Application of FIN 48 to Transfer Pricing and Permanent Establishment Issues

Interpretation No 48, Accounting for Uncertainty in Income Taxes (FIN 48), as promulgated by the Financial Accounting Standards Board (FASB) during 2006, provides guidelines to a company for recording the benefit of tax return positions on its financial statements. Effective for tax years beginning...

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Bibliographic Details
Published in:Tax Executive 2007-12, Vol.59 (6), p.485
Main Authors: Donohue, Michael J, Lowell, Cym H, Martin, Mark R
Format: Article
Language:English
Subjects:
Accounting
Compliance
Documentation
FASB Interpretations
Financial statements
Fines & penalties
Host country
Income taxes
International finance
International taxation
Jurisdiction
Permanent establishment
Tax planning
Tax returns
Taxation
Transfer pricing
Treaties
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Summary:Interpretation No 48, Accounting for Uncertainty in Income Taxes (FIN 48), as promulgated by the Financial Accounting Standards Board (FASB) during 2006, provides guidelines to a company for recording the benefit of tax return positions on its financial statements. Effective for tax years beginning after Dec 15, 2006, FIN 48 requires all companies that issue US generally accepted accounting principles-based financial statement to comply with specified accounting requirements to determine the amount of benefit to record on its books relating to uncertain income tax positions. The FIN 48 recognition requirement raises a number of critical transfer pricing and international tax issues for multinationals relating to identifying annually the company's transfer pricing tax positions that are subject to FIN 48 and documentation of a company's analysis and conclusions for particular transfer pricing positions to comply with FIN 48, including preparation of transfer pricing documentation. Independent auditors, FASB, and the SEC may all be expected to be interested parties in ensuring that uncertain tax positions taken on a tax return attract the attention they deserve.
ISSN:0040-0025