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Revision of Chapter VI on Intangibles

Revision of Chapter VI on Intangibles
18 Sep 2012
In 2010, the OECD announced the commencement of a project on the transfer pricing aspects of intangibles. A scoping paper was published on the OECD website for public comment.

In the interim three public consultations have been held with interested commentators. At the business consultation held in November 2011, representatives of the business community suggested that it would be helpful if the OECD were to release interim drafts of its work as it progresses for further detailed public comment. Taxand responds to the interim draft that OECD released in response to these requests.

There is a general consensus in Taxand that the revised guidance is helpful and provides greater clarity around the principles under which inter-company transactions involving intangibles should be priced. The guidance is also helpful in that it adds valuation techniques based on discounted cash flows to the methods supported explicitly by the Transfer Pricing Guidelines.

Our comments are structured in two parts -- the first consists of brief comments relating to the proposed text. First, we provide reference to the specific paragraph numbers and offer brief comments or suggest changes to the wording. Second, we provide a slightly more detailed response on three key issues related to the proposed valuation methodology:

  • The proposed treatment of taxes in the discounted cash flow analysis
  • The determination of an appropriate discount rate
  • The implementation of the discounted cash flow analysis.



Taxand's Take

  • The paper will bring some much needed clarity to the issue of transfer pricing intangibles and the suggested changes should help to achieve increased clarity and consistency. 
  • For a number of issues, we have suggested that further evaluation is needed and updated guidance is required.

Taxand's Take Author