RoyaltyStat Blog

Adecco Intercompany Royalty Litigation: CUP v. TNMM

Posted by Harold McClure

Swiss multinational employment service provider Adecco recently prevailed in a case brought by the Danish tax authority (Skattestyrelsen or SKAT) challenging the 2% sales royalty paid by Adecco affiliate in Denmark for the use of various intangible assets, including trademarks and know-how.

The arguments put forth by the taxpayer and SKAT represented the classic tension between market versus profits-based approaches to evaluating arm’s length royalties. The 3-2 split decision and SKAT’s less-than-comprehensive analysis in its argument also may have left room for the possibility that a more robust analysis could have led to a different result.

Controversy Aside, IKEA on Solid Economic Footing in Royalty Dispute

Posted by Harold McClure

European affiliates of multinationals such as IKEA face scrutiny from a variety of agencies including the European Union (EU), which issued EU Council Directive 2011/16 also known as DAC6. The stated purpose of DAC6, which became effective on June 25, 2018, is to provide transparency and fairness in taxation. DAC6 applies to cross-border tax arrangements between EU affiliates and tax havens. One of these cross-border tax arrangements is intercompany royalty payments from EU affiliates to affiliate in tax havens such as Liechtenstein. Such intercompany payments by European affiliates of IKEA are being challenged by the European Commission in a State Aid inquiry, which was initiated on December 18, 2017, according to an EC press release:

Applying Regression Analysis to Transfer Pricing's Cup Method

Posted by Ednaldo Silva

The comparable uncontrolled price (CUP) method is described in US Treas. Reg. §1.482-3(b).

We hold that the empirical verification of CUP transactions is best measured by regression analysis.