The new Temporary Services Regulations issued by the IRS raise significant issues for companies involved in related-party services transactions, including the creation of a new cost safe harbor, the Services Cost Method (SCM). However, to take advantage of this provision, companies must prepare appropriate documentation and meet required deadlines. The IRS clarified documentation requirements and modified the effective date of the Temporary Regulations in Notice 2007-5. While the SCM allows documentation to be filed after the tax return, non-contemporaneous documentation does not provide penalty protection. Also of note is the inclusion of stock-based compensation in the Temporary Regulations and the treatment of some services which may have been considered non-beneficial in the past as beneficial. This article also discusses the contingent payment agreement documentation requirements under the Temporary Regulations and offers taxpayers some advice on working with the various provisions. [Read More]
On August 1, the IRS issued final and temporary transfer pricing services regulations. These new regulations offer new methods for valuing services between related parties. [Read More]
A December, 2005 IRS hearing on its new proposed cost-sharing regulations drew sharp criticism from many in the business community. Many multinational companies, accounting firms, and law firms submitted testimony in advance of the hearing regarding the potential effects of the proposed regulations if they are adopted in their current form, some arguing that the regulations could have a chilling effect on conducting research and development in the United States leading to increased outsourcing of R&D operations overseas. Testimony submitted includes:
On June 30, the Tokyo Regional Taxation Bureau ordered Sony Corporation and its subsidiary Sony Computer Entertainment Corporation to pay 27.9 billion yen (USD$242.8 million) in back taxes on undeclared income stemming from a transfer pricing dispute. [Read More]
The U.S. Internal Revenue Service has imposed penalties of approximately $1 billion on virus-protection software maker Symantec for two separate incidents involving underestimation of intellectual property value generated by related parties in Ireland prior to Symantec's 2004 acquisition of Veritas Software. Related articles:
GlaxoSmithKline and the IRS announced a $3.4 billion settlement in their long-running transfer pricing dispute on September 11. The settlement has implications for use of the IRS' Advance Pricing Agreement program and for the transfer pricing of intangibles. The settlement is particularly interesting with respect to the role of marketing in creating value. [Read More]
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