Transfer Pricing of Intangibles
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The book analyses the nature, aim, applicability, shortcomings and possible improvement of the OECD DEMPE model for the transfer pricing of intangible assets.
Transfer Pricing of Intangibles
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 1: Introduction
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 2: Setting the Scene: Intangibles’ Importance, Definition and Categorization
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 3: The Current OECD Approach to the Transfer Pricing of Intangibles: History, Nature, Aim, Applicability, and Shortcomings of the DEMPE Model
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 4: Scope of DEMPE and National Departures
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 5: The Application of DEMPE to Fragmented Functions, Assets, and Risks with the RASCI Matrix
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 6: Author’s Proposal for Improving the Current Framework
DOI: https://doi.org/10.59403/3ke7tvd
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Chapter 7: Conclusions
DOI: https://doi.org/10.59403/3ke7tvd
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Transfer prices are the prices applied to controlled transactions involving the exchange of goods or the provision of services between related parties of the same multinational group but located in different tax jurisdictions.
In recent years, transfer prices have caused controversy not only at a doctrinal level but also at a court level, given the many disputes over their determination.
The technical difficulties of this discipline, typically highly independent of the good or service being transferred, increase when the related parties transfer intangible assets. The increase of complexity derives from the dematerialized nature of such assets, as they are easily transferable from one tax jurisdiction to another through sales or license contracts.
The OECD dedicates an entire chapter of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations to the controlled transactions of intangible assets.
In chapter VI of the guidelines, the OECD develops a specific approach to be used for intangibles: the DEMPE model. The acronym stands for development, enhancement, maintenance, protection and exploitation, referring to the to five categories of functions, assets and risks connected to the entire life cycle of intangible assets, typically considered to have high added value for transfer pricing purposes.
The present work clarifies the crucial aspects of the DEMPE model, such as the regulatory framework that preceded DEMPE and that led to its introduction, its nature and possible uses, and the possibility of applying the concept retroactively.
Having analysed these aspects, the author develops an analytical analysis of the main limitations of the model, namely the definition of its scope of application, the lack of categories of potentially important functions, assets and risks, the presence of divergent applications of the model among the various OECD member countries, and the application of the model to organizations characterized by a high level of fragmentation.
In the final section, the author presents some proposals aimed at improving the current regulatory framework applicable to controlled transactions of intangible assets.