US taxman eases transfer pricing rules

The US tax-man 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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