California franchise tax board
For instance, this approach would create a different result where intangibles are used within the same company, as in the STARCO example, versus intangibles used in an activity organized within a separate corporation. california franchise tax board Free electronic tax filing. It points out that the difference in tax result is not unique to electronic commerce, but the rise of electronic commerce will make intracompany use of intangibles in different countries more likely. Compensation for services. Under both the contract service provider and independent service provider models, the TAG theorizes that the PE will receive fees only for providing services to other parts of the enterprise. california franchise tax board Ir-repeater. In order to determine the adequacy of fees the TAG suggests a typical transfer pricing analysis, where, for instance, the price might be determined based on the comparable uncontrolled price (CUP) method. Another alternative suggested, where a CUP is not available, is the cost-plus method. Ex. california franchise tax board Tax filing. 1 - TAG conclusionsThe TAG seems to conclude that minimal profits should be allocated to the PE in Example 1. This is because profit would be calculated almost entirely on the cost- plus basis. Profits attributable to the exploitation of assets would not be allocated to the PE because, under the contract service provider model these assets would remain under the control of the Head Office; while under the independent service provider model, the Head Office would have to be adequately compensated for the use of assets. In either case, the profits attributable to the exploitation of assets would accrue to the Head Office, not the PE. The TAG concludes "the application of the functional and factual analyses : would, in all likelihood, leave the permanent establishment with a quantum of profit that is insignificant relative to either the value of transactions processed through the permanent establishment or the arm's length cost of securing the use of the hardware and software required to ensure the continuous operation of the server without human intervention. An independent enterprise providing the same software and hardware to the permanent establishment would insist on an arm's length reward for the exploitation of both types of property. Under this fact pattern, the permanent establishment is only performing low-level automated functions that make up only a small proportion of the functions necessary to act as a full function retail outlet/distributor or as a full function service provider.
California franchise tax board
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