Limiting Base Erosion

S. 4701. General Introduction – Assembled Workforce

In the historical development of the world, the last decades represent the evolution of the industrialized economy followed by an information- and knowledge-based economy. In transfer pricing practices the economic change has developed the special significance for intangibles in today’s business world. The importance of intangibles in business has been growing for years and across all industry sectors. The topics Transfer pricing and Intangibles play an increasing role nowadays.

Today’s typical multinational enterprise (MNE) neither has the whole production under one roof nor are the business parts accumulated in a single entity. Particular parts of the business are situated in different jurisdictions, considering the most beneficial locations. For example, intellectual property ownership is in one jurisdiction, research and development in another jurisdiction, manufacturing in a third, services in a fourth, financing in a fifth with customers worldwide. In transfer pricing language the aim is to accumulate the entrepreneurial risk and return in one entity and to limit the functions (low-risk profile) and taxes in the others. What should ...