The most important value driver for a tax department is certainty. In a cycle of radical tax transformation occurring in the world of international tax and transfer pricing today, certainty can seem out of reach, or least unsustainable.

Aptis aims to bring clarity in a cycle of complexity by grounding the transfer pricing strategy within the reality of the business as the most reliable route to certainty.

Whether it is achieved through the application of the commensurate with income law or the economic substance doctrine, the Internal Revenue Service will seek to align the characterization of the transaction with the arm's length standard.* The "Master file Light", largely based on 10-K information for many multinationals, will bring more questions than answers, blindly leading the taxpayer down a path of recharacterization with most any jurisdiction, including the US. The thoughtful preparation of documentation that memorializes the intended intercompany relationships, which drive the tested transactions, has evolved from being strategic to simply "table stakes."

Aptis has redesigned the basic framework of the Master file to meet the expectations of the OECD Guidelines and, for US Multinationals, to align with the principal documents defined by the penalty regime of the Internal Revenue Code § 1.6662(e) as well as the local laws or rules of other OECD member jurisdictions. To complete the story, we have also reshaped the Local file to ensure the most fluid and simplistic process in creating what can be a cumbersome collection of localized reports, allowing the focus at the local level to reside in the differences that are relevant to the economic analysis, particularly how the nuances of the local story support the best method selection and the tested party data supports the characterization and, collectively, the conclusion.

Our experience in audit controversy and defense support has focused on ensuring consistency and factual accuracy in sync with the assumptions available at the time of the transaction, while providing independent insights that close the gaps of any missing information. Evidence showing why the ultimate level of profitability may have shifted ex-ante is mission critical to a recharacterization defense, particularly when intangible property transfers are involved. These catalogs of evidence, perhaps supported by a simple memo to file or an internal business communication on market conditions, could also impact other surrounding international tax issues beyond transfer pricing and should be pressure-tested for consistency in factual content relative to the industry and other economic conditions as well as key assumptions supporting the intended business purpose of the intercompany transaction. 

As an independent team of senior transfer pricing advisors, Aptis Global is uniquely capable in helping you to elevate your company's transfer pricing documentation, making it more strategic, defendable, and manageable. If you are already facing a controversy matter, we have the depth and breadth of experience on our team to assist you on that journey whether it is through dispute resolution, Competent Authority, and/or an Advance Pricing Agreement, the most assured path to certainty. 

*References for US MNC's: Arm’s length standard (“ALS”) in Treas. Reg. § 1.482-1(b)(1); the specific Periodic adjustment rules in Treas. Reg. §§ 1.482 4(f)(2) and 1.482-7(i)(6), and the Economic substance doctrine (§ 7701(o)).