Cost Sharing Arrangements
Although cost-sharing arrangements have been used by multinational companies (MNCs) as part of tax planning strategies for years, recent regulatory developments have subjected cost-sharing arrangements to intense scrutiny. These developments include a major reformulation by the US Internal Revenue Service (IRS) of the 1995 cost-sharing regulations in January 2009; OECD ongoing revision of guidance on business restructuring; and the introduction by the German tax authorities of aggressive regulations related to valuing transfers of functions or risks in 2005.
Under these new regulations, certain intercompany transfers of intangibles—broadly defined as transfers of any profit-driving assets and capabilities—may have to be valued under a framework where all of the benefits from the transferred intangibles, including the benefits from subsequent development of these intangibles, accrue to the original intangibles developer.
NERA's experts assist clients in addressing the new requirements of these regulatory pronouncements and in adapting the valuations applied for existing arrangements and restructuring transactions to the new valuation paradigms.
