Signed Intercompany Agreement Made Easy

Signed intercompany agreement

welcome to deloitte's debrief legal webcast series a webcast today is from our commercial law serious and his title ruskin intercompany agreements on intangibles in the web's environment from a legal perspective my name is dulce Miranda and I had the IP and I pila low global practice of Deloitte legal I have the pleasure of hosting today's webcast I have three speakers with me today bridges milky Maria Vidal and Matthias via 30 is a partner with the Lord German transfer pricing service line I leave the local transfer pricing team in Munich Maria is a senior associate of the IP and I t regulatory and compliance legal area in deloitte Madrid and Matthias is a senior associate specializing in IE and information and communications technology law in results you may access our buyers at the top left hand corner of the screen for before I introduce the agenda for today's webcast I like to take a moment to highlight some of the features of firstly all users are only and only mode if you have 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program and now let me give you an overview of the topics we will discuss in a step in step with the globalization of the economy worldwide intergroup trade has increased significantly as a direct consequence transfer pricing rules have become more and more important especially after the publication last October of the package of measures on base erosion and profit safety in the so-called becks bebs action plan action eight looks at transfer pricing issues related to intangibles this means a location of the profits generated by such assets may contribute to base erosion and profit 15 our speakers today will explain how this new scenario requires a clear characterization of transactions between related companies that the agreements need to be consistent with the conduct of the parties the legal ownership alone does not necessarily generator right to the return generated by an intangible and are therefore it is important to have clearly define the different functions performed by the companies within the group risk-taking and assets provided so the agenda today will include mainly the following topics identification of intangibles with special reference to pattern straight secrets copyright and trademarks our speakers today will also refer to legal ownership vis-a-vis economic own economic ownership so they will refer to the so-called temple functions and their relevance in relation to profit allocation they will also make a reference to key closest on different agreements on intangibles that an R&B or license agreement and then we will come to a conclusion after which we will answer to your to your questions and now I would like I will hand over to our first speaker today Richard please thank you to Action thank you very much so as a short introduction you know our audience today and it's a mix of yeah people from the from a tax department as well as all of the legal department for that reason I would like to give you a short overview about this action point number eight about intangibles as part of the peps project this blazer Rosen profit shifting project of the OECD and so the background is you know with stories like Amazon Google starbucks you all know them and there is a feeling that multinationals shifting profits into low-tax jurisdictions yeah and and if we look in the area of cran surprising we returned surprising people have a mantra that profits should be allocated acids are located functions are performed and risks assumed and let us focus on assets so profit should be allocated where assets are allocated now so if you think about assets so tangible assets like a plant or property you cannot move to a low text jurisdiction or it's very difficult to move to a low tax jurisdiction however if you speak about intangibles the feeling is that it's quite easy to move intangibles from a high-tech jurisdiction into a low-tax jurisdictions based on that you could claim that more profits should be allocated to the slow text action yeah and that is that is the topic VOD tries to attack with this action point number eight to avoid that you use intangibles for profit referring purposes yeah and so if we look into the details action point number eight is saying and the otd has to develop rules that prevent base erosion and profit shifting by moving intangibles among groups members and this will involve four sub bullet points and in this call due to time limits we can only deal with the first two bullet points and we will have to leave the last two bullet points open so the last two bullet points are about what we call hard to value intangibles and cost sharing arrangements but on what we will focus today is that voz de defined abroad and we say climate clear definition of intangibles so that's the first bullet point and then when the second bullet point is after we identified the intangibles Tran surprising regulations are now in place which should ensure that profits with respect to antenna bills are text in a jurisdiction their value edits with respect to that intangible is carried out yeah and we will focus on these two or two topics now yeah so if you move to the next slide I will now go to be first you know it's a bully point so about this identification of intangibles and and what the OECD did is they and developed a specific definition of intangibles Fortran surprising purposes so you know we are very proud that we now have our own definition of intelligence and and I put the definition on the left side of a of a slide so based on the OECD guidance an intangible is something which is not a physical asset or a financial asset I think there's a straightforward and then the second bullet point is saying it is something which is capable of being owned or controlled for use in commercial activities and let us know you know for us the very important point so we can only call something an intangible if we are able to own it or to least control it yeah so that is that is the definition which is important for us and then the last point more less for completeness the intentional has to have a kind of value otherwise you know it wouldn't be value creating and wouldn't be regarded as an intangible so and yeah so the transfer would