Transfer Pricing and the Arm's Length Principle in International Tax LawPDF电子书下载

Part Ⅰ Introduction 1

Chapter 1 The Subject, Definitions, Methodology, and Plan for the Book 3

1.1. The Subject 3

1.1.1. Transfer Pricing 3

1.1.2. The Arm’s Length Principle 6

1.1.3. Scope of the Subject 11

1.2. The Methodology and Material 13

1.3. Definitions and Terminology 16

1.3.1. General 16

1.3.2. Adjustments 16

1.3.2.1. Transfer Pricing Adjustment 16

1.3.2.2. Attribution of Income Adjustment 17

1.3.2.3. Transactional Adjustment 17

1.3.3. Transfer Pricing Adjustments 17

1.3.4. The Arm’s Length Test 18

1.3.5. Economies of Integration 19

1.4. The Plan for the Book 20

Part Ⅱ The Legal Basis for the Arm’s Length Principle 21

Chapter2 U.S.Tax Law 23

2.1. The Sources of Law in U.S.Tax Law 23

2.1.1. General 23

2.1.2. Legislation 24

2.1.3. Administrative Regulations 26

2.1.3.1. General 26

2.1.3.2. Regulations 26

2.1.3.3. Other Administrative Rules 28

2.1.4. The Court System 30

2.2.Historical Development 31

2.2.1. 1917-1960 Domestic Transactions 31

2.2.2. 1960-1968 Section 482 Regulations 33

2.2.3. 1966 Internationalization of the Section 482 Regulations 37

2.2.4. 1960-1986 Outbound Transactions 39

2.2.5. 1986 CWI Standard 42

2.2.6. 1988 White Paper 43

2.2.7. 1992-1994 Section 482 Regulations 44

2.2.8. 1982-2005 Inbound Transactions 46

2.2.9. 2000-2009 Outbound Transactions 51

2.3.Section 482 54

2.3.1. General 54

2.3.2. The Purpose of Section 482 54

2.3.3. Application of Section 482 55

2.3.3.1. Law 55

2.3.3.2. Facts 56

2.3.3.2.1. Information 56

2.3.3.2.2. Burden of Proof 57

2.3.3.3. Subsumption 61

2.3.4 Legal Conditions of Section 482 63

2.3.4.1. Taxpayers 63

2.3.4.2. Control 65

2.3.4.3. Transactions 67

2.3.4.4. Allocation norm 68

2.3.4.5. Causality 70

2.3.5. Legal Consequences of Section 482 70

2.3.5.1. Primary Adjustment 70

2.3.5.2. Corresponding Adjustment 72

2.3.5.3. Secondary Adjustment 72

2.4. Tax Treaties 73

2.4.1. General 73

2.4.2. Historical Development 75

2.4.3. U.S.Model Tax Convention 79

2.4.3.1. General 79

2.4.3.2. Article 9 80

Chapter 3 The OECD 83

3.1. Introduction to the OECD 83

3.2. Historical Development 84

3.2.1. The League of Nations 84

3.2.1.1. Introduction 85

3.2.1.2. 1921-1927, 1927 Draft Model 85

3.2.1.3. 1928-1929, 1928 Model 87

3.2.1.4. 1930-1933, The Carroll Report 89

3.2.1.5. 1933-1939, 1933 and 1935 Models 92

3.2.1.6. 1939-1946, 1943 and 1946 Models 94

3.2.2. OECD 95

3.2.2.1. 1956-1963, 1963 Model 96

3.2.2.2. 1963-1976, 1976 Guidelines for Multinational Enterprises 98

3.2.2.3. 1977, 1977 Model 99

3.2.2.4. 1974-1979, 1979 OECD Report 100

3.2.2.5. 1980-1984, 1984 OECD Report 101

3.2.2.6. 1984-1986, Unitary Taxation 102

3.2.2.7. 1987, 1987 OECD Thin Capitalization 103

3.2.2.8. 1992, 1992 Model 103

3.2.2.9. 1992-1993, The Task Force Reports 104

3.2.2.10. 1992-1997, OECD Transfer Pricing Guidelines 105

3.2.2.11. 1997-2009 109

3.3. Article 9 of the OECD Model 111

3.3.1. General 111

3.3.2. Interpretation of Article 9 112

3.3.2.1. General 112

3.3.2.2. The Vienna Convention on the Law of Treaties 113

3.3.2.2.1. General 113

3.3.2.2.2. Primary Means of Interpretation 115

3.3.2.2.3. Supplementary Means of Interpretation 119

3.3.2.2.4. Multilingual Treaties 121

3.3.2.3. The OECD Commentaries 122

3.3.2.3.1. General 122

3.3.2.3.2. Legal Status 123

3.3.2.3.3. Static or Dynamic Interpretation 128

