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16 April 2019

US IRS releases new financial model, continuing pressure on transfer pricing policies

OECD member countries continue to focus on the management and control of risk in tax structures, paying close attention to transfer pricing. The US Advance Pricing and Mutual Agreement (APMA) program has released the Functional Cost Diagnostic Model to assist its due diligence of contributions by the relevant parties. APMA intends to use the model in limited cases to determine whether the US entity has significant functions related to control of risk. While the model is not meant to determine the best method, the model assesses whether a profit split method or another method is better suited to determine the arm’s length price. Read EY’s Tax Alert and listen to EY’s webcast replay.

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