be common thread between third pies and and the LCD based on this definition you know the OECD it gives some examples about what are intangibles and what are not intangibles and you have to understand the context why for us trans arising people and that was how they in lighting yeah and because we had a long discussion in particular with development developing countries that fake claimed something like location specific advantages but they called market premiums that all these kind of things which are provided by a country that these things should be seen as an intangible and there should be in a kind of additional remuneration and if you look at the right hand side what is not an intangible Geo CD made very clear that for example something like group synergies another intangible because you cannot control it and you cannot own it yeah it started be related to you know business activities which you can own a you can control but not these energy czar such or another example is market specific advantages so to give you an example if consumer in China have a higher willingness to pay for product air for example luxury cars then consumers that they in Europe yes there is a kind of specific advantage in the market and China however there is nothing you can own or control for that reason that the davantage it they are but it's not an intangible yeah and the last example is assembled work for us so an example of force I think it has a value because otherwise you would have to recreate it we create this work force however you cannot own or control it because your employees can always terminate their contracts and move on now on the other hand something things like patterns no hold and know-how and create secrets trademarks these are from a transfer pricing perspectives are intangibles because like patterns you can legally owned them so you were just as a patent you are the owner of a patent or for example this great egrets you can control it yeah because you are able to decide who gets access to that information and who don't get access to that information for the reason that is also an intangible now the interesting point is so we have depth definition from from a transfer pricing purpose or transfer pricing perspective now coming to the legal perspective which is gaining more and more importance in the area of transfer pricing because going forward you know you will have to hand over all your intercompany legal agreements together with your transfer present documentation towards the Texas authorities and the legal agreements of a starting point for any transfer pricing and others analysis and so we have to be very careful that these kind of definitions we have known for transfer pricing purposes our lines are reflected law in invalidity agreements and Maria with that I would like to hand over to you so that you will you know guide us a little bit true whether from a legal perspective but it's a little bit more complex and because we talk about specific or different types of intangibles with because you know different and a level of protection okay yeah of course thank you Richard some of these intangibles are user to identify this is the case for example of patents and trademarks chapter six of the OECD guidelines defines a patent as a legal instrument that runs an exclusive right to its owner to use the given invention for a limited period of time within a specific geography and it also is specifies that a patent may relate to a physical object or to a process obviously this is this doesn't intend to be a legal definition the world internet Intellectual Property Organization defines patent as an exclusive right granted for any mention that consists mainly on our product or a process an invention that provides a new way of doing something that offers a new technical solution to a problem it is important to highlight that the assistance of this exclusive right depends on its previous registration and that it's a trivet a territorial right what means that a company only owns exclusive right in such jurisdictions in which the pattern has been granted finally another issue that must be taking into consideration is that this right is limited in time it has a duration of 20 years from the date the application was filed and it cannot be extended other important intangibles that are commonly involved in intercompany transactions and trademarks chapter 6 of osed guidelines defines a trademark as unique name 15 ball logo or pictures that the owner may use to the extinguished is products and services from those of other entities I'll on the same line the world intellectual property organization conceives a trademark as a sign capable of distinguishing the woods and services of one enterprise from those of other enterprises it is important to take into account that trade masks are ruled by the speciality and territoriality principles a trademark gives an exclusive right but only related to those words or services for which the trademark has been granted there for two related companies could not agree to license a trademark or a patent and to pay and collect royalties related to the use of Santa intangibles in territories in which there is no registration and therefore no protection this agreement will not be answered length and we also go against competent loss on what concerns the duration of the rotation of trademark it plots for a period of ten years but in this case it can be renew it indefinitely as explained the next slide the identification of the legal owner of a patent or trademark can be relatively easy on the trademark and patent offices we can find a lot of information information related to the identification of the legal owner the duration of the right and other information for example licenses granted on such intangibles author important in tangibles are copyright and trade secrets Matthias will now give us information about these two Thank You Maria I will indeed now guide you through principles related to copyright and trade secrets when identifying intangibles patents and trademarks will very easily come on the radar well do not forget however that text to these also copyright and trade secrets they exist and these two intangibles are very often underestimated companies are often unaware of the existence of these rights and also