Intangible Property

This chapter discusses the Organisation of Economic Co-Operation and Development (OECD) guidance regarding intangible property. The present OECD intangible property guidance goes back to 1996, and the OECD made few, if any, changes regarding intangible property while promulgating the 2010 Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The 2010 Guidelines Chapter VI, “Special Considerations for Intangible Property,” focuses on the delineation among various intangible property categories, such as for commercial activities and for marketing activities. Then, the Guidelines specify the tax consequences applicable to the legal owners and to the economic owners of these property intangibles. The OECD cautions the multinational enterprise or the tax administration to ascertain whether or when a trade intangible or a marketing intangible exists. The chapter examines the issue of arm's length pricing when valuation is uncertain at the time of the transaction and the steps that the independent enterprises might undertake to deal with high valuation uncertainty when they price a transaction. The response of the tax administration in highly uncertain valuation situations is discussed and three examples presented in the Annex to Chapter VI, which illustrate the OECD's guidance regarding intangible property and the highly uncertain valuation as to that intangible property, are reviewed.