Taxation in a Global Digital Economy

1. S. 284Importance of Intangibles in a Digital Economy

In a global context, intangibles have become key drivers of entrepreneurship and economic growth. For example, more than 80 % of Microsoft’s market value is in intangibles. As a result, multinational enterprises (MNEs) are focusing on continuous innovation and investment in the development of intangible assets such as patents, trademarks, copyrights, know-how, and others. In addition, intangible assets validate the MNE business model and define it, hence, are central to transfer pricing. They are, however, notoriously difficult to value.

The analysis of cases involving the use or transfer of intangibles should begin with a thorough comparability analysis that includes a functional analysis. In this context, it is important to consider the identification of specific intangibles as part of the comparability and functional analysis in order to determine the arm’s length remuneration for the use or transfer of them; the identification of the parties that should be entitled to retain the returns derived from the use or transfer of the intangibles; the nature of the controlled transactions and whether they involve the use of intangibles and...