TRANSFER PRICING

The essence of transfer pricing issues is the fact that payments across state or national borders for goods, services, or intellectual property rights are a tax deduction for the payer and taxable income to the payee. This chapter depicts the essence of transfer pricing issues. Holding companies are business entities created for the purpose of owning intangible assets and/or intellectual property. A holding company can centralize ownership and management and focus responsibility for the protection and exploitation of these important corporate assets. The arm's-length consideration for the transfer of intangible assets must be commensurate with the income attributable to the intangible asset, and must be determined using one of four methods: The comparable uncontrolled transaction method (CUT); the comparable profits method (CPM); the profit split method; and unspecified methods. The chapter explores these methods in detail.