3.3.2.4. Domestic Legislation 131

3.3.2.4.1. General 131

3.3.2.4.2 Autonomous or Domestic Law Interpretation 132

3.3.2.4.3. Domestic Law of the Source State or of the State Applying the Treaty 137

3.3.2.4.4. Domestic Tax Law or Other Law 141

3.3.2.4.5 Static or Dynamic Interpretation 141

3.3.2.5.Foreign Court Decisions 143

3.3.3. The Purpose of Article 9 145

3.3.3.1.General 146

3.3.3.2.Economic Double Taxation 148

3.3.3.3.Transfer Pricing Adjustments 149

3.3.3.4.Attribution of Income Adjustments 151

3.3.3.5.Transactional Adjustments 151

3.3.3.5.1. General 152

3.3.3.5.2. Thin Capitalization 161

3.3.3.5.3. CWI Standards 166

3.3.3.5.4. Business Restructurings 169

3.3.4. Relationship between Article 9 and other Articles of the OECD Model 177

3.3.4.1.General 177

3.3.4.2.Article 10 and Article 21 183

3.3.4.3.Article 11（6） and Article 12（4） 184

3.3.5. Relationship between Article 9（1） and Domestic Tax Law 190

3.3.5.1.Does Article 9（1） Broaden the Right to Tax under Domestic Law? 190

3.3.5.2.Does Article 9（1） Restrict the Right to Tax under Domestic Law? 193

3.3.5.2.1. General 193

3.3.5.2.2. Allocation Norm 195

3.3.5.2.3. Personal Scope 199

3.3.6. Legal Conditions of Article 9（1） 203

3.3.6.1.Subjective Scope 203

3.3.6.1.1. General 203

3.3.6.1.2. Enterprise 203

3.3.6.1.3. Resident 205

3.3.6.2.Control 213

3.3.6.2.1. General 213

3.3.6.2.2. Autonomous or Domestic Law Interpretation 213

3.3.6.2.3. Control Requirement 215

3.3.6.2.4. Concept of Control 216

3.3.6.2.5. Direct/Indirect and Vertical/Horizontal Relations 221

3.3.6.3. Objective Scope 222

3.3.6.3.1. General 222

3.3.6.3.2. Unilateral and Bilateral Transactions 226

3.3.6.3.3. Formal Requirements 227

3.3.6.3.4. Acts and Omissions 230

3.3.6.3.5. Direct/Indirect 233

3.3.6.4. Conditions 235

3.3.6.5. Allocation Norm 236

3.3.6.6. Income Reduction 237

3.3.6.7. Causality 239

3.3.7.Legal Consequences of Article 9 240

3.3.7.1. Primary Adjustment 240

3.3.7.2. Corresponding Adjustment 241

3.3.7.3. Secondary Adjustment 244

3.4. The OECD Transfer Pricing Guidelines 246

Chapter 4 Other International Law 249

4.1. United Nations 250

4.2. European Union 252

4.2.1. Primary Legislation 253

4.2.1.1.General 253

4.2.1.2.Fundamental Freedoms 253

4.2.1.2.1. General 253

4.2.1.2.2. Primary Adjustment 257

4.2.1.2.3. Corresponding Adjustment 272

4.2.1.2.4. Secondary Adjustment 275

4.2.1.3.State Aid 275

4.2.2. Secondary Legislation 276

4.2.3. Joint Transfer Pricing Forum 282

4.3.World Trade Organization 284

4.3.1. General 284

4.3.2. Arm’s Length Principle 284

4.4.Customary International Law 287

4.4.1. General 287

4.4.2. Arm’s Length Principle 288

Part Ⅲ The Concept of the Arm’s Length Principle 291

Chapter 5 Introduction 293

Chapter 6 U.S.Tax Law 295

6.1. General 295

6.2. Controlled Transaction 297

6.3. Reference Transaction 298

6.4. Valuation 302

Chapter 7 Discourse: German Tax Law 303

7.1. General 303

7.2. Controlled Transactions 307

7.3. Reference Transactions 307

7.4. Valuation 311

Chapter 8 Article 9（1） of the OECD Model 313

8.1. General 313

8.2. Controlled Transactions 313

8.3. Reference Transactions 314

8.4. Valuation 316

Part Ⅳ General Arm’s Length Rules 319

Chapter 9 Recognition of Controlled Transactions 321

9.1. U.S.Tax Law 321

9.1.1. General 321

9.1.2. Economies of Integration 326

9.1.3. Realistic Alternatives 329

9.2. The OECD Guidelines 332

9.2.1. General 332

