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Legal Ownership of Intangible Assets versus Economic Substance

Because of mounting public and political pressures, the G20 countries asked the Organisation for Economic Co- operation and Development (“OECD”) to develop an action plan on base erosion and profit shifting (“BEPS”) limiting opportunities for multinational enterprises (“MNEs”) to shift profits to jurisdictions with a lower tax rate. The 15 BEPS action plans the OECD produced are broad in nature and coverage. From the transfer pricing perspective, there are four action plans, Action Plans 8, 9, 10 and 13. Action Plans 8-10 predominantly address the issue of pro t shifting by MNEs through the use of a transfer pricing policy. On the other hand, Action Plan 13 deals with transfer pricing documentation, amongst which an MNE may need to prepare and submit to the relevant tax authority a country-by-country report, a master le, and a local le if certain thresholds are met. One item that would need to be analysed and disclosed in the master file and local file deals with value-chain analysis, which would help the MNE and the relevant tax authority to formulate an approach to identify the key value drivers, including intangibles, in order to allocate the MNE’s pro ts accordingly.