Episode 117: Services or something more? Navigating blurred lines in transfer pricing

Kristina Novak (Principal in PwC’s US National Tax Services Transfer Pricing Practice) is joined by Marco Fiaccadori (Principal in PwC’s US National Tax Services Transfer Pricing Practice) and John Cianfrone (Director in PwC’s US National Tax Services Transfer Pricing Practice). Kristina, Marco, and John discuss the complex and evolving landscape of intercompany services transactions. They explore the treatment of stock-based compensation, characterization issues, and interactions with international tax provisions. Kristina and her guests also discuss higher-value services, services that embed IP, planning and documentation considerations, and anticipated updates to Chapter VII of the OECD Transfer Pricing Guidelines.

Timestamps 

01:38 - What are the key issues that commonly arise in intercompany services transactions? 

05:31 - How is stock-based compensation treated in intercompany services transactions? 

08:33 - Why is there increased global scrutiny on stock-based compensation in services? 

10:43  -What are the key tax consequences of characterizing a transaction as a service or a royalty? 

12:13 - Where is the line when services embed IP, and what are the transfer pricing implications? 

15:46 - How does the service vs. royalty distinction affect FDDEI eligibility and BEAT exposure? 

20:28 - What does the recent IRS GLAM on the SCM exception say, and why does it matter? 

22:29 - When is cost-based pricing not appropriate for services transactions? 

28:22 - How do the 861 regulations on stewardship expenses interact with transfer pricing rules? 

31:33 - What are current challenges in pricing and allocating headquarter services? 

34:55 - What planning considerations should companies prioritize in documenting service arrangements? 

37:18 - What can we expect from the OECD’s update to Chapter VII on intercompany services?

Authors: Kristina Novak, Marco Fiaccadori, John Cianfrone