Transfer Pricing of Intangibles under review by OECD in 2011

In connection with 2010 revisions by the Organization for Economic Cooperation and Development (OECD) regarding the transfer pricing aspects of business restructuring, the OECD noticed an area of concern related to the lack of guidance regarding the identification and valuation of intangibles. This concern affects both governments and taxpayers because the uncertainly of the treatment of intangibles increases both the possibility of disputes and the risks of double or less-than-single taxation. In response, the OECD announced a new project for 2011 which will result in revisions and updates to the transfer pricing guidelines. OECD has identified seven key areas for the project: 1) The framework or process for analyzing intangible-related transfer pricing issues; 2) The definitional aspects, specifically defining “intangibles” for transfer pricing purposes; 3) The specific categories or types of intangibles, including research and development, workforce in place, going concern and goodwill as well as differentiating between intangible transfers and services and matters pertaining to marketing intangibles; 4) The determination of intangible transfers including the determination of when a transfer has occurred and possible recharacterization issues that may result; 5) The right of an associated enterprise to share in the return from an intangible that it does not own; 6) The cost contribution arrangements which are used to organize the development and ownership of valuable intangibles; and 7) The most appropriate transfer pricing method – currently OECD has five recognized methods. The OECD has delegated this review and responsibility to the Working Party No.6 of the Committee on Fiscal Affairs. The scope of the project can be accessed at: http://www.oecd.org/dataoecd/10/50/46987988.pdf. –Elaina L. Blanks