Discussion Draft on BEPS Action 8: Discussion Draft on Hard-to-value Intangibles

18 June 2015
Pim Fris, Dr. Emmanuel Llinares, and Guillaume Madelpuech

On 4 June 2015, the OECD invited comments from interested parties on the Discussion Draft on Hard-to-value Intangibles relating to Action 8 of the BEPS Action Plan.

NERA transfer pricing experts Pim Fris, Dr. Emmanuel Llinares, and Guillaume Madelpuech submitted their comments on 18 June 2015. According to them, the Draft emphasizes difficulties experienced by tax administrations “as a result of information asymmetry” as the reason for developing an approach that should protect tax administrations against the negative effects thereof. Yet, the NERA experts show that solutions to the HTVI issues raised in the Draft can be and should be developed within the framework of the arm’s length principle, and do not call for special privileges for tax administrations. The arm’s length principle ultimately requires the identification of behavior of independent parties, whether found in practice or as a result of bargaining analysis, in commercial and financial relations similar to the ones between related parties concerned. That can only be based on careful and comprehensive analysis of the circumstances at hand, as well as on appropriate communication thereof between a business and the tax administrations concerned. This is the case for flows of transactions as well as for incidental transactions and, in their opinion, HTVIs are no exception to this rule.