The purpose of this article is to analyse the interaction between EU primary law and intellectual property (IP) boxes designed according to the modified nexus approach included in the final report on BEPS Action 5. It does so by analysing the different elements of an IP box in the light of the freedom of establishment and the state aid rules. It is concluded that while an IP box system should be compatible with the freedom of establishment, it conflicts with the state aid rules. Therefore, IP boxes not yet in place but planned by the Member States should, in principle, fall under the prohibition on implementation and the notification requirement stipulated in Article 108(3) of the Treaty on the Functioning of the European Union (TFEU).

The purpose of this article is to analyse the interaction between EU primary law and intellectual property (IP) boxes designed according to the modified nexus approach included in the final report on BEPS Action 5. It does so by analysing the different elements of an IP box in the light of the freedom of establishment and the state aid rules. It is concluded that while an IP box system should be compatible with the freedom of establishment, it conflicts with the state aid rules. Therefore, IP boxes not yet in place but planned by the Member States should, in principle, fall under the prohibition on implementation and the notification requirement stipulated in Article 108(3) of the Treaty on the Functioning of the European Union (TFEU).

Cet article analyse l’approche de l’entité distincte comme base théorique du principe de pleine concurrence dans les principes de l’Organisation de coopération et de développement économiques (OCDE) en matière de prix de transfert. Malgré son rôle central, ce concept manque d’une définition claire et son application semble osciller entre différentes perspectives, soit transactionnelle, basée sur l’entité et à l’échelle du groupe, ce qui pourrait remettre en question le recours sans équivoque à cette approche comme fondement théorique du principe de pleine concurrence dans les principes de l’OCDE. L’objectif de cet article est d’analyser la définition et l’application de l’approche de l’entité distincte dans les principes de l’OCDE, dans le but de clarifier sa signification, de déterminer les écarts potentiels par rapport à une analyse strictement fondée sur l’entité et d’examiner la logique, le cas échéant, qui soustend ces écarts.

La première conclusion de l’étude est que l’article 9 du modèle de convention fiscale de l’OCDE, qui sous-tend le principe de pleine concurrence, n’impose pas l’obligation légale d’analyser les transactions strictement au niveau des entités juridiques individuelles. Il favorise plutôt une interprétation souple visant à garantir que les transactions entre parties liées reflètent les bénéfices réalisés sur le marché. La deuxième conclusion est que les principes de l’OCDE doivent tenir compte des structures complexes des groupes et des accords intragroupe qui peuvent ne pas exister entre des parties non liées, tout en restant dans le cadre du principe de pleine concurrence. Ce paradoxe conduit à l’adoption de différentes perspectives — transactionnelle, basée sur l’entité et à l’échelle du groupe — afin de mieux se rapprocher des conditions qui peuvent exister entre des entreprises indépendantes. La nécessité d’une telle flexibilité reflète la difficulté d’appliquer une norme fondée sur le marché dans un contexte hors marché.

This article analyzes the separate-entity approach as the theoretical basis of the arm’s-length principle in the transfer-pricing guidelines of the Organisation for Economic Co-operation and Development (OECD). Despite its central role, the concept lacks a clear definition, and its application appears to fluctuate between transactional, entity-level, and group-wide perspectives, potentially calling into question an unequivocal reliance on the approach as the theoretical basis of the arm’s-length principle in the OECD guidelines. The purpose of this article is to analyze the definition and application of the separate-entity approach in the OECD guidelines, with the aim of clarifying its meaning, identifying potential deviations from a strictly entity-based analysis, and examining the rationale, if any, behind such deviations.

The first conclusion of the study is that article 9 of the OECD model tax convention, which underpins the arm’s-length principle, does not impose a legal requirement to analyze transactions strictly at the level of individual legal entities. Rather, it supports a flexible interpretation aimed at ensuring that related-party transactions reflect market-based profits. The second conclusion is that the OECD guidelines need to address complex group structures and intragroup arrangements that may not exist between unrelated parties, while remaining within the realm of the arm’s-length principle. This paradox leads to the adoption of various perspectives—transactional, entity-based, and group-wide—to better approximate the conditions that may exist between independent enterprises. The need for such flexibility reflects the difficulty of applying a market-based standard in a non-market setting.