Transfer Pricing Challenges in the Digital Economy: A Case Study of the Internet of Things (Part II of II)

Abstract

The OECD's BEPS project mandated that transfer pricing outcomes under the arm's-length standard should be aligned with value creation. In the digital economy, new business models are challenging transfer pricing practitioners on how best to apply the value creation approach. In a two-part series Niraja Srinivasan and Srini Lalapet of Dell Technologies and Lorraine Eden of Texas A&M illustrate the complexities and challenges posed by digital business models. The first article explored the digital economy and the OECD's work on BEPS Action Item 1 (taxing in the digital economy). This second article is a case study of the Internet of Things (loT), which builds and uses a stylized transfer pricing analysis to explore the transfer pricing challenges posed by an loT ecosystem.

Note: Reproduced with permission from Bloomberg Tax (June 14, 2019). Copyright 2019 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com.

Keywords: transfer pricing, digital economy, internet of things, taxation, OECD, BEPS

JEL Classification: F23, H26, H25, K34, L11, 033