9.2.2. Economies of Integration 334

9.2.3. Realistic Alternatives 341

Chapter 10 Aggregated and Separate Arm’s Length Tests 343

10.1. Aggregated Arm’s Length Tests 343

10.1.1. U.S.Tax Law 343

10.1.2. The OECD Guidelines 348

10.1.3. Discourse: German Tax Law 354

10.2. Separate Arm’s Length Tests 357

10.2.1. U.S.Tax Law 357

10.2.2. The OECD Guidelines 360

Chapter 11 Set-Off 365

11.1.U.S.Tax Law 366

11.2.The OECD Guidelines 367

Chapter 12 Multiple Year Analyses 375

12.1.U.S.Tax Law 375

12.1.1. General 375

12.1.2. Losses 377

12.1.3. Dynamic or Static Arm’s Length Tests 378

12.1.4. Prospective or Retrospective Arm’s Length Tests 379

12.2.The OECD Guidelines 379

12.2.1. General 379

12.2.2. Losses 382

12.2.3. Dynamic or Static Arm’s Length Tests 384

12.2.4. Prospective or Retrospective Arm’s Length Tests 388

Chapter 13 The Comparability Requirement 393

13.1.The Comparability Standard 393

13.1.1. U.S.Tax Law 393

13.1.2. The OECD Guidelines 396

13.2.Internal and External Reference Transactions 397

13.3.Comparability Factors 397

13.3.1. The Property or Services 398

13.3.2. The Functional Analysis 399

13.3.3. The Functions 400

13.3.4. Risks 403

13.3.4.1. General 403

13.3.4.2. Risk Allocation 407

13.3.4.2.1.U.S.Tax Law 407

13.3.4.2.2.The OECD Guidelines 411

13.3.5. Assets 417

13.3.6. Contractual Terms 418

13.3.6.1. General 418

13.3.6.2. Recognition of Contractual Terms 419

13.3.6.2.1.U.S.Tax Law 419

13.3.6.2.2.The OECD Guidelines 421

13.3.6.3. Volume 423

13.3.6.4. Long-term Contracts 426

13.3.7. Economic Circumstances 428

13.3.7.1. General 428

13.3.7.2. Geographic Market Differences 428

13.3.7.3. Location Savings 434

13.3.7.4. Market Form 438

13.3.7.5. Bargaining Position 440

13.3.8.Business Strategies 442

13.4. Irregular Transactions 446

Chapter 14 Legislative Restrictions 449

14.1. U.S.Tax Law 449

14.2. The OECD Guidelines 454

Chapter 15 Arm’s Length Range 459

15.1. U.S.Tax Law 459

15.2. Discourse: German Tax Law 462

15.3. The OECD Guidelines 472

Part Ⅴ The Special Arm’s Length Rules 475

Chapter 16 Services 477

16.1. General 477

16.2. The Definition of Services 478

16.2.1.General 478

16.2.1.1.U.S.Tax Law 478

16.2.1.2.The OECD Guidelines 479

16.2.2.The Activity Test 480

16.2.2.1.U.S.Tax Law 480

16.2.2.2.The OECD Guidelines 481

16.2.3.The Benefit Test 484

16.2.3.1.General 485

16.2.3.1.1.U.S.Tax Law 485

16.2.3.1.2.The OECD Guidelines 487

16.2.3.2.Shareholder Activities 488

16.2.3.2.1.U.S.Tax Law 488

16.2.3.2.2.The OECD Guidelines 495

16.2.3.3.Duplicative Activities 499

16.2.3.3.1. U.S.Tax Law 499

16.2.3.3.2.The OECD Guidelines 500

16.2.3.4.Indirect Benefit 501

16.2.3.4.1.U.S.Tax Law 501

16.2.3.4.2.The OECD Guidelines 502

16.2.3.5.Passive Association 503

16.2.3.5.1. U.S.Tax Law 503

16.2.3.5.2.The OECD Guidelines 506

16.3.Payment Form 509

16.3.1.U.S.Tax Law 509

16.3.1.1. Direct/Indirect Payment 509

16.3.1.2. Contingent Payment 512

16.3.2.The OECD Guidelines 514

16.3.2.1. Direct/Indirect Payment 514

16.3.2.2. Contingent Payment 521

16.4.Valuation 521

16.4.1.U.S.Tax Law 521

16.4.1.1. General 521

16.4.1.2. Arm’s Length Price or Cost-Only Price 524

16.4.2.The OECD Guidelines 527

16.4.2.1. General 527

16.4.2.2. Arm’s Length Price or Cost-Only Price 529

Chapter 17 Cost Sharing 537

17.1.General 537

17.2.The Relationship between the General Arm’s Length Rules and the Cost Sharing Rules 540

