Transfer Pricing

What is Transfer Pricing?

Transfer pricing is an international tax area that covers the methods of properly accounting for transactions between entities located in different countries that are under common control – such as subsidiaries and different company divisions of a larger parent company. These transactions can include transfers of tangible goods, services, intellectual property or financing transactions.

The strategic use of transfer pricing enables related companies to manage and reduce the overall tax burden of the parent company.

However, transactions that increase profits in one country and decrease profits in another are highly scrutinized and are required to meet the “arm’s length standard” which means prices comparable to the prices that would be charged between two independent companies.

Laws and regulation require taxpayers to maintain documentation and justification of intercompany transfer pricing policies for tax authorities in each country that it has a presence.

Are you:

Operating Internationally?

Owned by a Foreign Parent?

Performing Cross Border Payments for Services or Royalties?

Operating a Cross Border Supply Chain?

Borrowing From a Related Entity?

If any of the above apply to you, transfer pricing requirements and efficiencies could be available to your organization. Our firm helps mitigate risks and optimize your tax exposure.

Transfer Pricing Compliance

The transfer pricing area is receiving significant attention from the IRS and tax authorities around the world.

Transfer pricing rules exist to prevent companies from using intercompany pricing for tax avoidance by artificially inflating or deflating revenue or expenses in specific countries. Companies need to perform analysis and maintain regular documentation to prove out and support intercompany arrangements that regularly pit them between two separate country tax authorities that are seeking to protect their own local country's tax base, with transfer pricing being an increasingly significant tool for them to raise revenues.

Briggs & Veselka’s experts have significant experience helping companies of different industries, ownership structures, and sizes. We will develop practical and optimized transfer pricing methodologies as well as help companies ensure they are compliant with the many local country laws and regulations around transfer pricing in the US and international markets.

Examples of Transfer Pricing Needed for:

Tangible GoodsServicesIntellectual PropertyFinancing Transactions

Tangible Goods

Multinational groups commonly manufacture products that are bound for sale in multiple different countries. The import and export prices of goods crossing borders within the multinational group have a significant impact on the tax paid in the respective countries. Therefore, it is important to establish and maintain arm’s length policies and documentation in compliance with local country laws and regulations.

Services

Multinational companies regularly employ specifically skilled or shared workforces in central locations to support operations across many different countries. When beneficial services are provided across international borders, multinational groups must properly calculate and charge arm’s length services fees to the beneficiary of the services. Multinationals must be careful to maintain proper documentation to support the deductibility of these expenses in local country of the service recipient(s).

Intellectual Property

Intellectual Property is currently the most highly scrutinized area of transfer pricing. When a multinational group develops an intangible or intellectual property that will be exploited commercially in multiple different countries, the owner of the intellectual property should be compensated for its value. Entities within a multinational group should be compensated properly for contributions to develop, enhance, maintain, protect, and exploit intellectual property across international borders.

Financing Transactions

Multinational groups are commonly required to fund operations across borders through making intercompany loans or other financial transactions. Multinationals making loans are regularly required to document the nature of the loan arrangements to support arm’s length loan principal, terms and conditions, and interest rates to ensure proper treatment with local law and regulations.

Transfer Pricing Service Offerings

Advisory Services	Compliance Services
Transfer Pricing (TP) policy development Structure planning, TP modelling Benchmarking: CPM/TNMM, royalty rates, interest rates, Terms & Conditions, rents, leases Due diligence readiness TP review/memo Global TP compliance requirements review Internal audit memo providing red/yellow/green light TP risk assessment for PE owners/boards/management Fractional in-house TP director GILTI, FDII, BEAT related TP planning Operational transfer pricing consulting/implementation COVID impact on TP analysis Digital Services Tax, Pillar 1, Pillar 2 transfer pricing implications analysis State and Local Tax, Regulated ESOP related TP planning APMA planning and advisory	§6662/§482 US documentation Master File Country Specific Local File(s) Intercompany services interviews and allocation calculations Intercompany agreement drafts Review forms 5471, 5472, 8865, 8858, 926, 8275, 8975, 8990, 8991, 8992, 8993 for consistency with TP policies Country-by-Country reporting (CBCR) International dealings schedule(s) Compliance co-sourcing with large tax departments ASC740 memos for TP Tax provision review for TP Schedule UTP for TP APMA applications for APA or Competent Authority relief

Advisory Services

Compliance Services

Transfer Pricing (TP) policy development
Structure planning, TP modelling
Benchmarking: CPM/TNMM, royalty rates, interest rates, Terms & Conditions, rents, leases
Due diligence readiness TP review/memo
Global TP compliance requirements review
Internal audit memo providing red/yellow/green light TP risk assessment for PE owners/boards/management
Fractional in-house TP director
GILTI, FDII, BEAT related TP planning
Operational transfer pricing consulting/implementation
COVID impact on TP analysis
Digital Services Tax, Pillar 1, Pillar 2 transfer pricing implications analysis
State and Local Tax, Regulated ESOP related TP planning
APMA planning and advisory

§6662/§482 US documentation
Master File
Country Specific Local File(s)
Intercompany services interviews and allocation calculations
Intercompany agreement drafts
Review forms 5471, 5472, 8865, 8858, 926, 8275, 8975, 8990, 8991, 8992, 8993 for consistency with TP policies
Country-by-Country reporting (CBCR)
International dealings schedule(s)
Compliance co-sourcing with large tax departments
ASC740 memos for TP
Tax provision review for TP
Schedule UTP for TP
APMA applications for APA or Competent Authority relief

Intangible & Financing Specific Services

Intangible Property (IP)	Financing Transactions
IP Valuation Profit Split Method Analysis Cost Sharing Arrangement: planning, implementation, true ups, documentation Intangible Development Costs (IDC) included costs analysis Reasonably Anticipated Benefit (RAB) share analysis Benchmarking royalty rates and license agreement T&Cs M&A IP Integration	Debt capacity analysis Synthetic credit rating Benchmarking: interest rates, leases, rents, T&Cs Intercompany Agreement Drafts Cash Management Cash Pooling Guarantee fee analysis