a lot of the value of these rights let's take for example copyrights I'm sure you all know copyright it is the legal term used to describe the rights that creators have over their literary and artistic works this description they make you think that only books music movies and paintings qualify as copyright protected works but this is not the case words are to be understood very broadly and also include computer programs technical drawings databases manuals describing the use of machinery business presentations and so on so your company probably owns a lot of copyrights and we often see that companies are not aware of the fact that they actually owned so many copyrights which they also could exploit whether it is internally or externally it is true that not every single text or presentation enjoys copyright protection and as you know works must be original which means that it must reflect the author's personality we will not dive deeper into this concept which could be the subject of a separate presentation but an important to point out is the requirement for works to be expressed an ID or a method of operation for example will not be protected as long as this is not written down or in any other way materialized some things to keep in mind when you identify in tangibles I need or not copyright protected but they could have ever qualify a straight sequence trade secret is a very broad term it is most often understood as a valuable piece of information for an enterprise that is treated as confidential and that gives that enterprise a competitive advantage it is possible that a trade secret is also copyright protected as long as the criteria thread secrets permit in case you need to identify intangibles and you wonder whether trade secrets or at play make sure to check for the following element first one seems very obvious but the disease will of course an essential element a trade secret is secret it must be in the sense that it is not generally known or accessible to persons which normally deal with the kind of information in question the next to that the information must have commercial value because it a secret and thirdly and this is a very important effect information must have mistaken to reasonable steps to keep it secret next slide please just for the purpose of completeness I'll go quickly cool this slide you all know that copyright and trade secrets are not registered in official registers and this make the identification of these intangibles a bit more challenging links to the identification it is also less clear whether an intangible actually enjoys copyright protection or trade secret protection because they did not go through a registration process where legal conditions are checked and then this only before court that their existence may be selling stone and that companies can actually be sure about the qualification of their rights nevertheless in some countries it is possible to voluntarily registered copyrights and as trade secrets or in the essence kept secret there are of course no public registers but it is however possible to register or to store secrets and non-public registers such as the Benelux aleppo and such a registration will not create any intellectual property rights but it will serve as a first proof of ownership and also the date of creation in case of discussions so these voluntarily registrations can be very very useful which is very often in practice that we rely on these four voluntarily registrations next slide please it is because of this lack of public registers that the identification of the legal owner of intangibles can be difficult and that's why we whenever we will consult to identify the legal owner that we verify the entire chain of titles and this actually means that I mean IP due diligence is performed imagine that a company wants to license and inhale developed software program to a member of the group we often see that the company that paid for the software development presumes to be the owner of the right vested and the software mostly copyrights this is always the case and in order to be sure we go back to the very beginning to the creation of IP first we must know who developed the software author of the copyright protected work as we look at contractual relationship between the authors for example his employer or Commissioner such employer or Commissioner may then have entered into another agreement within the signing or licensee and does not longer owned all right tested and relevant intellectual property right the investigation of all these steps out of the creation that are crucial we often especially for software development that the rights owned by independent default developers have not been transferred if then intra-group parties enter into life in the greenest the license or may possibly not own all the rights better than the software and does not have the cable the capacity to enter into such an interim license agreement and we will further in the presentation go into the details of the clauses of intercompany agreements next slide please okay thank you my tias this probably brings us to the first polling question first polling question of the day and the question is do you rely on external lawyers to draft intercompany agreement to cope with the legal complexity and the options that you have our years of course no bien intercompany agreements we don't need external lodges the can do it with our in-house legal department the third option is being in the company agreements with a need external lawyers as we do not perform a legal review as long as the tax department please comfortable the fourth option we only hire seven our lawyers when problems arise in relation to intercompany agreements already signed and the last one no we don't have budget for this but we would see the added value added and while we're waiting for the results to come in let me ask a question to reach her which are speaking about legal complexities in intercompany IP agreement could you give us a practical example based on your experience yeah thanks to happy to do so so am you know it was a tax audit en Germany and factual background you know the fishermen taxpayer a company and he did he acted as a kind of license manufacturer so he licensed in IP and he produced with that I p.m. you know