§ 1.482-7(i) Allocations by the Commissioner in connection with a CSA –
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By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-7 Methods to determine taxable income in connection with a cost sharing arrangement | Tag: Allocation by Commissioner, Audit, CCA/CSA, CCA/CSA - methods for pricing, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA), Pre-existing intangibles, Valuation, Valuation of intangibles
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- TPG2022 Chapter VIII paragraph 8.26In valuing contributions, distinctions should be drawn between contributions of pre-existing value and current contributions. For example, in a CCA for the development of an intangible, the contribution of patented technology by one of the participants reflects a contribution of pre-existing value which is useful towards the development of the...
- TPG2022 Chapter VIII paragraph 8.40As indicated in paragraph 8.33, the guidance in Chapter VI on hard-to-value intangibles may equally apply in situations involving CCAs. This will be the case if the objective of the CCA is to develop a new intangible that is hard to value at the start of the development project, but...
- TPG2022 Chapter VIII paragraph 8.33Company A based in country A and Company B based in country B are members of an MNE group and have concluded a CCA to develop intangibles. Company B has entitlement under the CCA to exploit the intangibles in country B, and Company A has entitlement under the CCA to...
- TPG2022 Chapter VIII paragraph 8.24Contributions to a CCA may take many forms. For services CCAs, contributions primarily consist of the performance of the services. For development CCAs, contributions typically include the performance of development activities (e.g. R&D, marketing), and often include additional contributions relevant to the development CCA such as pre-existing tangible assets or...
- TPG2022 Chapter VIII Annex example 417. Company A and Company B are members of an MNE group and decide to undertake the development of an intangible through a CCA. The intangible is anticipated to be highly profitable based on Company B’s existing intangibles, its track record and its experienced research and development staff. Company A...
- TPG2022 Chapter VIII paragraph 8.53Over the duration of the CCA term, the following information could be useful: a) any change to the arrangement (e.g. in terms, participants, subject activity), and the consequences of such change b) a comparison between projections used to determine the share of expected benefits from the CCA activity with the...
- TPG2022 Chapter VIII paragraph 8.52The following information would be relevant and useful concerning the initial terms of the CCA: a) a list of participants b) a list of any other associated enterprises that will be involved with the CCA activity or that are expected to exploit or use the results of the subject activity...
- TPG2022 Chapter VIII paragraph 8.51The transfer pricing documentation standard set out in Chapter V requires reporting under the master file of important service arrangements and important agreements related to intangibles, including CCAs. The local file requires transactional information including a description of the transactions, the amounts of payments and receipts, identification of the associated...
- TPG2022 Chapter VIII paragraph 8.508.50 Generally, a CCA between controlled parties should meet the following conditions: a) The participants would include only enterprises expected to derive mutual and proportionate benefits from the CCA activity itself (and not just from performing part or all of that activity). See paragraph 8.14. b) The arrangement would specify...
- TPG2022 Chapter VIII paragraph 8.49When a CCA terminates, the arm’s length principle requires that each participant retains an interest in the results, if any, of the CCA activity consistent with their proportionate share of contributions to the CCA throughout its term (adjusted by any balancing payments actually made, including those made as a result...