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The Economic Properties Of Intangible Assets

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TABLE OF CONTENTS Introduction 2 1. Challenges to the definition of the digital economy 4 1.1. The traditional accounting approach and its limits 4 1.2. The economic properties of intangible assets and their consequences 6 1.2.1 The main economic features of intangibles 6 1.2.2 Intangible assets and resource allocation 7 2. The OECD’s approach to taxing digital activities 9 2.1. The redefinition of the permanent establishment concept 9 2.2. The transfer pricing aspects of intangible assets 12 2.2.1 The limits of the arm’s length principle 12 2.2.2 The proposed revision of the transfer pricing regime for intangibles 13 2.2.3 Risks and capital associated with intangible assets 17 3. Proposals for further reform 19 3.1. Redefining the PE notion with closer attention to the nature of intangibles 19 3.1.1 The creation of a ‘virtual PE’ concept 20 3.1.2 Placing the ‘force of attraction principle’ at the centre of the PE definition 21 3.2. The taxation of MNEs on the basis of the ‘enterprise doctrine’ 22 Conclusion 26 Bibliography 28 Introduction The pace at which hardware, software and networks are developing allows considerable growth and value creation. The digitalisation of existing assets and the creation of new kinds of intangible assets are accompanied by an unprecedented diffusion of knowledge and increasing interconnectedness. The rapid technological progress which characterizes the digital economy has also led to emerging trends and new ways of ‘doing

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