TPG2022 Chapter VI paragraph 6.35

Category: B. Ownership of intangibles and transactions involving DEMPE of intangibles | Tag: , , , , , , , , , ,
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Legal rights and contractual arrangements form the starting point for any transfer pricing analysis of transactions involving intangibles. The terms of a transaction may be found in written contracts, public records such as patent or trademark registrations, or in correspondence and/or other communications among the parties. Contracts may describe the roles, responsibilities and rights of associated enterprises with respect to intangibles. They may describe which entity or entities provide funding, undertake research and development, maintain and protect intangibles, and perform functions necessary to exploit the intangibles, such as manufacturing, marketing and distribution. They may describe how receipts and expenses of the MNE associated with intangibles are to be allocated and may specify the form and amount of payment to all members of the group for their contributions. The prices and other conditions contained in such contracts may or may not be consistent with the arm’s length principle.






Related Guidelines

  1. TPG2022 Chapter VI paragraph 6.79The principles set out in the foregoing paragraphs also apply in situations involving the performance of research and development functions by a member of an MNE group under a contractual arrangement with an associated enterprise that is the legal owner of any resulting...
  2. TPG2022 Chapter VI paragraph 6.50Under the principles of Chapters I – III, each member of the MNE group should receive arm’s length compensation for the functions it performs. In cases involving intangibles, this includes functions related to the development, enhancement, maintenance, protection, and exploitation of intangibles. The...
  3. TPG2022 Chapter VI paragraph 6.55The relative value of contributions to development, enhancement, maintenance, protection, and exploitation of intangibles varies depending on the particular facts of the case. The MNE group member(s) making the more significant contributions in a particular case should receive relatively greater remuneration. For example,...
  4. TPG2022 Chapter VI paragraph 6.36Where no written terms exist, or where the facts of the case, including the conduct of the parties, differ from the written terms of any agreement between them or supplement these written terms, the actual transaction must be deduced from the facts as...
  5. TPG2022 Chapter VI paragraph 6.53In outsourcing transactions between independent enterprises, it is usually the case that an entity performing functions on behalf of the legal owner of the intangible that relate to the development, enhancement, maintenance, protection, and exploitation of the intangible will operate under the control...
  6. TPG2022 Chapter VI paragraph 6.52Where associated enterprises other than the legal owner perform relevant functions that are anticipated to contribute to the value of the intangibles, they should be compensated on an arm’s length basis for the functions they perform under the principles set out in Chapters...
  7. TPG2022 Chapter VI paragraph 6.57Because it may be difficult to find comparable transactions involving the outsourcing of such important functions, it may be necessary to utilise transfer pricing methods not directly based on comparables, including transactional profit split methods and ex ante valuation techniques, to appropriately reward...
  8. TPG2022 Chapter VI paragraph 6.48In identifying arm’s length prices for transactions among associated enterprises, the contributions of members of the group related to the creation of intangible value should be considered and appropriately rewarded. The arm’s length principle and the principles of Chapters I – III require...
  1. 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

  1. 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...
  2. Austria vs S GmbH, November 2020, Verwaltungsgerichtshof, Case No Ra 2019/15/0162-3S GmbH was an Austrian trading company of a group. In the course of business restructuring, the real estate division of the Austrian-based company was initially separated from the “trading operations/brands” division on the demerger date of 31 March 2007. The trademark rights...
  3. Poland vs “E S.A.”, June 2023, Provincial Administrative Court, Case No I SA/Po 53/23In 2010, E S.A. transferred the legal ownership of a trademark to subsidiary S and subsequently entered into an agreement with S for the “licensing of the use of the trademarks”. In 2013, the same trademark was transferred back to E. S.A. As...
  4. France vs Ferragamo France, June 2022, Administrative Court of Appeal (CAA), Case No 20PA03601Ferragamo France, which was set up in 1992 and is wholly owned by the Dutch company Ferragamo International BV, which in turn is owned by the Italian company Salvatore Ferragamo Spa, carries on the business of retailing shoes, leather goods and luxury accessories...