Transfer Pricing and Business Restructurings

1. Introduction

The previous chapters have dealt with accurate delineation and recognition of business restructurings, determining the arm’s length compensation for the restructuring itself, and delineating post-restructuring intra-group transactions. The scope of this chapter is to discuss “Other Relevant Issues” that impact business restructurings. These include modifications to business models and organizational setups of MNEs. Such modifications may or may not effectuate the need for compensation payments resulting in exit taxes.

From a TP perspective, a business restructuring involves a cross-border redeployment of functions, assets, and/or risks, including the associated profit potential, by or between MNEs. Business restructurings may trigger compensation requirements between entities arising from transfers of valuable intangibles or any other sources of value. In certain cases, the termination or substantial renegotiation of existing contractual arrangements could give rise to compensation requirements in the context of a business restructuring.

However, despite the broad approach of defining business restructurings, there is no general or legal definition for the term in the ...