Intercompany transfers of assets are common and are under intense and increasing scrutiny by tax authorities around the world. The amount of income tax paid to each country affected by a transfer is determined by the prices charged within multinational companies. Transfer pricing rules and guidelines govern virtually all intercompany transactions, including those for intangible property.
Most tax authorities follow guidelines set by the OECD, of which the U.S. is a member, which require “arm’s length” transfer pricing, meaning that prices recorded should be the same as prices that would have been negotiated between unrelated parties.
The first line of defense against an audit of transfer pricing is documentation. The preferred method for benchmarking IP transactions and documenting their “arm’s length” nature is to locate comparable royalty agreements such as those found in the ktMINE database.
- The full text of the agreements is available and searchable (for related parties, for example)
- Search sets and search rationale can be archived
- The number of agreements in the database exceeds 10,000, and it is continuously updated
- Tax authorities now rely upon ktMINE for the efficiencies it provides