Intangible Property Valuations

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Insights of intangible property valuation under TP provisions

For several reasons, intangible Property valuation is almost always more challenging as per the transfer pricing regulations than that of physical assets. As far as intellectual property is con-cerned, intangible assets are unique in that they cannot be precisely compared to anything else. Because it is recognized that comparing can be difficult to identify and that intangible assets are, well, intangible, active markets, when they exist, are consequently less conclusive in determining value. Since value mostly rests on prediction accuracy, it may be quite chal-lenging to determine, especially for fresh, untested IPs. Therefore, there are few impartial measures available for assessing intangible assets. Since intangible assets consist of intangible property in particular, valuation techniques and models for accurately valuing intangibles are becoming more and more crucial in the ever-growing share of all corporate assets. We at En-terslice offer various services related to intangible property valuation as per the transfer pric-ing regulations, including expert consultation, documentation process, legal compliance as per your country, assistance in tax planning, and other compliance related to your business.

What can be meant by Intangible property valuation?

The intangible property valuation can be determined by first identifying the intangible assets in finding the intellectual assets and services such as patents, trademarks, know-how, soft-ware, research and development, marketing, management, or technical support, which can be a part of the controlled intangible property valuation as per the transfer pricing regulations is the first stage. It is necessary to specify the characteristics, rights, and legal safeguards of eve-ry intangible and service, along with the advantages and disadvantages that come with them. The relationships and synergies between various intangibles and services, as well as how they add to the multinational enterprises' entire value chain, must also be taken into account.

Intangible Property Valuation as a Business Asset?

Any company or entity that has been formed can be differentiated into two types, i.e. one is the tangible asset like the infrastructure, machinery, labour, etc. In contrast, the second one is the intangible asset. The intangible assets can be designs, ideas, brands, etc., which previously could not be there. With the change in time, this trend has changed and given more weightage to innovative ideas, new software, and new inventions in all enterprise sectors. Now, compa-nies are rolling on intangible assets and digging out various ways to secure and use them. So, it can be well said that intellectual property is one of the market's trendy business assets.

Benefits of Intangible property valuation under transfer pricing

Multinational firms with operations in many tax countries may profit from intangible property valuation under transfer pricing regulations in several ways. A key component of risk management and tax compliance is transfer pricing, which is the costing of products, services, and intangible assets moved inside a company, especially across international boundaries. Conducting intangible property valuation using transfer pricing regulations has the following advantages

Legal compliance and regulations

Transfer pricing regulations are in place in a lot of nations to make sure that transactions between related entities can be based on arm's length (at the same price as they would be between unrelated parties). We will assist you in intangible property valuation for your organization, which can exhibit consistency with these guidelines, limiting the risk of punishments, reviews, and debates with charge specialists.

Optimization of taxes

We will also assist you in proper intangible property valuation as per the transfer pricing regulations, which permits your organization to process their assessment liabilities by guaranteeing that benefits are designated suitably among various wards where the intangible property is used. This can assist in lessening the general expense with troubling by exploiting special assessment systems, tax reductions, or allowances accessible in specific wards.

Minimises risk

Tax authorities may pay close attention to transfer pricing, particularly those involving intellectual property transactions. We will help you in the intangible property valuation as per transfer pricing regulation and recording the reason for move estimating choices, and organizations can moderate the transfer pricing of difficulties or audits by charge specialists, as they can exhibit a very much contemplated way to deal with evaluating their intercompany transactions.

Increase transparency

Performing the intangible property valuation as per the terms of transfer pricing regulations can increase the transparency and also the accountability of intercompany transactions. It also gives you a better understanding of the importance of your intangible assets to your investors, stakeholders, and tax authorities, and also for the profit allocation across different jurisdictions.

Enhance market confidence

By providing stakeholders with assurance regarding the company's financial position and the value related to the intangible assets, accurate intangible property valuation can increase stakeholders' confidence, including investors, lenders, and business partners. This can be especially significant in exchanges, including consolidations, acquisitions, or funding exercises.

