Transfer Pricing Associates

Update on the OECD's Intangibles Project

post Monday January 30, 2012



A few months back, we posted a newsletter outlining how the Organisation for Economic Co-operation and Development (OECD) has undertaken a project to rewrite the chapters in their Transfer Pricing Guidelines (TPG) pertaining to intangibles.  As the OECD’s Working Party No.6 passes the halfway mark of their proposed four-year project, we wonder what progress has been made thus far.   

The two chapters that relate to intangibles in the TPG are Chapter VI, which contains special considerations for intangibles, and Chapter VIII, which contains guidance on cost contribution arrangements.  Given that transfer pricing issues pertaining to intangibles are a key area of concern to governments and taxpayers, the OECD found that updating these chapters has become an increasingly important issue in the evolution of transfer pricing regulation.  

In their November 2011 meeting with private sector representatives, Working Party No.6 discussed definitional and ownership issues of intangibles.  In the meeting’s agenda, which was released on the OECD’s website, five areas of interest were discussed:

  1. Definitional Aspects: should a definitional approach be taken that is broader than existing accounting or legal definitions, and if so, how can risks of double taxation be mitigated?
  2. Goodwill & Going Concern: how should these two intangibles be defined and treated for transfer pricing purposes?
  3. Brands & Brand Value: how should brands be defined and which entity with an MNE should receive the profits from a brand value?
  4. Ownership Issues: which entity in an MNE is entitled to premium returns associated with intangibles?
  5. Synergies: how are corporate synergies defined and do they create value-added for an MNE?

The project seems straight forward, but in reality, there are far-reaching implications on how the Working Party decides to define intangibles and word the guidelines surrounding them.  If the OECD sticks to their strict definition of intangibles, this could cause alienation of the BRIC countries (Brazil, Russia, India, and China).  These countries instead favor a wider definition of intangibles since they have not traditionally been the frontrunners in protection of IP through patents, trademarks, or copyrights.  The BRIC countries have even gone as far as threatening to become members of the UN Charter on Transfer Pricing instead of OECD members.  The difference in regulations between the two bodies has the potential to cause double taxation for multinational companies operating in both BRIC countries and OECD-member countries. 


For more information on the OECD’s intangibles project, please visit: OECD's website     

To read our previous article on the intangibles project, please follow this link:

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