Transfera pricing,a thea rsta thinga thata comesa toa minda isa aa largea mul-naonala organizaon,a sucha asa
Applea ora Google,a thata cana shia protsa toa lowera taxeda jurisdicons.a a Theya cana doa thisa becausea thea
parenta entya hasa controla overa itsa subsidiariesa ina mulplea countriesa anda cana dictatea thea pricea ofa
transferringa goods,a services,a ora intellectuala propertya (IP),a anda thusa limita theira taxa liabilitya bya ensuringa
thata thea protsa earneda froma thea transfersa area taxeda ata thea lowesta ratesa (Seth,a 2023).a a Ia believea thata
ita isa importanta fora governmentsa sucha asa thea USa toa connuea toa maintaina rulesa ona thea faira valuaona ofa
goods,a servicesa anda IPa beinga transferreda betweena subsidiariesa ofa ana organizaon,a becausea ofa thea
economica anda sociala impacta ofa unfaira transfera pricinga pracces.a a Ata thea samea me,a Ia feela thata thisa
praccea shoulda providea countriesa witha ana incenvea toa makea theira taxa policiesa compevea ina ordera
toa aracta mul-naonala organizaonsa toa doa businessa ina theira jurisdicons.
Ia currentlya livea ina Easta Stroudsburg,a Pennsylvaniaa witha mya husband,a foura childrena anda twoa dogs.a Ia
alsoa worka full-mea fora aa majora banka anda havea beena witha thea companya fora overa 22a years.
Thisa week’sa discussiona givesa usa thea opportunitya toa reviewa transfera pricing.a Transfera pricing,a puta ina
simplesta terms,a isa aa commona praccea useda bya companiesa toa transfera goodsa anda servicesa betweena
subsidiaries,a aliates,a ora relateda enesa fora aa seta price.a Thisa pricea cana bea abovea ora belowa thea
marketa price.a Highera pricesa area useda ina high-taxa jurisdiconsa toa reducea prot,a whilea lowera pricesa area
useda ina low-taxa jurisdiconsa toa increasea prot.a Ina othera words,a companiesa usea transfera pricinga toa
reducea taxa liability.
Secona 482a statesa thata thea pricesa chargeda bya onea aliatea toa anothera fora thea exchangea ofa goodsa anda
servicesa shoulda bea consistenta witha whata woulda havea beena chargeda ifa thea exchangea wasa madea witha aa
non-aliate.a Ina thea arclea wea reada thisa week,a Whata Facebooka anda Applea Cana Teacha Youa Abouta
Transfera Pricing,a wea area givena ana examplea ofa whata happensa whena aa companya isa invesgateda bya thea
IRSa fora potenallya nota pricinga aa gooda ora servicea transferreda toa itsa aliatea ata aa faira price.a Ina thea
arcle,a Facebooka coulda potenallya owea billionsa fora ana invesgaona broughta ona bya thea IRSa fora thea
waya ita moveda assetsa toa itsa Irisha subsidiarya toa reducea thea company’sa taxa liabilitya (Worstall,a 2016).
Ia doa nota agreea witha transfera pricinga althougha Ia understanda whya companiesa engagea ina thisa pracce.a
Althougha transfera pricinga createsa taxa reducona fora thea companiesa thata engagea ina it,a ita createsa aa
negavea economica impacta ona thea countriesa anda socieesa wherea thesea businessesa doa business.
Aa transfera pricea isa thea pricea chargeda betweena relateda paresa (e.g.,a aa parenta companya anda itsa
controlleda foreigna corporaon)a ina ana intercompanya transacona (McKinleya anda Owsley,a 2013).a Whilea
it’sa absolutelya legala toa usea thea transfera pricinga methoda ifa ita meetsa thea requirementsa ofa Regs.a Sec.a §a
1.482-1(b),a ita oena leadsa toa ligaona sincea mulnaonala companiesa havea dierenta judgementa anda
interpretaona ofa factsa whena theya determinea aa rangea ofa arm’s-lengtha pricesa (ora prots).a Aa greata
examplea woulda bea aa taxa courta casea 3Ma Co.a v.a Commissioner,a ina whicha 3Ma Companya anda itsa Braziliana
subsidiarya trieda toa entera intoa aa licensea agreementa witha similara condionsa toa thea othera related-partya
manufacturinga arrangements.a However,a thea Braziliana Patenta anda Trademarka Oce,a disalloweda ita bya
sayinga thata thea royaltya ratea 3Ma hada oereda wasa tooa higha anda nota ina linea witha locala regulaons.a Asa aa
result,a aa mucha lowera royaltya wasa accepteda bya thea pares.a Ina 2006,a 3Ma Brazila paida $5.1a milliona ina
royalesa toa 3M,a ina addiona toa $64.5a milliona ina dividends.a Therea werea twoa primarya issuesa ligateda ina
thea case.a Thea rsta wasa whethera thea IRSa coulda usea Secona 482a toa allocatea addionala royaltya incomea
toa 3M.a Thea seconda wasa whethera Treas.a Reg.a Sec.a 1.482-1(h)(2),a whicha speciesa whena anda howa
foreigna legala restriconsa willa bea considereda fora purposesa ofa aa Secona 482a adjustment,a wasa invalid.a
Thea Taxa Courta ruleda ina Favora ofa thea IRSa ina aa narrowa 9-8a decision.a Thea IRSa claimeda thata thea arm’sa
lengtha standarda appliesa ina everya case,a cinga Treasurya Regulaona Sec.a 1.482-1(b).a Thea IRSa alsoa
claimeda thata Treas.a Reg.a Sec.a 1.482-1(h)(2)a isa aa reasonablea construcona ofa Secona 482,a withina thea
authoritya Congressa delegateda toa Treasury.
Whilea Ia seea thea benetsa ofa thea transfera pricinga policy,a sucha asa costa savingsa betweena dierenta
departmentsa ofa thea company,a protecona froma uncertaina supplya froma thea vendors,a reducona ina
incomea taxes,a reduconsa ina customa fees,a Ia alsoa thinka thata transfera pricinga opensa doorsa fora taxa
evasion.
References
3Ma Co.a v.a Commissioner,a 160a T.C.a 3
IRCa §a 482
McKinley,a J.,a Owsley,a J.a (2013).a Transfera pricinga anda itsa eecta ona nanciala reporng.a Journala ofa
Accountancy.a Retrieveda froma
hps://www.journalofaccountancy.com/issues/2013/oct/20137721.html
Regs.a Sec.a 1.482-1(b)
Seth,a S.a (2023).a Transfera Pricing:a Whata Ita Isa anda Howa Ita Works,a Witha Examples.a Transfera Pricing:a Whata
Ita Isa anda Howa Ita Works,a Witha Examplesa (investopedia.com)
Worstall,a T.a (2016).a Whata Facebooka anda Applea Cana Teacha Youa Abouta Transfera Pricing.a Whata Facebooka
Anda Applea Cana Teacha Youa Abouta Transfera Pricinga (forbes.com)
Seth,a S.a (2023,a Maya 28).a Transfera pricing:a whata isa it,a howa ita works,a witha examples.a Retrieveda froma
Investopedia.com:a hps://www.investopedia.com/terms/t/transfer-pricing.asp
