publicly-available IP data

Movement of Intangibles and the Information Asymmetry Myth

Since the release of the Organisation for Economic Co-operation and Development (OECD) Base Erosion Profit Shifting (BEPS) guidelines, there have been a lot of questions regarding the existence and availability of pertinent information to support tax positions. There have been numerous calls for comment on various aspects of the original document; each with it’s own host of questions and issues.

Information Asymmetry

The recent discussion draft BEPS Action 8 Implementation Guidance on Hard-to-Value Intangibles (HTVI) is no different. Specifically, the draft discusses “information asymmetry” between the information corporations have on the movement of their own intangibles, and the availability of that information to tax administrations. A common misconception, one perpetuated in the BEPS Action 8 (HTVI) discussion, is that corporations have all the data, while tax administrations must waitoften too longto receive the same information on intercompany transactions.

Historically, tax administrations have been forced to rely upon taxpayers to provide information when the economic ownership of intangibles shifts between entities. Global regulations and the rise of intangible data providers have flipped this scenario.

Public Sources of IP Data

Where BEPS Action 8 gets it wrong is that despite this misconception, data is available for tracking the movement of intercompany IP. The information is on a global scale and does not discriminate between public or private companies. Tax administrations no longer need to wait for corporations to  provide details about their intercompany transactions, they have them at their fingertips on a daily basis.

Needless to say tax administrations are already using this data to challenge consultants and corporations. This is forcing practitioners to acquire this information in order to properly defend their clients during audits from evolving tax administrations. Access to the same information is paramount in creating a thorough and defensible transfer pricing analysis.

Movement of Intangibles Between Related Entities: An Example

To highlight the information available to tax administrations, take the following example.

A tax administration researching a company, such as Blackberry Corporation, would find that since 2013, Blackberry Corporation, a US corporation, transferred or assigned the legal ownership of over 60 patents to Blackberry Ltd., a Canadian corporation. This information enables tax administrations and transfer pricing professionals to ask certain questions, such as:

  • Since the legal ownership has transferred, has there been a change to the economic owner of the intangibles?
  • Was the transfer part of a new cost sharing arrangement?
  • Was there an intercompany purchase agreement for the intangibles drafted to support the transaction?
  • What was the US Corporation compensated for the transfer of the legal ownership of the intangible?

Supplementing Your IP Data

The gap between what companies know, and what tax administrations have access to, is closing. The scale is no longer tipped in favor of corporations, often leaving consultants surprised with the details available to tax administrations. The good news is that the same information available to tax administrations is available to consultants. Make sure you are accessing all available information by utilizing resources for research regarding intercompany transactions.

About the author: John Wiora
John Wiora
As Chief Operating Officer, John oversees strategic initiatives for the company’s growth, manages partner and reseller relationships, and supports product enhancement strategies. John started at ktMINE in 2010 as an Expert Analyst with experience in strategic economic analysis. Having researched trends, patterns and relationships surrounding specialized facets of IP intangibles transactions for a broad range of customers, he is well versed in the needs of our broad customer base. Through his work with ktMINE, and his previous life as a transfer pricing professional, John has personally analyzed thousands of IP license agreements. He has conducted research and contributed to various publications including International Tax Review, Licensing Executive Society (LES), Intellectual Asset Management (IAM), and Business Valuation Resources.