Checklist for the intangible property valuation

Some essentials should be fulfilled before taking intangible property valuation as per the transfer pricing regulations. In this way, an agenda is justified before going in for the intangible property evaluation. We have prepared a certain checklist for your reference before going for the intangible property valuation, as suggested below

  • Any identifiable description of the intellectual property that has been owned by you has to be appropriate
  • Intellectual property used by you to be gathered from the other business, and you have taken the permission of the owner of the intellectual property.
  • The owner of the existing intellectual property assets of the company or employees or consultant pr the business partner of the company
  • It has to be evidentiary that the existence of intangible assets in the form of intellectual property as a contract of intellectual property as patents, designs, trademarks, or licenses to the intellectual property.
  • Legal enforceability and transferability of the intellectual property
  • It has to be distinct from the other assets of the business
  • The intellectual property has been sold without selling out the other company assets.
  • Intellectual property has a definite period of existence.
  • There could be no third-party claim of the intellectual property from the same business.

Compliances under the intangible property valuation under TP provisions

The Indian tax authorities, being one of the signatories to OECD in 2001, had brought esti-mate arrangements into the Indian Income Tax Act. The stipulations are made following OECD rules yet are not expressly referenced under the demonstration. Later on, India felt the need to safeguard its tax base in light of the worldwide consensus that fraudulent transfer pricing transactions are reducing the tax base. To find, regardless of whether an exchange es-timation is deceitful, a manageable distance rule is utilized to find, on the off chance that the exchange between the related endeavours is sensible or not. After the reception of the ex-change estimating component, India became the main focus of legal disputes and law of TP-related matters. The term "intangibles" is defined within section 92B of the Income Tax Act by the Finance Act 2012. This explanatory provision outlines 12 items that fall under the cat-egory of "intangible property" and specifies exclusions. The OECD has further categorized these items into two main groups: "trade intangibles" and "marketing intangibles". Trade in-tangibles encompass the expertise involved in products and services developed through re-search and development.

Scope of the intangible property values as per TP provisions

The extent of intangible property valuation as per the transfer pricing regulations inside move estimating is wide and envelops different angles connected with the valuation of immaterial resources for charge consistency purposes in intercompany transactions. Here is the scope of the intangible property valuation as the provision of the transfer pricing mentioned below for your reference by our experts

Recognition of the intangible asset

The very first step is to distinguish and identify the various kinds of protected intangible property valuation engaged with intercompany exchanges. This might incorporate licenses, brand names, copyrights, proprietary advantages, innovation expertise, and different types of theoretical resources.

Intangible property valuation method

There are also different methods for intangible property valuation, as stated above for your reference, which include the market-based method, cost based-based method, and the income-based method to guide your business, which depends on the jurisdiction and nature of the intellectual property.

Value of the brand

The brand valuation includes the intangible property valuation of the general worth of a brand, including its standing, client dedication, market situating, and generosity. The premium that customers are willing to pay for branded goods or services is reflected in brand value.

Dispute resolution principles

In situations where transfer pricing regulations problems emerge in calculating intangible property valuation, multinational enterprises might use different question goals components, like mutual agreement procedures (MAP) under charge deals or mediation, to determine clashes with charge specialists regarding the valuation of protected innovation.

Requirement of documents

Multinational enterprises are required to maintain detailed documents to support their transfer pricing situation, including the intangible property valuation. The documents always play a crucial role in any legal compliance with the transfer pricing regulations and in defending the transfer pricing in cases of disputes.

Methods of intangible property valuation under TP provisions

There are different methods for intangible property valuation as per the transfer pricing regulations for your intellectual property assets. All these methods have their advantages and disadvantages for intangible property valuation, and it is a bit complicated to find a method that is ideal and works in all situations. You need to decide which method suits your company. We at Enterslice will help you to understand the market intangible property valuation services and who can help you with how to get the most reliable valuation possible through the following was below for your reference

Market based method

Based on the intangible property valuation of the product based on its performance in the market, it is considered a good approach when the intangible property valuation is right. The intangible property valuation in the market gives a decent calculation of its worth. The issue with this technique is that it tends to be hard to track down distributed data on moves of immaterial property and freedoms, as they are frequently private. There aren't many transfers that are close enough to one another to be useful for comparison. No exchange is something similar.

