The Amazon Case deals with a commonly used structuring of US multinational enterprises (MNE) to set up a non-US company structure to explore the European or global markets outside the US by way of a transfer of intangibles using a cost-sharing arrangement (CSA). The US cost-sharing regime is originally a safe harbour regime that protects research joint ventures from regular transfer pricing scrutiny. A CSA is an agreement between controlled parties to share the costs of developing intangibles in proportion to the respective anticipated benefits of each party. As a consequence, each participant is considered an owner of the intangible property and is able to exploit it without paying a royalty in return. The parties to a CSA typically must make a “buy-in” payment to the participant providing already existing assets and resources that contribute to the development of the cost-shared intangibles. Even though the idea behind the CSA regime was to create simplicity through a safe harbour, the determination of prices for “buy-in” payments on the basis of a CSA has generated controversies in recent years.

The OECD addressed CSA set-ups of US MNEs based on the specific US corporate income t...