In an increasingly complex global tax environment, transfer pricing continues to be one of the most sensitive and strategic issues in international taxation. Recent developments in the United States and Ireland show how these two key jurisdictions are adopting diametrically opposed regulatory and administrative approaches, creating significant challenges for multinationals in terms of compliance, litigation, and tax dispute resolution.
Structural transformations in the United States
In the United States, the evolution of transfer pricing disputes is strongly influenced by administrative changes. The Internal Revenue Service (IRS) has recently experienced a 25% reduction in staff, particularly in Human Resources and the Appeals Office, which has weakened its ability to independently manage tax disputes.
This institutional weakening has led to an increase in the complexity and duration of tax audits and has encouraged taxpayers to explore preventive mechanisms such as Advance Pricing Agreements (APAs) or Mutual Agreement Procedures (MAPs). These instruments make it possible to avoid lengthy litigation and offer greater legal certainty in cross-border transactions.
In addition, the IRS has intensified its scrutiny of certain sensitive transactions, such as corporate restructurings, intangible transactions, stock-based compensation, and ex post adjustments to effective profitability. In particular, the institutional position expressed in GLAM 2025-001 suggests a growing willingness on the part of the IRS to consider actual profitability results to adjust transfer prices, which could mark a shift from the traditional approach focused on ex ante projections.
Strengthening and sophistication of the Irish approach
Unlike the US environment, Ireland has adopted a more robust and expansive strategy for transfer pricing enforcement. The Irish tax authority has increased its operational capacity by incorporating specialized teams in competent authority and dispute resolution functions, as well as in international litigation.
The Irish approach is distinguished by its emphasis on substantive analysis of transactions, beyond formal contracts. Tax authorities have begun to actively question the real economic nature of transactions, especially those involving intercompany interest rates, intellectual property, and the allocation of functions, risks, and assets (FAR).
There is also a growing emphasis on strict compliance with contemporary documentation, in line with OECD guidelines. The recharacterization of transactions and the application of the arm’s length principle from an economic perspective are becoming standard practice in Irish audits.
Implications for multinational groups
The divergence in criteria and institutional capacities between the United States and Ireland has multiple consequences for taxpayers:
- Increased legal uncertainty, especially in transactions between related parties in both jurisdictions.
- Risk of double taxation, to the extent that each country applies transfer pricing adjustments under different methodologies or with different time criteria (ex ante vs. ex post).
- Need to strengthen tax defense strategies, including not only robust technical documentation, but also proactive consideration of APAs and MAPs.
- Possible expansion of the use of transaction recharacterization, which puts structured arrangements based solely on formal contracts at risk.
Final considerations
The current environment requires constant adaptation by multinational taxpayers. The growing divergence between the US and Irish approaches to transfer pricing illustrates how global tax pressures are not only focused on complying with regulations, but also on anticipating the risks of protracted international disputes.
In this context, internal coordination between the tax, accounting, legal, and operational areas of multinationals becomes essential. In addition, it is critical to continuously monitor regulatory and doctrinal developments in both jurisdictions and strengthen defense strategies based on real economic substance and documentary consistency.
Source: https://www.morganlewis.com/pubs/2025/07/evolving-transfer-pricing-controversy-divergent-paths-in-the-united-states-and-ireland