International Taxation

Chapter 8Transfer Pricing and BEPS Overview

Learning objectives

• Recognize that transfer pricing rules and regulations under Section 482 and Organization for Economic Co-operation and Development (OECD) apply to intercompany or related-party transactions.
• Identify required taxpayer documentation, analysis, and penalties for noncompliance with the transfer pricing regulations.
• Recognize the Base Erosion and Profits Shifting (BEPS) initiative and actions by the OECD and G20.

Summary of U.S. Transfer Pricing rules

Note to practitioner or reader. Transfer pricing is the practice of economic analysis and documentation of intercompany (IC) or related party (used interchangeably in this course) transactions. In this course and in the United States, the controlling rules are within IRC Section 482, IRS Notices, and corresponding tax regulations. The IRS considers its transfer pricing laws and regulations to be wholly consistent with the OECD Guidelines. For domestic purposes, the OECD Guidelines do not provide support and would not be directly relevant to the application of any pricing methods. However, if taxpayers pursue competent authority relief from double taxation or a bilateral advance pricing agreement (APA), the OECD Guidelines are relevant and may be used to demonstrate compliance with international principles.

With new domestic and international tax provisions within the Tax Cuts and Jobs Act, corresponding regulations and IRS Notices expanding and clarifying the same, ...