Bloomberg Tax
April 15, 2020, 2:33 PMUpdated: April 15, 2020, 7:23 PM

Companies Urged to Bolster Intercompany Pricing Documents (1)

Isabel Gottlieb
Isabel Gottlieb

Companies should sharpen how they document their intercompany transactions to avoid penalties—which the IRS may be looking to apply more strictly in the future.

The Internal Revenue Service released informal guidance Tuesday addressing in question-and-answer format what it wants to see in companies’ documentation.

“It sends a pretty clear signal that the IRS will be increasing its scrutiny of transfer pricing documentation, and may seek to assess penalties more frequently where they believe documentation is inadequate or unreasonable,” said David Ernick, a principal at PwC’s transfer pricing practice.

Transfer pricing values intercompany transactions based on the arm’s-length principle—how unrelated ...

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