Companies engaging in a project to develop intangible assets may need to spread the risk by performing the research jointly with other companies. Research and development activities do not always result in a marketable product and one company may not be in a position to perform the research on its own. Research may therefore be performed jointly, under a contract between two companies or by forming a jointly owned entity or consortium. Companies might also pool their resources to pay for shared services.

Where one or more companies in the same group, situated in different countries, enter a joint cost contribution arrangement for performing research or sharing services, there could be an opportunity to shift taxable profits between countries by adjusting the amount of contributions made to the joint project.

One of the companies might enjoy most of the benefits of the intangible assets resulting from the research even though the other company makes the most contributions to the arrangement, thereby transferring profit potential from one country to another. Many countries have therefore introduced rules under their transfer pricing legislation to deal with this type of arrangement.

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