At the seminar conducted on March 7, 2023, Jennifer Best, deputy commissioner of the U.S. Internal Revenue Service’s (IRS) Large Business and International (LB&I) Division, focused on the government’s ongoing efforts to reduce excessive Transfer Mispricing practices by multinational enterprises aiming to reduce their taxes by shifting profits to tax havens.
The IRS will use funds from the Inflation Reduction Act to boost compliance with this goal, about $80 thousand million. Therefore, they are hiring new professionals, tax law specialists, and economists to work on Transfer Pricing issues and end corporations mispricing.
Sophisticated data analysis indicators will be promoted. The Advance Pricing Agreement (APA) process will also be adjusted.
In order to comply with the plan, the reasonableness of the method selection and that of the application will be analyzed to impose a penalty or not. Taxpayers should expect to see an increase in audits, penalties, and Transfer Pricing assessments, as well as increased scrutiny of Transfer Pricing rules.
Given this, multinational enterprises will assess and develop strategies to mitigate risk by ensuring that the Arm’s Length Principle will be observed in all related party transactions.
Source: Thomson Reuters 30/05/23