17.2.1. U.S.Tax Law 540

17.2.2. The OECD Guidelines 541

17.3.The Definition of Cost Sharing 542

17.3.1. U.S.Tax Law 542

17.3.2. The OECD Guidelines 545

17.4.The Participants 546

17.4.1. U.S.Tax Law 546

17.4.2. The OECD Guidelines 547

17.5.Cost Contributions 548

17.5.1. U.S.Tax Law 548

17.5.1.1. General 548

17.5.1.2. Costs 548

17.5.1.3. Methodology 551

17.5.2. The OECD Guidelines 552

17.5.2.1. General 552

17.5.2.2. Costs 552

17.5.2.3. Methodology 554

17.6.Buy-In Payments 555

17.6.1. U.S.Tax Law 555

17.6.1.1. General 555

17.6.1.2. PCT 557

17.6.1.2.1.General 557

17.6.1.2.2.Platform Contributions 558

17.6.1.2.3.Terms of a PCT 564

17.6.1.3.Supplementary Guidance on Transfer Pricing Methods 566

17.6.1.3.1.General 566

17.6.1.3.2.Discount Rates 568

17.6.1.3.3.Realistic Alternatives 570

17.6.1.3.4.Investor Model 572

17.6.1.4.Transfer Pricing Methods 576

17.6.1.4.1.General 576

17.6.1.4.2.Comparable Uncontrolled Transaction Method 576

17.6.1.4.3.Income Method 577

17.6.1.4.4.Acquisition Price Method 582

17.6.1.4.5.Market Capitalization Method 583

17.6.1.4.6.Residual Profit Split Method 584

17.6.1.4.7.Unspecified Methods 586

17.6.2. The OECD Guidelines 586

17.7.Changes in Participation 586

17.7.1. U.S.Tax Law 586

17.7.2. The OECD Guidelines 587

17.8.Adjustments 587

17.8.1. U.S.Tax Law 587

17.8.1.1. Transfer Pricing Adjustments 587

17.8.1.2. Transactional Adjustments 589

17.8.1.3. Periodic Adjustments 589

17.8.2. The OECD Guidelines 591

17.8.2.1. Transfer Pricing Adjustments 591

17.8.2.2. Transactional Adjustments 591

Chapter 18 Intangibles 593

18.1.General 593

18.2.Defition of Intangibles 596

18.2.1. General 596

18.2.2. U.S.Tax Law 596

18.2.2.1. General 596

18.2.2.2. Application of the Definition 601

18.2.3. Discourse: German Tax Law 610

18.2.4. The OECD Guidelines 615

18.2.4.1. General 615

18.2.4.2. Application of the Definition 619

18.3.Ownership of Intangibles 624

18.3.1. General 624

18.3.2. U.S.Tax Law 625

18.3.3. The OECD Guidelines 629

18.4.Joint Development of Intangibles 631

18.4.1. General 631

18.4.2. U.S.Tax Law 632

18.4.3. OECD Guidelines 641

18.5.Valuation 643

18.5.1. U.S.Tax Law 644

18.5.1.1.Special Arm’s Length Rules 644

18.5.1.2.Transfer Pricing Methods 645

18.5.1.2.1.Introduction 645

18.5.1.2.2.Comparable Uncontrolled Transaction Method 649

18.5.1.2.3.Comparable Profits Method 651

18.5.1.2.4.Profit Split Method 656

18.5.1.2.5.Unspecified Methods 658

18.5.2. Discourse: German Tax Law 662

18.5.3. The OECD Guidelines 666

18.5.3.1.Special Arm’s Length Rules 666

18.5.3.2.Transfer Pricing Methods 667

