Transfer pricing of intangibles

The world we live in today witnesses two radical changes. The first is associated with the notion of supply chains. With cross-border business activities, the supply chain concept is globalized. Research and development, manufacturing, distribution, and service-providing functions of business have moved beyond merely domestic boundaries. The other is as to a transformation from the industrial revolution to the knowledge economy. As a result, intangibles, for example, a patent caused by one's knowledge and intellectual efforts, have become more valuable than non-intangibles, such as assets created by muscle power. In other words, it is no longer case that the product of muscle is of more value than the product of the mind. Trademarks, patents, copyrights, industrial designs, know-how, licenses, and other intangibles, as valuable income generators, have become prominence subjects of trade and law. In this regard, this study focuses on transfer pricing aspects of intangibles, covering inter alia the OECD's BEPS project, the arm's length principle, comparability analysis, cost contribution arrangement, intangible ownership, transfer of intangibles, the application of transfer pricing methods pursuant to the analytical framework provided in the OECD Transfer Pricing Guidelines as well as functional analysis centered around development, enhancement, maintenance, protection and exploitation (DEMPE) of intangibles. Keywords: Multinational Enterprises, OECD, UN, Base Erosion and Profit Shifting (BEPS), Arm's Length Principle, Comparability, Intangible Ownership, Cost Contribution Arrangements, Functional Analysis, DEMPE Concept, Control over Risk, Transfer Pricing Methods, Transactional Profit Split Method, Residual Analysis, Discounted Cash Flow Method.