The 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, a company that merely funds research and development should have a lower anticipated return than if it both funds and controls research and development. Other things being equal, a still higher anticipated return should be provided if the entity funds, controls, and physically performs the research and development. See also the discussion of funding in Section B.2.2.
TPG2022 Chapter VI paragraph 6.55
Category: B. Ownership of intangibles and transactions involving DEMPE of intangibles | Tag: Assets actually used, Control functions, DEMPE, DEMPE functions, Entitelment to part of return, Functions actually performed, Funding, Funding intangibles, Intangibles, Legal owner, Ownership, Relative value of contributions, Risk actually assumed, Significant contributions
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- TPG2022 Chapter VI paragraph 6.56In considering the arm’s length compensation for functional contributions of various members of the MNE group, certain important functions will have special significance. The nature of these important functions in any specific case will depend on the facts and circumstances. For self-developed intangibles,...
- TPG2022 Chapter VI paragraph 6.60Funding and risk-taking are integrally related in the sense that funding often coincides with the taking of certain risks (e.g. the funding party contractually assuming the risk of loss of its funds). The nature and extent of the risk assumed, however, will vary...
- TPG2022 Chapter VI paragraph 6.72The entitlement of any member of the MNE group to profit or loss relating to differences between actual (ex post) and a proper estimation of anticipated (ex ante) profitability will depend on which entity or entities in the MNE group in fact assumes...
- TPG2022 Chapter VI paragraph 6.61Under the principles of Section D. 1.2 of Chapter I, the first step in a transfer pricing analysis in relation to risks is to identify the economically significant risks with specificity. When identifying risks in relation to an investment with specificity, it is...
- TPG2022 Chapter VI Annex I example 1549. Shuyona is the parent company of an MNE group. Shuyona is organised in and operates exclusively in country X. The Shuyona group is involved in the production and sale of consumer goods. In order to maintain and, if possible, improve its market...
- TPG2022 Chapter VIII Annex example 521. The facts are the same as in Example 4 except that the functional analysis indicates Company A has no capacity to make decisions to take on or decline the risk-bearing opportunity represented by its participation in the CCA, or to make decisions...
- 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...
- TPG2022 Chapter VI paragraph 6.65Particular types of risk that may have importance in a functional analysis relating to transactions involving intangibles include (i) risks related to development of intangibles, including the risk that costly research and development or marketing activities will prove to be unsuccessful, and taking...
- 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...
- Italien Transfer Pricing Guidelines, Ministerial Decree of 14 May 2018, published in the Official Gazette no. 118/2018Italien legislation on transfer pricing is contained in Article 110, paragraph 7 of the Consolidated Income Tax Act, where the first sentence states that “the components of income deriving from transactions with companies not resident in the territory of the State, which directly...
Related Case Law
- UK vs Refinitiv Limited, October 2023, Upper Tribunal, Case No [2023] UKUT 00257 (TCC)According to Refinitiv Limited a Diverted Profit Tax-notices they had been served for FY 2018 by the tax authorities were unlawful because the tax authorities had used another transfer pricing method (Profit Split) than the method previously agreed (TNMM with a cost based...
- European Commission vs. Amazon and Luxembourg, October 2017, State Aid – Comissions decision, SA.38944 Luxembourg gave illegal tax benefits to Amazon worth around €250 million The European Commission has concluded that Luxembourg granted undue tax benefits to Amazon of around €250 million. Following an in-depth investigation launched in October 2014, the Commission has concluded that a...
- Poland vs “Fertilizer Licence SA”, April 2022, Provincial Administrative Court, Case No I SA/Po 788/21“Fertilizer Licence SA” (“A”) transferred its trademarks to “B” in 2013, previously financed the transfer through a cash contribution, and then, following the transfer, paid royalties to “A” in exchange for the ability to use the assets. According to the tax authorities, a...
- Netherlands vs “X B.V.”, August 1998, Supreme Court, Case No 32997, ECLI:NL:HR:1998:AA2288In a situation where a new intangible asset has been developed and is transferred to an affiliate at a time when its success is not yet sufficiently apparent, for example, because the intangible asset has not yet generated revenues and there are significant...