Transfer Pricing

Transfer Pricing

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Transfer Pricing

INSTRUCTIONS:
A multi-national company has hired you as its tax professional to advise the company on how to use transfer pricing to avoid or mitigate taxes. This company manufactures and sells cars in the US and 2 foreign countries. 1. create projections of revenues, costs, and tax rates for all 3 countries including the US. Provide support for your projections. 2. based on your projections create at least 2 scenarios in which you allocate revenues and costs to each country to determine the lowest possible overall tax for each country. Provide support for your rationale. 3. create at least 3 scenarios and propose a scenario to the client that will result in a favorable tax position. Provide support for your rationale. 4. create at least 3 scenarios and propose a scenario to your client that is less likely to result in an IRS tax audit. Provide support for your rationale. 5. assume that the IRS has challenged the allocations and is preparing to audit the client. Prepare a position to defend the client to the IRS. Provide support for your rationale. 6. imagine that you are an IRS agent auditing a multinational company`s transfer pricing methods. Evaluate the tools you could use to perform the audit and propose an audit plan. Provide support for the strategy
CONTENT:
Running Head: Multinational Firms Name University Course Tutor Date Introduction The United States federal government imposes income tax on individuals and corporate that generate income within the United States and outside the United States. This follows from the nature of the taxation system that has been adapted in the United States that stretches to reach the United States citizens generating income outside the United States. The federal government, through the Internal Revenue Service (IRS), it applies a progressive tax on the taxable income. The taxable entities include individual persons residing in the United States both citizens and non citizens, and the American citizens who are generating income outside the country. The other entities that are liable to pay income tax include the partnerships, both limited and unlimited companies, corporations, trusts and estates. Income tax policies in the US can be traced back to 1890`s under the United States Constitution, that is, Article one, section 1., as given in clause one. This was during the time of the civil war. At the current times, the income tax provisions are contained in the United States constitution and also provisions that are given in the Internal Revenue Service Code. The Internal Revenue Service is the agency that is responsible for the US tax income collection and also the enforcing of the taxation rules. The main aim of the rules is to define the scope of taxation and the also ensure that there are minimum tax evasion cases reported in the United States. Tax Considerations of Doing Business in Puerto Rico In Puerto Rico, a company is regarded domestic firm in the case that it is governed by laws in Puerto Rico and when governed by laws from anther country it is viewed as foreign company. In this case, taxation is carried out based on its global income. In addition, a company uses the calendar or financial year in computing its tax. A company is taxed a constant rate of 22%. Surta...
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