which generated a preferred dividend for its sole shareholder. L SARL wanted confirmation that the MRPS would be characterised as debt and...
  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. 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...
  4. US vs. Medieval Attractions, 1996 October,The United States Tax Court sustained the IRS determination that there were no arm’s-length business reasons why payments would have been made for the intangible property in question and therefore refused to allow those expenses to be included in the Section 482 calculation...