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Transfer Pricing and Intangibles : US and OECD Arm's Length Distribution of Operating Profits from IP Value Chains.

By: Material type: TextTextSeries: IBFD Doctoral SeriesPublisher: Amsterdam : IBFD Publications USA, Incorporated, 2018Copyright date: ©2018Edition: 1st edDescription: 1 online resource (877 pages)Content type:
  • text
Media type:
  • computer
Carrier type:
  • online resource
ISBN:
  • 9789087224974
Subject(s): Genre/Form: Additional physical formats: Print version:: Transfer Pricing and IntangiblesDDC classification:
  • 341.48439999999999
LOC classification:
  • K4542 .T678 2018
Online resources:
Contents:
Cover -- IBFD Doctoral Series -- Title -- Copyright -- Preface -- Abbreviations -- Part 1 -- Chapter 1: Research Questions, Methodology and Sources of Law -- 1.1. Introductory comments -- 1.2. Key terminology and contextualization -- 1.3. Research questions and structure -- 1.4. Methodology -- 1.5. The relevant OECD sources of law -- 1.5.1. Introduction -- 1.5.2. Article 9 of the OECD MTC -- 1.5.3. The OECD Commentaries on Article 9 and the OECD Transfer Pricing Guidelines -- 1.5.4. Article 7 of the OECD MTC -- 1.5.5. The OECD Commentaries on Article 7 and the 2010 OECD Report -- 1.5.6. Case law in connection with articles 9 and 7 -- 1.6. The relevant US sources of law -- 1.6.1. Introduction -- 1.6.2. IRC section 482 -- 1.6.3. The IRC section 482 US Treasury Regulations -- 1.6.4. Case law -- 1.6.5. The OECD TPG -- 1.7. A few words on the 2017 US tax reform -- 1.8. The relationship between the book and other transfer pricing literature -- 1.9. Reference register and source abbreviations -- Chapter 2: Business and Tax Motivations for Intangible Value Chain Structures -- 2.1. Introduction -- 2.2. Horizontal and vertical FDI -- 2.3. To stay home (outsource) or to go out (FDI)? -- 2.4. The centralized principal model for profit allocation -- 2.5. IP regimes and the 2015 OECD nexus approach -- Chapter 3: Controlled Intangibles Transfers -- 3.1. Introduction -- 3.2. The US intangibles definition -- 3.2.1. Introduction -- 3.2.2. The pre-2018 version of the US IP definition -- 3.2.2.1. Introductory comments -- 3.2.2.2. The relationship between the 936 definition and profit allocation -- 3.2.2.3. Are goodwill, going concern value and workforce in place encompassed by the pre-2018 version of the 936 definition?.
3.2.2.4. Is goodwill distinguishable from synergy value attributable to a group of identifiable 936-definition intangibles valued in the aggregate? -- 3.2.2.5. Concluding comments on the pre-2018 version of the US IP definition -- 3.2.3. The 2018 version of the US IP definition (the 2017 tax reform amendment) -- 3.3. The OECD intangibles concept -- 3.4. Useful distinctions on the intangibles concept -- 3.4.1. Introduction -- 3.4.2. Manufacturing and marketing intangibles -- 3.4.3. Unique and non-unique value chain contributions -- 3.5. Controlled intangibles transfers subject to transfer pricing under US law -- 3.5.1. The taxation of US inbound and outbound intangibles transfers -- 3.5.2. The context in which IRC section 367 applies: Non-recognition transactions -- 3.5.3. The historical background of IRC section 367 -- 3.5.4. Current gain recognition under IRC section 367(a) -- 3.5.5. Deemed royalty inclusions under IRC section 367(d) -- 3.5.5.1. Historical background -- 3.5.5.2. The material content of IRC section 367(d): Sale of contingent payments -- 3.5.6. Income recognition under section 367(a) or (d) for intangible transfers? -- 3.5.7. The further relationship between profit allocation under sections 482 and 367 -- 3.5.8. The relationship between profit allocation under the section 482 cost-sharing regulations and section 367(d) -- 3.6. Controlled intangibles transfers subject to transfer pricing under the OECD TPG -- 3.7. Concluding comments -- Chapter 4: Introduction to Part 2 -- Part 2 -- Chapter 5: The Historical Development of ­ Profit-Based Trans -- 5.1. Introduction -- 5.2. Development of the US PSM and the contract manufacturer theory through case law -- 5.2.1. Introduction -- 5.2.2. The 1968 regulations and their background -- 5.2.3. Three inbound cases: Nestlé, French and Ciba -- 5.2.3.1. Introduction -- 5.2.3.2. Nestlé (1963).
5.2.3.3. French (1963) -- 5.2.3.4. Ciba (1985) -- 5.2.4. Three outbound cases: Eli Lilly, Searle and Merck -- 5.2.4.1. Introduction -- 5.2.4.2. The historical tax treatment of investments in US ­p -- 5.2.4.3. Eli Lilly (1985) -- 5.2.4.4. Searle (1987) -- 5.2.4.5. Merck (1991) -- 5.2.5. Four roundtrip cases: Bausch, Sundstrand, Perkin and Seagate -- 5.2.5.1. Introduction -- 5.2.5.2. Bausch (1989) -- 5.2.5.3. Sundstrand (1991) -- 5.2.5.4. Perkin-Elmer (1993) -- 5.2.5.5. Seagate (1994) -- 5.2.6. Two cases on controlled services and sales contracts: DuPont (1979) and Hospital Corporation of America (1983) -- 5.3. US legislative and regulatory implementation of "profit-based" methods -- 5.3.1. Introduction -- 5.3.2. The 1986 tax reform -- 5.3.3. The 1988 White Paper -- 5.3.4. The 1994 US regulations -- 5.4. OECD implementation of "profit-based" transfer pricing methodology -- Chapter 6: Metaconcepts Underlying the US and OECD Profit Allocation Rules -- 6.1. Introduction -- 6.2. The relationship between operating profits and the transfer pricing methods -- 6.2.1. Introduction -- 6.2.2. The concept of operating profits -- 6.2.3. Delineating the components of operating profits -- 6.2.3.1. Sales -- 6.2.3.2. Costs of goods sold -- 6.2.3.3. Gross profit -- 6.2.3.4. Operating expenses -- 6.2.3.5. Net profit -- 6.2.4. Information on gross profits may be unavailable -- 6.2.5. Information on transaction-level profits may be unavailable -- 6.3. The relationship between gross and net profit methods -- 6.3.1. Introduction -- 6.3.2. Common methodological traits among the gross and net profit methods -- 6.3.3. Relevant parameters under the gross and net profit methods and their impact on reliability -- 6.3.4. Are operating expenses relevant under the transactional pricing methods (CUT, resale and cost-plus)?.
