Recognition of HTVI for tax purposes is more important than ever before

Do you know what HTVI is? Do you know how associated enterprises are defined in Council Directive (EU) 2018/822? You should, since all cross-border HTVI transactions between associated enterprises should be reported to the tax administration, if the first step in their implementation has been made on or after 24 June 2018.

HTVI is the abbreviation of hard-to-value-intangibles as defined in the OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Valuation of intangibles is always difficult, as predictions about future events are always uncertain. In this regard all intangibles are hard to value. However, the concept of hard-to-value-intangibles refers to a specific type of intangibles whose ability to generate income is not established at the time of the transaction.

The term HTVI covers intangibles or rights in intangibles for which at the time of the transaction (i) no reliable comparable exist, and (ii) the projections of future cash flows or expected income, or the assumptions used in their valuation are highly uncertain. Again, depending on the definition of highly uncertain compared to just uncertain, almost all intangibles seem to fall in the category of HTVI. However, the OECD has given examples that shed some light on the HTVI definition. For example, intangibles that are only partly developed, intangibles whose commercial exploitation will only take place after several years, and intangibles that will be exploited in a manner that is novel may be mentioned as examples.

Challenging to assess

In intra-group transactions covering HTVI, the tax administrations have found it very challenging to assess the reliability and appropriateness of the taxpayers’ valuation calculations. If (and almost always as) the actual cash flows and income generated by the intangible differs from the predictions and assumptions, the tax authorities have found it difficult to estimate whether this is due to unforeseeable events or because the taxpayer has not done the valuations with proper care. Consequently, it has been decided within the OECD, that in case of HTVI the tax authorities may use future events as presumptive evidence of the reliability of the taxpayer’s predictions and assumptions.

There are ways for the taxpayer to avoid the HTVI treatment (the tax authorities’ right to assess the reliability of valuation of intangibles based on ex post outcomes), and careful projections and their sufficient documentation may be mentioned as examples. In addition, the tax authorities’ ability to make adjustments to taxable income afterwards is often limited. For example, in Finland, tax reassessment in transfer pricing cases must be made within six years from the end of the tax year. This means that in case the company has transferred HTVI between group companies in 2017, the tax authorities should evaluate the appropriateness of the transaction in 2023, at the latest. If the transferred intangible was under development in 2017, it is probable that it has not generated any income during the first years after the transfer. If the intangible turns to be a great success, say in the year 2021, the tax authorities have only a couple of years’ time to assess the transfer pricing. It seems that the tax authorities in the EU member countries have considered this inadequate, since in Council Directive (EU) 2018/822 (the so-called DAC6), the reporting requirements have been extended to HTVI transactions.

Tax authorities within the EU automatically exchange DAC6 information

DAC6 sets reporting requirements on certain arrangements that are considered to contain a potential risk of tax avoidance. Further, it is mostly the tax advisors that are liable to report arrangements whose main or one of the main purposes has been to obtain a tax advantage. However, the company may be liable to file the report, and especially concerning transfer pricing, obtaining a tax benefit is not a relevant requirement. All HTVI transactions between associated parties have to be reported to the tax authorities regardless their tax effects. And this reporting requirement covers transactions that have already been carried out since midsummer 2018.

The tax administrations within the EU automatically exchange information that has been reported under DAC6. As the transfer pricing is actually the allocation of income between jurisdictions, a low transfer pricing risk in one jurisdiction often creates a high transfer pricing risk in the other jurisdiction.

New transfer pricing guidance on HTVI and DAC6 reporting requirements increase the transfer pricing risk and are likely to lead to transfer pricing controversies.

And finally, according to DAC6, enterprises are associated if one enterprise participates in the management of another enterprise by being in a position to exercise significant influence over the other, holds more than 25 % of its voting power, directly or indirectly owns over 25 % of its capital, or is entitled to 25 % or more of its profit.

You are warmly welcome to our transfer pricing seminar on 2 October, where we will consider the issues and steps that companies can take to mitigate their HTVI related tax risks.


Roschier’s distinctive tax team works in close co-operation with the firm’s market leading IP team. The teams provide clients with a “one-stop shop” for advice on the entire spectrum of IP issues. The IP team typically provides leading advice throughout the life cycle of IP from identification, acquisition and registration to enforcement and transactions with portfolio management and valuation in between, the tax team helping to resolve various tax issues. The advice typically includes IP identification and acquisition strategies (throughout the supply chain), licensing, either together with or independent of technology, intellectual property transactions, either independent of non-IP assets or as part of conventional transactions, such as transfer of business as well as IP strategies and policies across the board.


Merja Raunio 
Senior Advisor