Transfer Pricing Agreements: IRS and OECD Requirements, IRS Challenges, Impact of Tariffs

Transfer pricing is the determination of prices between related entities for transactions, including the purchase of goods or services, intercompany loans, and intangible assets. Section 482 requires the prices charged and paid be arm's length. In other words, they should be comparable to prices agreed upon by unrelated parties.

In early 2024, the IRS announced its Large Foreign-Owned Corporations Transfer Pricing Initiative targeting U.S. subsidiaries of foreign companies. Airbnb, Coca-Cola, and Newell Brands have all had their transfer pricing positions subjected to IRS scrutiny. The ramifications of noncompliance are substantial. Nondeductible penalties under IRC Code Section 6662 are 20%, or 40% if the underpayment exceeds $20 million. These arrangements must also consider Organisation for Economic Co-operation and Development (OECD) guidelines and could be subject to penalties in other countries. 

Section 482 lists several methods for determining income for commonly controlled entities and dictates that companies choose the "best method." The importance of documenting the pricing method selected cannot be overemphasized. Now, with significant tariffs charged on overseas goods, MNEs and international tax practitioners need to incorporate these assessments in their transfer pricing agreements.

Listen as our panel of transfer pricing and valuation experts explains how to establish and support a transfer pricing arrangement for MNEs and international tax advisers.

I. Transfer pricing: introduction

II. Rules governing transfer pricing agreements

III. Transfer pricing life cycle for a multinational

IV. Transfer pricing in an acquisition environment

V. OECD and the shifting TP landscape

VI. Tariffs and transfer pricing

VII. IRS challenges to transfer pricing agreements 

The panel will cover these and other critical issues:

• Establishing a transfer pricing agreement that meets Section 482 requirements
• Transfer pricing in an acquisition environment
• The rules governing transfer pricing arrangements
• Withstanding IRS scrutiny of transfer pricing agreements
• The impact of tariffs on transfer pricing

Learning Objectives

After completing this course, you will be able to:

• Identify rules governing transfer pricing agreements
• Determine pricing methods available under Section 482
• Ascertain the impact of tariffs on transfer pricing
• Decide how to establish a transfer pricing agreement to minimize IRS scrutiny

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).