On July 10, 2017, the OECD released the 2017 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations ("OECD Guidelines"), which incorporates new transfer pricing approaches agreed to by OECD and G20 countries in the 2015 base erosion profit shifting (BEPS) plan final reports. The OECD Guidelines address the issues of returns to IP development by focusing on people function and risk control. In this article, we consider returns to an IP Company with varying degree of economic substance in four different scenarios. Through this analysis, we highlight economic considerations that need to be taken in account when applying the OECD approach to determining IP returns.
