Transfer pricing methods in the context of intangible property

Abstract

The purpose of this study is to evaluate the suitability of existing acceptable transfer pricing methods and their application to international transactions between related parties involving intangible property, more specifically intellectual property that is legally protected. The application of the internationally accepted transfer pricing methodology, which is based on the application of the arm’s length standard to the transaction, necessitates the finding of suitable comparables between independent enterprises. However, the methods of determining an arm’s length value are being challenged as intangible property, which is often unique and for which no suitable comparables exist, increasingly migrates between tax jurisdictions. Consequently, the existing and accepted transfer pricing methods may not always be appropriate to establish an arm’s length value for intangible property migrations.