Guidelines Address Migrating Business
International Tax Review, Vol. 32
Posted: 17 May 2009
Abstract
As the largest economy within the EU, Germany hosts a number of multinational enterprises that conduct an increasing number of cross-border migrations of business functions. New German guidelines (Verwaltungsgrundsätze Funktionsverlagerung) concentrate on the object of a migration - the transfer package - and its profit potential. When determining arm’s-length, it is not decisive whether the transfer package was profitable. The value is usually calculated based on the net present value of expected future earnings that the transfer package could generate in its market and in the hands of the new owner. Up-front investments and other expenses incidental to performing the business need to be considered in the valuation. The price of the transfer package can be paid as a one-time payment but remuneration for the shift usually must be paid based on an annual licence fee. So the new guidelines also affect deemed current licence fees of cases that have already been audited by the tax authorities.
Keywords: business, tax, transfer prices, trade, MNE
JEL Classification: K, L, M
Suggested Citation: Suggested Citation