Brazil’s unique transfer pricing rules have allowed multinationals to shift income to tax havens in certain situations. We explore through the lens of the Macopolo case how Brazil could benefit from adoption of the arm's length standard.

Topics: Base Erosion and Profit Shifting (BEPS) Tax Policy TNMM/CPM tax controversy Brazil OECD Guidelines

Harold McClure explores intercompany financing issues through the lens of a recent case before the EU General Court and an upcoming battle between Perrigo and the IRS.

Topics: Intercompany Financing United States Interest Rates Europe

International tax law firms are rightfully warning clients of audit risks with respect to intercompany financing in France. Taxpayers can mitigate risk by following new OECD guidance, providing sound economic analysis and avoiding overly aggressive positions on group vs. standalone credit ratings.

Topics: France Intercompany Financing United States Interest Rates

In February 2021, the Supreme Court of Canada declined to hear the Canadian Revenue Agency's (CRA) appeal in its case against uranium multinational Cameco Corporation. However, this only marked the end of Round 1, as the courts only ruled on 8 of 14 years under review.

Topics: Mining and Extractives Canadian Revenue Agency Profit Indicators TNMM/CPM tax controversy

The Israel Tax Authority is questioning whether costs plus markup models Israeli R&D affiliates are at arm's length. This could present issues for multinationals that have not been giving proper consideration to cost base, asset intensity and ownership of valuable intangibles in their benchmarking.

Topics: Intangibles DEMPE Benchmarking Base Erosion and Profit Shifting (BEPS) Tax Policy

Notwithstanding its acceptance in Coca Cola Co. v. Commissioner of the IRS, Return on Assets is a controversial profit indicator to use in transfer pricing. At the very least it must be subject to economic analysis to corroborate a relationship between operating profit and operating assets.

Topics: Profit Indicators Tutorial Return on Assets tax controversy

A recent article asserted that state tax authorities should use the Comparable Profits Method (CPM) with care in the evaluation of transfer pricing for tangible goods. However, some of the examples cited, including the recent Coca Cola case, in their piece are misplaced for reasons we will address.

Topics: State Transfer Pricing Tax Policy TNMM/CPM tax controversy

Selecting alleged comparable companies with different functions than the tested party is known to open Pandora's Box in transfer pricing controversy, and is often exacerbated by a failure to adjust for material differences between the tested party and the selected comparables.

Topics: Profit Indicators Comparability Limited Risk Distributor tax controversy

Ad hoc adjustments are a risky endeavor in transfer pricing. Using regression analysis, we can test if asset intensity is relevant to explain the behavior of the operating profit markup or profit margin and calculate a reliable adjustment to the profit indicator.

Topics: Profit Indicators Asset Intensity Adjustment Tutorial TNMM/CPM

The prevalent use of quartiles to determine profit indicators often results in a wide (unreliable range) and ad hoc assets adjustments. These problems can be solved by using regression analysis, which produces more defensible statistical ranges of the profit indicator resistant to audit scrutiny.

Topics: Profit Indicators Tutorial TNMM/CPM

Following its neighbor Australia, New Zealand has issued a large assessment to Oracle related to its distribution affiliate. We explore potential comparability and BEPS issues that could play a role in the dispute.

Topics: Profit Indicators Comparability Base Erosion and Profit Shifting (BEPS) TNMM/CPM

Changes to tax laws are often seen as the primary solution to curb profit shifting. However, proper application of the arm's length principle alongside BEPS CbCR disclosures already offer powerful tools in this endeavor.

Topics: Pharmaceutical Industry Base Erosion and Profit Shifting (BEPS) Tax Policy TNMM/CPM

Comparability is a key issue in transfer pricing that is often not fully appreciated. However, comparability issues are hardly uncommon in transfer pricing controversies and can create a trickle-down effect that leads to major taxation issues.

Topics: Profit Indicators Comparability Limited Risk Distributor TNMM/CPM