certain products which he sold into the market and then very important because that was the point of discussion he had a significant after sales service business and because all the products he sold him to be feared and you know fave I needed maintenance service afterwards which was a very profitable business and and the discussion point we had in the audit was that the German licensee he paves a license rate of defining villager agreement on its full revenue and now the German auditor made the argument that based on the legal agreement there was no need for such kind of payment because he in the pre dibs the free license pays a stipulated infidelity agreement only relates to the products but don't include revenue made with the aftermarket services yeah and though we have a problem that because the license base was not clearly defined we had this you know first discussion point with the auditor now you know it got involved because our line of defense was and then to say look you know we have to interpret the agreement and given the IPA which was licensed it is clear that we relies on space has to cover the product revenue as well as the service revenue because also for the service business you need access to VIP now the problem here was that again in the license agreement which was very lean yeah mvi p licensed was not clearly specified though the auditor made the argument of the reviewing the agreement that he couldn't identify IP which was required for service business and which is license that part of that license business for that reason he sees you know no reason why a license payment should be made for the revenue and roofing services yeah and as always you know I'm transfer pricing in the end we were able to set service he ordered us all you know v.v morris and met in the middle of the bargaining negotiations yeah but the client finally faced a significant double taxation and you know in my view if it would have a fully fledged license agreement which is clear about what is license which is clear above the license maze we wouldn't have such kind of discussions so that that's just for illustration purposes you know one of these cases we see in practice thank you reach a very very interesting conclusions i fully agree with you and now now we have the results of this polling question very interesting because apparently no one relies on external lawyers to draft intercompany agreements on one relies on and lawyers specialized in ni p just a few rely on external lawyers whether when programs right at twenty percent of our attendees I said that as far as the tax department feels comfortable they do not perform a legal review and sixty-seven almost sixty eight percent and do this work with their in-house legal department well now the presenters will explain some key issues related to the allocation of probably profits associated to eat angels and key issues related to winter company agreements on own intangibles so please return yeah thank you very much and you know just a comment to this oil question and so you know em I think unfold you will see here change yeah I'm not saying that intercompany agreement you know have to be done with external lawyers I mean if a legal department in-house can cover that great but I think and that will you know will get obvious over the next year's we will have a new focus on legal agreement in the past often because it's in the company never will go to court you didn't even have some written legal agreements but Texas oh it is more more focus on that so I think here we are you know I think we'll we'll see a change going forward so am yep into the next bullet point of action point number eight so just to understand where we stand yeah so we talked about the identification of intangibles next point is via OCD thought about how to ensure that profits relating to intangibles are allocated to the restrictions we have a value added with respect to the intended modes are carried out yeah and if we go to the next slide here's what they developed so if I developed a kind of five or six step approach otherwise this would be true symbol yeah so the first step is you have to identify the legal owner with respect to VI p.m. yeah which is quite important and sometimes can be how they unexpected because it could be that you know for example someone developed VIP however someone adds registered VIP within the group just due to the reason that the group has an approach that have a kind of centralized IP management and for that reason all the IP is registered in the name of a specifically entity even though his contributions to VIP or small as zero yeah so first step is identify the legal owner second step you have to identify and the parties with respect to the central risk on assets who contributed to that I p.m. yeah and in particular vlcd developed and the so-called damper approach so you have to analyze who developed who enhanced who maintains and we exploit and the intangibles yeah and as a third step you have then to match how that fits with legal owner or a legal ownership there are so going back to my example if you know it's it's a point of concern for transfer pricing purposes if someone if a specific group company performed all the damper functions however the legal owner of VIP is a separate group company yeah because then we damper functions are not aligned with the legal ownership of your APM and based on that you have to identify in the fourth step we control transactions the meaning if a group company performed all the damper functions however another entity is now the legal owner you have to think about how that could happen was it that the entity who developed VIP sold it to the company which registered via pin in its own name or was it that you know you think this was a kind of contract are on the arrangement and so that is the first step you have based on your analysis about nuclear ownership and functions performed you have to come up with see specific intercompany transactions which brings things together then the first step is you have to determine our find arm's length pricing or market prices for you are identified control transactions yeah or and that is step number six if it appears to be completely artificial what we see here and where you would say look what happened here has no