TPG2022 Chapter VI paragraph 6.160

Category: D. Determining arm’s length conditions in cases involving intangibles | Tag: , , , , , ,
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Because of the importance of the underlying assumptions and valuation parameters, taxpayers and tax administrations making use of valuation techniques in determining arm’s length prices for transferred intangibles should explicitly set out each of the relevant assumptions made in creating the valuation model, should describe the basis for selecting valuation parameters, and should be prepared to defend the reasonableness of such assumptions and valuation parameters. Moreover, it is a good practice for taxpayers relying on valuation techniques to present as part of their transfer pricing documentation some sensitivity analysis reflecting the consequential change in estimated intangible value produced by the model when alternative assumptions and parameters are adopted.






Related Guidelines

  1. TPG2022 Chapter VI paragraph 6.159The reliability of the intangible value produced using a valuation model is particularly sensitive to the reliability of the underlying assumptions and estimates on which it is based and on the due diligence and judgment exercised in confirming assumptions and in estimating valuation...
  2. TPG2022 Chapter VI paragraph 6.158When applying valuation techniques, including valuation techniques based on projected cash flows, it is important to recognise that the estimates of value based on such techniques can be volatile. Small changes in one or another of the assumptions underlying the valuation model or...
  3. TPG2022 Chapter II paragraph 2.175For instance, where an asset-based profit splitting factor is used, it may be based on data extracted from the balance sheets of the parties to the transaction. It will often be the case that not all the assets of the taxpayers relate to...
  4. TPG2022 Chapter VI Annex I example 29104. Pervichnyi is the parent of an MNE group organised and doing business in country X. Prior to Year 1, Pervichnyi developed patents and trademarks related to Product F. It manufactured Product F in country X and supplied the product to distribution affiliates...
  5. TPG2022 Chapter VI Annex I example 28101. Company A is the Parent company of an MNE group with operations in country S. Company B is a member of the MNE group with operations in country T, and Company C is also a member of the MNE group with operations...
  6. TPG2022 Chapter VI Annex I example 2797. Company A is the Parent of an MNE group with operations in country X. Company A owns patents, trademarks and know-how with regard to several products produced and sold by the MNE group. Company B is a wholly owned subsidiary of Company...
  1. Report on the Application of Economic Valuation Techniques (2017)The Study on the Application of Economic Valuation Techniques for Determining Transfer Prices of Cross Border Transactions between Members of Multinational Enterprise Groups in the EU provides an overview on how valuation techniques can practically and most efficiently be used for transfer pricing...

Related Case Law

  1. 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...
  2. Bulgaria vs KEY END ES ENERGY, April 2020, Supreme Administrative Court, Case No 4972Key End Es Energy concluded a share purchase and sale agreement of 20.12.2012 with a related party LUKERG BULGARIA GmbH, under which KEY END EU ENERGY transferred to its parent company LUKERG BULGARIA GmbH the ownership of the shares in eight subsidiaries. The...
  3. Denmark vs “IP ApS”, March 2023, Tax Tribunal, Case No. SKM2023.135.LSRThe case concerned the valuation of intangible assets transferred from a Danish company to an affiliated foreign company. The Tax Tribunal basically agreed with the valuation of the expert appraisers according to the DCF model, but corrected the assumptions with regard to revenue...
  4. Portugal vs C… – Sociedade de Investimentos Imobiliários, S.A., November 2023, Tribunal Central Administrativo Sul, Case 541/02.5 BTLRSThe tax authorities had issued an assessment in which the value of shares transfered between related parties had been adjusted by application of the arm’s length principle. The assessment was appealed to the Administrative Court, which upheld the assessment. An appeal was then...
  5. Finland vs. Corp. February 2014, Supreme Administrative Court, KHO:2014:33A Ltd, which belonged to the Norwegian X Group, owned the entire share capital of B Ltd and had on 18.5.2004 sold it to a Norwegian company in the same group. The Norwegian company had the same day transferred the shares back on...