Photo of Anthony D. Pastore

Just in time for the holidays, the OECD has published detailed guidance about the impact of the COVID-19 pandemic on transfer pricing. The guidance has useful information for taxpayers and tax administrations alike. It contains general advice on the application of basic transfer pricing principles during the pandemic, as well as specific advice on four issues: (i) comparability analyses, (ii) allocating losses, (iii) government-assistance programs, and (iv) advance pricing arrangements (“APAs”). The OECD guidance is broadly consistent with comments we made in a prior post about the impact of the pandemic on transfer pricing.

Continue Reading OECD Guidance on Pandemic’s Impact on Transfer Pricing

The parties recently completed briefing on an IRS motion for partial summary judgment in Western Digital Corporation v. Commissioner. The motion asks the US Tax Court to hold that a safe harbor in the Section 482 regulations is not relevant to whether intercompany receivable terms are “ordinary and necessary” under a provision in Subpart F. In our view, the motion is an unusual attempt to bar the taxpayer from making a well-founded legal argument in a case that is over a year away from trial.

Continue Reading IRS Seeks to Bar Transfer Pricing Argument in Western Digital

Last week, the IRS issued new guidance that addresses “telescoping” in mutual agreement procedure (“MAP”) and advance pricing agreement (“APA”) cases. Very generally, the guidance disallows (subject to a $10 million materiality exception) telescoping for tax years starting in 2018, when the Tax Cuts and Jobs Act (“TCJA”) came into effect, while continuing to allow telescoping for pre-2018 years in appropriate cases. According to the IRS’s Advance Pricing and Mutual Agreement (“APMA”) program, the new guidance was needed to address the impact of the TCJA “and its many interlocking provisions that require careful determination (and redetermination, as needed) of a U.S. taxpayer’s taxable income and tax attributes.” The new guidance has the potential to drive up compliance costs by increasing the number of tax returns that taxpayers must file to resolve MAP and APA resolutions for post-TCJA years (and resolutions spanning both pre- and post-TCJA years).

Continue Reading Telescoping into the Void

As discussed in a recent blog post, the Inland Revenue Authority of Singapore (“IRAS”) has been issuing guidance on the impact of COVID-19 on transfer pricing issues. This week, IRAS issued new forward-looking guidance on (i) the tax residency status of companies and (ii) permanent establishments. This guidance is temporary and applies for the 2021 tax year.

Continue Reading Singapore Issues New Guidance on Tax Residency & Permanent Establishments

COVID-19 has sparked a seismic change in the workplace as many companies have found that working from home (“WFH”) has not diminished employee productivity and that employees prefer its greater flexibility. Given that—and the potential for saving on overhead costs—many companies have announced plans to adopt long-term WFH policies and close or realign office space. The OECD and several countries including the US, UK, Ireland, and Australia have issued guidance that excepts employees temporarily dislocated outside their employer’s country from creating unintended permanent establishments (“PE”)—but long-term WFH employees are not similarly excepted. The US, in particular, has thus far only officially extended PE protection for temporary dislocations of up to 60 calendar days that begin within the emergency period of February 1, 2020 through April 1, 2020.

While many employees that WFH do so from the same country as their employer, that is not always true, and so companies would be wise to perform their due diligence. To that end, this post analyzes some PE issues that a company should consider before it adopts a long-term WFH policy.


Continue Reading Work-From-Home Policies in the Post-COVID Era

In a recent landmark case involving basic transfer pricing principles, Canada v. Cameco Corporation, 2020 FCA 112, the Canadian Federal Court of Appeal sided with the taxpayer. The Court rejected an argument by the Crown that would have applied “realistic alternatives”-like principles to effectively disregard and recharacterize certain related party purchase and sales transactions. For international observers, the case is worth studying, if for no other reason than to understand the government’s aggressive arguments. In light of the codification of the realistic alternatives principle in IRC § 482, the IRS might now be emboldened to make similar arguments in the US.

Continue Reading Canadian Federal Court of Appeal Nukes Crown’s Transfer Pricing Arguments

In May, the IRS asserted $340 million in transfer pricing penalties in Western Digital Corporation v. Commissioner. If the IRS prevails, these would appear to be the largest transfer pricing penalties sustained in US Tax Court history.

The penalties are notable not only for their amount, but also for the way the IRS raised them. The IRS did not apply penalties in its notices of deficiency or in its initial Tax Court pleadings. Instead, the IRS asserted the penalties in amended pleadings over a year after the case began.
Continue Reading IRS Asserts Big-Ticket Transfer Pricing Penalties in Western Digital

COVID-19 has made force majeure a hot topic in transfer pricing. The idea is that the pandemic was an unexpected development of such power, like a natural disaster, that transfer pricing agreements can be changed to reflect the changed economics of a changed world.

But is there any case authority to support this approach? In fact there is, from one of the largest US transfer pricing cases of the 1990s.


Continue Reading “Mutual Dependence”: Authority for Force Majeure in Transfer Pricing