Transfer Pricing in Business Restraucturings --
Andrew B. Shact
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:
OECD, JCT, Transfer Pricing, Business Restructuring, Transfer Pricing Guidelines, Chapter IX, 482, Intangibles, Synergy, Tax Shelter, Arms length price, Decisions
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