Commentary

B4.142 Transfer pricing—intangible items - special considerations

Business tax
Business tax | Commentary

B4.142 Transfer pricing—intangible items - special considerations

Business tax | Commentary

B4.142 Transfer pricing—intangible items - special considerations

The globalisation of brand names and technology has led many firms to take steps to identify where the value of their business lies. By their nature, transfers of intangible property are harder to identify than transfers of tangible goods. Yet, as tax authorities become more sophisticated the likelihood of them identifying a transfer of intangible property increases.

According to the OECD Guidelines1, the arm's length principle must be applied to transfers of intangible property just as much as any other type of transaction. This means that for an intangible item a comparability analysis must be performed and the relevant risks which are assumed by any relevant parties should be assessed as discussed in B4.131–B4.132. However there are some specific considerations in relation to intangible items which are described further below.

Definition of intangible items for transfer pricing

Intangible property is defined in the OECD Guidelines very widely as 'something which is not a physical asset or a financial asset, which is capable of being owned or controlled for use in commercial activities, and whose use would be compensated had it occurred in a transaction between independent parties in comparable circumstances'2.

Unlike the definition of intangible assets for corporation tax purposes (see D1.602) the main focus of the definition for transfer pricing is not an accounting definition but what would be agreed upon between independent parties. An intangible item would not have to be an asset on the balance sheet of a business but could be something

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