Transfer Pricing: The Challange Regarding Intangibles

Marcus Emil Skjoldager & Benjamin Mastø Ipsen

Student thesis: Master thesis


In this master thesis, we will address the complexity regarding intangibles when Multinational Enterprises (MNE) is trading within the MNE. Transfer pricing has become one of the largest and most important issues regarding international tax law challenges, because of the asymmetry of information between the taxpayer and the tax authorities. Furthermore, intangibles are the main source for MNEs value creation, why the location and ownership is crucial to determine. MNEs is estimated to account for 60 – 70 % of the total global trade within the MNEs, why a true and fair valuation of the intangibles is crucial. Because of the complexity of intangibles, it will be difficult to determine a true and fair arm's length price. This is why there the last years and been an significant increase from the Danish tax authorities' (SKAT) increase and decrease of the MNEs taxable income, where intangibles account for between 18 – 70 % of the total increase in the MNEs taxable income from 2012 to 2016. In our master thesis, we have examined the intangibles by using Danish tax law and OECD TPG to analyze the arm's length principle, why we have used the dogmatic method to determine this, and out master thesis are therefor exclusively a theoretical approach, and not a practical approach. In 2016, OECD revised the OECD Model Tax Convention on Income and on Capital and published in December 2017, where example new changes to the arm's length principle occurred. With this change of the arm's length principle, this has led to a material change of the OECD Model Tax Convention on Income and on Capital article 9, 1 why this new change significantly deviates from the 1995 arm's length principle. This new arm's length principle will therefor have no legal value regards the Danish LL § 2, stk. 1 because that LL § 2, stk. 1 rest on the wording from the 1995 arm's length principle. Furthermore, an "ex post" have been introduced as a CWI‐variety, which opens op for the tax authorities to determine a valuation after the time of the transaction, which will infringes with the OECD Model Tax Convention on Income and on Capital article 9, 1 because you are not allowed to use hindsight after the time of the transaction between MNEs. Because of this infringement, it must be expected, that OECD in the future will eliminate these infringement to the arm's length principle.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2018
Number of pages123