Please reference the OECD Transfer Pricing Guidelines for Multinational Enterpri

Question

Please reference the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and the 1.482-4 Treasury Regulations documents to answer the following question: What are the available methods per the U.S. regulations to determine transfer prices for intangible property? Which method in your opinion is the most appropriate in GSK's case? What are the difficulties, if any, in the application of your chosen method? Compare:

Comparable Uncontrolled Price

Comparable Profits Method

Profit Split Method

Considering the positions advocated by the Company and the IRS, and your review of the additional print and web resources, what arguments would you make to support IRS's position? GSK's position?

Arguments for
GSK's Position

Possible
Counterpoints

Arguments for
IRS's Position

Possible
Counterpoints

What can you conclude in terms of the $8.3 billion claim by the IRS and the fear of GSK that the tax bill would go up to $15 billion?

Requirement 6. What are possible ways for multinational corporations to reduce the odds of negative settlements (involving higher taxes and penalties) with the tax authorities?

Arguments for
GSK's Position

Possible
Counterpoints

Arguments for
IRS's Position

Possible
Counterpoints

Explanation / Answer

The IRS reached settled its long-running transfer pricing dispute with GlaxoSmithKline, which agreed to terminate its counter-suit against the IRS for rejecting its Advance Pricing Agreement (APA) application.

The GSK-IRS dispute revolved around two fairly simple questions:

The allowable methods are:

• The comparable uncontrolled transaction method or the comparable uncontrolled services price method;

• The income method;

• The acquisition price method;

• The market capitalization method;

• The residual profit spit method; or

• Unspecified methods.

The efforts were went into marketing Zantac product in the United States and the research and development that took place in Europe. So Here appropriate method will be Profit Spit method Where profit from Zantac product will divided between USA and Europe in proportion of marketing Expenses incurred in USA and R&D Expenses incurred in Europe.

Arguments for GSK's Position

Arguments for IRS

In My opinion, GSK should settle case by paying tax on proportionate revenue which is reasonably attributable to USA.

Possible ways for multinational corporations to reduce the odds of negative settlements (involving higher taxes and penalties) with the tax authorities are

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