Transfer Pricing and Value Creation

1. S. 314Overview

This chapter tries to give an overview of the delineation process of transactions in Research, Development and Innovation. Special focus will be put on the Functional Analysis and the performed functions, used assets, and assumed risks relating to development, enhancement, maintenance, protection, and exploitation (DEMPE) of intangible assets. As the DEMPE activities are the deemed most value creating contributions in transactions with intangibles, therefore, it is of high importance to analyze them correctly.

Another focus will be put on the risk framework, especially on the concept of control. As legal ownership and contractual arrangements can no longer be taken at face value, they only provide for a starting point in a transfer pricing analysis. Only entities actually exercising control are to be remunerated for their contributions to the value creation of intangible assets.

Another topic that will be discussed is the problem of coherence in transfer pricing especially related to intangibles.

2. Introduction

The business landscape changed dramatically over the past decades. Globalization in conjunction with the exponentially growing progress of technology gave companies ...