On June 5, 2021, the Finance Ministers and Central Bank Governors of the G7 countries issued a Communiqué announcing their agreement on the conceptual framework for a substantial revision to global tax policy (the “Communiqué”). The Communiqué puts the G7’s stamp of approval on recent efforts by the OECD (supported by a big push by
Jenny Austin is a partner in Mayer Brown's Chicago office and a member of the Tax Controversy practice. She concentrates her practice on federal tax controversy and litigation, working across all industries, including medical device, pharmaceutical, health care, retail, and technology companies. She guides clients through all stages of tax controversies, from Internal Revenue Service (IRS) audits to administrative appeals, alternative dispute resolution proceedings, and litigation. Jenny is prepared to respond to a variety of both domestic and international issues that the IRS audits and challenges. Jenny favors strategies to resolve issues successfully with the IRS at the earliest possible stage without litigation.
In the dawn years of transfer pricing, when the bulk of international trade focused on tangible goods, relatively little attention was devoted to the analysis of transactions involving services. The 1968 U.S. Treasury Regulations governing intercompany services focused on the allocation and apportionment of costs with respect to services undertaken for the benefit of the related parties, roughly in line with the current Services Cost Method, and provided a high level discussion of the services that were an integral part of the business activity of a member of a controlled group without elaborating on the methods to be used to test compliance with the arm’s length standard (Section 1.482-2(b) (1968)). In the 1995 Transfer Pricing Guidelines from the Organization for Economic Cooperation and Development (“OECD”), the analysis of pricing of intracompany services occupied a mere 15 pages. In the mid-2000s, there was a renewed focus on the pricing of intercompany services. First to the stage were the U.S. Treasury Regulations in Section 1.482-9 promulgated in August of 2009, followed by several International Practice Units in 2014 through 2017, and then by the OECD with a revised Chapter VII in the 2017 OECD Guidelines. The increased attention is not surprising: over the last 20 years, from 1999 to 2019, the growth of trade in services far outpaced that of tangible goods (215% vs 137% for exports and 199% vs 143% for imports), with particularly robust performance in maintenance and repair, financial, and business services.
Continue Reading Intercompany Services: The Next Frontier of Transfer Pricing Disputes
Assume the Internal Revenue Service (“IRS”) is auditing your company’s transfer pricing. The administrative process is starting to break down, and it looks as if the IRS might assert a sizeable income adjustment. What is your duty to save documents for a potential upcoming court case?
Continue Reading Document Preservation for Transfer Pricing Litigation: What You Need to Know