The Evolution of the Arm’s Length Standard: Part 5 – An Increasing Focus on the Location of Decision-Makers

Click here to start with the first post in this series. The OECD’s most recent guidance discusses three types of control over decision-making and risk: (i) the capability to make decisions to take on, lay off, or decline a risk-bearing opportunity, together with the actual performance of that decision-making function, (ii) the capability to make … Continue reading The Evolution of the Arm’s Length Standard: Part 5 – An Increasing Focus on the Location of Decision-Makers

Four Take-Aways from the Amazon Tax Court Decision

The Tax Court recently issued its decision in the Amazon transfer pricing case. The key issue was the value of the buy-in payment, and the values computed by the taxpayer ($254 million) and the IRS ($3.5 billion) were completely inconsistent with each other. The Tax Court decision found that the IRS was arbitrary and capricious, … Continue reading Four Take-Aways from the Amazon Tax Court Decision

Transfer Pricing Documentation – Comparing Costs and Benefits

Documentation is expensive, and tax department budgets are finite. Therefore, tax departments face the very common economic problem of how to allocate resources more effectively, a process that starts with the determination of which legal entities need documentation and an evaluation of the type of documentation that is needed. Some tax departments approach this issue with … Continue reading Transfer Pricing Documentation – Comparing Costs and Benefits

Why Documentation is So Expensive

Preparing global documentation is expensive. Understanding why it is so expensive is the first step in trying to determine how to lower costs while improving quality. Let’s start with some simple arithmetic. The OECD local file template has 20 information requests, 4 asking for legal entity information and 16 asking for information by transaction. For … Continue reading Why Documentation is So Expensive

The Evolution of the Arm’s Length Standard: Part 4 – Reasonable Alternatives

  Click here to start with the first post in this series. The IRS regulations and OECD Guidelines discuss the need to for taxpayers to consider “reasonable alternatives” in determining whether their transfer prices are arm’s length. As a matter of first impression, this seems reasonable. When applied to arm’s length prices, the question is … Continue reading The Evolution of the Arm’s Length Standard: Part 4 – Reasonable Alternatives

Local Documentation – Not Necessarily New, But Certainly Costly

While the CbC report and the master file have attracted the most attention among the OECD’s recommendations for transfer pricing documentation as they are new, as a practical matter local documentation requirements will impose a much greater burden upon MNEs because of the sheer volume of information required. Local files, which are customized for each … Continue reading Local Documentation – Not Necessarily New, But Certainly Costly

Building a Risk Scorecard

Over the past decade, the number of countries that require (or at least expect) transfer pricing documentation has increased dramatically. However, the nature of the regulatory requirements and the benefits/cost of providing documentation varies substantially by country. Given the cost of preparing documentation, many MNEs prioritize different countries, designating some as ones where documentation is … Continue reading Building a Risk Scorecard

Basics of Setting Up a Visual Dashboard

One of the most immediate and practical issues that that MNEs are facing is how to deal with the large volumes of information that they are expected to collect and present to tax authorities. Visual dashboards – which can now be developed easily using readily available software – are an effective tool for quickly examining … Continue reading Basics of Setting Up a Visual Dashboard

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