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What is Transfer Pricing?
The transfer pricing of goods, royalties, services, and loans drives the amount of tax a multinational pays by country. We assist US and international companies establish, document, and defend transfer pricing practices for the IRS and international tax authorities. Our services include IRS and OECD transfer pricing documentation, economic benchmarking, BEPS services, and advance pricing agreement. We assist companies in optimizing cash flow and global effective tax rates.
From a government perspective, transfer pricing audits are a high return on investment making sure companies pay their ‘fair share’ of income tax. Transfer pricing audits can result in significant additional tax, interest, and penalties along with double taxation.
We provide a full suite of transfer pricing services to US and international multinationals.
Transfer Pricing Services
- Documentation - US, OECD, and International
- Documentation Report Updates
- Comparable Benchmarking Studies
- Audit Defense
- OECD Base Erosion and Profit Shifting (BEPS) Services
- Tax Reform Transfer Pricing Strategies
- Supply Chain Restructuring
- Mergers & Acquisitions/Due Diligence
- Advance Pricing Agreements
While transfer pricing is a significant tax issue, the many US and foreign clients are unaware of the tax and cashflow benefits of proactive planning. For example, US tax reform creates some new incentives for multinationals to increase US taxable income to reduce taxes payable. Strategic intercompany pricing strategies can lead to substantial savings on a global basis.
Transfer Pricing Success Stories
Success Story #1 – Multinational Company Utilizing Tax Net Operating Losses
A profitable US parent company sells $7 million in products to its foreign subsidiary that is incurring losses. The company relies upon a “Cost-Plus” policy.
After preparing a transfer pricing analysis, KBKG recommends reducing transfer pricing on cross- border inventory sales by $3M.
Reducing inventory transfer prices by $3 million leads to $330,000 of annual tax savings!
- This strategy is also applicable to foreign-owned companies with US subsidiaries.
- This strategy is also applicable for royalties and service charges.
- Reduces transfer pricing audit risk in foreign country. Tax authorities regularly challenge lossmaking subsidiaries.
Success Story #2 – Tax Reform Transfer Pricing Strategy
US based C-Corp with global revenue of $50M. Historically minimized their tax footprint in the US (due to old 35% tax rate). New investments in R&D and manufacturing have justified increasing transfer prices for goods, royalties and services to subsidiaries.
Increase transfer prices to capitalize on lower US tax rates (21%) through tax reform. Higher transfer prices generate more deductions overseas at higher rates.
A $1 million increase in goods, royalties and/or service charges to subsidiary in a 30% tax jurisdiction yields income tax savings of $90,000 annually ((30%-21%) x $1m)
- This strategy also applies to foreign-owned companies with US subsidiaries
- Higher income in low-tax jurisdictions increases deductions in high-tax subsidiaries
- Every $1m increase in royalty generates $90,000 in tax savings
New incentive for C-Corp exporters, Foreign Derived Intangible Income (“FDII”), allows some export income, including goods, royalties and services, to be taxed at a rate of 13.125%.
- Increases to transfer prices could lead to even higher tax savings, e.g. (30% - 13.125%) = $168,750 annual savings
How Much is it Worth?
US tax reform has created opportunities to improve global effective tax rates through changes to transfer prices. Below is a list of three of the most prominent benefits.
Transfer Pricing Tax Insights
Looking for CPE credit? We have several sessions available this month. Click the links below to register. If you have questions or need help registering, please email [email protected] Research & Development Tax Credits 11/1/2022 | 12:00 PM PT | 1 hour | 1 CPE credit This webinar will cover the fundamentals of the Research and … Read More
[PRESS RELEASE] KBKG Named One of the World’s Leading Transfer Pricing Practices by International Tax Review
Chicago – September 19, 2022 – For the second year in a row, KBKG, a nationally recognized tax specialty firm, was named one of the world’s leading transfer pricing firms by the International Tax Review for 2022-23. The International Tax Review, which surveys and analyzes more than 13,000 clients and 2,700 practitioners, identifies the most … Read More
Some taxpayers equate voluntary state tax amnesty programs with an episode of “The Sopranos” operating in New Jersey– volunteer to pay us now, or you pay much more when we visit later during an audit. State transfer pricing amnesty programs have become more popular recently as states including New Jersey, North Carolina, Indiana, and Louisiana … Read More
Transfer Pricing may not have been a specific focus of the 700+ page Inflation Reduction Act. However, global tax strategies can be impacted by the new 15% alternative minimum tax (AMT). This AMT targets large companies to ensure these highly profitable enterprises pay their fair share of tax. A large corporation’s tax liability would be … Read More
Research & Development Tax Credit Principal, Jonathan Tucker and Director, Ian Williams will be speaking on Research and Development Tax Credits Overview and Recent Updates. Their presentation is taking place on Thursday, June 9th from 10:30 AM – 11:20 AM. Regional Director, Chad Niehaus is speaking in a 25-minute Ted-Talk, a new way of presenting … Read More
Alex Martin, Transfer Pricing Principal, will be speaking at TXCPA Dallas Convergence on Monday, May 16th. He’ll be joined by Bill Taylor, William Long, Matthew Geltz, Mike Cornell, and Emily Kennedy from our Dallas Fort-Worth office. This event is taking place at the Omni Frisco Hotel in Frisco, Texas. About the TXCPA Dallas Convergence TXCPA … Read More
Our Research and Development Tax Credit Director, Ian Williams, is speaking while Principal, Jonathan Tucker, and Regional Director Chad Niehaus are representing KBKG at the SCACPA Spring Splash Conference 2022. This event takes place from May 12th and May 13th in Spartanburg, SC. Our Southeast team specializes in Cost Segregation, Green Building Tax Incentives (45L … Read More
What Happens if Coke Continues to Lose in Tax Court? Coca-cola recently lost an appeal of a transfer pricing court case, which concluded that Coke owes an additional $3.1 billion in tax for 2007 through 2009.¹ In addition to denying the Motion for Reconsideration on procedural grounds, Tax Court Judge Albert Lauber decided to elaborate … Read More
[PRESS RELEASE] KBKG Named One of the World’s Leading Transfer Pricing Practice by International Tax Review
Chicago, Illinois—November 4, 2021—KBKG, a nationwide tax specialty firm, was named one of the world’s leading transfer pricing firms by International Tax Review for 2021-2022. International Tax Review surveyed over 13,000 clients and 2,700 practitioners to identify the most effective transfer pricing advisors across 84 countries. KBKG’s transfer pricing practice is led by Alex Martin, … Read More
KBKG has expanded its leading-edge continuing education offerings to include CLE credits for attorneys. We have partnered with the National Academy of Continuing Legal Education, a leading provider of accredited continuing legal education courses throughout the United States. Attorneys have 24/7 access to course offerings online or on DVDs. Our first CLE course is “Transfer … Read More