Transfer Pricing Considerations For Intangible Property

Intangible assets are mostly seen as the main driver of value creation for a majority of businesses. Intangibles are now a key profit driver due to technological changes and the digital revolution. Companies need to be aware of the intangible assets or property they possess, how to manage them and consider the tax implications.

In this article, we will briefly consider transfer pricing matters in relation to intangible assets. 

What are intangible assets?

To put it simply, intangibles are valuable assets that cannot be seen or touched and have no physical substance. Intellectual property (IP) is a key category of intangibles, in which the creator’s ownership rights are protected by law. As a result, they can earn economic recognition or returns for this IP.

For Section 19B of the Singapore Income Tax Act, the qualifying IPRs are:

1. Patents;

2. Copyrights;

3. Trademarks;

4. Registered designs;

5. Geographical indications;

6. Lay-out designs of an integrated circuit;

7. Trade secrets or information with commercial value; and

8. Plant varieties.

Who owns the intangible assets?

Identifying the owner of intangible assets is a crucial consideration in analysing such assets. It may be challenging to identify the correct owner, especially when numerous related parties use and rely on the same intangible assets.

To ensure that profits from the exploitation of intangibles are allocated based on each party’s relative contribution, the OECD has issued new guidelines on ownership. The OECD refers to these as DEMPE functions.

The DEMPE functions

Group entities assuming the relevant risks and performing the relevant functions regarding the Development, Enhancement, Maintenance, Protection and Exploitation of the intangibles should be reimbursed for their contributions.

Therefore, the OECD Guidelines indicate that the legal owner of the intangible is likely to have full rights to any profits derived from the use of that intangible if the legal owner is economically responsible for all functions, assets and risks with respect to DEMPE functions.

Valuing intangible assets for transfer pricing purposes

When it comes to valuing intangible assets, the OECD transfer pricing guidelines provide guidance on the accurate price that should be charged in the transfer of intangible assets.

Outside of transfer pricing rules, numerous valuation methodologies are used to value various intangible assets, and these valuation methodologies are gradually merging with transfer pricing rules. All assets have an intrinsic value, and it is to be measured no matter which set of rules is being followed.

According to the OECD transfer pricing guidelines, the most useful transfer pricing method in matters involving transfers of one or more intangibles would be valuation techniques, the Comparable Uncontrolled Price (CUP) method, and the transactional profit split method.


Multinational groups must consider intangibles from a business, operational, and tax perspective. To ensure compliance with current practices/regulations, organisations should consistently monitor their intangible assets from a transfer pricing and tax perspective. It is also essential to examine certain considerations when valuing intangible assets amid COVID-19.

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*The above represents our opinions and views and does not reflect the position of any entities mentioned.