Transfer Pricing and Value Creation

1. S. 226Introduction

The increasing internationalization and globalization of the economy leads to a growing “dematerialization” of intra-group transactions. Nevertheless, the manufacturing function within multinational enterprises (MNEs) continues to be of comparatively great significance and is characterized by an increasing fragmentation of activities and functions across countries and the emergence of global value chains. In order to maintain and strengthen their competitiveness, MNEs are forced to constantly rationalize, centralize, or outsource the production and distribution of goods to countries where these activities can be performed cheaper. These developments lead to an enormous increase of global trade within MNEs. For this reason, the importance of transfer prices for them has risen sharply. MNEs are faced with the challenge of analyzing their global value chains and aligning transfer pricing outcomes with value creation as claimed in the BEPS project.

Value creation is currently one of the most popular terms in international tax policy discussions. In the context of the BEPS project, the term “value creation” has taken on a new meaning for transfer prices. On 5 October 2015,...