Transfer Pricing is Key for International Business Taxation Strategies

September 23, 2019

Transfer pricing is key for international business taxation strategies.  Transfer pricing is the cost paid for goods or services exchanged between affiliated corporations.  Transfer pricing has increasingly become a target for the IRS and California state taxation agencies.  Transfer pricing is also one of the primary ingredients for many international business taxation strategies.  These transfers must be conducted meticulously and well documented to ensure compliance with the “arm’s-length” standard and applicable US tax laws.

The challenge for many of these corporations is a genuine lack of expertise in the underlying accounting, legal and taxation issues that underpin corporate transfers.  Existing internal systems are usually not designed to support these transactions and capture important detailed breakouts at each stage of the transaction.  Existing internal auditors or accounting staff have enjoyed a fairly lax standard for many years, but the old ways of doing things will not suffice any longer.

Ask Microsoft and Coca-Cola.  Both are involved in IRS audits resulting in legal battles over huge sums of money with a core issue in common: transfer pricing.

I understand.  You aren’t Microsoft or Coca-Cola.  So what does this really have to do with you?  The answer: everything.  If you have offshore affiliated businesses or corporations (including Canada and Mexico) and you have any transfer of goods or services between entities you are a target of the IRS and California taxation agencies.  This isn’t a question of “if“, it is a question of “when.”

Transfer pricing is key for international business taxation strategies but it must be informed by and documented within internal accounting systems.  Prudent international business people understand the need to audit existing systems, processes, accounting and taxation strategies surrounding transfer pricing.  They understand the substantial financial implications of transfers between their affiliated companies and have long enjoyed this effective strategy of shielding income.  They also understand that the IRS has access to banking information abroad, and the technology to inspect these transactions in a much more detailed and granular fashion.  This has created a substantial contingent liability for most multi-national businesses and entities.

Allen Barron is uniquely qualified and positioned to help you with these challenges.  Our unique blend of the diverse disciplines of tax, legal and accounting experts allows us to work with your internal team to audit existing practices, systems and procedures and provide valuable insight into new IRS tactics, as well as US and California laws.

We invite you to contact Allen Barron or call for a complimentary and substantive consultation at 866-631-3470.  Learn how the protections of the attorney-client privilege are a valuable shield from the IRS.  Transfer pricing is key for international business strategies going forward.  The “old way of doing things” will no longer suffice, and the IRS has the power to inflict a heavy financial toll on your business, and in some cases, take it from you.

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