IP transfer following an M&A deal – 2024 ACTP Conference @ UvA

This year’s conference on Controversy & Policy in TP and Income Allocation, excellently prepared and hosted by Svitlana Buriak, Wendy Rademaker-Swart, Richard Collier, Rezan Okten, Federico Lo Bianco and their colleagues from the ACTP at the University of Amsterdam, has covered a range of hot topics in Business Restructuring and TP on day 1 as well as recent Policy Developments in TP & Income Allocation on day 2.

In our panel on Intra-group transfer of intangibles following the acquisition of a stand-alone entity, I had the pleasure to join the discussion with my fellow panelists, Svitlana Buriak , Anna Stepaniak, Nate Zahnd and Dr. Giammarco Cottani, LL.M .

Based on a case study published by Nate Zahnd in IBFD’s International TP Journal (see below), various aspects such as relevant IP-valuation features, IP-transfer structuring alternatives, pertinent case law, practical challenges encountered and recommendations how to deal with these were outlined and discussed by the panelists.

From an industry practitioner’s perspective, the following challenges should be considered in the context of designing, documenting and defending respective intercompany transactions:

• Synergies and/or control premiums are not easily quantifiable, traceable, nor documentable to provide watertight tax audit defense at a later point in time
• The risk of potential double counting of such effects needs to be addressed
• Goodwill is an unspecified IP asset, not the sum of synergy, control and other factors
• Understanding the valuation purpose and corresponding stakeholder interests is key: Any (IP) valuation is inherently subjective and interest-driven, and more sophisticated valuation approaches (e.g. Shapley Value, APV vs. NPV, Real Options, etc.) cannot overcome this issue
• Identification and separate assessment of the valuation object is crucial
• Tax follows business – It is not always “aggressive tax planning interest” which drives the choice of valuation approaches and/or valuation processes by corporate taxpayers
• Tax authorities may be inclined to attribute the majority of value to IP assets (and/or related functions) transferred in a subsequent audit situation, potentially disregarding other relevant assets or functions

For those interested, Nate Zahnd ’s abovementioned article as well as recent publications authored by Richard Goh provide valuable insights and recommendations on how to design and document IP-valuations and corresponding intra-group transfers in alignment with the arm’s length principle:

Nathanael Zahnd (2023) Intra-Group IP Transfers Following International M&A Transactions – Challenges and Best Practice from a (Swiss) Transfer Pricing Perspective, International Transfer Pricing Journal, IBFD (Amsterdam), Volume 30, No. 3, pp. 133 – 148.

Richard Goh (2024) Finding the Nexus in Accounting and Transfer Pricing Valuations for Tax Amortisation of Intellectual Property Rights in Singapore, Parts 1 and 2, International Transfer Pricing Journal, IBFD (Amsterdam), Volume 31, No. 3, pp. 175 – 183, and No. 4, pp. 250 – 258.