Boston University School of Law

Transfer Pricing in Business Restraucturings --
Synergies and Shelters

Richard Thompson Ainsworth
Boston University School of Law

Andrew B. Shact

63 Tax Notes International 341 (August 1, 2011)
Boston University School of Law Working Paper 11-24


Transfer pricing in business restructuring is attracting global attention.  In the past two years two key policy making groups have released three substantive documents on this topic. The Organization of Economic Cooperation and Development (OECD) issued two position statements while the Joint Committee on Taxation (JCT) issued one.  While restructurings are a very common commercial practice, until recently it has been uncommon to apply transfer pricing criteria when examining them in detail.

Essentially, the OECD has overlooked that a unique and valuable intangible is created during the restructuring process. By not acknowledging that this intangible in the mix, the OECD fails to see the whole picture.  The JCT has the same blind spot.  Even though the JCT is far more focused on intangible assets, it too overlooks the restructuring’s intangible asset creating function.  The critical point that both the OECD and JCT fail to understand is that a restructuring’s core activity is not asset movement; it is fundamentally changing enterprise decision-making.

As a result, when efforts are made to square real world business restructurings with the OECD’s abstractions of business restructurings, things do not “fit” well.  Some of the most obvious problems are:

  • Successful business restructurings are more about aligning decision-making processes throughout an MNE with its structure, than they are about structural change; the OECD is largely concerned with asset transfers and very little about changes in decision-making.
  • Because of the need to critically examine decision-making the CEO frequently is directly involved in successfully restructurings; the OECD does not consider the involvement of the CEO in business restructurings.
  • Over 70% of business restructurings fail to achieve performance objectives, and many actually damage productivity; the OECD largely ignores losses in a restructuring, focusing instead on restructuring gains.
  • Business restructurings primarily seek performance-changing synergies; the OECD’s concern is with transfers of profit potential (that may include losses) embedded in assets transferred among related parties.  
  • Business restructurings invariably involve three or more entities, if not the entire MNE; the OECD only examines binary transactions between two related parties within the MNE. 


OECD, JCT, Transfer Pricing, Business Restructuring, Transfer Pricing Guidelines, Chapter IX, 482, Intangibles, Synergy, Tax Shelter, Arms length price, Decisions

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Richard Thompson Ainsworth Contact Information

LL.M. Tax Program
Boston University School of Law
765 Commonwealth Ave
Boston, MA 02215

Phone: (781) 773-1052

Andrew B. Shact


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