6.3.5. Are comparability adjustments under the gross profit methods more reliable than under the net profit methods? -- 6.4. Which transfer pricing method should govern the profit allocation among value chain inputs? -- 6.5. The arm's length range -- 6.5.1. Introduction -- 6.5.2. The level of comparability required to include an uncontrolled transaction in the arm's length range -- 6.5.3. On which point within the arm's length range may a reassessment be based? -- 6.6. Comparability -- 6.6.1. Introductory comments -- 6.6.2. The standard of comparability -- 6.6.3. Does the degree to which comparability is required vary among the pricing methods? -- 6.6.4. The relationship between comparability and the rules for determining ownership of intra-group-developed intangibles -- 6.6.5. Comparability factors -- 6.6.5.1. Introduction -- 6.6.5.2. Contractual terms -- 6.6.5.2.1. Introduction -- 6.6.5.2.2. Comparability of contractual terms -- 6.6.5.2.3. Economic substance and non-recognition -- 6.6.5.3. Functions -- 6.6.5.4. Economic conditions -- 6.6.5.4.1. Introduction -- 6.6.5.4.2. Use of comparables from other markets -- 6.6.5.4.3. Location savings -- 6.6.5.4.4. Temporary pricing strategies -- 6.6.5.5. Risks -- 6.6.5.5.1. Introductory comments on risk -- 6.6.5.5.2. Contractual risk allocation among group entities -- 6.6.5.5.3. Risks affect pricing, not the other way around -- 6.7. The aggregation of controlled transactions -- 6.7.1. Introduction -- 6.7.2. The US regulations -- 6.7.3. The OECD TPG -- 6.7.4. GlaxoSmithKline (Canada) -- 6.7.4.1. Introduction -- 6.7.4.2. The factual pattern -- 6.7.4.3. The 2008 Tax Court ruling -- 6.7.4.4. The 2012 Supreme Court ruling -- 6.7.4.5. Observations on the Supreme Court ruling -- Chapter 7: Direct Transaction-Based Allocation of Residual Profits to Unique and Valuable IP: The CUT Method -- 7.1. Introduction.
7.2. The US CUT method -- 7.2.1. Introduction -- 7.2.2. The purported CUT pertains to a transfer of the same intangible as transferred in the controlled transaction -- 7.2.3. The purported CUT pertains to a transfer of a different intangible than that transferred in the controlled transaction -- 7.2.3.1. Introduction -- 7.2.3.2. Direct assessment of profit potential -- 7.2.3.3. Indirect assessment of profit potential -- 7.2.3.4. Assessment of profit potential in other cases -- 7.2.4. There are no CUTs available -- 7.3. The OECD CUT method -- 7.3.1. Introduction -- 7.3.2. Comparability requirements for unique IP under the CUT method -- 7.3.3. Comparability adjustments for unique IP under the CUT method -- 7.3.4. Commercial databases -- 7.3.5. Concluding comments -- Chapter 8: Indirect Profit-Based Allocation of Residual Profits for Unique and Valuable IP: The CPM (US) and TNMM (OECD) -- 8.1. Introduction -- 8.2. A lead-in to the methodology -- 8.3. The scope of application of the methodology -- 8.4. How operating profits may be allocated to the tested party under the methodology -- 8.4.1. Introduction -- 8.4.2. Selecting an appropriate profit level indicator -- 8.4.3. Extracting the profit level indicator data from comparable independent enterprises -- 8.4.4. Applying the extracted profit level indicator data to the tested party -- 8.5. Comparability under the CPM -- 8.6. Comparability under the TNMM -- 8.6.1. Introduction -- 8.6.2. The concept of blended profits illustrated by an example -- 8.6.3. The 1995 consensus text on the TNMM with respect to aggregation of transactions -- 8.6.4. The 2006 comparability report -- 8.6.5. The 2008 discussion draft -- 8.6.6. The final 2010 OECD TPG on the use of aggregated third-party profits as comparables -- 8.6.6.1. Introduction.
8.6.6.2. The first norm: Aggregated third-party profits may be used as comparables as long as they are the result of "similar" third-party transactions.
Summary: This book explores how taxing rights to multinationals' business profits from valuable IP shall be allocated among jurisdictions under US and OECD transfer pricing law.
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Cover -- IBFD Doctoral Series -- Title -- Copyright -- Preface -- Abbreviations -- Part 1 -- Chapter 1: Research Questions, Methodology and Sources of Law -- 1.1. Introductory comments -- 1.2. Key terminology and contextualization -- 1.3. Research questions and structure -- 1.4. Methodology -- 1.5. The relevant OECD sources of law -- 1.5.1. Introduction -- 1.5.2. Article 9 of the OECD MTC -- 1.5.3. The OECD Commentaries on Article 9 and the OECD Transfer Pricing Guidelines -- 1.5.4. Article 7 of the OECD MTC -- 1.5.5. The OECD Commentaries on Article 7 and the 2010 OECD Report -- 1.5.6. Case law in connection with articles 9 and 7 -- 1.6. The relevant US sources of law -- 1.6.1. Introduction -- 1.6.2. IRC section 482 -- 1.6.3. The IRC section 482 US Treasury Regulations -- 1.6.4. Case law -- 1.6.5. The OECD TPG -- 1.7. A few words on the 2017 US tax reform -- 1.8. The relationship between the book and other transfer pricing literature -- 1.9. Reference register and source abbreviations -- Chapter 2: Business and Tax Motivations for Intangible Value Chain Structures -- 2.1. Introduction -- 2.2. Horizontal and vertical FDI -- 2.3. To stay home (outsource) or to go out (FDI)? -- 2.4. The centralized principal model for profit allocation -- 2.5. IP regimes and the 2015 OECD nexus approach -- Chapter 3: Controlled Intangibles Transfers -- 3.1. Introduction -- 3.2. The US intangibles definition -- 3.2.1. Introduction -- 3.2.2. The pre-2018 version of the US IP definition -- 3.2.2.1. Introductory comments -- 3.2.2.2. The relationship between the 936 definition and profit allocation -- 3.2.2.3. Are goodwill, going concern value and workforce in place encompassed by the pre-2018 version of the 936 definition?.

