Companies A and B, both of which are members of the same controlled group, commence an IDA on March 1, Year 1. Company A pays the first IDCs in relation to the IDA, as cash salaries to A’s research staff, for the staff’s work during the first week of March, Year 1. A and B, however, do not sign and date any written contractual agreement until August 1, Year 1, whereupon they execute a “Cost Sharing Agreement” that purports to be “effective as of” March 1 of Year 1. The arrangement fails the requirement that the participants record their arrangement in a written contractual agreement that is contemporaneous with the formation of a CSA. The arrangement has failed to meet the requirements set forth in paragraph (b)(2) of this section and, pursuant to paragraph (b) of this section, cannot be a CSA.
§ 1.482-7(k)(1)(iii)(B) Example.
Posted on |
By Internal Revenue Service
Category: US IRC Section 482 on Transfer Pricing, § 1.482-7 Methods to determine taxable income in connection with a cost sharing arrangement | Tag: CCA/CSA, CCA/CSA - administrative requirements, CCA/CSA - methods for pricing, Contractual requirements, Cost Contribution Arrangement (CCA), Cost Sharing Arrangement (CSA)
« Prev |
Next » Related Guidelines
- TPG2022 Chapter II Annex I paragraph 1[See Chapter II, Part III, Section B of these Guidelines for general guidance on the application of the transactional net margin method. The assumptions about arm’s length arrangements in the following examples are intended for illustrative purposes only and should not be taken as prescribing adjustments and arm’s length arrangements...
- TPG2022 Chapter VIII paragraph 8.4As indicated in Section D. 1 of Chapter I, the delineation of the actual transaction undertaken forms the first phase in any transfer pricing analysis. The contractual agreement provides the starting point for delineating the actual transaction. In this respect, no difference exists for a transfer pricing analysis between a...
- TPG2022 Chapter VIII paragraph 8.29Since contributions are based on expected benefits, this generally implies that where a cost reimbursement basis for valuing current contributions is permitted, the analysis should initially be based on budgeted costs. This does not necessarily mean fixing the costs, since the budget framework may accommodate variability arising from factors such...
- TPG2022 Chapter VIII Annex example 2Example 2 12. The facts are the same as Example 1, except that the per-unit value of Service 1 is 103 (that is, both Service 1 and Service 2 are low-value services). Assume, therefore, that the calculation of the costs and value of the services is as follows: Cost to...
- TPG2022 Chapter VIII paragraph 8.5A key feature of a CCA is the sharing of contributions. In accordance with the arm’s length principle, at the time of entering into a CCA, each participant’s proportionate share of the overall contributions to a CCA must be consistent with its proportionate share of the overall expected benefits to...
- TPG2022 Chapter IV Annex II paragraph 67Once the MAP APA has been finally agreed, the participating tax authorities need to give effect to the agreement in their own jurisdiction. The tax administrations should enter into some kind of a confirmation or agreement with their respective taxpayers consistent with the mutual agreement entered into by the participating...
- TPG2022 Chapter VIII paragraph 8.18In cases where CCA activities are outsourced, an arm’s length charge would be appropriate to compensate the entity for services or other contributions being rendered to the CCA participants. Where the entity is an associated enterprise of one or more of the CCA participants, the arm’s length charge would be...
- TPG2022 Chapter VIII paragraph 8.14Because the concept of mutual benefit is fundamental to a CCA, it follows that a party may not be considered a participant if the party does not have a reasonable expectation that it will benefit from the objectives of the CCA activity itself (and not just from performing part or...
- TPG2022 Chapter IX paragraph 9.18The accurate delineation of the transactions comprising the business restructuring requires performing a functional analysis that seeks to identify the economically significant activities and responsibilities undertaken, assets used or contributed, and risks assumed before and after the restructuring by the parties involved. Accordingly, the analysis focuses on what the parties...
- OECD COVID-19 TPG paragraph 95When considering the consequences of the failure to meet critical assumptions, tax administrations and taxpayers should consider the (i) terms of the APA; (ii) any agreement between relevant tax administrations as to how to deal with the failure; and (iii) any applicable domestic law or procedural provisions.45 This section follows...