Objectives of the course:
- The student has knowledge of the legal and economic backgrounds of the arm’s length principle and he/she is able to evaluate the advantages and disadvantages of this principle with the help of the provided literature. This means that he/she is also able to place this principle in the context of developments in society in the field of tax planning and that he/she can offer an alternative to the principle that takes account of these developments.
- The student has insight into the organization of a multinational company and into the relevant changes in these organizations (i.e. the development of global value chains and the centralization of functions). A central element of this knowledge concerns the insight into the most important business models of a multinational company. The student must be able to evaluate the development of these organizations with the help of the provided literature.
- The student has an in-depth knowledge of the relevant law that gives substance to the arm’s length principle and he/she is able to apply this knowledge to practical cases derived from practice. These case studies not only include the ‘standard’ situations in the main business models, but also specific capita selecta (i.e. intangibles and cost distribution agreements and cross-border business restructurings).
- The student has knowledge of some formal-legal aspects of transfer pricing.
- The student has detailed knowledge of the importance of transfer pricing for the management control of a multinational company and of the influence of the new international standards (such as country-by-country reporting) on this control. With this knowledge, the student is able to analyse and evaluate the interaction between management control and tax obligations.
- The student can independently conduct a scientifically based research in the field of transfer pricing.
- The student can report clearly and concisely in writing about the research.
- The student can give an insightful presentation about the research and debate it.
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These objectives of the course are elaborated in the following topics as they will be discussed in the eight lectures.
1. Transfer pricing: an introduction
- Defining the problem and looking ahead to the different lectures.
- The arm’s length principle: basic principle, relevant sources of law, definition of affiliated bodies, international discussion on the principle (BEPS, state aid procedures).
2. Application of the arm’s length principle
- The basic elements of the arm’s length principle: i.e. comparability analysis and functional analysis.
- The transfer pricing methods: Comparable Uncontrolled Price method (CUP), Resale price method, Cost plus method, Transactional net margin method (TNMM), Profit split method.
3. Application of the arm’s length principle ( continuation of lecture 2)
- The transfer pricing methods: Comparable Uncontrolled Price method (CUP), Resale price method, Cost plus method, Transactional net margin method (TNMM), Profit split method.
- Application of the transfer pricing methods in ‘standard situations’
4. Critical discussion of the arm’s length principle and introduction to some formal-legal aspects of transfer pricing
- Critical comparison of the arm’s length principle with alternative methods
- Documentation requirements (including developments in country-by-country reporting)
- Safe harbours
5. ‘Inside a multinational company’
- The organization of a multinational company
- Global value chains
- Business models
- The centralization of functions: the spectrum from a complete local structure to a principal structure
6. Application of the arm’s length principle: some capita selecta
- Intangibles and cost contribution agreements (CCA’s)
- Cross-border business restructuring
7. Some formal-legal aspects of transfer pricing
- Advance Pricing Agreements
- Transfer pricing corrections
- Disputes about transfer pricing
8. Tax governance of a multinational company
- Transfer pricing and management control
- The implementation of country-by-country reporting
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