A Guide to Transfer Pricing for Intangibles


This section provides additional guidance on issues related to the transfer between linked enterprises of intangible assets or rights to intangible assets. These transactions may include the sale of an intangible asset and transactions that are economically equivalent to the sale.

These transactions may also include licensing rights to one or more Intangible Assets or a similar transaction. This section is not intended to provide complete guidance on transfer pricing treatment of such intangible asset transfers. The assignment of an intangible asset or a right to an intangible Asset guides some of the issues that often arise with such an assignment. Comparability of intangible assets or rights to intangible assets


When applying the provisions to transactions involving the transfer of intangible assets or rights to intangible assets, it should be noted that intangible assets often have unique characteristics. And thus, the ability to generate profits and to generate future benefits can vary widely.

Therefore, when conducting a comparability analysis regarding the transfer of an intangible asset, it is essential to consider the unique characteristics of the intangible Asset. This is especially important when the CUP method is considered the most appropriate transfer valuation method, but also important when applying other methods based on comparative methods.

In the case of an intangible asset transfer or a right to an intangible asset that gives the company a unique competitive advantage in the marketplace, the intangible Asset or transactions that are presumed to be comparable should be audited. Check carefully. It is essential to assess whether potential comparisons do have similar profitability potential.


These can be important in a comparability analysis involving transferring intangible assets or rights to intangible assets. The following list is not exhaustive, and in a particular case, consideration of additional or different factors may be an essential part of a comparative analysis.


The question of whether rights to intangible assets are related to Transactions involving the transfer of intangible assets or rights to an intangible asset that is exclusive or non-exclusive can be an important comparative consideration.

Some intangible assets allow the legal owner of the intangible Asset to prevent others from using the intangible Asset—for example, a patent grants exclusive use of it protected by a patent for several years. Can the party controlling intangible rights exclude other firms from the market?

Or prevent them from using intangible assets that confer a market advantage, that party can obtain a high degree of market power or influence. A party with a non-exclusive right to Intangible Assets will not be able to exclude all competitors. It will generally have a different degree of influence or market power. Accordingly, the exclusive or non-exclusive nature of the Intangibles or the rights to the Intangibles should be considered part of the comparability analysis.


The degree and duration of the legal protection of intangible assets associated with a particular transfer can be an important comparability factor. For example, legal protections related to intangible assets may prevent competitors from entering a particular market. For other intangible assets, such as technological know-how or trade secrets, existing legal protections may differ and may be less strong or long-lasting.

For intangible assets with a finite life, the duration of legal protection can be important because the duration of the intangible rights will affect the expectations of the parties to the transaction about the benefits in the future. Future of intangible asset mining. For example, two comparable patents will not be equivalent if one expires after one year while the other expires only after ten years.


Geographical coverage of Intangibles or rights to Intangibles would be an important comparison factor. A global grant of an intangible asset may be more valuable than a limited grant of one or several.


Many intangible assets have a finite life. The useful life of a particular Intangible Object may be affected by the nature and duration of the legal protections available to the Intangible Object, as discussed above. The useful life of some intangible assets can also be affected by the rate of technological change in an industry and the development of new and potentially innovative products. It is also possible to extend the useful life of specific intangible assets.


Therefore, when performing a comparability analysis, it is important to consider the intangible Asset’s expected useful life. In general, intangible assets that are expected to provide business benefits over a longer period are more valuable than similar intangible assets that provide such benefits in a shorter time, all of which everything else is equal. When assessing the intangible asset, it is important to consider the use of the intangible Asset. The useful life of an intangible asset forms the basis for ongoing research and development that can extend beyond the commercial life of the current generation product line based on the intangible Asset.


When performing a comparability analysis, it is important to consider the development stage of some intangible assets. Typically, an intangible asset is transferred in a controlled transaction at some point before it is fully demonstrated that the intangible Asset will support commercially viable products.

A common example is the pharmaceutical industry, where chemical compounds can be patented, and the patent (or patent use right) is transferred in controlled, long-term transactions. Additional research, development, and testing prove that the compound is a safe and effective treatment for a particular medical condition.


As a general rule, intangible assets related to products with established merchantability will be more valuable than comparable intangible assets about products for which merchantability has not been established. Therefore, when performing a comparability analysis involving partially developed intangible assets, it is important to assess the likelihood that further development will result in significant future commercial benefits. . In certain cases, industry data regarding the risks associated with further development may be useful for such assessments.


The specific circumstances of any individual situation must always be considered. The right to improve, modify, and update is often an important consideration in comparative analysis

concerning Intangible Assets concerning the rights of the parties to future improvements, modifications, and updates of the Intangible Assets.

In some industries, products covered by Intangible Assets may become obsolete or uncompetitive within a relatively short period without the continued development and improvement of the Asset. Intangible product. As a result, access to updates and improvements can make the difference between getting short-term benefits from intangible assets and achieving longer-term benefits. Therefore, it is necessary to compare whether a specific grant of rights to the Intangible Assets includes access to improvements, modifications, and updates to the Intangible Assets.

A similar question, often important in comparability analysis, is whether the recipient of the Intangible Asset is entitled to use the Intangible Asset in research to develop new and improved Intangible Assets.

For example, the right to use an existing software platform as a basis for developing new software products can shorten development times and make the difference between being first to market a new product or application or being forced to enter a market already occupied by established competing products. Therefore, a comparative analysis involving intangible assets should consider the rights of the parties involved in using the intangible Asset in developing new and improved versions of the product.


Each of the above comparative considerations has consequences for the parties’ expectations of the transaction about the future benefits derived from the use of the intangible asset in question. If, for any reason, there is a substantial difference between the expected future benefits of using one intangible Asset and another.

708 thoughts on “A Guide to Transfer Pricing for Intangibles”

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