Transfer Pricing Arrangements: 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, as well as the regulations of most countries, 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. Many other countries may also impose penalties for lack of compliance with transfer pricing regulations.

Section 482 and guidelines from the Organisation for Economic Cooperation and Development (OECD) list 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 policies and procedures.

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 arrangements

III. Transfer pricing life cycle for a multinational

IV. the importance of intercompany agreements

V. Transfer pricing in an acquisition environment

VI. OECD and the shifting TP landscape

VII. Tariffs and transfer pricing

VII. Tax authority challenges to transfer pricing

The panel will cover these and other critical issues:

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

Learning Objectives

After completing this course, you will be able to:

• Identify rules governing transfer pricing arrangements
• Determine pricing methods available under Section 482 and OECD
• Ascertain the impact of tariffs on transfer pricing
• Decide how to establish a transfer pricing arrangement to minimize tax authority 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).