Contents - AL-Tax

144 10 Provision of CDN Services to Third Partiessuch, in this instance, it would be reasonable to divide combined after-tax free cashflows among Group members based on each party’s relative contributions of tangibleassets, valued at book.10.6 ComparisonThe traditional transfer pricing methods are difficult to apply in analyzing this case,in part because the transactions in tangible property involve only the transfer ofaccess rights, not of the property as a whole. Therefore, neither the resale pricemethod nor the cost plus method applies. Additionally, the most intuitively logicalCUPs, consisting of lease transactions, require difficult and inexact adjustmentsand may raise misplaced permanent establishment issues. The comparable profitsmethod is difficult to apply as well, due in part to data limitations.At bottom, the foreign affiliates in this case have invested in network assets, andmust recoup both the cost of these assets and their cost of capital through USP’spayment of access fees. Our alternative methodology is based on this more fundamentalview of the foreign members’ contributions, and does not suffer from thetheoretical weaknesses of, or give rise to the data constraints associated with, theexisting transfer pricing regime.