Bloomberg BNA Quotes Patricia Lewis: 4 Things to Know About the IRS's Intercompany Pricing Deals

Coca-Cola Co., Procter & Gamble Co., and Honda Motor Co. Ltd. are a few of the multinational companies capitalizing on advance tax deals with governments, including the U.S., to shrink tax reserves and secure tax certainty in their cross-border transactions.

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“Being able to operate with certainty in your major transactions lets you focus on other things,” Patricia Lewis, a member at Caplin & Drysdale, told Bloomberg Tax. “Maybe that's another way to look at it—spend more time on your business than your taxes.”

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Securing an agreement can take years.

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“You have to be very patient,” Lewis said. “And if the client is not of that mindset, it can be a very uncomfortable situation.”

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The entire process can get quite expensive.

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Lewis agreed. If anything, $100,000 is a bare minimum for the outside sources a company may use. “It could be $1 million depending on the complexity of the case and the tenacity of the IRS,” she said.

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Smaller companies will certainly be affected by the user fee increases, Melo and Lewis said, but most companies that get an APA tend to be large. For Honda, the increase is “relatively small” and won't affect its decision to pursue an APA.

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Japan tends to be a popular country for bilateral agreements.

APMA has become increasingly thoughtful about the overall APA process, Lewis said, and other countries have gotten more sophisticated. “The U.S. has good relations with a lot of these countries,” she added.

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Tax reform might change the reason behind getting an APA.

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Lewis agreed. Unless a company is under particular deadlines to renew an APA, most companies are spending this year trying to determine where their business and transactions stand under the new tax regime, she said.

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Excerpt taken from the article “4 Things to Know About the IRS's Intercompany Pricing Deals” by Sony Kassam for Bloomberg BNA.