IRS Issues New Roadmap for Transfer Pricing Examinations

On June 29, 2018, the Internal Revenue Service (“IRS”) released Publication 5300 (06‑2018), Transfer Pricing Examination Process (“TPEP”), a 37-page document intended to guide IRS agents in the planning, execution and resolution of transfer pricing examinations (“TP Audits”).  Additionally, TPEP is intended to provide taxpayers with enhanced audit transparency, so they may better understand the process and can work effectively in collaboration with the IRS’s examination team.

TPEP replaces the Transfer Pricing Audit Roadmap (“Roadmap”), which was issued in 2014 to provide IRS examiners with best practices, audit techniques, advice, links and reference materials regarding the administration of TP Audits.  In many respects, TPEP mirrors the Roadmap; however, TPEP contains additional new materials on items such as Country‑by‑Country (“CbC”) reporting and recently‑developed Practice Units (additional guides on various transfer pricing aspects designed to assist IRS examiners during TP Audits).  TPEP is a detailed and lengthy document that will play an integral role in the selection, execution and resolution of TP Audits going forward.

BT’s Top Ten TPEP Takeaways for Taxpayers

  1. TP Audits are Lengthy and Costly
  2. The IRS Eyes Large Adjustments
  3. The IRS Publicizes Use of Data Analytics for Selecting Taxpayers to Audit
  4. IRS References Website Content in TP Audits
  5. Bullseye on Hybrid Structures
  6. IRS Emphasizes New Expectations and Scrutiny of Supply Chains
  7. The IRS to Respect Taxpayer Method Selection
  8. IRS Practice Units are Best Indicator of IRS Positions
  9. IRS Expecting Uptick in MAP Requests
  10. OECD Guidelines Themes Sneaking into TPEP

Read more about the top takeaways here.

Final Thoughts

TPEP confirms BT’s longstanding belief that the first and best line of defense for taxpayers in a transfer pricing audit is the ability to provide IRS with proper transfer pricing documentation immediately upon request. While navigating the transfer pricing regulatory environment can be complex, the Transfer Pricing team at Bennett Thrasher has the expertise and resources to assist with preparing appropriate transfer pricing documentation for companies of all sizes. For more
details, please contact Ben Miller or call 770.396.2200.