OECD releases 42 comments on transfer pricing guidance for hard-to-value intangibles

The OECD today released 42 comment letters responding to draft guidance that seeks to create a common method for tax administrations to implement Chapter VI of the OECD Transfer Pricing Guidelines regarding pricing hard-to-value intangibles.

The draft guidance, issued on May 23, allows tax administrations to consider ex post outcomes as evidence of the appropriateness of ex-ante pricing arrangements to revise the original value assigned to the hard-to-value intangible. The guidance is designed to protect tax administrations from the negative effects of information asymmetry.

In its letter, BIAC argues that the guidance is too broad and the examples are not comprehensive enough for taxpayers to determine whether they priced a transaction appropriately. BIAC wrote it may be helpful to provide a list of features that indicate what is not considered a hard-to-value intangible.

BDI, representing German industries, said the guidance should define or narrow very important terms used, such a “satisfactory evidence,” “unforeseeable events,” and “extraordinary.”

Keidanren wrote that although guidance is appreciated, it lacks adequate explanation of the exemptions. Further discussion is also required with regard to statute of limitations rules and the elimination of double taxation, the Japanese business group said.

The BEPS Monitoring Group, which advocates on behalf of NGOs supporting developing nations, expressed concern that the guidance effectively legitimizes tax avoidance structuring.

They said that an entity, such as the entity described in the guidance’s examples, would virtually never transfer all or any portion partially developed intangible rights to unrelated persons.

“These are most typically core products that would be considered ‘crown jewels,'” the group said.

The group advocated that a statement be added at the end of paragraph 17 clarifying that a transfer of partially developed rights invites close tax authority scrutiny, in comments principally drafted by Jeffery Kadet.

The BEPS Monitoring Group also said that the examples should note that the profit split method is an approach that should be considered given the risks posed by the high uncertainty in valuing intangible property.

Comment letters were also submitted by Andrew Hickman; Arthur Cox, Chiomenti, Cuatrecasas, GIDE, Gleiss Lutz, Homburger and Macfarlanes; AstraZeneca; BDO; Brigitte Baumgartner; Cajetan M. Fiedler; Chartered Institute of Taxation; Confederation of Swedish Entreprise; Contrabass; Copenhagen Economics; Deloitte LLP; Deloitte Tax LLP; Duff & Phelps; EY; Fieldfisher; Flick Gocke Schaumburg; FTI Consulting; Harris Consulting & Tax Ltd; International Chamber of Commerce; Japan Foreign Trade Council; Japan Machinery Center for Trade and Investment; Johann H. Müller; KPMG; ktMINE; Loyens & Loeff NV; Maisto e Associati; MDW Consulting Inc.; National Foreign Trade Council; NERA Economic Consulting; Pat Breslin; PwC; RELX Group; RSM; Silicon Valley Tax Directors Group; SwissHoldings; Tax Executives Institute, Inc.; Transfer Pricing & Controllling; and USCIB.


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