Discussion:Advance Pricing Agreement Program with IRS
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| Revision as of 05:49, 26 May 2006 ArchCPA (Talk | contribs) (Sandy, By PWC, I) ← Previous diff |
Revision as of 15:13, 26 May 2006 Foxttron (Talk | contribs) (Sandy, I can tel) Next diff → |
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| {{ForumReplyPost|UserID=ArchCPA|Date=26 May 2006|Text=Sandy, | {{ForumReplyPost|UserID=ArchCPA|Date=26 May 2006|Text=Sandy, | ||
| By PWC, I meant PriceWaterhouseCoopers. Yes, you're right, they were called Coopers & Lybrand before the merger. Initially, we sought the help of a local CPA firm in Bellingham, WA for the transfer pricing study. They balked and eventually advised us to go the big 6 (back then) route. We eventually settled with PWC as they were our independent accountants. From personal experience, I can vouch that the study stood its test of time because of the name behind the study. Their partner from Vancouver, B.C who worked on the project was brilliant and knew his stuff. If you need more information, we can communicate off-line. My email address is ravi@archcpa.com.}} | By PWC, I meant PriceWaterhouseCoopers. Yes, you're right, they were called Coopers & Lybrand before the merger. Initially, we sought the help of a local CPA firm in Bellingham, WA for the transfer pricing study. They balked and eventually advised us to go the big 6 (back then) route. We eventually settled with PWC as they were our independent accountants. From personal experience, I can vouch that the study stood its test of time because of the name behind the study. Their partner from Vancouver, B.C who worked on the project was brilliant and knew his stuff. If you need more information, we can communicate off-line. My email address is ravi@archcpa.com.}} | ||
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| + | {{ForumReplyPost|UserID=Foxttron|Date=26 May 2006|Text=Sandy, I can tell you that your client best bet is to use a Big 4 from a small office. I can tell you that the Toronto office will have much higher rates than a Jacksonville or Pittsburgh Office. Sometimes these fees are about 40% than from the main offices. At the same time, because it is a specialty, they may not have the necessary expertise on site, and they need to involve personell from different offices. I hope this helps.}} | ||
Revision as of 15:13, 26 May 2006
Discussion Forum Index --> Tax Questions --> Advance Pricing Agreement Program with IRS
| 13 May 2006 | |
| Has anyone entered into this program with IRS and if so, has it been beneficial? My client who is Canadian and his US corporation do not at this point (even with my nagging) have arms length transactions in my opinion. He is not meaning to defraud the US out of taxes, but he has a tough time understanding the concept of arms length.
In order to protect him re Section 482 of the IRC, he can enter this agreement and file with IRS so they do not try and audit his books to determine if he is selling to himself at a comparable rate. Before applying for the program, I wanted to see if any of you have had any involvement with it. Thanks! | |
Inagpurwala (talk|edits) said: | 14 May 2006 |
| I was involved indirectly at Altera Corporation, San Jose, CA. Tax Director there worked on this project and negociated the pricing (in 1998-1999). That brought final tax rate to 17%(if I remmember correctly).
