A key development coming out of the OECD Transfer Pricing Guidelines has been new rules on “intangibles.” These new rules affect multinational enterprises that rely on unique and valuable intangibles to set themselves apart from their competitors.

While the OECD and other tax rules are explicit about what is needed in transfer pricing setup and documentation, the regulations include no specific guidance indicating precisely how these factors should be reflected. This has led practitioners to rely on economic methods to find a reasonable and defensive setup.

In their new article published in International Tax Review, NERA Managing Director Dr. Yves Hervé and Director Philip de Homont discuss transfer pricing solutions in situations in which multiple entities make unique and valuable contributions to a business. The authors also provide practical insight on addressing the new TP challenges surrounding intangibles using the Shapley Value method, a tool used to calculate arm’s length profits shares of highly integrated business models. Dr. Hervé and Mr. de Homont use the digital tech industry as an example, though the model can be applied to several industries.