You have been hired by an international company identified as cooperating with a foreign country that the U.S. is boycotting. Present a defense for the company to overcome the presumption that all activities in the boycotted country involving all related persons are tainted. Identify at least one (1) deterrent of the Internal Revenue Code (IRC) used to discourage the payment of bribes and kickbacks to foreign officials. Next analyze the tax effects on U.S. shareholders as a result of these bribes and kickbacks.
Assignment 4: Intercompany Pricing
Transfer pricing is important to multinational entities and tax administrators. Transfer pricing involves transactions between affiliated entities domiciled in different countries creating different tax requirements. Profit determination of multinationals generated by intra-company transactions is one of the most challenging issues in international taxation.
A multinational company with cross border transactions in two (2) foreign countries has engaged you to provide advice on intercompany pricing to achieve the lowest combined taxes for all jurisdictions. The company manufactures and sells cars in the U.S. and two (2) foreign countries.
Using the Internet or Strayer Learning Resource Center, research the rules and techniques for transfer pricing. Choose two (2) foreign countries and research their respective tax rates.
Write a five (5) page paper in which you:
Based on your research, create projections of revenues, costs, and tax rates based on the two (2) countries researched and the U.S. Create a scenario in which you allocate revenues and costs to each country to determine the lowest possible overall tax for each country. Provide support for your allocations. Propose a scenario to the client that will result in a favorable tax position. Provide support for your position. Analyze how the Internal Revenue Service (IRS) uses Internal Revenue Code (IRC) section 482 to prevent shifting of profits to other countries to reduce U.S. tax liability. Assume that the IRS has challenged the allocations and is preparing to audit the client. Prepare a brief position to defend the client to IRS. Provide support for your position. Evaluate two (2) tools IRS agents have available to perform the audit on multinational transfer pricing issues. Use at least five (5) quality resources in this assignment. Note: Wikipedia and similar Websites do not qualify as quality resources. Format your assignment according to the following formatting requirements: Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides. Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page is not included in the required page length. Include a reference page. Citations and references must follow APA format. The reference page is not included in the required page length. The specific course learning outcomes associated with this assignment are:
Examine various transfer pricing methodologies and how they impact taxation. Use technology and information resources to research issues in international tax planning and research. Write clearly and concisely about international tax planning and research using proper writing mechanics.
