Limiting Base Erosion

S. 5261. Introduction

This contribution deals with the elaborations of Actions 8–10 of BEPS Action Plan concerning the arm’s length conditions in cases involving intangibles. It aims to identify and to critically investigate whether the new set of rules can serve the purpose stated by the OECD: “Aligning Transfer Pricing Outcomes with Value Creation”.

In the past few decades two remarkable transformations have affected firms- the steady growth of the relevance of intangible and the rapid development of firms’ international activities. Plenty of empirical evidence shows that the importance of physical assets has rapidly decreased in many sectors, as companies have shifted towards intangible business resources which have become an important value driver of today’s economy. This change can be traced through many industries in the decline of book-to-market ratios and the constant increase in investment expenditure in intangibles. Concerning internationalization, in the last twenty years, global foreign direct investments have almost quadrupled in absolute terms, evidencing that firms have constantly increased their international activity. Moreover, international trade has radically changed. It...