Multinational enterprises often operate under brand(s) that are used and developed by multiple entities within the Group. From a transfer-pricing perspective, all parties that contribute to developing such a brand need to be remunerated in accordance with the Arm’s Length Principle. At the same time, the right value of such an intangible can be difficult to assess and local tax authorities may have different opinions on the remuneration of each entity.
We evaluated the actual profit generated by the brand by examining the ways and locations in which the brand created value, such as enabling the group to charge a higher price. Instead of relying on royalty benchmarks, which often provide limited reliable and independent comparables due to the unique characteristics of each brand, we determined how royalties should be allocated between the involved parties based on their relative contributions to the development, enhancement, maintenance, protection, and exploitation of each brand.
Using this method, we have defended the arm’s length’s nature of brand royalties in tax audits across multiple continents.
Read more about our IP Valuation & Transfer Pricing service below.
