We once worked with a company that had spent months preparing its US transfer pricing study. The economic analysis made sense, the comparables were solid, and they even cited the OECD Guidelines.
The problem arose during an IRS audit:
The report was not ready at the time of filing the tax return.
It referenced the OECD framework instead of the US Treasury Regulations (Secs. 482 and 6662).
Several of the elements required in the “ten principal documents” were missing.
The result? The report did not qualify for penalty protection, and the company became exposed to potential fines that could have been avoided with a more strategic preparation.
The lesson for U.S. transfer pricing is clear:
1) Penalty protection only applies if the report is ready and filed with the tax return.
2) The study must be drafted in IRS-compliant terms, not just OECD language, and cover all the requirements expressed in the hashtag#tenprincipaldocuments.
3) It must robustly document industry and taxpayer’s characteristics, functional and economic analysis.
📌 In short, a U.S. transfer pricing report is not just an economic exercise—it is a legal and strategic tool to mitigate IRS risk.
At BaseFirma, we have more than 20 years of experience helping companies ensure their studies meet all requirements and are fully protected. Because when it comes to penalty protection, the difference isn’t just “having a study”—it’s having it done right and on time.
For more information: Daniel.medvedovsky@basefirma.com