18.5.3.2.1. Specified Methods 667

18.5.3.2.2.Unspecified Methods 670

18.6.Periodic Adjustment 674

18.6.1. General 674

18.6.2. U.S.Tax Law 675

18.6.3. Discourse: German Tax Law 684

18.6.4. The OECD Guidelines 689

Part Ⅵ Transfer Pricing Methods 695

Chapter 19 General 697

19.1.Introduction to the Transfer Pricing Methods 697

19.2.Transfer Pricing Methods in Existing Law 701

19.2.1. U.S.Tax Law 701

19.2.2. The OECD Guidelines 701

19.3.Selection of Transfer Pricing Method 701

19.3.1. U.S.Tax Law 702

19.3.2. The OECD Guidelines 708

Chapter 20 Transfer Pricing Methods 713

20.1.Comparable Uncontrolled Price Method 713

20.1.1. Introduction 713

20.1.2. Comparability 714

20.1.3. Adjustments 715

20.1.4. Information 716

20.2.Resale Price Method 720

20.2.1. Introduction 720

20.2.2. Comparability 721

20.2.3. Adjustments 725

20.2.4. Information 726

20.3.Cost Plus Method 726

20.3.1. Introduction 726

20.3.2. Comparability 727

20.3.3. Adjustments 734

20.3.4. Information 735

20.4.CPM/TNMM 735

20.4.1. Introduction 735

20.4.2. Tested Party 739

20.4.3. Net Profits 739

20.4.4. Profit Level Indicators 740

20.4.4.1. Return on Operating Assets 741

20.4.4.2. Operating Margin 744

20.4.4.3. Berry Ratio 745

20.4.4.4. Net Profit Mark-Up 746

20.4.5. Comparability 747

20.4.6. Adjustments 748

20.4.6.1. Accounting Adjustments 749

20.4.6.2. Asset Intensity 749

20.4.7. Information 751

20.5.Profit Split Method 753

20.5.1. Introduction 753

20.5.2. Combined Net Profits 756

20.5.3. Allocation Methods 758

20.5.3.1. General 758

20.5.3.2. Residual Profit Split 759

20.5.3.3. Contribution Method 763

20.5.3.4. Comparable Profit Split 765

Part Ⅶ Conclusion 767

Chapter 21 Summary and Discussion 769

21.1. The Legal Basis for the Arm’s Length Principle 769

21.2. The Content of the Arm’s Length Principle 771

21.2.1.De lege lata 771

21.2.1.1. Controlled Transactions 772

21.2.1.2. Reference Transactions 773

21.2.1.3. Valuation 775

21.2.1.4. The Special Arm’s Length Rules 776

21.2.1.5. Summary 778

21.2.2.Problems de lege lata 778

21.2.2.1. Legally Oriented Problems 779

21.2.2.2. Economically Oriented Problems 780

21.2.2.2.1.Economies of Integration 781

21.2.2.2.2.Empirical Data 783

21.2.2.2.3.Quality of Functions 783

21.2.2.2.4.The Relativity of Arm’s Length Prices 784

21.2.2.2.5.Information Asymmetry 785

21.2.2.2.6.Tax Planning 786

21.2.3. De lege ferenda 787

21.2.3.1. General 787

21.2.3.2. Legally Oriented Problems 790

21.2.3.3. Economically Oriented Problems 793

Bibliography 799

Table of Cases 839

Table of Official Reports 853

Table of Statutes 861

Index 873