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What to Expect When You’re Expecting… A Transfer Pricing Examination?

Posted on May 1st, 2019

Transfer pricing examinations can be unpleasant experiences for taxpayers. Chances are, an international business in the U.S. – whether it is headquartered in the U.S., or a subsidiary of a foreign parent – is going to have its transfer pricing examined by the IRS or another tax authority.

Transfer pricing has been cited by IRS officials for years as one of their most important enforcement priorities. But as a direct result of BEPS (the OECD’s Base Erosion Profit Shifting project), tax authorities around the world are actively engaged in the process of revising and tightening their expectations and requirements with respect to transfer pricing. The prospect of thorough and detailed examinations of taxpayers’ transfer pricing positions is growing every day.

Fortunately for multinational companies operating in the U.S., an important document exists that can help taxpayers be better prepared for the eventual IRS transfer pricing exam: The Transfer Pricing Examination Process, Publication 5300 (TPEP). Originally released in June 2018, the TPEP is a 37-page guide prepared by the IRS for its issue teams to help them be better prepared to examine the transfer pricing positions of taxpayers, and it lays out in considerable detail the process and expectations surrounding such an examination. The TPEP replaces the Transfer Pricing Audit Roadmap, which was issued in 2014. WTP Advisors’ Guy Sanschagrin and Doug Schwerdt authored a comprehensive review of the TPEP, “Review of and Insights on the IRS Transfer Pricing Examination”, which was published by Tax Notes International on March 18, 2019. This article contains key insights to help taxpayers be better prepared and it can be accessed by clicking here.

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