Reflections on the Aim of the DEMPE Concept in Contemporary Transfer Pricing: Delineation, Non-Recognition and Valuation

Abstract

Within the contemporary transfer pricing debate, one may identify a question that is no less elusive than it is central, yet relatively unaddressed: can the DEMPE model be used for delineation and non-recognition purposes? In other words, whether the DEMPE model comes into play only after having delineated the transaction and passed the commercial rationality test or whether it can be relied upon for the purpose of delineating and recognizing a transaction. The question is crucial because the answer directly determines the extent to which DEMPE can be used in an intercompany transaction involving intangibles. Addressing the proposed research question also raises issues about the changes that have been recently incorporated into the OECD Guidelines. The present study is structured in the following manner: section 1. introduces the topic setting the ground for the discussion, section 2. provides some preliminary considerations before approaching the research question, section 3. highlights the evolution of the non-recognition, section 4. focuses on the primary question to be answered as the focal point of the study, and section 5. provides a conclusion.