26Jan 2023 by Pat Geddie
A Closer Look at the Procedural Tools Available to the IRS in International Examinations Involving Transfer Pricing

A Closer Look at the Procedural Tools Available to the IRS in International Examinations Involving Transfer Pricing

Tax Law
By Anthony Diosdi An exam of a multinational corporation tax return(s) will begin much the same manner as any other audit in that the taxpayer will receive a letter from the Internal Revenue Service or “IRS” notifying it of the audit. However, unlike a typical audit, the examiner will likely be specially trained to deal with issues involving controlled foreign corporations, cross-border transfers and reorganizations, transfer pricing, calculation of foreign tax credits, utilizing bilateral tax treaties, and the branch profits tax. Given the extraordinary complexity of these international provisions, special procedural issues may arise in multinational corporate audits that will not typically arise in an audit of an individual taxpayer or small business. This article explores the special procedural tools that are unique to an IRS examination of a multinational…
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28Jul 2022 by Pat Geddie
Exploitation of Intangible Property Abroad: The Use of Cost Sharing Arrangements to Avoid the Transfer Pricing Rules

Exploitation of Intangible Property Abroad: The Use of Cost Sharing Arrangements to Avoid the Transfer Pricing Rules

Tax Law
By Anthony Diosdi In considering the U.S. and foreign tax aspects of exploiting abroad intangible property rights, such as rights to patents, copyrights, trademarks, confidential knowhow, and trade secrets, it is convenient to analyze transfers of intangible property between commonly controlled parties. For example, Corp A, U.S. corporation owns the copyright in a computer program, Program X, and Corp A transfers a disk containing Program X to Corp B, wholly owned subsidiary, a Country Z corporation, and grants Corp B “an exclusive license for the remaining term of the copyright to copy and distribute an unlimited number of copies of Program X in the geographic area of Country X, prepare derivative works based upon Program X, make public performances of Program X and publicly display Program X. Corp B will…
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29Oct 2020 by Pat Geddie
Cross-Border Lending of Related Parties Requires Attention be Given to Transfer Pricing and Earnings Stripping Rules

Cross-Border Lending of Related Parties Requires Attention be Given to Transfer Pricing and Earnings Stripping Rules

Tax Law
By Anthony Diosdi Cross-border lending is a common business practice with groups of related corporations. However cross-border lending requires attention be given to the transfer pricing and earnings stripping rules. The Internal Revenue Service (“IRS”) has broad powers to recharacterize “any multi-party financing transaction as a transaction directly among any two or more of such parties where the Secretary determines such recharacterization is appropriate to prevent the avoidance of any tax imposed by this title.” See IRC Section 7701(1). We will begin our discussion with a look at how the transfer pricing rules impact cross-border lending.Transfer Pricing Rules for Cross-Border Lending of Related PartiesFor transfer pricing purposes, controlled entities generally must charge each other an arm’s length rate of interest on any intercompany loans or advances. See Treas. Reg. Section…
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27Oct 2020 by Pat Geddie
Transfer Pricing for Tangible Property

Transfer Pricing for Tangible Property

Tax Law
By Anthony Diosdi IntroductionTransfer pricing must be taken into consideration by any business involved in cross-border transactions. Although many have heard of the term “transfer pricing,” few understand how transfer pricing works. This article is designed to provide the reader with a very basic understanding of how transfer pricing works. To understand transfer pricing we must think of the operating units of a multinational corporation. Multinational corporations usually engage in a variety of arrangements of intercompany transactions. For example, a U.S. manufacturer may market its products through foreign marketing subsidiaries. A domestic parent corporation may provide managerial, technical, and administrative services for its subsidiaries, and may license its manufacturing and marketing intangibles to its foreign subsidiaries for commercial exploitation abroad. A “transfer price” must be computed for each of these…
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27Oct 2020 by Pat Geddie
Transfer Pricing for Intangible Property

Transfer Pricing for Intangible Property

Tax Law
By Anthony Diosdi IntroductionTransfer pricing must be taken into consideration by any business involved in cross-border transactions. Although many have heard of the term “transfer pricing,” few understand how transfer pricing works. This article is designed to provide the reader with a very basic understanding of how transfer pricing works. To understand transfer pricing we must think of the operating units of a multinational corporation. Multinational corporations usually engage in a variety of arrangements of intercompany transactions. For example, a U.S. manufacturer may market its products through foreign marketing subsidiaries. A domestic parent corporation may provide managerial, technical, and administrative services for its subsidiaries, and may license its manufacturing and marketing intangibles to its foreign subsidiaries for commercial exploitation abroad. A “transfer price” must be computed for each of these…
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