Income- ased method

This method helps around the pay that intangible property valuation might produce from now on. The technique considers both future pay, which the right can create during its lifetime and the expenses of this. This method also considers the income and the data of the expenses relating to the intangible property valuation.

Cost based method

This method can be based on the cost required for the intangible property valuation for the cost to be recorded or develop a similar product or service for your intellectual property assets. This method never takes the current economic value of any of the intangible property assets or services. The costs that have been considered by this method are the labour, materials, research and development, and development of the prototype. Also, the test involved regulatory approval and certification, application, and registration granting for the intangible property.

Challenges in intangible property valuation under TP provisions

There can be challenges in intangible property valuation as per the transfer pricing regulations, which represent a few difficulties, including the absence of practically identical exchanges, the intricacy of elusive resources, quick mechanical changes, subjectivity in valuation, infor-mation impediments, deciding financial proprietorship, choosing fitting exchange evaluating techniques, arrangement with business system, documentation necessities. Multinational en-terprises play a proactive role related to compliance efforts; expertise in valuation techniques and careful analysis are necessary to address these issues. We will help you to overcome these challenges with the expert team of our intellectual property division for the intangible proper-ty valuation counted as identifying the intangible assets, comparable uncontrolled price of intangible property, also valuation technique, functional analysis as well and dispute resolu-tion mechanism.

Start with Enterslice to enjoy the intangible property valuation

We have already noticed that intellectual property has been playing a very significant role in the sustainability of the company or business. We follow various steps to calculate the intan-gible property valuation as per the transfer pricing regulations and will help you mitigate them, which involves negotiation in terms of the transaction to implement new IP protection measures or take legal action against the infringers. We at Enterslice can assist you in the in-tangible property valuation process to choose the right business transactions, paving a path for better insights. We give proper time for the intangible property valuation process with an ex-pert attorney in the field to endorse the best results.

Frequently Asked Questions

The value of the intangible property for intangible property valuation is valued based on subtracting a firm book value from its market value. The market constantly changes from time to time, and the value of the intangible changes.

In order to carry out intangible property valuation under transfer pricing, which in-volves intangibles, it is necessary to consider the identification of the specific intangi-ble assets and ownership of the intangible assets in multinational enterprises.

There are methods for calculating intangible property valuation as follows, i.e. the cost-based method, the income-based method, and last but not least, the market-based method.

The common challenges in dealing with the intangible property valuation under the transfer pricing present a few difficulties. These incorporate the absence of equivalent exchanges, fast mechanical headways influencing the worth of elusive resources, sub-jectivity in valuation approaches, and information limits concerning the monetary presentation of immaterial resources.

The documents that are required for assessing the intangible property valuations under the transfer pricing provisions for multinational enterprises This documentation ought to incorporate subtleties of the valuation systems utilized, presumptions made, exami-nations performed, and any applicable comparable considered.

The role of advance pricing agreements in intangible property valuations is to acquire assurance regarding the exchange valuing treatment of immaterial property exchanges. By arranging APAs with charge specialists, MNEs can lay out settled upon move valuing strategies and evaluating plans.

The arm’s length guideline expects that the valuing of exchanges between related par-ties (like those including elusive resources) reflects what might have been charged be-tween free elements under comparable conditions. Valuations of immaterial property should consequently be founded on equivalent market exchanges to conform to this guideline.

The economic conditions affect intangible property valuations. For example, market interest, contest, and mechanical progressions can fundamentally affect the worth of elusive resources. Businesses must regularly review and, if necessary, adjust their valu-ations to reflect the current market conditions for valuations to be responsive to such changes.

The DEMPE functions, which stand for the development, enhancement, maintenance, protection, and exploitation, are crucial in determining essentials for the valuation of different entities within multinational enterprises of the intangible property valuation to these functions and compensated under the intercompany transactions.

In addition to introducing new types of intangibles (such as data analytics, software, and digital platforms), digitalization and technological advancements have the poten-tial to significantly increase the value and lifespan of intangible assets. These elements of intangible property valuation moves toward can adjust to quick changes in innova-tion, market interest, and the serious scene.

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