IRS APPLIES TRANSFER PRICING PRINCIPLES TO FTC ANALYSIS FOR INTERBRANCH TRANSACTIONS

On Dec 6, 2013, the IRS released Chief Counsel Advice (CCA) 201349015 (dated Sep 16, 2013), which applies transfer pricing principles to foreign tax credit (FTC) analyses of certain transactions that would not give rise to income for US federal income tax purposes. The CCA states that transfer prici...

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Bibliographic Details
Published in:Journal of International Taxation 2014-02, Vol.25 (2), p.18
Main Authors: Fischl, Alan, Rosenberg, Rebecca, DiFronzo, Mike, Collins, Marty, Sotos, David
Format: Article
Language:English
Subjects:
Disregarded entities
Foreign tax credits
Income taxes
International taxation
Profits
State court decisions
Stockholders
Tax credits
Tax returns
Tax treaties
Taxpayers
Transfer pricing
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Summary:On Dec 6, 2013, the IRS released Chief Counsel Advice (CCA) 201349015 (dated Sep 16, 2013), which applies transfer pricing principles to foreign tax credit (FTC) analyses of certain transactions that would not give rise to income for US federal income tax purposes. The CCA states that transfer pricing principles should be considered to determine whether a taxpayer applied a non-arm's-length transfer price with the effect that it reported too much income in a foreign jurisdiction and, concomitantly, paid too much foreign tax (i.e., a non-compulsory foreign tax that is ineligible for a US FTC). This conclusion would apply to the extent that the relevant foreign tax law (as modified by tax treaties) includes similar arm's-length principles. While the transfer pricing principles of Section 482 may apply to foreign-to-foreign transactions and between a US entity and a foreign branch, the IRS often does not assert them in those contexts.
ISSN:1049-6378