Transfer Pricing of Intangible Assets and R&D Services with Respect to a Service Level Agreement

Service level agreements (SLA) concerning services in research and development and other intangible assets in particular must be treated from the tax perspective within a multinational group of related enterprises with the setting of transfer pricing. However, this generates many problems which must be identified, and suitable and realistic applicable solutions must be proposed, to minimise the risk that tax authorities assess the transactions with licence or other fees as prohibited profit-shifting, or shifting tax bases to countries with more favourable taxation. The main problems looming in this are primarily with the measurability of utility for the recipient of intangible assets, where economic rationality is key, even from the provider, as well as the allocation of costs method by the provider for the traded intangible assets and determining the normal profit margins over the provider's costs. The author of this article identifies theoretical solutions and proposes practical ways for dealing with the theoretical conclusions