Editing Transfer pricing (section)

===Cost sharing===
Multi-component enterprises may find significant business advantage to sharing the costs of developing or acquiring certain assets, particularly intangible assets.  Detailed U.S. rules provide that members of a group may enter into a cost sharing agreement  (CSA) with respect to costs and benefits from the development of intangible assets.<ref>OECD Chapter VIII, [http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&rgn=div8&view=text&node=26:6.0.1.1.1.0.8.188&idno=26 26 CFR 1.482-7T].</ref>  OECD Guidelines provide more generalized suggestions to tax authorities for enforcement related to cost contribution agreements (CCAs) with respect to acquisition of various types of assets.<ref>OECD Guidelines 8.3.</ref>  Both sets of rules generally provide that costs should be allocated among members based on respective anticipated benefits.  Inter-member charges should then be made so that each member bears only its share of such allocated costs.  Since the allocations must inherently be made based on expectations of future events, the mechanism for allocation must provide for prospective adjustments where prior projections of events have proved incorrect.  However, both sets of rules generally prohibit applying hindsight in making allocations.<ref>Note that few countries besides the U.S. have formally adopted cost sharing rules, as of 2009.  The OECD Guidelines do not specifically require such rules, so adoption of the Guidelines may not constitute approval of cost sharing under the laws of some countries.</ref>

A key requirement to limit adjustments related to costs of developing intangible assets is that there must be a written agreement in place among the members.<ref>U.S. rules permit, in some cases, actions of members consistent with the principles of a CSA to be considered to constitute a CSA.</ref>  Tax rules may impose additional contractual, documentation, accounting, and reporting requirements on participants of a CSA or CCA, which vary by country.

Generally, under a CSA or CCA, each participating member must be entitled to use of some portion rights developed pursuant to the agreement without further payments.  Thus, a CCA participant should be entitled to use a process developed under the CCA without payment of royalties.  Ownership of the rights need not be transferred to the participants.  The division of rights is generally to be based on some observable measure, such as by geography.<ref>OECD Guidelines 8.9, 26 CFR 1.482-7T(b)(4).</ref>

Participants in CSAs and CCAs may contribute pre-existing assets or rights for use in the development of assets.  Such contribution may be referred to as a platform contribution.  Such contribution is generally considered a deemed payment by the contributing member, and is itself subject to transfer pricing rules or special CSA rules.<ref>OECD Guidelines 8.16, 8.17, 26 CFR 1.482-7T(c).</ref>

A key consideration in a CSA or CCA is what costs development or acquisition costs should be subject to the agreement.  This may be specified under the agreement, but is also subject to adjustment by tax authorities.<ref>OECD Guidelines 8.13-8.18, 1.482-7T(c).</ref>

In determining reasonably anticipated benefits, participants are forced to make projections of future events.  Such projections are inherently uncertain.  Further, there may exist uncertainty as to how such benefits should be measured.  One manner of determining such anticipated benefits is to project respective sales or gross margins of participants, measured in a common currency, or sales in units.<ref>OECD Guidelines 8.8, 8.9, 26 CFR 1.482-7T(e).</ref>

Both sets of rules recognize that participants may enter or leave a CSA or CCA.  Upon such events, the rules require that members make buy-in or buy-out payments.  Such payments may be required to represent the market value of the existing state of development, or may be computed under cost recovery or market capitalization models.<ref>OECD Guidelines 8.31-8.39, 26 CFR 1.482-7T(g).</ref>