Transfer Pricing Developments Steven

Transcript:Transfer Pricing Developments Steven:
Transfer Pricing Developments Steven Wrappe--Moderator Grant Thornton Laurie Dicker BDO Rocco Femia Miller and Chevalier Sayantani Ghose KPMG Ryan Lange Kroll Natalia Pierotti—YIN Reporter Weil, Gotshal & Manges Transfer Pricing Exam Trends (US) Heightened transfer pricing audits in the US. Some areas of focus include: Exit Charges Intercompany Financing TP documentation and penalties (discussed later) Role of Economic Substance Exam teams not constrained to follow results from prior audits Additional activities: Compliance Alerts GLAM on Implicit support Quantification technique Burden of Proof Section 482 versus Section 385 Transfer Pricing Exam Trends (Globally) Increased audit activity in EU and APAC jurisdictions including Italy, France, Netherlands, Australia, Switzerland Specific exams and litigations involve: DEMPE Intercompany Loans in UK Compensation payments in France Factoring of receivables/guarantee fees in the Netherlands Deductibility of commitment fees Intercompany loans, and embedded or unstated royalties in Australia Focus not just on arm’s length pricing, but reasonableness of the transaction and the intercompany agreement Would third parties enter into similar transactions? Would the agreement have similar clauses (or not have certain clauses/covenants)? Transfer Pricing Global Trends Several recent changes to legislation across the world, expected to raise more controversy going forward Brazil: New TP rules (OECD consistency) UAE: New TP rules requiring UAE businesses to comply with internationally accepted TP documentation requirements France: The draft Finance Bill for 2024, includes more stringent transfer pricing documentation Canada: Finance released a consultation paper with proposed amendments Australia: 2022 consultation paper related to thin cap rules and intangible transactions; draft legislation regarding public CbyC U.S. Transfer Pricing Litigation Uptick in significant docketed cases IP license cases IRS asserts CPM to benchmark foreign licensees, allocating residual profits to U.S. licensor Taxpayers rely on CUTs and other approaches that were negotiated with IRS in prior cycles Coca Cola (T.C. 2020, pending appeal); Medtronic (T.C. 2016 / 2022, pending appeal), Amgen (T.C., pending) Cost sharing buy-in cases IRS asserting various positions to increase consideration for buy-in / PCT transfers Facebook (T.C., pending); Microsemi (T.C., pending) Microsoft (administrative controversy) Economic substance IRS asserting application of economic substance doctrine in transfer pricing context Perrigo (W.D. Mich., Pending) Ancillary litigation Taxpayers increasingly pulled into ancillary litigation related to transfer pricing disputes Eaton (summons); Microsoft (summons / FOIA); Amgen (shareholder suit) Regulation validity cases Altera (9th Cir.); Abbot Labs (T.C., pending); 3M (T.C., pending appeal) Transfer Pricing Penalties Historically, IRS did not impose penalties if documentation existed Increased