TPguidelines

In order to determine arm’s length conditions for the use or transfer of intangibles it is important to perform a functional and comparability analysis in accordance with Section D. 1 of Chapter I, based on identifying the intangibles and associated risks in contractual arrangements and then supplementing the analysis through examination of the actual conduct of the parties based on the functions performed, assets used, and risks assumed, including control of important functions and economically significant risks. Accordingly the next section, Section A, provides guidance on identifying intangibles. Section B examines legal ownership and other contractual terms, together with guidance on the evaluation of the conduct of the parties based on functions, assets and risks. Section C outlines some typical scenarios involving intangibles, and Section D provides guidance on determining arm’s length conditions including the application of pricing methods and valuation techniques, and provides an approach to determining arm’s length conditions for a specific category of hard-to-value intangibles. Examples illustrating the guidance are contained in the Annex to this chapter.