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DECEMBER 2011 TRANSFER PRICING



What is Transfer Pricing?

From Transfer Pricing; Written by Steve Dowling on 2011-12-08
What is Transfer Pricing?

Transfer pricing refers to the analysis, documentation, and adjustment of charges made between related parties for goods, services, or use of tangible and intangible property. Transfer prices among components of an enterprise may be used to reflect allocation of resources among such components, or for other purposes. OECD Transfer Pricing Guidelines state, “Transfer prices are significant for both taxpayers and tax administrations because they determine in large part the income and expenses, and therefore taxable profits, of associated enterprises in different tax jurisdictions.”

Over 60 governments have adopted transfer pricing rules. Transfer pricing rules in most countries are based on what is referred to as the “arm’s length principle.” This is to establish transfer prices based on analysis of pricing in comparable transactions between two or more unrelated parties dealing...(Read More)


U.S. Regulators Interactions with Global Banks

From Transfer Pricing; Written by Steve Dowling on 2011-12-18

Global banks are closely related to several bodies. The SEC and Fed work very closely with large global banks. The OCC, FINRA and FDIC work with these banks, however have a more targeted relationship. The FFIEC is a body, but does not regulate the bank. The SEC is responsible for protecting investors and maintaining orderly markets. The Fed sets monetary policy and examines, supervises and regulates. The OCC ensures safety and soundness and examines, supervises and regulates. The FDIC ensures deposits and examines and supervises. FINRA protects investors and writes and enforces rules. The FFIEC is a formal interagency body, which sets principles, standards and report forms.

The SEC is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities...(Read More)


Sanctions Regulations

From Transfer Pricing; Written by Steve Dowling on 2011-10-26

The purpose of U.S. sanctions and trade embargoes as enforced by the U.S. Department of the Treasury ("Treasury") through the Office of Foreign Assets Control ("OFAC") is to prevent economic support of certain foreign governments, terrorist organizations, and narcotics traffickers as a means of implementing U.S. foreign policy and protecting national security interests. These economic sanctions are affected through blocked assets controls, trade embargoes, travel bans, and other commercial and financial restrictions. Since 1990, there has been a significant increase in multinational economic sanctions based on the United Nations Security Council Resolutions.

The U.S. Government enforces various types of sanctions against the following countries: Burma (Myanmar), Cuba, Iran, Libya, and Sudan. Limited sanctions also exist with respect to North Korea and Syria. OFAC has also designated...(Read More)


Resale Price Method Of Transfer Pricing

From Transfer Pricing; Written by Steve Dowling on 2011-09-30

The resale price method begins with the resale price to arm's length parties (of a product purchased from an non-arm's length enterprise), reduced by a comparable gross margin. This comparable gross margin is determined by reference to either:

--the resale price margin earned by a member of the group in comparable uncontrolled transactions (internal); or
--the resale price margin earned by an arm's length enterprise in comparable uncontrolled transactions (external).

Under this method, the arm's length price of goods acquired by a taxpayer in a non-arm's length transaction is determined by reducing the price realized on the resale of the goods by the taxpayer to an arm's length party, by an appropriate gross margin. This gross margin, the resale margin, should allow the seller to:

--recover its operating costs; and
--earn an arm's length profit based on the functions performed,...(Read More)


Cost Plus Method Of Transfer Pricing

From Transfer Pricing; Written by Steve Dowling on 2011-09-29

The cost plus method begins with the costs incurred by a supplier of a product or service provided to an non-arms length enterprise, and a comparable gross mark-up is then added to those costs. This comparable gross mark-up is determined in two ways, by reference to:

--the cost plus mark-up earned by a member of the group in (internal)comparable uncontrolled transactions; or
--the cost plus mark-up earned by an arm's length enterprise in (external) comparable uncontrolled transactions.

In either case, the returns used to determine an arms length mark-up must be those earned by persons performing similar functions and preferably selling similar goods to arm's length parties. The more comparable the functions, risks and assets, the more likely it is that the cost plus method will produce an appropriate estimate of an arms length result.

Where the transactions are not comparable...(Read More)





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