We know and use various approaches to help multinational groups avoid double taxation and benefit from operations in low-tax jurisdictions. Our goal is to minimize both the aggregate taxation of the multinational group consistent with its ongoing business operations and the compliance costs associated with achieving that result.
Our capabilities distinguish Alston & Bird from other firms that advise on transfer pricing matters. We have been among the leaders in creating innovative substantive and procedural solutions to resolve transfer pricing controversies. We helped develop the advance pricing agreement program by filing a request for an advance pricing agreement eight months before the IRS released the Revenue Procedure that created the program. We have introduced a number of transfer pricing methodologies that were at the time quite novel but have since become widely accepted, and we continue to help our clients by crafting unique and novel methodologies that fit their particular circumstances and business objectives while also satisfying the appropriate tax authorities.
As lawyers, we are skilled in analyzing factual material, organizing that material to communicate the benefits of particular transfer pricing methodologies both to government representatives and courts, and negotiating settlements, agreements, and similar documents that are needed to resolve transfer pricing disputes. Effective presentation of a taxpayer’s justification for selecting a transfer pricing method requires advocacy, drafting, and the other skills associated with the legal profession, as does negotiating with tax authorities to sustain the taxpayer’s transfer pricing on an ongoing basis.
The legal privilege accorded attorney-client communication and a lawyer’s work product allows for candid and complete discussions of approaches to develop and defend transfer pricing systems and methodologies. The privilege afforded to communications between us and our clients extends to communications among the client, the lawyer, and professionals that the lawyer retains to assist the lawyer in the engagement. You can be confident that your communications with us will remain confidential.
Transfer Pricing
Transfer pricing for transactions between related entities in different countries is one of the most complex tax issues global companies face. We’ve been developing transfer pricing methodologies to facilitate cross-border operations and satisfy tax authorities for decades. Clients rely on our sophisticated application of economic, legal, and mathematical methods to find resolutions.
On cross-border transfer pricing disputes that require coordinated responses or analyses in multiple jurisdictions, we have the flexibility to secure the assistance of the most qualified and experienced local transfer pricing advisers in each jurisdiction. Alston & Bird maintains a close working relationship with a network of tax experts in the major countries where our clients do business. We have carefully developed and nurtured this network to ensure that our clients receive responsive and sound advice and effective presentation of their positions to the local tax authorities.
We have the capability to litigate these issues. In preparing submissions for the tax authorities and other transfer pricing documentation, we always consider the impact of such submissions and documentation in litigation in the event that the transfer pricing dispute were ultimately to be resolved through litigation.
Our transfer pricing experience is well recognized. For example:
- Both the IRS and the OECD have relied on our attorneys’ insight by inviting them to participate in a number of task forces, committees, and advisory boards.
- We have been among the leaders in developing innovative methodologies to resolve transfer pricing disputes. Trade press accounts have confirmed that the IRS is using some transfer pricing methodologies that we developed to help our clients in transfer pricing disputes with other taxpayers. A former director of the APA Program acknowledged that he wanted to try to use a methodology we developed on behalf of a Japanese multinational group to resolve a significant number of the unresolved transfer pricing cases involving transactions between U.S. and Japanese affiliates.
- We have a reputation with the IRS for integrity and sophistication in analyzing transfer pricing disputes. The IRS respects the knowledge we bring to the field of transfer pricing, and we have persuaded the IRS to employ transfer pricing approaches that it initially rejected. The IRS will listen and give careful consideration to the analyses and methodologies that we suggest, even when we are proposing approaches that are quite unconventional.
- We are comfortable with the economic theories and principles that are the focus of transfer pricing controversies. We know how to work with experts to get to the best answer for our clients. We also have the experience to be able to propose a variety of potential analyses and interpretations of data to reduce or eliminate the risk of transfer pricing adjustments.
- Persuaded the IRS to withdraw proposed transfer pricing adjustments in their entirety for multiple clients.
