KPMG report: Legal advice memorandum shows IRS approach to intercompany debt pricing

A report that discusses recent IRS legal advice memorandum and issue of implicit support

A report that discusses recent IRS legal advice memorandum and issue of implicit support

The U.S. transfer pricing regulation addressing financial transactions (Treas. Reg. § 1.482-2(a)) was promulgated in 1994 and has not substantively evolved since that time. In the intervening decades, the OECD has developed and promulgated transfer pricing guidance for financial transactions: a discussion draft in 2018, final guidance in 2020, and corresponding updates in the 2022 version of the OECD Transfer Pricing Guidelines. Although U.S. law does not incorporate the OECD guidelines, the IRS has taken the position since at least 2007 that the guidelines are consistent with the applicable U.S. Treasury regulations. In that vein, the IRS published a legal advice memorandum (from the Office of Chief Counsel) in December 2023 that interprets existing law as requiring consideration of implicit support when pricing intercompany loans. Read TaxNewsFlash

Read a January 2024 report* [PDF 84 KB] prepared by KPMG LLP that discusses the recent IRS legal advice memorandum and the issue of implicit support.

* This article appears in International Tax Review and is provided with permission.


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