Browsing by Author "Pätäri, Heidi Maria"

Transfer pricing can be described as the internal price setting between multinational group companies. In recent years the issue of jurisdiction’s tax revenue flowing out of the jurisdiction has been closely related with transfer pricing and the tax authorities all over the world have increasingly began to question the arm’s length nature of the intra-group transactions of multinational enterprises. In this thesis the focus is on the transfer pricing issues arising in situations where intangible assets are involved in business restructuring. Multinational enterprises have noticed that in this time of global recession and economic uncertainty in order for them to be able to answer the invariably increasing competition on the global markets the need to restructure their functions, assets, and risks in a way that will rationalize their operations and reduce the related costs. Intangible assets are often the items being transferred to low-cost / low-tax jurisdictions as they are easily transferrable due to their nature. However, intangible assets are commonly also those, which cause the most controversy between tax payers and tax administrations because they are difficult to identify as well as it is difficult to determine the appropriate arm’s length compensation for them. The research questions in this thesis include the question of how intangible assets are defined and who is the owner of the intangible for transfer purposes. Even though it might sound simple, these factors are often difficult to determine, and different countries might have different interpretations even though the OECD Transfer Pricing Guidelines are quite unanimously accepted at least among the OECD Member Countries as leading guidance in the area. The possible inadequate determination of ownership or failure to recognize a certain item as a compensable intangible asset may lead to transfer pricing adjustment by the tax authorities and possible penalties. It may also lead to double taxation especially in the case of jurisdictions disagreeing on the right characterisation of the item or the rightful owner. The main research questions of this thesis are what type of issues generally arise regarding to transfer pricing of intangibles in business restructuring situations and how different (OECD) jurisdictions treat these situations. Issues relating to back-to-back transactions and treatment of business synergies and location savings, which are common in centralization of intangible property, are examined. Also the issues related to transferring intangible assets with no established value are focused on. An issue which is especially closely related to the back-to-back transactions is the recognition or actually the non-recognition of the actual transactions taken by the taxpayer. The research questions the thesis aims at answering are thus also, in what situations should the tax authorities have grounds for restructuring the transaction instead of a pricing adjustment, what are the approaches of various OECD countries to restructuring transactions and what is the relationship of the restructuring according to Art 9 of the OECD Model Tax Convention to domestic anti-avoidance provisions. Finally, as it is established that the risk of transfer pricing disputes in the area of intangible assets and business restructurings exists, the preventative measures and measures for resolution of such disputes should be available to mitigate the risk. However, the conclusion that was reached in this thesis is that there is still a lot more room for improvement in this regard.