Transfer Pricing Highlights – August 2014

Thomson Reuters Tax & Accounting Newsletters, ONESOURCE August 3, 2014

Welcome to the August edition of the ONESOURCE Transfer Pricing Newsletter, your monthly source for the latest transfer pricing news. Each edition will feature articles and insight to keep you apprised on current events in the transfer pricing industry, as well as exciting things we are working on at Thomson Reuters ONESOURCE.

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What’s New

Zimmer Holdings Claims IRS Disregarded Arm’s-Length Deals in Making Adjustments

Zimmer Holdings became the third U.S. based medical device multinational that has decided to litigate a large transfer pricing adjustment. This case as well as the Guidant and Medtronic litigations involve accusations by the IRS that the multinational transferred the use of valuable intangible assets for less than the arm’s length consideration.

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Transocean wins court case in Norway

The Norwegian tax authorities lost another attempt to completely eliminate the profits accruing to a leasing affiliate located in Switzerland. This taxpayer win still leaves open the issue of whether its intercompany leasing policy was consistent with the arm’s length standard.

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China Asserts Location Savings, Profit Split In One-Third of Audits, Deloitte Survey Finds

The Chinese SAT and the Indian tax authorities have been asserting that the local affiliate deserve more than a routine return for contract manufacturing or for distribution activity. Their assertion that the local affiliate deserves a portion of residual profits because of location specific advantages often comes up during an audit. Multinationals should review their current intercompany policies and documentation to insure they do not fact double taxation from other national tax authorities taken positions that differ from these assertions from the Chinese and Indian tax authorities. The example mentioned in this story has been noted before even though there seems to be considerable confusion as to the alleged calculation of location savings.

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Bolivia’s New Transfer Pricing Regime Includes ‘Sixth Method’ for Commodities

Bolivia joined nine other Latin American tax authorities in its adoption of a “sixth method” for evaluating intercompany pricing for agricultural commodities, which was pioneered by the Argentine tax authorities. This method appears to be a variation of the Comparable Uncontrolled Price approach.

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