Recommended Citation

Jeffrey M. Kadet, Expansion of the Profit-Split Method: The Wave of the Future, 77 Tax Notes Int'l 1183 (2015), https://digitalcommons.law.uw.edu/faculty-articles/1045

Authors

Jeffrey M. Kadet, University of Washington School of LawFollow

Expansion of the Profit-Split Method: The Wave of the Future

Keywords

BEPS, Transfer Pricing, TP, International Taxation

Document Type

Article

Abstract

Recognizing the reality that multinational corporations are centrally managed and not groups of entities that operate independently of one another, the OECD base erosion and profit-shifting project is considering expanded use of the profit-split method. This article provides background on why expanded use of the profit-split method is sorely needed. In particular, resource-constrained tax authorities in many countries are unable to administer or intelligently analyze and contest transfer pricing results presented by multinational groups. Most importantly, this article suggests a simplified profit-split approach using set concrete and objective allocation keys for commonly used business models that should be welcomed by multinational groups and tax authorities alike.