Tag: Aggregation of the intangibles

Transactions can be so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Examples may include: a) some long-term contracts for the supply of commodities or services, b) rights to use intangible property, and c) pricing a range of closely-linked products (e.g. in a product line) when it is impractical to determine pricing for each individual product or transaction. Another example would be the licensing of manufacturing know-how and the supply of vital components to an associated manufacturer; it may be more reasonable to assess the arm’s length terms for the two items together rather than individually. Such transactions should be evaluated together using the most appropriate arm’s length method. A further example would be the routing of a transaction through another associated enterprise; it may be more appropriate to consider the transaction of which the routing is a part in its entirety, rather than consider the individual transactions on a separate basis.

TPG2022 Chapter VI paragraph 6.135

/ Aggregation of the intangibles, Intangibles, OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VI: Special Considerations for Intangibles, Transfer pricing methods, Transfer pricing methods for intangibles, Valuation, Valuation on aggregate basis
Paragraphs 3.9 to 3.12 and paragraph 3.37 provide guidance regarding the aggregation of separate transactions for purposes of transfer pricing analysis. Those principles apply fully to cases involving the transfer of intangibles or rights in intangibles and are supplemented by the guidance in Section C of this chapter. Indeed, it is often the case that intangibles may be transferred in combination with other intangibles, or in combination with transactions involving the sale of goods or the performance of services. In such situations it may well be that the most reliable transfer pricing analysis will consider the interrelated transactions in the aggregate as necessary to improve the reliability of the analysis ... Read more

TPG2022 Chapter VI paragraph 6.92

/ Aggregated transactions, Aggregation of the intangibles, Intangibles, OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter VI: Special Considerations for Intangibles, Transfers of combinations of intangibles
Intangibles (including limited rights in intangibles) may be transferred individually or in combination with other intangibles. In considering transactions involving transfers of combinations of intangibles, two related issues often arise ... Read more

TPG2022 Chapter VI paragraph 6.7

/ Aggregation of the intangibles, Identifying intangibles, Intangibles, OECD Transfer Pricing Guidelines (2022), Self-developed intangibles, TPG2022 Chapter VI: Special Considerations for Intangibles, Valuation on aggregate basis
Intangibles that are important to consider for transfer pricing purposes are not always recognised as intangible assets for accounting purposes. For example, costs associated with developing intangibles internally through expenditures such as research and development and advertising are sometimes expensed rather than capitalised for accounting purposes and the intangibles resulting from such expenditures therefore are not always reflected on the balance sheet. Such intangibles may nevertheless be used to generate significant economic value and may need to be considered for transfer pricing purposes. Furthermore, the enhancement to value that may arise from the complementary nature of a collection of intangibles when exploited together is not always reflected on the balance sheet. Accordingly, whether an item should be considered to be an intangible for transfer pricing purposes under Article 9 of the OECD Model Tax Convention can be informed by its characterisation for accounting purposes, but will not be determined by such characterisation only. Furthermore, the determination that an item should ... Read more

TPG2017 Chapter VI paragraph 6.92

/ Aggregated transactions, Aggregation of the intangibles, Intangibles, OECD Transfer Pricing Guidelines (2017), Transfers of combinations of intangibles
Intangibles (including limited rights in intangibles) may be transferred individually or in combination with other intangibles. In considering transactions involving transfers of combinations of intangibles, two related issues often arise ... Read more
US vs. Veritas Software Corporation, December 2009, US Tax Court, Case No 133 T.C. 297, 316

US vs. Veritas Software Corporation, December 2009, US Tax Court, Case No 133 T.C. 297, 316

/ Aggregation of the intangibles, Akin to a sale, Cost Contribution Arrangements, Digital Economy, Intangibles - Goodwill Know-how Patents, Ireland, Lump-sum payment, Pre-existing intangibles, Synergies, Tax Avoidance Schemes, Terminal value, Trade name, Trademark (trade name), United States, Valuation, Valuation - DCF and CUT/CUPs
The issue in the VERITAS case involved the calculation of the buy-in payment under VERITAS’ cost sharing arrangement with its Irish affiliate. VERITAS US assigned all of its existing European sales agreements to VERITAS Ireland. Similarly,VERITAS Ireland was given the rights to use the covered intangibles and to use VERITAS US’s trademarks, trade names and service marks in Europe, the Middle East and Africa, and in Asia-Pacific and Japan. In return, VERITAS Ireland agreed to pay royalties to VERITAS US in exchange for the rights granted. The royalty payment included a prepayment amount (i.e. lump-sum payment) along with running royalties that were subject to revision to maintain an arm’s length rate. Thereafter, VERITAS Ireland began co-developing, manufacturing and selling VERITAS products in the Europe, the Middle East and Africa markets as well as in the Asia-Pacific and Japan markets. These improvements, along with the establishment of new management, allowed VERITAS’ 2004 annual revenues to be five times higher than its 1999 revenues ... Read more