Transfer Pricing – Theoretical and Practical Problems Regarding Intangible Assets

Josefine Neel Kofoed Schmidt & Charlotte Moon Hee Lindberg Andersen

Student thesis: Master thesis


The purpose of this thesis is to examine the theoretical and practical challenges for multinational enterprises when they have cross-border controlled transaction within the group company. OECD’s Transfer Pricing Guidelines are the foundation of transfer pricing, and these will, therefore, be examined and analyzed to determine the latest rules within transfer pricing. The primary focus will be on intangible assets, because of the complexity of finding comparable transactions between independent parties. Intangible assets are especially problematic because of their uniqueness, where the identification and valuation of the intangible assets is difficult. The increase in cross-border trades between multinational enterprises has given group companies incentive to move profits from a high-tax-country to a low-tax-country. Consequently, OECD established the BEPS-project to prevent base erosion and profit shifting. Because of the BEPSproject, the guidelines have undergone an extensive development, which affects the firms and national regulations. In this thesis, the changes in the guidelines for chapter 1, 6 and 9 are analyzed. These have changed because of the implementation of action point 8, 9 and 10, which are actions to prevent transfer pricing. Throughout the chapters, professional advisors’ opinions are discussed to demonstrate another perspective to OECD. Chapter 9 is a discussion draft. However, it is used together with chapter 1 and 6 in the fictive case. The case illustrates a business restructuring, which involves intercompany transfers of intangible assets, risk and functions. There are two scenarios; the first is regarding the Danish parent company as the principal enterprise, and the second scenario involves one of the foreign subsidiaries that is receiving all the risk, intangible assets and functions, and therefore becomes the new principal enterprise. The thesis analyzes how these transactions should be compensated in arm’s length terms and prices. The paper concludes that there are many challenges with an intercompany transfer of intangible assets and restructuring. OECD’s transfer pricing guidelines are expected to make the process easier by making the rules uniform and minimizing the gap between enterprises and tax administration

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2017
Number of pages137