Transfer pricing is the pricing of (typically crossborder) transactions between commonly controlled business entities. These controlled transactions include transactions involving (1) finished goods, components, raw materials, or other tangible property; (2) services; (3) patents, copyrights, and other intangibles; (4) leasing or rental of real or tangible property; and (5) loans or other transfers of money. There is a transfer pricing transaction every time there is a transaction between internationally related companies, whether there is a parent-subsidiary, brother-sister, or other direct or indirect controlled configuration.
The Internal Revenue Service (“IRS”) and most other national taxing authorities expect these related party transactions to be carried out at arm’s length prices. Arm’s length prices are those prices that would occur if unrelated parties (i.e., independent companies) carried out the same transactions under the same facts and circumstances. Transfer pricing may be the most important international corporate tax issue today.
Johan Deprez has worked on transfer pricing projects since 2000 for a large multinational company, large accounting firms, and for more than eight years with the IRS. As both an attorney and an economist, he has worked on over fifty Advanced Pricing Agreements (“APAs”). This includes unilateral APAs (only involving the IRS and the taxpayer) and bilateral APAs (involving the IRS, the taxpayer, and the tax authority of a second country) involving Japan, Canada, the United Kingdom, Germany, France, the Netherlands, and other countries. Industries covered included automotive manufacturing, distribution, and parts supply; semiconductors, computers, and consumer electronics; textile, clothing, and footwear; shipping and transportation; agricultural products; and other high-tech products.
Deprez Tax Law provides transfer pricing services directly to multinational companies or, on a consulting basis, to accounting and law firms whose clients need transfer pricing services. The transfer pricing services include Transfer Pricing Planning, Compliance Analysis, and Audit Defense.
Transfer Pricing Planning
Multinational companies with controlled transactions should develop a transfer pricing plan in order to adhere to transfer pricing laws, meet their tax filing obligations, minimize the tax due, and avoid serious tax penalties. Deprez Tax Law provides:
- General transfer pricing and intercompany transactions planning, including for companies early in their international expansion;
- Transfer pricing risk analysis;
- Supply chain and business structuring planing;
- Services to arrive at Advance Pricing Agreements (“APAs”);
- Drafting of intercompany contracts, agreements, and related documentation to support an multinational corporate structure and its transfer pricing plan.
Transfer Pricing Compliance Analysis, Support, and Filing
Multinational companies are typically required to provide contemporaneous documentation to support the transfer pricing employed. Deprez Tax Law:
- Prepares the appropriate documentation studies;
- Advises and trains clients on the proper preparation of documentation studies; and
- Advises, reviews, and trains employees of accounting and law firms on the proper preparation of documentation studies and other transfer pricing issues.
Transfer Pricing Audit Defense and Appeals
When the IRS and other tax authorities challenge the transfer pricing structure employed by a company, the tax adjustments, penalties, and interest can very large. Deprez Tax Law:
- Provides analysis and support during transfer pricing audits;
- Negotiates mutually-acceptable outcomes;
- Handles the appeals process, if required; and
- Manages Competent Authority Mutual Agreement Procedures (“MAP”).