If you are a multinational enterprise with cross-border transactions with related entities you probably know that transfer pricing enforcement is a high-profile and big-money priority for tax authorities around the world.
Related entities engaged in cross-border transactions must deal with each other at arm’s length (as if they were independent). In the United States, IRS is expanding its transfer pricing enforcement activities. According to BNA Tax Management’s analysis of court records, the number of transfer pricing cases filed in U.S. federal courts for the first half of 2004 doubled from those filed during the same period in 2003, and the amounts in controversy increased more than eightfold. Total transfer pricing allocations currently at issue in U.S. federal courts have risen sharply to $ 9.2 billion, up from 2003 total of approximately $1 billion. New regulations in various areas of transfer pricing rules have been promulgated in final, temporary or proposed form. Transfer pricing enforcement is also on the rise worldwide, with an increased number of countries introducing transfer pricing rules and documentation requirements, and transfer pricing specific penalties. Over 30 countries have enacted their own documentation rules, including (among others) Argentina, Australia, Brazil, Canada, Colombia, Chile, China, France, Germany, Hungary, India, Korea, Malaysia, Mexico, The Netherlands, New Zealand, the United Kingdom, and Venezuela. These countries also impose moderate to heavy penalties on transfer pricing adjustments. The result of this global enforcement environment is that taxpayers with international business operations are no longer able to ignore transfer pricing. It is generally not a case of whether their transfer pricing policy will be examined, but when it will be examined.
“In this crucial area on international tax law, which lies at the heart of international taxation, we can assist clients to minimize their expenses and burdens connected with transfer pricing disputes in every stage of the transfer prices planning, documentation and defense process”.
Our services in this area include:
- evaluating your transfer pricing profile and advise on minimizing future exposure;
- determining an appropriate transfer price, interest or royalty rate for tangible and intangible property;
- determining ownership of intangibles and establishing research and developments cost sharing arrangements;
- defending your transfer price strategy against adjustments;
- defending “at cost” administrative services and interest-free advances;
- preparing transfer pricing documentation and reports;
- assisting in direct correlative adjustments with foreign tax authorities.