- Persuaded the IRS to grant correlative adjustments that produced refunds to offset transfer pricing adjustments initiated by foreign tax authorities.
- Secured through mutual agreement the withdrawal of adjustments proposed by multiple foreign tax authorities.
- Secured a unilateral APA that allowed European profits, including profits in tax-favored jurisdictions, to be aggregated for purposes of testing pricing on sales to European manufacturers and distributors.
- Secured multiple bilateral APAs that included novel pricing methodologies that had not previously been accepted by either the IRS or its foreign counterpart and retrospective application of the APA methodologies to resolve open years in the U.S. and the foreign country.
- Developed a transfer pricing methodology that involves cost allocations that re-adjust to the transfer prices and persuaded a multilateral APA to apply this methodology to cover transfer pricing for transactions between a parent and its subsidiaries in three other countries.
- Assisted in developing a transfer pricing policy that involved affiliates in the U.S., multiple other high-tax countries, and several low-tax countries; prepared the implementing agreements; and defended the structure on audit.
- Persuaded the IRS to make no adjustments to the allocation of costs in a cost-sharing arrangement or to the buy-in payments at the inception of the cost-sharing arrangement.
- Secured a bilateral APA that satisfactorily remedied a mismatching of interest income and expense and eliminated a noncompliance penalty.
- Secured an APA to cover transfer pricing for design and construction operations of Canadian, European, and U.S. affiliates.
- Persuaded, on behalf of different clients, the IRS to accept methodologies that combine profit-split concepts with return on capital employed concepts, which allow a marketing return based on growth in sales in tax-favored circumstances or that split profits so as to provide a consistent return on capital employed.
- Lobbied, along with others, to amend the Internal Revenue Code to provide that APAs and the associated background files are confidential tax return information.
- Lobbied on behalf of the National Foreign Trade Council to secure legislation to recognize that competent authority agreements and pre-filing agreements are confidential.
- Resolved at appeals and through competent authority proceedings a transfer pricing dispute involving eight jurisdictions and approximately 10 audit years; IRS and foreign tax authorities agreed on amounts for transfer pricing adjustments and on correlative adjustments with credits or refunds to eliminate multiple taxation of all but nominal amounts of income.
- Reduced, through two audit cycles (at appeals in the first cycle and the examination level in the second), proposed transfer pricing adjustments to between six and 15 percent of the examining agent’s proposed amounts and, through competent authority, in securing a correlative adjustment with credits or refunds to eliminate foreign taxation of the remaining transfer pricing adjustment.
Highlights
International Tax Advisory: Searching for "Green Shoots" After a Difficult Year for IRS's Advance Pricing and Mutual Agreement Program
Last year's historic demand with a smaller staff compounded 2021's challenges for the Advance Pricing and Mutual Agreement Program (APMA). Our International Tax Group delves into this year's annual report to evaluate trends and paths for success.
International Tax Advisory: Seeking Shelter in Your International Tax Safe Harbors, Even if They Are Temporary
Our International Tax Group provides an overview of a pair of safe harbors the Organisation for Economic Cooperation and Development has provided for large multinational enterprises during the transition to the Pillar 2 global anti-base erosion rules beginning next year.
“What to Make of IRS’ New Advance Pricing Guidance,” Law360, June 15, 2023.
This article explores new IRS advance pricing agreement (APA) guidance and details the key steps in the agency’s Treaty and Transfer Pricing Operations (TTPO) Memorandum.
International Tax Advisory: What to Make of the IRS’s New “Gatekeeping” Guidance for Advance Pricing Agreements
Our International Tax Group unpacks recent IRS guidance and public comments that reveal how the agency is changing its advance pricing agreement (APA) procedures.
Alston & Bird Shortlisted in Three Transfer Pricing Categories for ITR’s 2021 Americas Tax Awards
Alston & Bird has been shortlisted by International Tax Review (ITR) in three transfer pricing categories for the “Americas Tax Awards 2021.”