Tax Services
Transfer Pricing
What transfer pricing rules require for transactions between related parties.
The Ground Rules Behind Transfer Pricing
Whenever goods, services, or intangibles cross borders between related entities, the IRS requires every transaction to be priced as though the parties were unrelated, at arm's length. Without documentation to back those prices up, penalties and double taxation are both on the table. It's a specialized corner of tax law, and if it applies to your business, we're happy to help point you toward the right specialist and make sure it lines up with the rest of your filings.
Documentation has to hold up under both IRS Section 482 and OECD standards.
Key Things to Know
- What arm's-length pricing means
- Documentation basics
- When to bring in a specialist
Ready when you are
Operational Milestones
Map & Analyze
It starts with mapping every intercompany relationship and transaction flow, then assessing the functions, assets, and risks tied to each related entity.
Benchmark
From there, comparable analysis against industry databases helps establish defensible arm's-length price ranges for each type of transaction.
Document & Maintain
Contemporaneous reports get produced to satisfy both domestic and international requirements, with monitoring and policy updates built in year after year.
Included Services & Outcomes
Pricing Without Support Invites an Adjustment
The IRS has been auditing intercompany pricing aggressively. Solid documentation isn't optional here, it's the first and strongest line of defense available.
Questions
Transfer Pricing FAQ
Who actually needs transfer pricing documentation?
Any US business transacting with foreign affiliates, subsidiaries, or related entities across borders, which covers multinationals, eCommerce companies with offshore teams, import-export businesses, and real estate firms sharing international management.
What's the downside of non-compliant transfer pricing?
Under Section 482, the IRS has the authority to reallocate income between related entities, which can mean double taxation, penalties as high as 40% of the underpayment, and interest on top of it. Solid documentation remains the best defense against all of it.
How often do transfer pricing studies need updating?
At least once a year, at a minimum. Any material shift in business operations, entity structure, or the regulatory landscape should prompt an immediate review and update.
What does the arm's-length standard actually require?
It requires that prices charged between related parties reflect what independent, unrelated parties would have agreed to under similar circumstances. The IRS tests for this using several approved methods: comparable uncontrolled price, cost-plus, resale price, and profit-split.
How long does a transfer pricing study usually take?
These studies are typically handled by specialists and usually run 6 to 10 weeks, from the initial functional analysis through final documentation. If one's needed, we're glad to help point you toward the right specialist and make sure the result fits with the rest of your tax filings.
Resources
Transfer Pricing insights
Doing Business With a Related Entity Overseas?
Reach out for a free consultation. We'll review your situation, quote a flat fee, and show you exactly what we'd do differently.