Transfer Pricing: IP Migration Issues – Dovetail into the DPT

Transfer pricing continues to be a topical issue for taxpayers and revenue authorities in Australia and around the world. The OECD’s base erosion and profit shifting (BEPS) project, and Australia’s implementation of many of its recommendations, highlight the importance of transfer pricing to the compliance and governance frameworks of affected taxpayers.

Intangible property presents particular and unique challenges, since transfer pricing outcomes can incorrectly misprice the presence of intangible property in the Australian sales, distribution or marketing businesses.

At August’s National Transfer Pricing Conference in Sydney, Jonathan Malone, CTA, and Karim Raphael (both PwC), present the session ‘IP Migration Issues – Dovetail into the Diverted Profits Tax’.

Jonathan spoke with us about some of the issues and what to expect from their session.
Jonathan Malone, CTA


Jonathan told us “Karim and I will be covering IP transfers, related transfer pricing topics and the interaction of the Diverted Profits Tax (DPT). We’re going to dive into the circumstances in which IP transfers are typically considered by multinational groups, valuation and pricing issues, plus exit taxes and integrity rules.”

Whether a start-up or in a growth phase, intangible property is becoming more and more difficult to deal with in a global context.

“We’ll be discussing the commercial context in which IP transfer issues arise and the TP/tax considerations to be aware of. We’ll also look at some recent developments, including BEPS actions 8-10, DPT and associated guidance material, and some other associated topics, from CGT to R&D, and royalty withholding tax.”

The session looks at commercial and supportable ways companies are leveraging intangible property in growing their offshore businesses through disposal or licence arrangements, and how the presence of intangible property in the Australian sales, distribution or marketing businesses can be incorrectly mispriced by transfer pricing outcomes.

Jonathan and Karim will also look at the use of contract R&D arrangements and congruence with R&D concessions, and discuss where the ATO is at in managing intangible property risk.

Jonathan said “This is, unsurprisingly, a complex area of practice and there are a number of blind spots advisers need to be aware of, from the OECD’s guidance on hard to value intangibles (HTVI) from BEPS actions 8-10, to whether or not a tax benefit arises from IP transfers in the context of DPT.”

Jonathan is a partner in PwC’s Global Tax team. He specialises in topics relating to multinational groups, including financing, restructuring, related party transactions (along with the interaction of rules such as the MAAL, DPT, anti-hybrids, MLI, PE issues and BEPS). 

Karim is a Director in PwC’s Global Tax team. He has spent significant time with both PwC Australia and PwC Canada, and specialises in matters relating primarily to transfer pricing in the context of multinational groups, including structuring, cross-border transactions as well as tax authority engagement.

The National Transfer Pricing Conference includes addresses from thought leaders from both the profession and the Australian Taxation Office, covering difficult technical issues on the migration of intellectual property and the application of Div 815 following Chevron, and highlight what transfer pricing risks boards must consider in discharging their directors’ duties.

It is also important to recognise that transfer pricing is not just the domain of large multinational enterprises. It impacts Australian-headquartered groups expanding overseas. It also affects Australian subsidiaries of global groups who often have limited resources to deal with detailed transfer pricing issues and documentation requirements, and the conference contains a separate stream of sessions that will explore the issues those taxpayers face, including some practical sessions on transfer pricing documentation.

Find out more about the program on our website, and join us in Sydney on 8 August 2018.

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