Navigate IRS Section 482 and 6662(e) with strategic certainty. Protect your US operations from substantial valuation misstatement penalties with robust contemporaneous documentation.
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The United States maintains one of the world's most sophisticated transfer pricing regimes under Internal Revenue Code Section 482. The IRS utilizes the "Best Method Rule," requiring taxpayers to select the methodology that provides the most reliable measure of an arm's length result.
Compliance is driven by Section 6662(e), which imposes strict contemporaneous requirements. Documentation is not just a reporting obligation—it is a mandatory shield against 20% to 40% accuracy-related penalties during an audit.
Taxpayers must justify why the chosen method (CUP, CPM, Profit Split, etc.) is more reliable than alternatives for the specific transaction.
Upon IRS request, taxpayers have exactly 30 days to produce contemporaneous documentation. No extensions are granted for penalty protection.
Mandatory annual reporting of transactions between US corporations and foreign related parties. Penalties for non-filing start at $25,000.
Avoiding the "Substantial Misstatement" trap.
Penalties apply if the TP adjustment exceeds the lesser of $5M or 10% of gross receipts:
• 20% Penalty: Substantial misstatement.
• 40% Penalty: Gross misstatement.
Contemporaneous documentation is the only way to establish "reasonable cause" and avoid these additions to tax.
Documentation must exist before the return is filed.
For US entities, documentation must be "in existence" by the time the corporate income tax return is filed (typically April 15 or October 15 with extension).
IRS agents increasingly verify the "date modified" on digital files to ensure reports weren't created retroactively during an audit.
Threshold for groups over $850 Million.
US Ultimate Parent Entities of MNE groups with revenue ≥ $850 Million must file Form 8975.
The report provides the IRS with a breakdown of the group's global income, taxes paid, and indicators of economic activity in each tax jurisdiction.
Complete Section 6662-compliant studies featuring rigorous Best Method analysis.
Ensuring transactional data on informational returns matches the TP economic analysis.
Utilization of Compustat and Orbis databases for high-quality North American comparables.
Managing IDR (Information Document Request) responses and technical interviews.
The IRS is receiving billions in new funding for high-wealth and corporate enforcement. Is your transfer pricing defense ready for the 30-day clock?
Contact US TeamFor further information on transfer pricing please contact:
Leader - TP Policy
Principal North America Practice