Transfer Pricing

Today’s economy was founded upon the fundamentals of capitalism and continues to find its strength in the presence of freedom of enterprise and trade. Regulation and taxes are vital in order to support fairness amongst businesses and to provide funds for the government to develop and maintain the country’s infrastructure. Most companies distribute some of the company’s accumulated profits, so that is why it is important to characterize the distribution under whether it

Income tax is a vital source of funds to any government. Money raised by taxing the working population can be used to fund infrastructure development as well as improving the standard of living in the country. United Kingdom was the first the country to establish a working income tax on its civilians in 1799. Initially implemented as a temporary source of income to fund the war to beat Napoleon, income tax is now an essential source of revenue for the government all over the world. This report will look at the significance of income tax in the UK since the late 18th century, through World War 1 and World War 2, and how it has evolved into the tax system, currently in practice. Income tax still remains as a temporary tax, and must be

To fulfill this study, the numbers of theories are reviewed to guide the study. Theories are vital to the study because they provide starting point for testing concepts and also provide framework to review the study. The following theories are reviewed to assists the study: Ability to pay theory, Deterrence theory, Theory of equal sacrifice, rational expectation theory, Benefits theory of taxation and optimal tax theory. These theories are discussed here under;

As mentioned, the globalization of markets and the rapid development of communication systems have increased the presence of trades between companies under common control. However, other factors have also helped highlight the subject. Factors like the increase of service provided within MNE’s, the continuous trading activity and the use of financial instruments have increased the amount of trade between associated parties. Political forces have also assisted in the development of transfer pricing regulations, especially now during this economic crisis as governments try to increase their income through tax collection. For example, a parent company could pay less income tax in the US by determining a higher transfer price from the product it purchases from its subsidiary located in China. Since China’s corporate income tax is 25% and the US tax rate is 35%, this arrangement would generate a higher income at the subsidiary in China and less overall income tax payment for the financial group in question. Nevertheless, such arrangements can be prevented by tax authorities in the US, since according to Section 482 of the Internal Revenue Code “the Secretary may distribute, apportion, or allocate gross income, deductions, credits, or

The main topic of this research paper is taxation. Seeing that this topic is pretty open, I’ve chosen to write about the proposed idea of Fair Tax. Along with a little bit of insight on Fair Tax and a couple highlights of history, I’ll try and explain some pros and cons as well as give my opinion on the topic.

The objective of International Accounting Standard 12 is to advise on the accounting treatment for income taxes. The main issue in accounting for income taxes is how to account for the current and future tax consequences of certain items. One item it advises on is the future recovery or settlement of the carrying amount of assets or liabilities that are recognized in an entity’s statement of financial position. The second main item the standard covers is transactions and other events of the current

Foremost, most nation’s taxing systems characteristically have five main features that either make them greatly competitive or not. Competitiveness includes desirability for both the society and business activity. A nations corporate rate, its consumption tax, property tax, the individual tax, and its international (global or territorial) are what make up the core features of competiveness. But is the competiveness of a nation’s taxing system related for both industrialized and developing nations? The answer is yes, but not completely.

➢ Taxation – firms functioning when dealing with a different country the subject to that country’s laws and regulations.

The recent introduction of the hybrid entities has shielded the foreign firms from paying their appropriate taxes through the shielding of the taxable income and through using the foreign tax amounts on the other incomes (Messina, 2015). In this regard, only minimal taxes are remitted from the revenue generated by the local firms. Besides, people tend to evade tax charged on dividends and interests by not giving honest reports pertaining to the revenue generated abroad. Furthermore, individuals evade the taxes through transferring their funds to foreign accounts. Fortunately, the IRS can address the issue of tax evasion by changing the existing tax laws to remove the deductions and other restrictions, for instance, the foreign tax credits. Besides, it is vital to impose restrictions to curb tax evasion at a personal level through the desired policies of better information reporting and tougher penalties for the

Income tax is considered to be one of the greatest ways that a country amasses wealth through known means from the public in order to use the funds for the benefit and welfare of the community. Since a very long time, there have been many discussions and debates on the way the finds collected for income tax have been spend. There are many who think that there is a lot of mismanagement and feel that the amount of the actual money spent on welfare of the community is far less that what gets collected by the country.

Alabede, J. O., Ariffin, Z. B. Z., & Idris, K. M. (2011). Determinants of tax

Metlife, Inc. (“Metlife”, ”Company”) is a multinational insurance company which carries operations both in the U.S. and in various other foreign jurisdictions. The taxable income that Metlife generates abroad through its subsidiaries is subject to income tax under the laws of those foreign jurisdictions within which the income is derived from. Under the U.S. worldwide taxation system, that same income is also subject to U.S. tax upon (deemed) repatriation to Metlife. The apparent result of the above is the double taxation of the income earned abroad. In order to alleviate this issue, the U.S. makes available to the taxpayer a Foreign Tax Credit (“FTC”) for foreign income taxes paid, subject to certain limitations. The calculation of the FTC is a complex process which is comprised of many steps, most of which are beyond the scope of this memorandum. The only step that this memorandum is concerned with is the allocation/apportionment of expenses to

The US transfer pricing regulations, as outlined in Section 482 of the Internal Revenue Code, are similar to the Organization for Economic Co-operation and Development (OECD) guidelines. They have a commitment to the arm 's length principle, as do many other countries worldwide who use it as a basis for bilateral treaties between governments. US Guidelines say that in the case of any transfer of intangible property, the income shall be proportionate with the income resulting from that intangible property. They insist companies provide documentation of a reasonable calculation for its transfer price and the burden to prove the calculation inaccurate is not on the IRS. The US guidelines also authorize the IRS to reallocate income, deductions, and other tax items between controlled taxpayers when necessary “to prevent evasion of taxes” or to “clearly reflect income”. (26 CFR §1.482)

The U.S. Taxation of Foreign Corporations has set substantial guidelines for which dictate the regulations by which taxation is initiated. It is no secret that organization are constantly looking for new ways to ‘deduct’ their bottom line, reducing their tax liabilities. The U.S. has been diligent in ensuring that all considerations are covered, however from time to time issues arise that challenge the system in its current status. This papers will strive to answer the question can a foreign taxpayer argue substance over form? In many cases this is a taxpayers catch-22. The basis of the law allows for substance and form allows room for individual interpretation. There are

After 1948, the Congress enacts the Tax Reform Act (TRA) of 1976, which indicated “single, graduated rate of tax imposed of both lifetime gifts and testamentary dispositions” . However, the carryover basis provision in 1976 was postponed in 1978 and repealed in 1980. In this case, the “old law” rules effects today carryover basis for inters vivo transfers and testamentary transfers .