Transfer Pricing: An Analysis of the OECD BEPS Project Focusing on Intangibles and Business Restructurings

Louise Krohn

Student thesis: Master thesis


This thesis is intended to analyze the OECD BEPS Project in regard to the use of the arm’s length principle related to intangibles and business restructurings in a Transfer Pricing context. Focusing on analyzing the elaborations and clarifications provided by OECD’s work under the BEPS Project incorporated in the latest version of the TPG 2017. In a world where the globalization continues to grow it increases the importance and impact of large enterprises cross border activities. OECD TPG 2017 provide additional guidance to transfer pricing aspects with the aim of avoiding BEPS situations where the taxation does not reflect the value creation by the means of the distribution of the companies’ functions, assets and risk. The BEPS Project consists of 15 action points where focus is actions 8-10 and the new TPG chapters about the arm’s length principle, intangibles and business restructurings. As a consequence of the BEPS Project chapter 1 of the TPG 2017 has been clarified and significantly expanded. The arm’s length principle is still the starting point when assessing the profit distribution. In regards to the comparability analysis changes have been made. Contractual terms, the functional analysis and risk assessment has been given greater significance. In order to comply with the arm’s length principle in relation to intangibles and business restructurings it is necessary to analyze the economically relevant conditions focusing on the allocation of risk. In order to assess the allocation of risk focus must be on functions performed, assets used and risks assumed. Furthermore, the substance requirements must be met. This means the risk-bearing party must possess financial capacity and thereby be able to exercise control over risk. The allocation of risk determines whether an entity is entitled to a risk free or risk adjusted return. Also, the allocation of risk is essential in determining a possible amount of compensation. The elaborations and clarifications as a consequence of the BEPS Project and the analytical results obtained is demonstrated in a self-developed case. The purpose is to analyze a restructuring of a MNE taking into account functions, assets and risk. With further use of DEMPE functions, decision making and controlling parties. Including use and transfer of intangibles, valuation considerations, reallocation of profit potential and considerations of compensation thereof.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages87