Transfer Pricing and Intangibles

1. S. 88General options to structure intangibles within MNEs and interrelations with the MNE’s business model

Generally, multinational enterprises (MNEs) are free to decide how they structure their intellectual property (IP). In doing so, they might consider efficiency aspects, asset protection needs, and potential tax opportunities as well as risks related to centralized or decentralized approaches. Nevertheless, the IP structure of an MNE is materially interlinked with the group’s business model. Deciding how to structure an MNE’s intangibles, therefore, goes hand in hand with the organization of technology-related research and development (R&D) activities and the structure of operations within an MNE.

Accordingly, in centralized business models whereby the MNE’s global supply chain is centrally managed and controlled (e.g., entrepreneur, principal, or global supply chain business models), the MNE’s intangibles are usually also centralized at the level of the entrepreneur or principal or in a separate IP holding company.

In decentralized business models, on the other hand, when each division or business unit of an MNE is separately managed and controlled by a divisional control company o...