Transfer pricing

OECD meets with business commentators on the valuation of intangibles for transfer pricing purposes 29 March 2011


29 March 2011 – On 21-23 March 2011, delegates from Working Party No. 6’s Special Session on the Transfer Pricing Aspects of Intangibles (“WP6 TPI”) met with private sector representatives to discuss the valuation of intangibles for transfer pricing purposes. The agenda for the meeting, presentation material submitted by private sector participants and list of participants have now been published.


Mr. Chris Lenon, the Chair of the BIAC Tax Committee, said that the business community wanted the Transfer Pricing Guidelines (“TPG”) to achieve the aims of minimising conflicts among tax administrations as well as between tax administrations and taxpayers. Multinational enterprises are encouraged to apply the guidance in the TPG to ensure that their transfer pricing is consistent with the arm’s length principle. The guidance should be sufficiently clear for all tax authorities to be able to apply it consistently. He welcomed the presence of several non-OECD economies at this meeting.  In terms of intangibles valuation, Mr. Lenon thought that the aim was to arrive at a reasonable solution, keeping in mind that income-based methods are based on a series of assumptions and are therefore not an exact science. In conclusion he said that business seeks guidance which will minimise double taxation, rather than a set of prescriptive rules.


Ms. Michelle Levac, the Chair of the WP6 TPI, welcomed the support provided by the business community to help develop further guidance in the TPG and a robust framework to minimise controversies and maximise tax certainty in relation to the transfer pricing aspects of intangibles. In her concluding remarks, she said that the discussions at this meeting had been very productive and helpful to move the OECD project forward. She highlighted the importance of determining whether financial valuation methods should be given greater recognition in the TPG and, if so, to provide guidance for taxpayers and tax administrators on how to assess the reasonableness of the assumptions and inputs used in valuation models. She acknowledged the message from the business representatives that the guidance in that respect should not be too prescriptive as valuation involves professional judgement and depends on the circumstances of each case, as well as the concerns expressed by commentators with respect to the compliance burden. She noted that valuation was only one of the topics to be covered by the OECD in its examination of the transfer pricing aspects of intangibles (see scoping document approved by the Committee on Fiscal Affairs in January 2011). Throughout the process, business representatives would be further invited to meet with the WP6 TPI.


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