Transfer Pricing

Erosion of local tax bases through transfer pricing strategies is a key concern for tax authorities throughout the world. Most authorities expect to see extensive documentation in support of transfer prices, including:

• Descriptions of the company and transaction
• Details of the transfer pricing method applied
• Assumptions on which the method is based

American Appraisal provides valuation services to assist clients with documenting and supporting their IRC §482 transfer pricing decisions. Our valuations might include application of the following methods:

Most transfer pricing rules are similar to those in the US, which require taxpayers to apply the arm’s length principle in reporting income, profits or losses for tax purposes. Where transactions have occurred on a non-arm’s-length basis and this results in a disadvantage to US tax authorities, the taxpayer is required to make appropriate arm’s length adjustments in its annual tax return. Transfer pricing documentation needs to be prepared, or to be in existence, contemporaneously with the related-party transaction.

The most contentious area within transfer pricing concerns royalty rates paid by related companies in return for the use of intellectual property including patents, trademarks, brands, copyrights, customer lists and software.

Why American Appraisal?
American Appraisal’s global footprint ensures familiarity with local practices and those local tax laws that impact valuation, as well as with cross-border treaties and requirements. Our consultants are quick to identify valuation issues and develop accurate and supportable value conclusions that withstand the scrutiny of global regulatory, judicial, and taxing authorities. 

Our extensive experience with intellectual property valuation ensures that we are well positioned to provide clients with advice concerning acceptable royalty rates that could be charged for the use of intellectual property and to prepare documentation to support pricing decisions.