- IRS Settles $3.4 Billion Transfer Pricing Dispute
Glaxco SmithKline Holdings has agreed to pay the IRS approximately $3.4 billon in back taxes and interest to resolve transfer pricing issues for tax years 1989 through 2005. The case primarily involved intercompany transactions between GSK and its foreign affiliates relating to the sale of various GSK “heritage” pharmaceutical products (principally the ulcer drug Zantac) in the United States.
- IRS Updates Transfer Pricing Regs on Related Party Service Transactions
The Internal Revenue Service issued temporary and proposed transfer pricing regulations that update the current tax treatment of related party service transactions. The transfer pricing regs provide guidance on numerous types of cross-border transactions involving companies located in different tax jurisdictions but owned by the same interests.
- Symantec Faces $1B Transfer Pricing Tax Bill
IRS is seeking over $1 billion in proposed back taxes from Symantec Corporation due to transfer pricing adjustments made in tax audits of Symantec and it's wholly owned subsidary, VERITAS Software Corporation.
- Setting a Target for Transfer Pricing: A Practical Approach
The methods used in the regulations suffer from lags and they do not track business cycle turning points. A better method of setting an annual target, a revised moving average, uses a two-step approach to smoothing annual data. This method is much better at tracking business cycle turning points than a simple moving average. Because the resulting targets are better at reflecting business cycles in real time, there is less risk of falling outside of the arm's-length range in any test done after year-end.
**This paper appears in the International Tax Institute's inaugural issue of the Transfer Pricing Focus.
- New Section 199 Production Deduction Available to Many Taxpayers
For tax years beginning after 2004, business taxpayers can claim a deduction under the new Code Section 199 equal to 3% of “net” qualified production activities. The deduction remains at 3% for 2006 and gradually increases to 9% for tax years beginning after 2009.
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