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College 2 week 5 – IntangiblesCoca Cola
Nov. 23, 2020. 10:45AM
IRS said Coca-Cola attributed too much profit to foreign entities
Companies should pay attention to IP, practitioners say
“The IRS’s $3.4 billion victory against Coca-Cola Co. signals that the battle with
multinationals over how to account for profits from intangible property, like brand
trademarks, isn’t going away.
The IRS’s U.S. Tax Court win last week comes after a string of high-profile cases for the
agency in recent years over transfer pricing issues—how companies should value their
intercompany transactions—involving Amazon.com Inc., Facebook Inc., Altera. Corp, and
Medtronic Inc.
The agency’s argument in the case wasn’t surprising, practitioners said, but it hammered
home one of the fundamental principles of transfer pricing: Profits should reflect the location
of valuable intangibles—intellectual property such as brand trademarks.”
Identification of Intangibles
Definition of intangibles
Andere definitie dan in accounting omdat we hier bezig zijn met het verdelen van winst over
landen, dit is een heel ander gezichtsveld. Een derde moet bereid zijn ervoor te betalen.
,Zinc casus
Before 2003
• Processing of zinc
• Owned raw materials
• Controlled economicaly signifiant risks
• Concluded purchase and supply agreements
As from 2003
• Gradual transfer of non-production activities to global organizational structure
• Reason: benefit from economies of scale
2009
• Cooperation agreement with Belgian group entity signed
• Belgium to supply raw materials for production to NL
2010
• Global business restructuring
• Move from HQ in Belgium and London to Switzerland
• Switzerland responsible for production planning, procurement, logistics and sales
• Cooperation agreement with Belgium terminated. Netherlands received indemnification of
EUR 28m for the remaining year.
• Netherlands treated as toll manufacturer on cost plus basis
DTA
• Functional profile of NL did not change
• Dispute on conversion fee and cost based TP policy
COURT PROCEEDINGS
• Focus on burden of proof question
• Shareholder motives; and
• Non-commercial nature of transfer prices applied
• Court ruled that taxpayer is compliant
APPEAL
• Taxpayer and DTA negotiated settlement during proceedings
• No conversion from entrepreneur to toll manufacturer
• Recognized that CH performs important functions
• NL entited to entreprenerial profits until 2010
• Profit split method
• Value of NL determined at PV of expected profits in 2010
• Basis for conversion fee: transferred business to CH represents 28% of business
• NL entitled to 72% of future profits
Wie doet wat; funcionele analyse is leidend
, OECD Guidelines: Examples of Intangibles
Goodwill in Purchase Price Allocations
Goodwill toerekenen aan bijv. synergien of wat te veel is betaald voor een onderneming die
is gekocht.
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