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. Blog writings reflect the position of the authors and are not the opinion of EdgarStat.
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.Read more
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%.Read more
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.Read more
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.Read more
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.Read more
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.Read more