Transfer Pricing and Corporate Taxation Problems, Practical Implicat
Transfer pricing is often identified as the most important tax issue that multinational corporations face. This publication is an extremely useful tool for practitioners and tax directors grappling with complex and contentious transfer pricing issues of v
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Elizabeth King
Transfer Pricing and Corporate Taxation Problems, Practical Implications and Proposed Solutions
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Elizabeth King Beecher Consulting, LLC 9 Beecher Road Brookline, MA 02445 USA www.beecherconsultinggroup.com
ISBN: 978-0-387-78182-2 e-ISBN: 978-0-387-78183-9 DOI: 10.1007/978-0-387-78183-9 Library of Congress Control Number: 2008937177 c Springer Science+Business Media, LLC 2009 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper springer.com
For Ella, an extraordinary person and a wonderful daughter
Acknowledgements
I have worked with many people—clients, attorneys and international examiners, fellow transfer pricing economists and others—over the years, all of whom have contributed greatly to my understanding of the issues addressed in this book. I thank all of these individuals for their professionalism, their willingness to share their knowledge, and their friendship. I would also like to thank several people for their extremely helpful and insightful comments on this manuscript. Confidentiality constraints prevent me from mentioning anyone by name. Finally, my profound thanks to Marianne Burge, in memoriam, for her mentoring and personal friendship. USA
Elizabeth King
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Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Part I Economic and Accounting Rates and Concepts Should Not be Conflated 2 Economic vs. Accounting Profit Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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3 Overview and Critique of Existing Transfer Pricing Methods . . . . . . . 3.1 Comparable Profits Method and TNMM . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 Description of CPM and TNMM . . . . . . . . . . . . . . . . . . . . . . 3.1.2 Circumstances when CPM and TNMM Are Applied . . . . . . 3.1.3 Underlying Economic Rationale . . . . . . . . . . . . . . . . . . . . . . . 3.1.4 Critique of Economic Reasoning . . . . . . . . . . . . . . . . . . . . . . 3.1.5 Summary and Practical Implications . . . . . . . . . . . . . . . . . . . 3.2 Resale Price and Cost Plus Methods . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 Circumstances when Resale Price and Cost Plus Methods Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 Description of Resale Price and Cost Plus Methods . . . . .
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