Contribution Analyses Under the Profit Split Method
31 December 2007
By Sébastien Gonnet and Pim Fris
In transfer pricing, a contribution analysis is ultimately a quantitative analysis of the contribution of each party to a transaction, to derive an arm's-length split of profit within an integrated multinational group. In this article from International Tax Review's Intellectual Property Supplement, NERA Senior Consultant Sébastien Gonnet and Special Consultant Pim Fris explain how, if applied based on sound economic principles, contribution analyses are powerful tools to address the bulk of most complex transfer pricing issues. Furthermore, with increased sophistication of transfer pricing techniques around the world, expectations from the tax authorities increase, rendering rule-of-thumb approaches outdated.
This article first appeard in the sixth edition of International Tax Review's Intellectual Property supplement, December 2007. For more information, please visit www.internationaltaxreview.com.
