US taxman eases transfer pricing rules

The US taxman has introduced less 'draconian' transfer pricing rules for multinationals, but has not removed all restrictions, say advisers.

The Internal Revenue Service and US Treasury have eased rules around cost sharing arrangements that provide extra flexibility in transfer pricing schemes, which apply to companies and their foreign partners that share in the cost of developing intanginble property.

The new rules relax how these properties are valued.

'They're not draconian now, but they are still very restrictive,' Ernst & Young director of transfer pricing controversy services David Canale told WebCPA.

'They have a framework called the investor model. They provide more flexibility in how it is implemented versus how they described it in the 2005 regulations, but it's still a fairly restrictive interpretation of how you value this intellectual property. The IRS view is that this establishes an arm's-length price. They provide more guidance outlining methods that they consider provide more of an arm's-length approach.'

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