economic substance it doesn't make sense at all then you wouldn't be asked to determine market prices for your identified transactions however what would be then happening would be that you re characterized the transactions and actually use a different sexual background for transfer pricing taxation purposes compare what the parties legally agreed on now so that is better see five or six step approach vlcd developed to ensure there very creation is taxable Varitek that happens and to avoid a situation where we just focus on media ownership and making the argument because the patents are just that in the name of XYZ you should be entitled to all the prophets and now I would like to hand over to Matthias to explain a little bit how this yeah has to be reflected or how this has to learn to be taking account as part of a giver agreements yes indeed Richard thank you well when exactly will companies we confronted with intercompany agreements which he treat situations first one this is for example the case whenever different group entities or planning an intra group section in order to reorganize or to exploit their IP and in such case you will need to draft new intercompany agreements now that the new OECD guidelines are available you also may want to review existing agreements in order to make sure that they're compliant with these rules and thirdly in case business structures change over time existing agreements may need to be modified in order to reflect the new situation as your muzzle and have reached indicated the new rules required for intercompany agreements to be at arm's length and the specificities of the agreement must be similar to those adding an agreement between non related companies so that there is no conflict of interest there are some typical clauses that are very often not foreseen in intercompany agreements just because of the fact that related companies or more relax if it comes to securing their rights via via each other and this should of course not be the case if you want an agreement to qualify at arm's length a lot of principle to be respected on the new measures become applicable is that it will be required for profits to be reported where the economic activities that generate them or carries out and their value is created this principle must also be reflected in agreements the intercompany agreements must make clear their economic activities generating profits or carried out and where value is created so how to implement these principles intercompany creams and what should you focus on whenever drafting reviewing or modifying intercompany agreements next slide please and here we see the document aligning transfer pricing outcomes with very creation which deals directions add up to 10 reference can be made a burger of one point 46 and there they've stated that in transactions between independent enterprises the divergence of interests between the parties ensures firstly that contractual terms are concluded that reflect the interest of both of the parties secondly that the party will ordinarily seek to hold each other to the terms of the contract and thoroughly that contractual terms will be ignored or modified after the fact generally only if it is in the interest of both parties so these elements are according to the OECD essential indicates of agreements between non related entities and this tablet is this to be applied an intercompany agreement as well well how do we implement these rules and guidelines concretely into intercompany agreements there are some general principles to look after and there are some principles that are specific for the kind of intentional that is concerned next slide please in general it is important to think of a following make sure the agreement clearly describes the damping functions who will do what in case of an investigation by the tech support is it will make things much more easy as clear agreements or put into place and of course very important if these greens or lived up to in reality in green said third parties you will want to avoid discussions about the scope of the agreement and about the intangible the tangible the dog for example subject of a license agreement therefore make sure that an intercompany agreement the intangibles are defined in the same way which is mostly in a limited way as you would do it in agreements with third parties also think of payment clothes and I will not talk about the amount to be paid the think of the surrounding rights and obligations at these will also indicate better'n agreement is at arm's length or not an intercompany agreement you may probably not provide anything about interests to be paid in case of late payment of royalties and in agreement involving third parties I'm sure that you would perceive such a provision well this is one of the examples of clothes that should be included in a drug company agreement as well the same goes for the adjustment of a time of royalty rates an intercompany green this may not be foreseen at an agreement between non related entities the review of royalty rate of return third time will be provided in the agreement so here again make sure that it included in intercompany agreements as well sir magician votes this is also something that we typically see that differ from intercompany agreements to third-party agreements what we advise here is to make sure that company gram agreements provide for balanced termination rights for both parties and typically for third-party agreements with royalties or to be paid based on sales or other criteria the parties agree o Muhammad right this is it applause the Lisp only not foreseen in intercompany agreements next to these generals losses are also difficult to the world relevance and maria will now briefly touch whole clothes that are the essence and patent and trademark agreements in addition to the general provisions that I just explained thanks like this absolutely Matty I thank you one of the main intercompany agreements is the one referred to the development of new technology that afterwards will be protected by a patent or through trade secret I am referring to the so-called research and development agreement in this important agreement most of the damping functions should we find a place there for a good and complete air and the agreement needs to