Intangible assets – what to keep in mind in intra group settlements?

The first-ever scent trademark has been registered in the European Union. Moreover, as much as 79% of consumers prefer to buy products with “eco” trademarks. The appearance of the Apple store is registered as a trademark. A patent claim must be written in the form of a single sentence, and this rule applies worldwide…

All these facts refer to intangible assets. When considering intangible assets, we should also keep in mind transfer pricing issues.

Transactions involving intangible assets are currently being more and more frequently audited by tax authorities in Poland. According to tax audit statistics published by the Polish Ministry of Finance, in 2022 a total of 366 transfer pricing audits were carried out. According to the published data, tax authorities especially often controlled transactions connected with intangible, including in particular verification of the amount and direction of royalties. As a result of the audits carried out in 2022 , the amount of overestimated income amounted to almost 1,106,5 million PLN.

Therefore it is essential to consider the transfer pricing aspects in transactions involving intangible assets. Proper implementation will allow you to adequately protect your business in terms of potential risks on TP grounds. From my experience, I know that transfer pricing can cause serious problems for taxpayers. The connection between intangible assets and transfer pricing is also not obvious, yet TP can hide there as well.

In accordance with Polish accounting regulations, intangible assets are defined as:

  • property rights acquired by an entity, that are included in fixed assets,
  • capable of economic use,
  • with an expected period of economic usefulness longer than one year and
  • intended to be used for the purposes of the entity[1].

When it comes to the intangible assets in transfer pricing, it should be pointed out that Polish transfer pricing regulations does not define the concept of intangible assets. Instead, the OECD guidelines come forward and indicate how the term “intangible” should be understood. According to the OECD guidelines “intangible” means something that is not a physical or financial asset, instead it is something what can be owned or controlled for use in commercial activities. Moreover, what use or transfer would be rewarded if it took place in a transaction between independent entities.

What can be considered as intangible asset?

Intangible assets include:

  • licenses, concessions, copyrights and similar rights,
  • know-how (the totality of knowledge useful for carrying out a particular type of business and gained by experience in a particular field),
  • Rights to inventions, patents, designs and models, trademarks,
  • goodwill,
  • costs of completed development works,
  • other…

Transfer pricing issues are crucial at every stage of a transaction, including transactions involving the mentioned intangible assets.

Stage of a transaction

Stage I – Concept – settlement planning

Stage II – Implementation of settlements

Stage III – Go-live phase

Stage I is connected with establishing the concept and planning how the settlements should be conducted. With Stage II comes the implementation of the settlements, and the Stage III brings the implementation of the previously mentioned assumptions.

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The crucial question is how to settle with a related contractor . First of all, it is necessary to identify all planned settlements, prepare implementable proposals / scenarios for settling intangible assets with recommendations from a transfer pricing perspective, and conduct benchmarking analyses to determine the market level of remuneration. On the other hand, in the situation of having a contract for transfer of intangible assets, review the provisions of the contract regarding the scope of transfer and valuation of intangible assets from the perspective of TP.

Practice shows that fulfilling transfer pricing obligations for transactions involving intangible assets raises many difficulties among taxpayers. The reason may be the complexity and unclarity of the subject. In intra-group transactions, among the most popular types of transactions related to intangible assets are trademark licensing transactions. Tax authorities do not bypass these transactions during audits, what is more, those transactions are being increasingly reviewed and analysed in depth.

To sum up, transactions with intangible assets raise many questions. Undoubtedly, the very stage of identifying what can be classified as intangible assets and what not necessarily, is problematic. After that, the situation becomes more complicated. From the perspective of TP, it is important to prepare a valuable benchmarking analysis, which will be based on market data with the best possible comparability. In my point of view, the preparation of a DEMPE analysis is a good idea. DEMPE analysis investigates the functions, assets and risks associated with the development, enhancement, maintenance, protection and use of intangibles. The analysis presents more comprehensive overview and shows how to avoid unwanted overestimations by the tax authorities, which, as I indicated above, can amount to significant values.


[1] Accounting Act of September 29th, 1994 (Journal of Laws of 2023, item 120, as amended).