Original Articles

Cost contribution agreements: The South African tax implications of research and development costs incurred by multinationals participating in joint research projects with offshore associates


Abstract

Cost Contribution Agreements (CCAs) or cost sharing of research and development costs, is one of the vehicles sanctioned by tax authorities that may be used by multinational enterprise groups (MNEs) to develop and distribute intangible property among members of the group. Such an agreement, which is often used as an international tax planning mechanism, may provide a solution to the challenge of determining a transfer price for the cross-border transfer of rights to intangible property between connected entities, thereby avoiding double taxation, limiting transfer pricing uncertainty and transfer pricing risk, as well as providing the planning opportunity for MNEs to potentially reduce their global tax liability.

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