Nestle Portugal: Issues with Comparables’ Royalty Bases
This litigation raised an oft-seen issue as to the correct definition of “sales” for transfer pricing approaches that rely on the Comparable Uncontrolled Transaction (Price) method.
Category Intangibles
McDonald’s France Intercompany Royalty: CUT v. CPM on Steroids
A 2008 restructuring transferred the European rights to the McDonald’s intangibles to McD Europe Franchising Sàrl, a Luxembourg-resident subsidiary with branches in both Switzerland and the U.S. While this migration of intangible assets created substantial controversy in Europe, the real transfer pricing concern would be an IRS issue and not an issue for the French Tax Authority (FTA) if the royalty rate remained at 5%.
Valuation of Software: CA Software Israel Ltd
The Israel Tax Authority prevailed in Israel vs CA Software Israel Ltd (October 2022, Tel Aviv District Court, Case No 61226-06-17), which involved the valuation of transferred software. While the taxpayer’s experts tried to justify the lower valuation arguing that the economic useful life of the transferred intangibles was very short.
Valuing Brands Using a Discounted Cash Flow Approach
There are several approaches to accounting for ongoing marketing expenses necessary to maintain a brand in a discounted cash flow valuation.
Intercompany Royalties: Does the Realistic Alternatives Principle Endorse CPM?
Licensees bear significant commercial risk when they use valuable intangible assets owned by another entity. As such, any method that affords them with an expected return to its tangible assets that is only as high as the overall enterprise’s cost of capital is inconsistent with sound economics.
Medtronic Litigation: Unspecified Methods vs. Traditional Methods
This discussion presents a simplified illustration of the issues with respect to the unspecified method applied in Medtronic III in contrast to the IRS' extreme CPM approach and a traditional RPSM approach based on sound financial economics.
Speculation as to the Transfer Pricing Battle Between Western Digital and the IRS
A discussion of the possible issues in the recently settled transfer pricing dispute between Western Digital Corp. and the United States IRS.
Super Royalties in Transfer Pricing: Going Beyond “Economics 101”
Use of the CPM/TNMM to determine royalty rates for valuable intangibles in transfer pricing is incompatible with basic financial economics.
Transfer Pricing Issues for Israeli R&D Centers
The Israel Tax Authority is questioning whether costs plus markup models Israeli R&D affiliates are at arm's length. This could present issues for multinationals that have not been giving proper consideration to cost base, asset intensity and ownership of valuable intangibles in their benchmarking.