Roberto H Castro recently published a fascinating note on a US Tax Court Decision on Valuing Intangible Assets for Transfer Pricing Purposes based on Amazon.com, Inc. and Subsidiaries vs. Commissioner, 148 T.C. 8 (March 23, 2017). It is worthwhile to read the article and the judgment which covers more than 200 pages.
Amazon entered into a cost sharing arrangement (CSA) with its Luxembourg subsidiary in 2005. Within this CSA, Amazon.com granted its Luxembourg subsidiary the right to use certain pre-existing intangible assets in Europe. This right includes the intangibles required to operate Amazon.com’s European website business.
The judgment describes in detail how Amazon operated and expanded its business in Europe. The focus of the decision is on:
- the useful life of intangible assets,
- the proper royalty rate,
- what compensation is includable when allocating costs and
- determining the buy-in value of intangible assets.
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