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Kiyan Quoted in Law360 Tax Authority Transfer Pricing Article

29 May, 2019

Andersen Tax Managing Director Kevin Kiyan was recently quoted in a Law360 Tax Authority article titled, Old Transfer Pricing Notions of IP Don’t Suit New Biz Models (by Amy Lee Rosen and Molly Moses).

In the article, Kevin summarized key points of his presentation at the Transfer Pricing Symposium held at the University of San Diego Law School. He explained how conventional approaches to transfers of intangible property tend to oversimplify the reality of how profits are generated in real-world value chains, and especially in the context of emerging business models such as “multi-sided platforms.”

For example, conventional approaches define – and quantify – intangible property as a residual concept, effectively allocating all the profits remaining after accounting for tangible property and services. In the real world however, operating results are not due solely to intangibles, because results also reflect market conditions and market conditions fluctuate. Thus, quantifying intangible value as a residual concept tends to oversimply and more importantly, overstate the influence intangibles have on a given company’s operating results.

In addition, his presentation highlighted further limitations of conventional transfer pricing methods when applied to multi-sided platforms, defined as business models in which companies serve multiple constituencies and the constituencies directly interact with, and influence, each other. For example, in a ride-sharing app-based business, having more drivers leads to having more riders and vice versa. In this case, each constituency depends on having more of the other constituency, so that gaining critical mass of either one is a fundamental challenge that most companies fail at while some succeed. Quantifying the intangibles using a conventional approach (i.e., as a residual concept) in such cases therefore, risks overvaluing them because achieving critical mass is more often the result of activities (i.e., services) rather than intangibles.

Kevin Kiyan is a Managing Director in our US National Tax office and the firm’s Transfer Pricing leader. Kevin has over 31 years of professional experience and has led all major aspects of Transfer Pricing issues, including planning/feasibility analyses, IP migration/ restructuring, cost-sharing, Advanced Pricing Agreements (APAs), audit defense/ litigation and global transfer pricing documentation.

May 8, 2019

Law360 Tax Authority

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