3.2.2.4. Is goodwill distinguishable from synergy value attributable to a group of identifiable 936-definition intangibles valued in the aggregate? -- 3.2.2.5. Concluding comments on the pre-2018 version of the US IP definition -- 3.2.3. The 2018 version of the US IP definition (the 2017 tax reform amendment) -- 3.3. The OECD intangibles concept -- 3.4. Useful distinctions on the intangibles concept -- 3.4.1. Introduction -- 3.4.2. Manufacturing and marketing intangibles -- 3.4.3. Unique and non-unique value chain contributions -- 3.5. Controlled intangibles transfers subject to transfer pricing under US law -- 3.5.1. The taxation of US inbound and outbound intangibles transfers -- 3.5.2. The context in which IRC section 367 applies: Non-recognition transactions -- 3.5.3. The historical background of IRC section 367 -- 3.5.4. Current gain recognition under IRC section 367(a) -- 3.5.5. Deemed royalty inclusions under IRC section 367(d) -- 3.5.5.1. Historical background -- 3.5.5.2. The material content of IRC section 367(d): Sale of contingent payments -- 3.5.6. Income recognition under section 367(a) or (d) for intangible transfers? -- 3.5.7. The further relationship between profit allocation under sections 482 and 367 -- 3.5.8. The relationship between profit allocation under the section 482 cost-sharing regulations and section 367(d) -- 3.6. Controlled intangibles transfers subject to transfer pricing under the OECD TPG -- 3.7. Concluding comments -- Chapter 4: Introduction to Part 2 -- Part 2 -- Chapter 5: The Historical Development of ­ Profit-Based Trans -- 5.1. Introduction -- 5.2. Development of the US PSM and the contract manufacturer theory through case law -- 5.2.1. Introduction -- 5.2.2. The 1968 regulations and their background -- 5.2.3. Three inbound cases: Nestlé, French and Ciba -- 5.2.3.1. Introduction -- 5.2.3.2. Nestlé (1963).

