Transfer Pricing

Transfer pricing refers to the setting of prices at which affiliated entities within a multination enterprise (MNE) transact with one another. These intercompany transactions have minimal impact on the MNE’s pre-tax profits but can significantly affect its tax liabilities and after-tax earnings. MNEs present unique challenges to the IRS and foreign taxing authorities, and most countries have established an “arm’s length” standard for evaluating a multinational taxpayer’s transfer pricing policies.

The Purpose

Transfer pricing analysis and documentation are essential for complying with US and international tax regulations and optimizing tax positions. Most MNEs work with outside experts to conduct transfer pricing analysis and prepare a report. The report will include a functional analysis of the MNE’s various entities, a review of the MNE’s controlled transactions (including transfers of goods, services, intangible property, and more), and a determination of an arm’s-length price. There can be severe consequences for MNEs with inadequate transfer pricing, including tax penalties of up to 40% in the U.S., and the potential for double taxation.

Trigger Event

• Establishment of a foreign subsidiary
• International mergers and acquisitions
• Cross-border development and licensing of intellectual property
• IRS or foreign taxing authority audit
• Advance Pricing Agreement (APA) programs
• Disputes, litigation, and Mutual Agreement Procedures (MAPs)

Scalar’s Services

Scalar’s transfer pricing team includes economists and valuation consultants with significant US and international experience. Scalar goes above and beyond basic benchmarking and tailors analysis to each individual taxpayer’s case. Our transfer pricing professionals are well-versed in the needs of both global MNEs and smaller international enterprises. We serve the entire array of transfer pricing needs and have successfully worked in advance pricing, mutual agreement, and litigation contexts.