determine the following which party takes the decision of the investigations which company performs the investigations who is providing assets human resources running laboratories which party takes the risks who will be the owner of the results who will pay for the registration and maintenance of the intellectual property rights which party takes the decisions on where to protect the intellectual property rights or who will be entitled to exploit the IP rights it is also important to determine who will own any future improvement on detecting technology as Ritter has already explained these functions will determine the economic ownership and therefore which party or parties are entitled to perceive economic compensation next slide please another important agreement is the one that allows one party to use the patterns or trademarks owned by the other party this is the license agreement as explained in the next slide a complete license agreement apart from the typical closest such as identification of the parties of the license intangibles should clearly identify type of license that is being granted if it is explosive or not that the ritory allah scope of the license price on arm's length basis not only related to the amount but to the way to fix such compensation what could mean the establishment of minimum reality's different percentages depending on the amount of sales obligation to use the license intangible with our differences young between the intangible license and the service provided by licensure on a clear revelation on determination related for example to the compensation for the wood will obtain by the trademark due to the use stone by the licensee the investments of giving publicity to new trademarking anime market in the next slide Matthias will provide us with information related to important clauses in copyright and trade secret agreements Thank You Maria indeed what we very often seen in the company agreement about copyrights is the decisions all copyrights are assigned to well the identification of the concerns rights as all copyrights is not valid in most European countries it is necessary to describe in detail whether the assignee or licensee will be entitled to reproduce the works to modify the work to distribute the work etc so remember to clearly define the right also in intercompany agreements and don't accept a general and short agreement just because it is another company agreement for trade secrets as well there are some specific clauses that are relevant and one of the most important is to oblige the other contract party whether it is a related entity or not to maintain the confidential character of the trade secret as we've seen at the beginning it is the obligation of the owner of the trade secret to take reasonable steps to make sure that the secret remains secret so not providing strict confidentiality obligation for example for the employees of a related company to which trade secrets or license could jeopardize the future existence of the trade secret and this on the intangible itself next likely we want to make this all a bit clearer with a basic example company a B and C are part of the same group company a performance air and D functions related to the development of invention it takes the decisions and takes care of funding company b appears as the owner of a mention in the official patent register and pays for the maintenance fees and receive the bulk of returns and benefits the ribbon from disputation of the intangibles in its capacity of legal owner company c exploits and commercialize the invention this is a very typical situation which we often see in practice the question now is whether this situation is complying with web guidance on intangibles next slide please in order to answer this question we firstly have to identify the problems that may arise from the situation that we have explained who is the legal owner of the patent company b who is the subject that is exploiting the patent rights company c need of a license from b to c to legitimate exploitation who is taking care of the damn perfect functions company a and c mainly is profit a location aligned with the economy activity that produces the profits now once the problem has been identified analyzed is time to search for solutions that will have to realize the situation even typically owners to enforce consistency and reflect reality of value creation internal reorganization to not centralize all the intangibles in a soul entity when it does not reflect reality writes assignments intercompany license agreements and annotation of Licensing official patent and trademark register so right now back to usually Thank You Maria very interesting York example and well this brings us to the second polling question of the day and you'll see in the next slide the question is did you already experienced that an intercompany agreement resulted in transfer pricing risk and the different options are no yes because the actual conduct value creation of the related parties was not in line with intercompany agreement yes because in the company of women was incomplete unless too much room for interpretation to the benefit of the tax authorities yes because intercompany agreement was too narrow which made it very difficult to follow in practice yes because the agreement had to be changed with with him its initial term result in a legal compensation claims and there's because of reasons and while the audience meets their answers and we wait for the results to come in let me ask question to Matthias Matthias persecute you could give us an example of a situation where an intercompany agreement had to be assessed as it comes to the arm's length principle I'm just sure doujin well we we recently were consulted by company having its European heritage and Belgium and that company owns several pants and they wanted to license all these buttons to their Indian subsidiary well this would see jury was partially owned by minority shareholders and as of Medicaid the interest of the minority shareholders or being looked after by an independent director and it was this independent director that has to prove that the agreement that to which the parties entered into was indeed at arm's length so in this specific case it was not text authorities who were asking for