Correctly applying transfer pricing principals can save business and individuals large sums in taxation by correctly recognizing profits in countries or jurisdictions that have lower tax rates.
Katz&Co can guide you through the complexities of international regulations to ensure you are in compliance and maximize your tax advantages.
The practice of transfer pricing is among the most highly scrutinized by the IRS and if compliance is not met, the penalties can be severe. In fact, the largest tax settlement payment in the history of the IRS occurred in 2006 when GlaxoSmithKline agreed to pay $3.4 billion to settle a transfer pricing dispute. The dispute took 17 years to resolve and Glaxo told its shareholders that they had gotten off easy.
Arms Length Rules in Transfer Pricing
Over 60 foreign governments have adopted their own transfer pricing rules and systems. Transfer pricing rules in most countries are based on the “arm’s length principle” – that is to establish transfer prices based on analysis of pricing in comparable transactions between two or more unrelated parties dealing at arm’s length.
Nearly all foreign systems require that prices be tested using an “arm’s length” standard. Under this approach, a price is considered appropriate if it is within a range of prices that would be charged by independent parties dealing at arm’s length. This is generally defined as a price that an independent buyer would pay an independent seller for an identical item under identical terms and conditions, where neither is under any compulsion to act.
The concept of what “arm’s length” means and how it is interpreted is an area where Katz&Co can guide you.
Katz&Co are experts in international taxation issues and can guide you every step of the ways in taking advantage of transfer pricing opportunities while keeping you out of harm’s way with regulators and the IRS.
Katz&Co can advise you on on-going international enterprises and carry out transfer pricing studies for you that will show if and how much you or your organization can benefit from it.
You can find out more about our services by following the links above. call or phone us for more information or to set up a consultative meeting in our convenient Bethesda offices
Here is resource Transfer Pricing definitions and theory From Wikipedia. Katz&Co will guide you through this complexity.