OECD Publishes New Draft on Intangibles

post Monday June 11, 2012

Tags: intangibles, new, oecd, regulation, transfer pricing, working party #6

The OECD announced in 2010 that it was launching a project reviewing the transfer pricing component of intangibles. Since the announcement the OECD has held three public consultations, most recently a business consultation in November 2011. It was there that the business community recommended the OECD release interim drafts of work as the project progresses.

The document recently launched by OECD Working Party #6 contains:

• “A proposed revision of the provisions of Chapter VI of the OECD Transfer Pricing Guidelines; and
• A proposed revision of the Annex to Chapter VI containing examples illustrating the application of the provisions of the revised text of Chapter VI.”

As the paper released is just an interim draft, it is not recognized as a consensus document to adjust current practices. However, the OECD hopes that the release will aid its work on the project to have businesses input and feedback on the draft and their current work.

Readers should remember however, that the draft does not represent a complete picture of the revisions and is just a part of the current project’s goals. The Working Party still plans to address:

• “Any necessary modifications to Chapter VIII of the OECD Transfer Pricing Guidelines related to cost contribution arrangements that may be necessitated as a result of the modification of Chapter VI;
• The transfer pricing consequences of various items treated in this draft as comparability factors rather than intangibles, including market specific advantages, location-based advantages, corporate synergies and workforce issues; and
• Any additional conforming changes to Chapters I – III and Chapter VII of the OECD Transfer Pricing Guidelines required as a result of the changes to Chapter VI.” 

This most recently released working paper describes the process for transactions between associated entities to be managed so that they accurately determine the relevant income and expenses and ensure entities receive the same tax rate as if they were unconnected.

Article sources: OECD & Tax-News.com

Image source: OECD

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