Transfer Pricing
MECOIS can accurately determine the transfer prices (compensation payments) that different organizational units may want to pay each other when collaboratively developing and sharing software source code.
If collaboration and sharing crosses a tax boundary, you are legally required to price the source code and pay for it. Otherwise, the tax authorities might suspect a profit shifting attempt.
The Hub and Spoke Model
MECOIS handles IP-flows from internal code consistently and models OECD transfer pricing options so you can focus on your business and let us take care of the legalese.
We suggest a hub and spoke model where one business unit acts as the hub for IP contributions and acquires payments from users and makes payments to contributors.
Note that if you are not crossing tax boundaries, these payments may be real or fictitious, i.e. for tracking purposes only. The central unit can theoretically switch on a per-project basis.
The system defines three roles: contributors (the basis for cost calculations), owners, and users (the basis for cost allocation). A single party can take on multiple roles within a project or collaboration.
Realize or amortize; use the costing method that works best for your business and your tax circumstances.
For contributors, costs can be equally divided or by incorporating real labor costs. For users, the costs can be equally divided or proportional to usage rate.
