How do you handle disputes and audits on intangibles in TP and CbCR?

1 What are the risks of intangibles in TP and CbCR?

MNEs may face significant risks in TP and CbCR due to intangibles, such as underestimating or overestimating their value, not adhering to the arm's length principle, not documenting and substantiating DEMPE functions, and failing to disclose or report intangibles accurately and consistently. These risks can lead to incorrect allocation of profits and taxes among jurisdictions, inquiries or audits from tax authorities, and scrutiny from competitors or activists.

2 How to avoid disputes and audits on intangibles in TP and CbCR?

To avoid disputes and audits on intangibles in TP and CbCR, MNEs should take a proactive and consistent approach to managing their intangible assets. This includes conducting a thorough analysis of the nature, value, and ownership of intangibles within the MNE group, applying appropriate TP methods and comparables to determine arm's length prices for transactions involving intangibles, preparing robust TP documentation and CbCR reports that support the TP policies and outcomes, and monitoring and updating the TP and CbCR positions regularly. All of these steps are necessary to explain the role and contribution of intangibles in the MNE's business model and value chain, as well as to adjust for any differences in functions, risks, and market conditions.

3 How to resolve disputes and audits on intangibles in TP and CbCR?

Despite the best efforts to avoid disputes and audits on intangibles in TP and CbCR, MNEs may still face challenges from tax authorities or other stakeholders. In such cases, MNEs should seek to resolve the issues in a timely and cooperative manner. Engaging in dialogue and information exchange with tax authorities, seeking advance pricing agreements or mutual agreement procedures, using alternative dispute resolution mechanisms, and litigating the matter in court are all options to consider. Providing clear and consistent explanations and evidence for TP and CbCR positions is key for successful dispute resolution. Advance pricing agreements or mutual agreement procedures provide certainty and prevent double taxation on TP issues, while alternative dispute resolution mechanisms are voluntary and confidential processes that involve a neutral third party. Litigating the matter in court is usually the last resort as it involves a formal and adversarial process that may result in a binding decision.

4 What are the best practices for intangibles in TP and CbCR?

In order to ensure compliance and reduce risks associated with intangibles in TP and CbCR, MNEs should adhere to some best practices. These include aligning the TP and CbCR policies and practices with the business strategy and objectives, taking a global and holistic perspective of the impact of intangibles on the MNE's overall profitability and tax position, remaining up-to-date on the latest developments and guidance on intangibles in TP and CbCR (e.g. OECD's BEPS Action 8-10 and Action 13), as well as seeking professional advice from experts in TP and CbCR who can provide technical expertise, insights, and solutions for complex issues.

5 How to learn more about intangibles in TP and CbCR?

If you want to learn more about intangibles in TP and CbCR, you have access to various resources and opportunities. Reading books, articles, reports, and blogs can provide practical examples, case studies, and tips. You can also take courses, webinars, workshops, or seminars to gain training and education on the subject. Joining networks, communities, or associations can give you a platform to exchange ideas, experiences, and best practices. Consulting mentors, coaches, or advisors with experience and expertise in intangibles in TP and CbCR can provide guidance, feedback, and support.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?