According to the OECD and most tax authorities, a discussion of data and facts relevant to intangible assets should be included in the transfer pricing documentation. This requires an accurate identification of the intangible assets used or transferred and the contractual agreements associated with them. According to the OecD guidelines, it is no longer only the legal ownership of intangible property that is decisive for the allocation of income, but also the effective exercise of functions of creation and preservation of values. It is therefore necessary to conduct a detailed functional analysis that documents the functions, assets and risks of development, improvement, modification, protection and operation (DEMPE). The objective of this analysis is to confirm the concordance between the contractual agreements (ex ante) and the actual exploitable behaviour of the parties. In addition, the analysis of the DEMPE forms the basis for the attribution of profits to each of the parties to the controlled transactions. Profit-sharing methods and cost-sharing arrangements are part of the more complex transfer pricing structures, even in stable economic environments. Under current conditions, when many companies are suffering losses and probably not reflecting our current economic realities before the pandemic, these structures require special attention. The agreements should be reviewed and the economic situation taken into account in the forecasts and calculations (2). 3 Any contribution to the costs, in cash or in kind, must be documentable. Records, including the names of individuals, the rate of pay, the number of hours and the corresponding calculation of effort, underperformance rate and calculation of applicable salaries, receipts, forms, shall be communicated to the Foundation for audit purposes on a quarterly basis during the performance period. 2. All cost-sharing positions shall be verifiable in order to determine their true value.
No item may be divided into amounts greater than their fair value. 3. In the case of federally funded projects, cost-sharing requirements must not be met by funds from other federal projects, including the transfer of federal funds through governments and local authorities. In this article, we look at profit-sharing methods and cost-sharing arrangements (1) and discuss how they may be affected by the economic disruptions caused by COVID-19. Fractions of profits are generally implemented when the parties involved in an intercompany transaction hold both (or all) significant intangible assets used in the transaction. In a crisis like the one COVID-19 presents, intangible assets cannot generate profits, but a loss, for example. B due to reduced sales of branded products and fixed costs, thus transforming the distribution of profits into the distribution of losses. A similar effect could apply to cost plans.
Under these agreements, two or more related persons contribute to the development of intangible value, their cost shares being based on a measure of the relative value or benefits of intangible value for each party. While before the crisis, such intangible heritage would have qualified as rewarding to be invested, things could be different. .