384 EUROPEAN TAXATION AUGUST. 200E vided?. Moreover, the US regul lations allow retroactive This fact pattern may actually be the standard situationin adjustments; whereas the German tax authorities have tra- many international M&A cases if the pooled esearch ditionally been rather reluctant to accept such a mecha- activities of the restructuring groups are put together. Itis nism. Instead it is claimed that if reviews are conducted in remarkable as well that the tax authorities do not requir due time the adjustments would only affect future peri- an exact match in value of the two sets of know-how. In One significant difference vis-a-vis the old guidelines is involved to find an appropriate solution and avoid disad the introduction of a test comparing the"cost-sharing vantageous profit realization. cheme and individual transaction. The tax authorities In cases that do not fall under the exception described willing to join or continue participation in a cost-sharing. sidered. Members of an existing pool would not gnnt any vices at lower costs in direct transactions, In that way, the member, but new members would rather have to pay a tax authorities are abstractly, prescribing a certain actual licence fee. This fee should normally be tax deductible and behaviour to the taxpayer and are thus also setting an would not result in an asset. Since the importance and thus implicit ceiling on the taxpayer's deductible expenses. It the value of the prior research results usually decreases might be questionable if such a requirement is in fact in over time, the licence fee should gradually phase out over granted a considerable degree of freedom in determining what the taxpayer deems appropriate or necessary activ ities and the legal framework of these activities. DOCUMENTATION REQUIREMENTS It would not be acceptable if the new rules were to be To be classified as a qualified cost -sharin for any single service request that the taxpayer could not. the written agreement must comply with certain require Such a requirement would make the use of cost-sharing chemes impossible. Also, the test demanded by the new arrangements must be in writing and contemporaneous idelines corre comparable uncontrolled ith the formation(and any revision) of the arrangement. price method. A comparison of prices could only be The new rules explicitly identify a number of items that and the potential service obtained directly were identical The document itself or its appendices, enclosures or addi- should rather be understood as a tool that can be used by the tax authorities against abusive cases. Under normal names of pool members and beneficiaries circumstances it should be acceptable to demonstrate the a detailed description of the contractually agreed ser- vIces general benefit and the use of an appropriate allocation a determination of the costs to be allocated, method of cost calculation and possible deviatio a determination of the benefits expected by the partic. TREATMENT OF BUY-IN PAYMENTS a determination of the allocation key a description of how initial contributions of pool mem Completely new to the cost-sharing guidelines is the sec- bers will be determined and allocated w participants seek membership in the type and extent of inspection of accounts; an existing pool, especially in an r&d pool. In such a provisions regarding adjustments that will be made if he new entrant would participate in the results of the circumstances change over the course of the agree. men research or development work that had already been per- formed but would not have participated in the costs that the contractual duration of the agreement; provisions regi had been incurred. In such a case, unrelated parties would garding the termination of the agreement the entry of new members and the withdrawal of mem usually require a compensation payment from the new agreements on the access to documents and records One question that arises in this context is how the buy-in regarding the expenses and services of the service provider; and guidelines state that the new member would generally have to show the payment as an asset in the new member's 2s. Us Treas Reg. Sec. 1.482-4(D(2)D)D) balance sheet (i.e. as an acquired intangible)and amortize 26. New Cost Sharing Guidelines, Para. 3.3 it appropriately in subsequent years. However, there is an 27. New Cost Sharing Guidelines, Para.3. important exception to this rule. If the new member would 28, Helmut Becker "Verwaltungsgrundsatze zur Einkunftsabgrenzung"IM in turn also introduce know-how to the pool that is valued Helmut Becker and Heinz-KJaus Kroppen(eds ) Handbuch internationl Vih at approximately the same amount as the existing know echnungspreise(KoLn: Dr. Orto Schmidt Verlag, 1999). note 1.4.1 29. New Cost Shaning Guidelines, Para. 4.1 how of the pool, a buy- in payment will not be necessary. 30. See Helmut Becker, "Cost Sharing". Internationale Wirtschafs-Brrfei (1998), Fach 10, Gruppe 2, at 1328 et seq 2000 international Bureau of Fiscal ocumenta