5.2.3.3. French (1963) -- 5.2.3.4. Ciba (1985) -- 5.2.4. Three outbound cases: Eli Lilly, Searle and Merck -- 5.2.4.1. Introduction -- 5.2.4.2. The historical tax treatment of investments in US ­p -- 5.2.4.3. Eli Lilly (1985) -- 5.2.4.4. Searle (1987) -- 5.2.4.5. Merck (1991) -- 5.2.5. Four roundtrip cases: Bausch, Sundstrand, Perkin and Seagate -- 5.2.5.1. Introduction -- 5.2.5.2. Bausch (1989) -- 5.2.5.3. Sundstrand (1991) -- 5.2.5.4. Perkin-Elmer (1993) -- 5.2.5.5. Seagate (1994) -- 5.2.6. Two cases on controlled services and sales contracts: DuPont (1979) and Hospital Corporation of America (1983) -- 5.3. US legislative and regulatory implementation of "profit-based" methods -- 5.3.1. Introduction -- 5.3.2. The 1986 tax reform -- 5.3.3. The 1988 White Paper -- 5.3.4. The 1994 US regulations -- 5.4. OECD implementation of "profit-based" transfer pricing methodology -- Chapter 6: Metaconcepts Underlying the US and OECD Profit Allocation Rules -- 6.1. Introduction -- 6.2. The relationship between operating profits and the transfer pricing methods -- 6.2.1. Introduction -- 6.2.2. The concept of operating profits -- 6.2.3. Delineating the components of operating profits -- 6.2.3.1. Sales -- 6.2.3.2. Costs of goods sold -- 6.2.3.3. Gross profit -- 6.2.3.4. Operating expenses -- 6.2.3.5. Net profit -- 6.2.4. Information on gross profits may be unavailable -- 6.2.5. Information on transaction-level profits may be unavailable -- 6.3. The relationship between gross and net profit methods -- 6.3.1. Introduction -- 6.3.2. Common methodological traits among the gross and net profit methods -- 6.3.3. Relevant parameters under the gross and net profit methods and their impact on reliability -- 6.3.4. Are operating expenses relevant under the transactional pricing methods (CUT, resale and cost-plus)?.

