1. Draft
Summary of
U.S. Transfer Pricing and Documentation Rules and Dispute Resolution Programs
John C. C. Hughes
Director, APMA
Advance Pricing and Mutual Agreement Program
Large Business & International Division
Internal Revenue Service
March 1, 2018
January

2. Transfer Pricing and Documentation Rules
Transfer Pricing Country Profile:
Substantive Transfer Pricing Rules:
Statute: Section 482 of Internal Revenue Code (1986)
Regulations: Treas. Reg. §§ through
Explicit adoption of arm’s length standard
Adoption of “best method” rule for selecting transfer pricing method
Guidance on application of transfer pricing methods
Documentation Rules and Penalties:
Statute: Sections 6038 and 6662
Regulations: Treas. Reg. § § ,
CbC reporting (required) (Treas. Reg. § , Form 8975)
Penalty protection: Treas. Reg. §
December

3. Treaty Profile and Dispute Resolution Programs
FTA MAP Forum Profile:
Overview:
Broad network of treaties, protocols, and information exchange agreements
U.S. Model Income Tax Convention contains…
Article 9(2) (corresponding adjustments)
Article 25(2) (implementation of mutual agreements)
Article 25(3) (MAP for “difficulties or doubts arising as to the interpretation or application” of the treaty)
Article 25(6) (mandatory, binding arbitration)
Competent Authority, MAP, and APA:
U.S. competent authority comprises several offices, including APMA
MAP Program Procedures: Rev. Proc
APA Program Procedures: Rev. Proc
December

4. Comparison and Connection to OECD
Transfer Pricing:
Consistency between U.S. transfer pricing regulations and OECD Transfer Pricing Guidelines
Analogies between key concepts:
“Best” method / “Most appropriate” method
Transactional methods (e.g., CUP method), profit-based methods (i.e., CPM / TNMM)
Comparability considerations (e.g., economic, legal factors)
Dispute Resolution:
Sizable inventories of MAP and APA cases (inbound and outbound)
Active participation in FTA MAP Forum
Peer review report (September 2017):
effective-map-peer-review-report-united-states-stage- 1_ en
December