Most companies involved with transfer pricing believe that a streamlined audit process will be the greatest benefit resulting from the new Transfer Pricing Audit Roadmap developed by the Internal Revenue Service (IRS), according to a recent survey conducted by KPMG LLP, the U.S. audit, tax and advisory firm, while acknowledging that they expect to be more involved with compiling documentation and file management.
The web-based survey of some 680 senior U.S. tax professionals revealed that 40 percent of respondents saw a streamlined process as the greatest benefit for taxpayers from the roadmap, which the IRS says is designed to provide practitioners with tax audit techniques and tools to assist with the planning, execution and resolution of transfer pricing examinations. Twenty percent expect the roadmap to expand taxpayers’ understanding of the IRS’s transfer pricing concerns and another 15 percent said it would provide them with enhanced certainty on tax audits.
“Our survey indicates that taxpayers are beginning to align behind the new roadmap and feel it will ultimately make the transfer pricing audit process smoother for them,” said Sharon Katz-Pearlman, national principal-in-charge of KPMG’s Tax Dispute Resolution network in the U.S.
“We expect increased discussion and a greater focus on the roadmap in the months ahead,” Katz-Pearlman added. “Clearly taxpayers should be thinking of using the roadmap to their advantage in developing a plan for managing a potential examination.”
Most survey respondents (53 percent) also indicated that they expect to expand their preparation for transfer pricing audits with the new roadmap, including performing self assessments, organizing relevant documentation and files, and having better familiarity with what is publicly available about their company’s profile via the Internet.
In other survey findings:
- Some 43 percent said that the roadmap addressed their main concerns about the transfer pricing audit process, which typically can include determining specific materials that need to be provided and how long the audit process will take.
- Respondents were divided on the time and effort required to comply with the roadmap. Twenty-four percent said that they expected their next transfer pricing audit to be more time-consuming with the roadmap, while 11 percent said they felt it would be more burdensome. At the same time, 15 percent expected it to be less burdensome and another 15 percent less time-consuming.
- When asked the biggest change they expected as a result of the roadmap, 35 percent of respondents said more discussions with IRS representatives of the specifics of transfer pricing arrangements.
The roadmap, introduced on Feb. 14, provides IRS examiners with a practical approach to the identification of transfer pricing issues and the development of issues that merit a full review.
“The IRS has indicated that the roadmap will be a ‘work in process,’ and that they plan to update the tool based on taxpayer comments,” said Brian Trauman, the U.S. national transfer pricing leader for KPMG’s Economic and Valuation Services practice. “The taxpayer community should take advantage of this opportunity to share their perspectives and help shape the tool for their ease of use.”
The survey was conducted in late May during a KPMG TaxWatch webcast focusing on the new roadmap -- part of a new KPMG webcast series on Tax Dispute Resolution Issues. Among the survey participants were tax directors, vice presidents of tax, and chief tax officers.
KPMG’s TaxWatch is part of the KPMG Institute Network which is dedicated to helping organizations and their stakeholders identify and understand emerging trends, risks and opportunities.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.
Robert Nihen/Deborah Primiano