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The A – Brand Value contribution to a brand by the licensee – solution proposal

The A – Brand Value contribution to a brand by the licensee – solution proposal. Markus Volkmann Federal Central Tax Office / Federal Audit Department OECD Transfer Pricing Case Studies Workshop San Jose , 31 March – 4 April 2014. Problem. Well known brand

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The A – Brand Value contribution to a brand by the licensee – solution proposal

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  1. The A – BrandValue contribution to a brand by the licensee – solution proposal Markus Volkmann Federal Central Tax Office / FederalAudit Department OECD Transfer Pricing Case Studies WorkshopSan Jose, 31 March – 4 April 2014

  2. Problem • Well known brand • Value contribution of a licensee • Does it effect in the royalty rate?

  3. Question What do you think about the auditor’s proposal? Which royalty rate could be at arm’s length?

  4. CUP – an appropriate method • Strong comparability standards • Not be met for intangibles • Special feature: adding a value to the brand name • Neither database nor the literature offers a solution for this. • Usually licensees do not contribute to the brand name

  5. How to create a successful brand • Brands are created by communication of the brand content • Strategy and implementation are imperative for the success • Communication alone can’t create a brand. • Responsibility for the brand-relevant content

  6. More information • Branding analysis • Who is responsible for the brand content? • How is the effect of the brand on sales? • Is there a value for the group? • Information for the company available? • If the value is explained, the question of the amount remains.

  7. Market segment • Where is the trademark used? • Customer oriented (“B to C”): Apple, Coke • Business oriented (“B to B”): “A” brand • B to B: • Brand has lesser impact on business decisions • Very specialized industry sector

  8. Products of A Germany • “A brand stands for high quality and safety standards.” • Guarantees for this with its finished products • For the products of the A-Group proportioanately

  9. Proposed Solution • A royalty for using the brand is at arm’s length. • But, the Licensee provides a significant contribution and should therefore pay a lower royalty. • Royalty of 1% may be an initial fee. • Lower the fee in the coming years to a lower (basic) level.

  10. Thank you for your notes and suggestions. Thank you for your attention. Markus Volkmann Federal Central Tax Office, Bonn + 49 (0) 172 2436049 Markus.Volkmann@bzst.bund.de

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