PORTFOLIO

Transfer Pricing: Competent Authority Consideration (892)

Tax Management Portfolio, Transfer Pricing: Competent Authority Consideration, discusses the considerations that the taxpayer should take into account in requesting competent authority assistance, negotiation of the competent authority agreement, the taxpayer's strategy, and finalization of the agreement.

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DESCRIPTION

This Portfolio also examines the costs and benefits of seeking a competent authority agreement.


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AUTHORS

Transfer Pricing: Competent Authority Consideration was authored by the following experts.
BRIAN S. GLEICHER, ESQ.

Brian S. Gleicher, Esq., White & Case, Washington, D.C. Mr.Gleicher focuses on international tax issues with an emphasis on transfer pricing and tax treaty issues. He routinely represents multinational companies in transfer pricing matters, including advance pricing agreements, with the Internal Revenue Service and foreign tax authorities. He also advises taxpayers on proceedings before the U.S. and foreign Competent Authorities on a broad range of issues, including double taxation, residency and permanent establishment questions.


Additionally, Mr. Gleicher represents corporate and individual taxpayers in domestic tax examinations and settlement negotiations with the Internal Revenue Service at the examination and appeals levels.


Mr. Gleicher received his B.S. with high honors in 1992 from the University of Florida, Fisher School of Accounting and his J.D. cum laude in 1995 from the Georgetown University Law Center, where he served as a lead articles editor of the Tax Lawyer. He is a member of the District of Columbia and Florida Bars and is admitted to practice before the U.S. Tax Court. Active in the Federal Bar Association Section of Taxation, he is currently an officer and has served as the chair of the Section of Taxation as well as the Section's Annual Tax Law Conference. He is also a member of the Transfer Pricing Committee of the American Bar Association Section of Taxation.


TABLE OF CONTENTS

 

Detailed Analysis

 I. Introduction

 II. Treaty Basis for Competent Authority Relief

 A. General

 B. U.S. Mutual Agreement Procedure Articles

 C. OECD Mutual Agreement Procedure Article and Commentary

 III. U.S. Implementation of the Competent Authority Procedure

 A. Identity of the Competent Authority

 B. Structure of the U.S. Competent Authority Office

 C. Other Roles of the Competent Authority Process

 D. Advance Pricing Agreements and the Role of Competent Authority

 IV. Procedures for Requesting Competent Authority Assistance

 Introductory Material

 A. Filing of a Request by the Taxpayer

 B. Time for Filing and Other Basic Requirements

 C. Information Required in Request

 D. User Fees

 E. Pre-Filing and Other Conferences

 F. Acceptance of Requests for Assistance

 G. Small Case Procedure

 V. Limitations on Applicability and Availability of Competent Authority Relief

 Introductory Material

 A. Applicability of Tax Treaty

 B. Failure of Tax Treaty to Address Certain Cases of Double Taxation

 C. Differences in Perspectives of Treaty Countries

 D. Jurisdictional Limits to National Taxes

 E. Eligibility for Requesting Assistance

 F. Expiration of Statute of Limitations

 G. U.S. Discretion to Accept a Request for Assistance

 H. Other Grounds for Denial

 I. Failure of Competent Authorities to Agree

 J. Effect of Agreements or Settlements on Competent Authority Proceedings

 VI. Considerations in Requesting Competent Authority Assistance

 Introductory Material

 A. Necessity

 1. Availability of Foreign Tax Credit

 2. Relief from Foreign-Initiated Transfer Pricing Adjustments

 3. Tax-Free Repatriation

 B. Issues to Consider in Requesting Competent Authority Assistance

 1. Possibility of Further Audits or New Issues Being Raised in Subject Years

 2. Possibility of Audit in Future Years

 3. Confidentiality of the Competent Authority Process

 4. Waiver of Attorney-Client Privilege

 C. Probability of Success

 1. Obtaining Full or Partial Relief

 2. Relief Statistics

 3. The Negotiating Environment

 VII. Negotiation of the Agreement Between the Competent Authorities

 A. Role of the Taxpayer

 1. No Direct Taxpayer Participation

 2. Active Indirect Taxpayer Participation

 3. Inherent Tensions in the Process

 B. Role of the U.S. Competent Authority

 C. Development of U.S. Negotiating Position

 1. Position Papers and Subsequent Negotiation

 2. Consistency with Other Cases and with Competent Authority and APA Precedents

 3. Role of OECD Guidelines

 D. Schedule and Length of Process

 E. Arbitration Alternative

 VIII. Competent Authority Process in U.S.-Initiated Transfer Pricing Cases

 Introductory Material

 A. Importance of Consulting the Foreign Competent Authority

 B. Paths to Competent Authority

 1. Competent Authority Follows Appeals Consideration

 2. Bypassing Appeals

 3. Simultaneous Appeals Procedure

 4. Coordination with Litigation

 5. Rollback of APA

 6. Granting of Unilateral Relief by the United States

 C. Importance of Creating a Record

 D. Shaping the IRS Negotiating Position

 E. Providing Additional Information

 F. Multi-Cycle Competent Authority Consideration

 IX. Competent Authority Process in Foreign-Initiated Transfer Pricing Cases

 Introductory Material

 A. Importance of Consulting the U.S. Competent Authority

 B. Paths to Competent Authority and Other Considerations

 C. Filing a Protective Claim for Refund

 X. Finalization of Competent Authority Agreement

 A. Notification of Agreement Between Competent Authorities

 B. Decision of the Taxpayer Whether to Accept the Agreement

 C. Form 870 or Form 870-AD and Closing Agreements

 D. Enforceability in Foreign Country

 XI. Direct Costs and Benefits of a Competent Authority Agreement

 A. Income Taxes

 B. Interest on Tax Deficiencies and Refunds

 C. Penalties

 D. Foreign Exchange Gain and Loss

 XII. Indirect Costs and Benefits of a Competent Authority Agreement

 A. Conforming Adjustments

 B. Rev. Proc. 99-32 Relief

 C. Deduction of Interest on Tax Liability

 D. Taxation of Foreign Exchange Gain or Loss

 Working Papers


WORKING PAPERS

 Table of Worksheets

 Worksheet 1 Rev. Proc. 2006-54, 2006-49 I.R.B. 1035, 12/4/2006 (procedure for requests for U.S. Competent Authority assistance filed after December 4, 2006)

 Worksheet 2 Example of Net Effect of Competent Authority Settlements

 Worksheet 3 Hypothetical U.S.-German Competent Authority Settlement

 Bibliography

 OFFICIAL

 Statutes:

 Treasury Rulings

 Cases:

 UNOFFICIAL

 Periodicals:

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