Transfer Pricing Policies Amidst Global Disruptions: Challenges + Opportunities From Tariffs to COVID-19 Pandemic to Economic Downturns

This program has been cancelled

A live 110-minute CPE webinar with interactive Q&A


Thursday, October 22, 2020

1:00pm-2:50pm EDT, 10:00am-11:50am PDT


This webinar will address the need to reevaluate existing transfer pricing strategies in light of current global events and the economic downturn. Reduced sales and profits, and an increase in reportable losses, will require restructuring existing arrangements to minimize these losses and take advantage of current planning opportunities. These changes will give the IRS and other tax authorities more reasons to examine these arrangements.

Description

Transacting business with controlled entities outside a business' geographic borders presents an opportunity for intercompany transactions to be structured so that losses occur in higher tax jurisdictions, and profits are recognized in lower tax (or even no tax) jurisdictions. While every company has the right to minimize effective global tax rate, doing so for purely tax driven reasons, without the economic business substance supporting it, is illegal. Transfer pricing provides the economic substance to deem intercompany transactions as arm’s length--or market rate--pricing to support the commercial nature of the activity. Hence, we have IRC Section 482 in the U.S., local legislation in other markets, plus the OECD guidelines that drive the efforts for global unity and transparency around transfer pricing.

Under Section 482, businesses must not only select a reasonable transfer pricing method, they must choose the "best method." Losses reported by companies internationally will be upsetting transfer pricing regimes, with advisers and taxpayers alike unable to foresee or control the current economic conditions. It is more critical that even to consider whether the existing transfer pricing policies, and benchmarking and analysis of comparable international industries to determine pricing structures, is still the best method. While the tax authorities may take the position of “normal course of business,” it is the responsibility of the taxpayer and adviser to build the argument that these are extraordinary events to quantify and adjust for in transfer pricing models. And this process is very specific and individual not only by industry, but by company itself, depending on the severity of the negative impact.

This economic decline requires more than a fresh look at transfer pricing regimes and documentation; it creates strategic opportunities. Among these are reevaluating supply chain locations, cash flow management strategies (or lack of), intangible asset locations, delineating companies and their contributions to the global business, treatment of extraordinary items (such as COVID-19 disruptions, tariff costs, or severance payments), refining customs declarations approach, and reworking intercompany legal agreements. The sooner companies respond to these changes, the sooner they can mitigate losses, strengthen arguments, and prepare for potential audits. Those who are most proactive are not waiting until next year for FY2020 documentation but engaging in transfer pricing planning work today to impact the year before closing the books.

Listen as our panel of international transfer pricing experts discusses reconsidering transfer pricing regimes during an economic decline.

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Outline

  1. Background
  2. Product pricing and methods
  3. Revisiting locations
  4. Cash flow management
  5. Specific industries
    1. Digital services
    2. Technology
  6. Extraordinary events
  7. Uncertainties and risks
  8. IRS other taxing authorities
  9. Documentation
  10. Best practices

Benefits

The panel will cover these and other critical issues:

  • How previously selected pricing methods may no longer be viable
  • When businesses may benefit by relocating intangible assets
  • How to document and support updated transfer pricing regimes
  • What activities will likely be considered normal course of business vs. extraordinary events
  • How to quantify and adjust for extraordinary events in FY2020 transfer pricing documentation
  • How to prepare to meet IRS and other taxing authorities' documentation requirements
  • How to shore up weaknesses or explore new opportunities presented by current global events

Faculty

Andrew DeSimone
Andrew DeSimone

Transfer Pricing Manager
Withum Smith+Brown

Mr. DeSimone evaluates intercompany transfers of tangible goods, intangible property, services, and loans and conducts...  |  Read More

Gentile, Marina
Marina Gentile

Lead, Global Transfer Pricing Strategies
Withum Smith+Brown

Ms. Gentile advises clients with regard to the market/arm's-length nature of their transfer pricing structure...  |  Read More