Pricing Intangible Property: The Path to a Sustainable Transfer Pricing System
31 March 2008
By Jean-Sébastien Lénik
Intangible property (IP) is a source of competitive advantage that enables a company to generate premium returns on the market. Sustainable competitive advantage is achieved when a company is able to develop and maintain IP assets to the point where it maximizes profit. Reaching this point, notes NERA Associate Director Jean-Sébastien Lénik, requires time, resources, and constant capital investment as the company will be continuously challenged in its leadership position by other market players. It is not surprising that domestic tax administrations focus more and more on IP assets when auditing taxpayers. As the main profit driver for a multinational group, IP assets are also the main opportunity of a significant transfer pricing reassessment for tax administrations. In this context, economic analysis provides a framework that enables taxpayers to successfully defend its position before the tax administrations and ultimately the tax courts.
This paper is an extract from an article published in Transfer Pricing Aspect of IP and Intangibles, a Tax Planning International Special Report (March 2008).
