12 Dec. '17
Last week we provided a second opinion to an accounting firm in respect of the envisaged transfer of valuable intangibles of one of its clients, a MNE, to a Luxembourg company. The MNE manufactured and distributed products. The value of the products was not determined by the technical features of the products, but rather by the brand name and exposure. The MNE wanted to differentiate itself from its competitors through the development of brand names with great value, by implementing a carefully developed and expensive marketing strategy. The brand names are owned by X BV in The Netherlands. The development, maintenance and execution of a worldwide marketing strategy are the main value drivers of the MNE, performed by 275 employees at X BV’s Netherlands head office. The value of the brand names resulted in a high consumer price for the products. X BV’s head office also provides for central services for the group affiliates (e.g. human resource management, legal, tax). The products are manufactured by affiliates under contract manufacturing arrangements with X BV. They are distributed by affiliates who purchase them from X BV. After having allocated an arm’s length remuneration to the contract manufacturers and distributors the profits derived by X BV are considered to be the remuneration for the intangibles, marketing activities and central services of X BV.
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