The EdgarStat Blog explores issues in transfer pricing and application of the transactional net margin method (TNMM or CPM in the US) and other enterprise profit-based methods.
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.
Topics: Royalty Rates Intangibles Comparable Uncontrolled Transaction (Price) Method Portugal Royalty Base
Read moreA 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%.
Topics: Royalty Rates Intangibles Europe Best Method TNMM/CPM Tax Controversy
Read moreThe 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.
Topics: Discounted Cash Flow Intangibles Valuation of Intangibles Tax Controversy
Read moreThere are several approaches to accounting for ongoing marketing expenses necessary to maintain a brand in a discounted cash flow valuation.
Topics: Intangibles France Valuation of Intangibles
Read moreLicensees 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.
Topics: US Transfer Pricing Royalty Rates Intangibles Medtronic Section 482 TNMM/CPM Tax Controversy
Read moreThis 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.
Topics: US Transfer Pricing Residual Profit Split Method Unspecified Method US Internal Revenue Service Intangibles Tax Policy Medtronic Section 482 TNMM/CPM Tax Controversy
Read moreA discussion of the possible issues in the recently settled transfer pricing dispute between Western Digital Corp. and the United States IRS.
Topics: Intangibles United States Transfer Pricing Asia-Pacific
Read moreUse of the CPM/TNMM to determine royalty rates for valuable intangibles in transfer pricing is incompatible with basic financial economics.
Topics: DEMPE Royalty Rates OECD Guidelines US Internal Revenue Service Intangibles Tax Policy TNMM/CPM
Read moreThe 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.
Topics: DEMPE Base Erosion and Profit Shifting (BEPS) Benchmarking Intangibles Tax Policy
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