Transfer Pricing

Transfer pricing issues arise from the every-day activities that make multinational corporations multinational – transactions and organizational structures that cross national borders. These activities give rise to tax risk where the tax authorities in a country question the prices charged in intercompany transactions, the allocation of expenses to a particular affiliate or branch, or the uncompensated use of an affiliate’s property by a related party; they also may create tax-planning opportunities.

BSM’s attorneys collectively have decades of government and private-sector experience addressing these and other transfer-pricing related issues involving companies engaged in manufacturing, pharmaceutical, high-tech, financial services, and other industries. These experiences are drawn upon to advise clients who:

• wish to balance up-front planning that manages global tax expense with avoiding unnecessary levels of risk;
• are subject to an IRS audit involving transfer pricing issues;
• seek to avoid double taxation through the competent authority process;
• desire the certainty or the benefits of an alternative dispute resolution process, such as an Advance Pricing Agreement; or
• want to review their existing transfer pricing practices and documentation to determine areas of audit and adjustment risk.

BSM has found many clients to be very interested in this last service and has organized a special program, the Transfer Pricing Preparation Audit Review (“TPPAR”), to address their needs. TPPAR is an independent, low cost, fixed-price review of a client’s transfer pricing practices and documentation. The report that the client receives not only analyzes audit and adjustment risk, but also may serve as an assessment of a client’s internal controls relating to transfer pricing.

The client may then choose to enter the second phase of the TPPAR process and decide to work with BSM to implement improvements and/or revisions to existing transfer pricing documentation and practices. This is an important part of a client’s defense to a transfer pricing audit, because of the IRS’s public statements that transfer pricing documentation will be one of the first matters addressed in an audit of a multinational enterprise, and the results of the initial review of the documentation determines whether a deeper probe will occur.