Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Acknowledgements
- The Golden Bridge: analytical table of cases by topics in the OECD Guidelines
- Table of Cases
- Abbreviations
- Part I The context of transfer pricing disputes
- 1 Introduction
- 2 The transfer pricing problem
- Part II North America and Europe
- Part III Asia Pacific
- Part IV BRIC Countries
- Part V South America, Middle East and Africa
- Part VI Conclusion
- Index
- References
2 - The transfer pricing problem
from Part I - The context of transfer pricing disputes
Published online by Cambridge University Press: 05 November 2014
Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- List of contributors
- Acknowledgements
- The Golden Bridge: analytical table of cases by topics in the OECD Guidelines
- Table of Cases
- Abbreviations
- Part I The context of transfer pricing disputes
- 1 Introduction
- 2 The transfer pricing problem
- Part II North America and Europe
- Part III Asia Pacific
- Part IV BRIC Countries
- Part V South America, Middle East and Africa
- Part VI Conclusion
- Index
- References
Summary
Introduction
Imagine the following scenario. A French multinational (FM) manufactures cars in France and owns a valuable intangible: the specific industry know-how in marketing its cars. FM is willing to expand its business to country X, where intellectual property rights are not properly enforced. In order to minimise the transaction costs in safeguarding the rights, FM decides to create a wholly-owned subsidiary in X which will be in charge of selling its vehicles (FM Sub.), instead of supplying its intangible know-how to an independent reseller in country X (Indep Co.). This strategy allows FM to expand its business to country X, minimising the risk of compromising its intangible via internalisation of these transactions costs.
This example shows that FM is able to replace the FM–Indep Co. relationship with the FM–FM Sub. model. More generally, this way, multinational enterprises (MNEs) are able to replace the arm's length market (the external market) for products and services with an internal market of inputs.
- Type
- Chapter
- Information
- Resolving Transfer Pricing DisputesA Global Analysis, pp. 10 - 24Publisher: Cambridge University PressPrint publication year: 2012
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