Transfer Pricing
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Key Offerings
Strategy & Compliance
Policy and Controversy
Strategy & Compliance
Transfer pricing refers to the pricing of goods, services, or intangible property transferred within a multinational company, particularly across different countries. It is a critical aspect of international taxation as it determines the allocation of profits among the different subsidiaries of a multinational corporation (MNC) for tax purposes.
In the United States, transfer pricing strategies are governed by the Internal Revenue Service (IRS) regulations and guidelines, particularly under Section 482 of the Internal Revenue Code (IRC). The IRS requires that transactions between related entities (e.g., parent company and its subsidiaries) be conducted at arm’s length, meaning the prices should be comparable to what would be charged between unrelated parties in an open market.
In the United States, transfer pricing strategies are governed by the Internal Revenue Service (IRS) regulations and guidelines, particularly under Section 482 of the Internal Revenue Code (IRC). The IRS requires that transactions between related entities (e.g., parent company and its subsidiaries) be conducted at arm’s length, meaning the prices should be comparable to what would be charged between unrelated parties in an open market.
Transfer Pricing Documentation:
Companies operating internationally are required to maintain thorough documentation to support their transfer pricing policies. This documentation typically includes detailed descriptions of the services or products transferred, analysis of comparable transactions in the market, and the methods used to determine transfer prices.
Advance Pricing Agreements (APAs)
APAs are arrangements between taxpayers and tax authorities that establish acceptable transfer pricing methodologies in advance. Companies can enter into APAs with the IRS to provide certainty and reduce the risk of transfer pricing disputes.
Transfer Pricing Policies
Developing and implementing transfer pricing policies that comply with IRS regulations while also aligning with the company’s overall business objectives is essential. This may involve determining centralized versus decentralized pricing approaches, considering tax optimization strategies, and ensuring consistency across the organization.
Transfer Pricing Analysis
This involves conducting a comprehensive analysis to determine an appropriate transfer price for goods, services, or intangible property transferred between related entities. This analysis often involves benchmarking against comparable transactions in the market to ensure arm’s length pricing.
Intercompany Agreements
Establishing clear intercompany agreements that outline the terms and conditions of transactions between related entities is crucial. These agreements should clearly define the nature of the services or products provided, pricing methodologies, and allocation of risks and responsibilities.
Risk Assessment and Compliance
Companies should conduct regular risk assessments to identify potential transfer pricing risks and ensure compliance with IRS regulations. This may involve conducting internal audits, engaging external advisors, and implementing controls to mitigate transfer pricing risks.
Overall, effective transfer pricing strategies in the USA require careful consideration of IRS regulations, market conditions, and the company’s overall business objectives to ensure compliance, minimize tax risks, and optimize financial performance.
Policy and Controversy
Transfer Pricing Risk Assessment
Conducting a comprehensive review of a company’s transfer pricing practices to identify potential areas of risk and exposure to transfer pricing disputes.
Documentation and Compliance Support
Assisting companies in preparing transfer pricing documentation that complies with relevant tax regulations and guidelines, thereby reducing the likelihood of disputes with tax authorities.
Advance Pricing Agreements (APAs)
Negotiating with tax authorities to establish APAs, which are agreements between a taxpayer and one or more tax jurisdictions regarding the appropriate transfer pricing methodology for future transactions. APAs provide certainty and can help prevent transfer pricing disputes.
Transfer Pricing Audit Defense
Representing companies in transfer pricing audits conducted by tax authorities, including responding to inquiries, providing documentation, and presenting arguments to support the company’s transfer pricing positions.
Alternative Dispute Resolution (ADR)
Facilitating negotiations and settlements through ADR mechanisms such as mediation or arbitration, aiming to resolve transfer pricing disputes outside of formal litigation proceedings.
Litigation Support
Providing expert witness testimony and litigation support services in transfer pricing disputes that escalate to formal legal proceedings, including preparing expert reports, conducting financial analysis, and presenting evidence in court.
Controversy Management Strategies
Developing proactive strategies to manage and mitigate transfer pricing controversies, including communication strategies, stakeholder engagement, and reputational risk management.
Post-Audit Resolution Services
Assisting companies in resolving transfer pricing disputes after the conclusion of a tax audit, including negotiating settlements, appealing adverse audit findings, and implementing corrective actions.
Transfer Pricing Training and Education
Offering training programs and workshops to educate company personnel on transfer pricing regulations, compliance requirements, and dispute resolution strategies.
