Classification of Cost Allocation Agreements

Abstract

Cost Allocation Agreements have begun to play an important role for MNEs in order to make intellectual property available to foreign subsidiaries. Cost Allocation Arrangements based on the pool-concept are a form of allocation financing. In the international context, different wordings for Cost Allocation Agreements (e.g., Cost Sharing Arrangements) are used. This paper is concerned with Cost Allocation Agreements in the area of R&D, which are based on the pool-concept. Cost Allocation Agreements are not based on specific national or international legal basis, but are the result of national transfer pricing guidelines and the OECD TPG. Due to the missing special provision and binding source of law of Cost Allocation Arrangements in Austria, this paper analyses Cost Allocation Arrangements in the field of R&D and its special questions by interpreting the regulations of civil law, tax law and treaty law and with it the arm's-length principle.