Publication Date

Spring 4-15-2013


The Organisation for Economic Co-operation and Development (OECD) has adopted a series of “soft law” guidelines similar to the “hard law” regulations enacted in the U.S. Internal Revenue Code (IRC) concerning tax upon transfer pricing among related multinational businesses or enterprises (MNE) not dealing at arm's length. International transfer pricing rules regulate yearly local jurisdictional taxes, which measure in the trillions of dollars.

In 2006, for example, the MNE pharmaceutical firm GlaxoSmithKline settled a transfer pricing controversy with the US Internal Revenue Service for $3.4 billion. The Guidelines of the OECD and the regulations of the IRC allocate taxes for loans, sales of tangible property, transfers of intangible property, and services between related persons, such as a multinational parent and its subsidiary corporation. This article outlines the methods of valuation used by the IRC and its regulations, which have served as models for the OECD guidelines.