Hard-to-value Intangibles
The transactions involving hard-to-value intangibles (“HTVI”) are on the radar of tax authorities in many jurisdictions including Belgium. During the transfer pricing audits in Belgium, the tax authorities start by referring to “all intangibles as HTVI”. The burden of proof is on the taxpayer to rebut the analysis of tax authorities which could be based on the ex-post outcomes.
Given the increasing significance of HTVI transactions and the Organization for Economic Cooperation and Development (“OECD”) approach of analyzing HTVI arrangements being formally adopted in the local legislation of various countries, it is important to analyze the industry dynamics, spot the hard to value intangible related transactions, prepare robust documentation and also report such transactions during the DAC 6 filings (i.e. European Union’s directive on the mandatory disclosure rules).
COVID-19 Implications
The ongoing pandemic has surely become an important event to consider not only from the operational, but from the tax standpoint for the majority of businesses globally. In the attempt to react on events in real time many corporate groups have re-arranged their procurement / supply chains, reconsidered functional profiles of group entities, relocated employees, introduced new functions and arrangements.
The FY 2020 will soon be open for the audit and it is important to make sure that all changes which have happened have a reasonable explanation and support from a transfer pricing perspective. Surprisingly, an importance of the respective TP analysis should not be underestimated also for the businesses which enjoyed a positive impact during pandemic.
The OECD Guidance on the transfer pricing implications of the COVID-19 pandemic stipulates rather broad definitions / guidance allowing for flexibility in interpretations and approaches to be taken by taxpayers.
Sooner critical assessment of the impact is performed, more possibilities a taxpayer will have to mitigate potential tax consequences and align operational changes with defendable transfer pricing analyses.
We have discussed the following topics in our Transfer Pricing webinar.
- How the ongoing COVID-19 pandemic has impacted groups and businesses in different ways, and how groups have reacted on the transfer pricing front;
- The key aspects of the OECD guidance on the transfer pricing implications of COVID-19, published on 18 December 2020;
- Practical guidance on how transfer pricing policies may be impacted by COVID-19;
- Latest developments on HTVIs – in particular, the OECD’s 16 December 2020 publication of jurisdictional-specific information on how countries have implemented the HTVI approach;
- Key observations on how the Belgian tax authorities have applied the principles on HTVIs in transfer pricing audits and how this compares with the input of other key European countries to the OECD survey.
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