information but it was an independent director and our review of the license agreement which we didn't draft in the beginning and made clear that many articles were not close typical closes were not provided and it it was then very difficult to prove that it was indeed an agreement that was at arm's length so what we can avoid here is to engage your legal team from the beginning of contract negotiations and that can prevent that later on it is to be concluded that an agreement actually in reality shows to be not to be at arms linked so i hope this this example explain extended bed where do chain yeah thank you matias very clear and now we have the results as you can see it forty five percent of our attendees did not have any any risk related to intercompany women's though a 25-percent did have these problems because that because a concrete reason that the conduct or the value creation of the parties was not in line with the intercompany agreement and in the day in ten percent had problems in four different cases but because it left too much to too much room for interpretation because it had to be changed where resulted in legal compensation claims and for other reasons unknown had problems because the women was to not wrong so very interesting conclusions and perhaps maria will now explain the conclusions of today's webcast thank you three as a conclusion I would like to sum up some some tips that that it probably will be very useful in the in the assessment of intangibles in a bit context so IQ I think we can highlight the importance of the identification of the owners and this identification must respond to the reality of value creation on the other hand a intangibles valuation variables to consider legal ownership objective and territorial scopes duration and development status in in market conditions also elaborated a solid contact wall structure based on market conditions sign complete intercompany license agreements and also and finally make the correct annotations of those license in the correspondent official patent and trademark registers so on that will be all from from my side thank you very much for your attention and if you have any any questions we will be happy to answer or please do not hesitate to contact us Thank You Maria and thank you Richard Matthias this brings us to the end of our today discussion but we now have some time to respond to some questions from our audience I see here one question that is for Richard which are someone in the audience is asking are saying I don't understand why closes in intergroup agreement should be comparable with closest using third-party agreements if there is no impact on profits and that's profit shifting what is the concern from a test point of view yeah thanks yeah sound good good question m and also you know complicated question right so to give you a background so we have a you know we have a discussion whether the arm thanks principal is saying that is the basis how we allocate profits and that's it and that is you know what what's aggression is small as implying so why do we care if you know if everything is just depending on the prize won you know whether the arms thanks principal is a little bit broader and arms length conditions do not only rely but it's not only relevant with respect to the prize but they also with respect to other terms and conditions and so to give you four German viewer I mean I think the German advisers the German industry would over say it's only about pricing however fishermen tax authorities have a different view on and to give you an example so for example in our national law it is stipulated that you have to conclude intercompany agreements in advance in a clear way and you have to carry them out as you agreed in the agreement if not there would be a full profit adjustment based on its merits because it didn't fulfill these formal requirements yeah and for that reason I think it is it is prudent to ensure that all the arm you know all the conditions within the legal agreement can be defended as being armed flings because in the end there is always the concern that at some point in time they may have an impact on profits so to give you an example and we had no two court cases about an intercompany financing well no collateral was asked for because it is in the company and as soon as you have to write off the agreement and there's no collateral you have a profit effect yeah and the channel tax authorities try to deny this profit effect and making the argument not asking for collateral if not alarm thanks behavior even though the pricing of V of the intercompany finance arrangement could be okay yeah for that reason and given that you know transfer pricing is getting more and more scrutinized in tax audits I believe you know so don't don't over engineer I mean there is also clear that we talked about agreements which in a lot of cases never will go to court however so will be reviewed by the tax authorities and you can imagine if tax authorities see a transaction covering millions of euros and v-league agreement is just a one or two pager I mean that that you know that will trigger more questions as if you as a tax auditor have impression wow that is you know fully fledged leave your woman's party thoughts a party thought about what is important and so on they have agreed on the basic terms and conditions I mean that gives you just a much better starting point and in the text audit and for that reason I think it's love the investment of time and money to put up such kind of agreements so I hope that answered a little bit you know that very good and I'd also you know complex question Thank You of which I fully agree with you I think that intercompany agreements will will play a very important role in the next few years well that unfortunately is all we have time for return Marianne mattia thank you special thank you thank you and special thanks to all of you 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welcome to deloitte's debrief legal webcast series a webcast today is from our commercial law serious I'm entitled ruskin intercompany agreements on intangibles in the best environment from a legal perspective my name is Don semi Rhonda and I hate the IP and I pila low global practice of Deloitte legal I have the pleasure of still