6.3.5. Are comparability adjustments under the gross profit methods more reliable than under the net profit methods? -- 6.4. Which transfer pricing method should govern the profit allocation among value chain inputs? -- 6.5. The arm's length range -- 6.5.1. Introduction -- 6.5.2. The level of comparability required to include an uncontrolled transaction in the arm's length range -- 6.5.3. On which point within the arm's length range may a reassessment be based? -- 6.6. Comparability -- 6.6.1. Introductory comments -- 6.6.2. The standard of comparability -- 6.6.3. Does the degree to which comparability is required vary among the pricing methods? -- 6.6.4. The relationship between comparability and the rules for determining ownership of intra-group-developed intangibles -- 6.6.5. Comparability factors -- 6.6.5.1. Introduction -- 6.6.5.2. Contractual terms -- 6.6.5.2.1. Introduction -- 6.6.5.2.2. Comparability of contractual terms -- 6.6.5.2.3. Economic substance and non-recognition -- 6.6.5.3. Functions -- 6.6.5.4. Economic conditions -- 6.6.5.4.1. Introduction -- 6.6.5.4.2. Use of comparables from other markets -- 6.6.5.4.3. Location savings -- 6.6.5.4.4. Temporary pricing strategies -- 6.6.5.5. Risks -- 6.6.5.5.1. Introductory comments on risk -- 6.6.5.5.2. Contractual risk allocation among group entities -- 6.6.5.5.3. Risks affect pricing, not the other way around -- 6.7. The aggregation of controlled transactions -- 6.7.1. Introduction -- 6.7.2. The US regulations -- 6.7.3. The OECD TPG -- 6.7.4. GlaxoSmithKline (Canada) -- 6.7.4.1. Introduction -- 6.7.4.2. The factual pattern -- 6.7.4.3. The 2008 Tax Court ruling -- 6.7.4.4. The 2012 Supreme Court ruling -- 6.7.4.5. Observations on the Supreme Court ruling -- Chapter 7: Direct Transaction-Based Allocation of Residual Profits to Unique and Valuable IP: The CUT Method -- 7.1. Introduction.

7.2. The US CUT method -- 7.2.1. Introduction -- 7.2.2. The purported CUT pertains to a transfer of the same intangible as transferred in the controlled transaction -- 7.2.3. The purported CUT pertains to a transfer of a different intangible than that transferred in the controlled transaction -- 7.2.3.1. Introduction -- 7.2.3.2. Direct assessment of profit potential -- 7.2.3.3. Indirect assessment of profit potential -- 7.2.3.4. Assessment of profit potential in other cases -- 7.2.4. There are no CUTs available -- 7.3. The OECD CUT method -- 7.3.1. Introduction -- 7.3.2. Comparability requirements for unique IP under the CUT method -- 7.3.3. Comparability adjustments for unique IP under the CUT method -- 7.3.4. Commercial databases -- 7.3.5. Concluding comments -- Chapter 8: Indirect Profit-Based Allocation of Residual Profits for Unique and Valuable IP: The CPM (US) and TNMM (OECD) -- 8.1. Introduction -- 8.2. A lead-in to the methodology -- 8.3. The scope of application of the methodology -- 8.4. How operating profits may be allocated to the tested party under the methodology -- 8.4.1. Introduction -- 8.4.2. Selecting an appropriate profit level indicator -- 8.4.3. Extracting the profit level indicator data from comparable independent enterprises -- 8.4.4. Applying the extracted profit level indicator data to the tested party -- 8.5. Comparability under the CPM -- 8.6. Comparability under the TNMM -- 8.6.1. Introduction -- 8.6.2. The concept of blended profits illustrated by an example -- 8.6.3. The 1995 consensus text on the TNMM with respect to aggregation of transactions -- 8.6.4. The 2006 comparability report -- 8.6.5. The 2008 discussion draft -- 8.6.6. The final 2010 OECD TPG on the use of aggregated third-party profits as comparables -- 8.6.6.1. Introduction.

8.6.6.2. The first norm: Aggregated third-party profits may be used as comparables as long as they are the result of "similar" third-party transactions.

This book explores how taxing rights to multinationals' business profits from valuable IP shall be allocated among jurisdictions under US and OECD transfer pricing law.

Description based on publisher supplied metadata and other sources.

Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2024. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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