Abstract

This paper investigates the effect of e-commerce and international taxation on transfer pricing of intangible assets. In the 21st century, the fast development of e-commerce era and service companies' paradigms in proportion to the bricks-and mortar business activities pushes most tax authorities to continue the attack of transfer pricing practices of multinational companies (MNCs) by issuing new or modified transfer pricing regulations to meet these challenges. First, general understanding of the nature of intangible assets and the new trends in transfer pricing are discussed. Second, MNCs' strategies of ownership are analyzed. Third, the appropriate transfer pricing methods are investigated. Finally, it is suggested that in designing an effective transfer pricing system, MNCs should consider tax and non-tax strategies to manage global earnings; the driving motivation behind the system; the environmental conditions; incorporate short-run active features within the system; potential income tax consequences; the selection of the best transfer pricing method; and practical solutions to avoid tax audits.

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