Transfer pricing is important to multinational entities and tax administrators. Transfer pricing involves transactions between affiliated entities domiciled in different countries creating different tax requirements. Profit determination of multinationals generated by intra-company transactions is one of the most challenging issues in international taxation.
For this assignment, identify a multinational company that engages in cross border transactions in two foreign countries. Suppose that this company has engaged you to provide advice on intercompany pricing to achieve the lowest combined taxes for all jurisdictions.
Using the Internet and/or Strayer Library, research the rules and techniques for transfer pricing. Choose two foreign countries and research their respective tax rates.
Write a 5–7-page paper in which you:
Provide the name of the company you’ve selected and what type of international business they are engaged in. Based on your research, create projections of revenues, costs, and tax rates based on the company’s transaction in the two countries researched and the United States.
Create a scenario in which you allocate revenues and costs to each country to determine the lowest possible overall tax for each country. Provide support for your allocations.
Propose a scenario to the client that will result in a favorable tax position. Provide support for your position.
Analyze how the Internal Revenue Service (IRS) uses Internal Revenue Code (IRC) section 482 to prevent shifting of profits to other countries to reduce U.S. tax liability.
Assume that the IRS has challenged the allocations and is preparing to audit the client. Prepare a brief position to defend the client to the IRS. Provide support for your position.
Evaluate two tools IRS agents have available to perform the audit on multinational transfer pricing issues.
Use at least five quality resources in this assignment. Note: Wikipedia and similar websites do not qualify as quality resources.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course.
The specific course learning outcome associated with this assignment is:
Create a proposal for allocating revenues and costs that satisfies IRS codes while determining the lowest possible taxes for a multinational company that engages in cross border transactions in two foreign countries.