So answer to your question, yes it does help reducing the tax rate. Altera Corporation manufactures PLDs and sales in the USA and the international market. Unfartunatley I do not know all the detail how to enter into the APA. I nolonger work at Altera.Inagpurwala 21:27, 13 May 2006 (CDT) | |
| 14 May 2006 | |
| Thank you. I suppose I will enter into the training that IRS offers for it and set it up. The transfer pricing is my biggest concern with this client and this seems like the least hassle in terms of market value approximation. Thanks again! | |
| 15 May 2006 | |
| Depending on the quantity of the sales, sec 482 may not apply to your client. TP studies are very cumbersome (and extremely expensive,) but they are "always" better than what the IRS agreement is calling for. See if at least IRC 6662(e) applies to your case; after all, the sales should be more than double or less than half comparing to 3rd parties, and they have some very high thresholds. Again, I would not want to take the IRS at their words when it comes to TP; I have noticed that the usually have no idea about it, but they always bring it up when there are foreign related companies. | |
| 15 May 2006 | |
| Yes, all of this in International Tax is very cumbersome and is quite a burden not only on the professional but the taxpayer as well. His audit risk is already extremely high as well as prior year's non compliance with state and federal tax laws but in order to protect him from the stiff penalties on transfer pricing, I would like to see what I can do to keep him from exposure to non arms length transactions. Does anyone know of software which can help with this? | |
| 15 May 2006 | |
| The best way to minimize audit exposure is to avoid agressive positions. If there are no Canadian sales to establish comparative values, you might consider a backwards approach through cost of goods. See if you can come up with some sort of range for gross profit percentage that falls in line with that of companies in similar lines of business. | |
| 15 May 2006 | |
| Well, yes there are some Canadian sales....not many but some and this may be my benchmark. I know COGS is 45% and then his overhead and facilities expenses leave him a nol in Canada. So I can start with that benchmark; thank you both! There are other Canadian cabinet companies in our area, so perhaps I can also check what they are buying Canadian cabinets for. As it is all custom work, it is a bit more difficult to determine but this is a great help! | |
| 24 May 2006 | |
| Sorry for the late post. Years ago, when I was CFO of a multinational corporation, we had to deal with transfer pricing issues between subsidiaries in the US, Canada and Asia. The US corporation was supplying windshield deflectors to the Big-3 auto manufacturers. The components were manufactured in Hong Kong and China (through a subsidiary) with final assembly in Langley, B.C (again through a related Canadian corporation). The transfer pricing studies were complex and were done by PWC. The IRS questioned the methodology, and the studies stood the test of time because they were done by PWC. Like R&D tax credit, this area a land mine. Please tread with caution, and hopefully you carry a sizeable professional liability insurance. Good luck! | |
| 25 May 2006 | |
| Ouch arch...my liability insurance is under the threshold of his current year earnings and thus, I am cautious about proceeding, but this is imperative for him. The pricing agreement with the US is demanding and also requires contemporous documentation....I am thinking of leading him to KPMG in Toronto to assist with this. He will not like it....they gave him a quote for the voluntary disclosure process and he went with me...but we are in another arena altogether here with APA....
Thank you for the heads up!! | |
| 25 May 2006 | |
| OOPS forgot to add: Yes, research and devlopment is intensive and needs to have the documentation that contemporously declares the income/expenes. Are you speaking of Price Waterhouse Coopers? I worked for Coopers and Lybrand when I began in accounting in the audit department...hence what I think you mean. So, in your experiences, is it necessary or at least beneficial to have a BIG 5 firm represent him in transfer pricing? This is an area oa dispute with my client, as he wants to charge whatever will benefit him the best...historically his custom papers to transfer title to the US are underexpensed to save him money, and now that I am requesting this information in order to proceed with US guidelines on transfer pricing he is adamanantly opposed.
Thank you for your help!! | |
| 26 May 2006 | |
| Sandy,
By PWC, I meant PriceWaterhouseCoopers. Yes, you're right, they were called Coopers & Lybrand before the merger. Initially, we sought the help of a local CPA firm in Bellingham, WA for the transfer pricing study. They balked and eventually advised us to go the big 6 (back then) route. We eventually settled with PWC as they were our independent accountants. From personal experience, I can vouch that the study stood its test of time because of the name behind the study. Their partner from Vancouver, B.C who worked on the project was brilliant and knew his stuff. If you need more information, we can communicate off-line. My email address is ravi@archcpa.com. | |
| 26 May 2006 | |
| Sandy, I can tell you that your client best bet is to use a Big 4 from a small office. I can tell you that the Toronto office will have much higher rates than a Jacksonville or Pittsburgh Office. Sometimes these fees are about 40% than from the main offices. At the same time, because it is a specialty, they may not have the necessary expertise on site, and they need to involve personell from different offices. I hope this helps. | |
