Transfer Pricing Insider

Frequently Asked Questions

Why do I need transfer pricing documentation?

Many taxing authorities around the world have documentation requirements and will assess penalties for not having the appropriate documentation. In addition, having clear transfer pricing policies and practices will help to minimize the effective tax rate of your multinational corporation. 

My transaction is out of range. How can I get the results of my analysis to be in range?

Depending upon the facts and circumstances surrounding the inter-company transaction, there are a number of ways to minimize the risk of transfer pricing penalty exposure. You can reconsider the list of comparable companies, re-evaluate the appropriateness of bulk rejections, re-examine the financial information entered for the tested party or reconsider the transfer pricing method. Users of CrossBorder Compliance have access to unlimited support from the economists at CrossBorder, so you can call us to discuss your situation at any time during the term of your software license.

What is the process of completing a transfer pricing analysis with CrossBorder?

You can work with CrossBorder in one of two ways:

1. Managed Outsourcing Solution (MOS)
   If you are a client and you choose the MOS option, CrossBorder contacts you to schedule fact pattern interviews, which are followed by questionnaires for you to complete, if necessary. Our economists review and discuss the information you provide about your inter-company transaction and determine the best way to approach the preparation of an analysis. A study is then prepared using the CrossBorder Compliance software. The study is delivered to you in electronic format for both jurisdictions in the inter-company transaction. The engagement is billed at a flat rate like any outsourcing engagement.
2. Hybrid Approach
   As a software client, you can also choose the hybrid approach. In this arrangement, CrossBorder’s transfer pricing team completes your study as an outsourcing engagement during the initial year. During this phase, inter-company transactions are analyzed as they would be in any outsourcing engagement. After the initial year study has been reviewed and finalized, the study file is delivered to you with the CrossBorder Compliance software. Next, we schedule a software training session for you that can be conducted either online or at one of our local offices so that you can continue using CrossBorder Compliance on your own to update your studies in the future.

What are the new services regulations that I keep hearing about? Do I need to concern myself with them?

On August 4, 2005, the Treasury Department and the Internal Revenue Service published temporary regulations that address controlled services under section 482. The temporary regulations provide for a new transfer pricing method called the Services Cost Method (SCM), which allows the arm's-length charge for the controlled services transaction to be determined by reference to the total services cost without an element of profit.

The application of the SCM is at the discretion of the taxpayer. In order to apply the method, you must demonstrate that the service transaction does not contribute significantly to key competitive advantages, core capabilities or fundamental risks of success or failure in one or more trades¹.

These temporary regulations are applicable to taxable years after December 31, 2007, with the exception of the business judgment rule, which should be considered when evaluating services for the taxable years beginning December 31, 2006.