Transfer Pricing & Business Restructurings: Intangibles, Synergies, and Shelters

34 Pages Posted: 3 Jun 2011 Last revised: 2 Dec 2019

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Andrew Shact

Boston University - School of Law

Date Written: June 3, 2011


Transfer pricing in business restructuring is attracting global attention. In the past two years two key policy-making groups have released three substantive documents on this topic. The Organization of Economic Cooperation and Development (OECD) issued two position statements while the Joint Committee on Taxation (JCT) issued one. While restructurings are a very common commercial practice, until recently it has been uncommon to apply transfer pricing criteria when examining them in detail.

Essentially, the OECD has overlooked that a unique and valuable intangible is created during the restructuring process. By not acknowledging that this intangible in the mix, the OECD fails to see the whole picture. The JCT has the same blind spot. Even though the JCT is far more focused on intangible assets, it too overlooks the restructuring’s intangible asset creating function. The critical point that both the OECD and JCT fail to understand is that a restructuring’s core activity is not asset movement; it is fundamentally changing enterprise decision-making.

As a result, when efforts are made to square real world business restructurings with the OECD’s abstractions of business restructurings, things do not “fit” well. Some of the most obvious problems are:

• Successful business restructurings are more about aligning decision-making processes throughout an MNE with its structure, than they are about structural change; the OECD is largely concerned with asset transfers and very little about changes in decision-making.

• Because of the need to critically examine decision-making the CEO frequently is directly involved in successfully restructurings; the OECD does not consider the involvement of the CEO in business restructurings.

• Over 70% of business restructurings fail to achieve performance objectives, and many actually damage productivity; the OECD largely ignores losses in a restructuring, focusing instead on restructuring gains.

• Business restructurings primarily seek performance-changing synergies; the OECD’s concern is with transfers of profit potential (that may include losses) embedded in assets transferred among related parties.

• Business restructurings invariably involve three or more entities, if not the entire MNE; the OECD only examines binary transactions between two related parties within the MNE.

Keywords: OECD, JCT, Transfer Pricing, Business Restructuring, Transfer Pricing Guidelines, Chapter IX, 482, Intangibles, Synergy, Tax Shelter, Arm's length price, Decisions

JEL Classification: K22, K29, K39

Suggested Citation

Ainsworth, Richard Thompson and Shact, Andrew, Transfer Pricing & Business Restructurings: Intangibles, Synergies, and Shelters (June 3, 2011). 63 Tax Notes International 341 (August 1, 2011), Boston Univ. School of Law, Law and Economics Research Paper No. 11-24, Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Andrew Shact

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

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