IRS releases its ‘roadmap’ of the transfer pricing audit process

By Sirathorn BJ Dechsakulthorn, Paul Flignor and Eric D Ryan

The US Internal Revenue Service has released its Transfer Pricing Audit Roadmap, a 26-page outline of the two-year transfer pricing audit process, emphasising upfront planning and a fact-based approach for examiners.  

The roadmap, released on 14 February, is part of an ongoing effort by the IRS Large Business and International Division to standardise the exam process. The stated goal of the roadmap is to assist both the IRS and taxpayer in the identification, selection, discussion and resolution of potential transfer pricing issues in a timely and orderly fashion and to resolve issues at the exam level rather than at appeals.

The roadmap emphasises the fact-based nature of transfer pricing audits, that ‘transfer pricing cases are usually won and lost on the facts’. It asserts that the facts should support a ‘working hypothesis’ on the reasonableness of the inter-company pricing policies that discourages fishing expeditions. Lastly, the roadmap stresses the importance of an effective presentation that integrates facts and legal and economic principles into a compelling story…

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