USA Law and Practice Contributed by: Kevin Spencer, Kim Marie Boylan, Nicholas Wilkins and Christina Culver, White & Case LLP
3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods Several transfer pricing methods are specified in the US transfer pricing regulations. The options avail - able are dependent on the type of service or property involved in the transaction, as follows. • Transfer of tangible property – the specified trans - fer pricing methods are: (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) comparable profit split method; and (e) residual profit split method. • Transfer of intangible property ‒ as detailed further in 4.1 Notable Rules , the specified transfer pricing methods are: (a) comparable uncontrolled transaction (CUT) method; (b) comparable profits method (CPM); and (c) profit split method. • Controlled services transactions ‒ the specified transfer pricing methods are: (a) comparable uncontrolled services price method; (b) gross services margin method; (c) services cost method (SCM); (d) CPM; and (e) profit split method. • Mixed property transactions – the specified trans - fer pricing methods are: (a) comparable profit split method; and (b) residual profit split method. • Cost-sharing platform contributions transactions ‒ the specified transfer pricing methods are: (a) CUT method; (b) income method; (c) residual profit split method; (d) acquisition price method; and (e) market capitalisation method. 3.2 Unspecified Methods Taxpayers are allowed to use unspecified methods if they are justifiable and appropriate.
3.3 Hierarchy of Methods There is no hierarchy of methods established in US transfer pricing regulations. Instead, the “best meth - od” is to be used. However, the method applied may differ depending on the type of transaction or the facts at issue (see 3.1 Transfer Pricing Methods ). 3.4 Ranges and Statistical Measures The USA does not have set ranges or statistical meas - ures that are used in transfer pricing regulations. How - ever, statistical measures are used in the arm’s length transactions. These statistical measures are generally used to help assess the reliability of CUTs, calculate profit margins, and analyse financial data in the con - The IRS requires comparability adjustments to ensure that transactions comply with the arm’s length stand - ard under Section 482 of the Code. The Treasury Regulations require that these adjustments account for differences between related-party transactions and the comparables being used. If the differences are material and affect the pricing of the transaction, adjustments are necessary to improve comparability in the intercompany transaction. text of the transfer pricing methods. 3.5 Comparability Adjustments The USA regulates transfer pricing of intangibles under Treasury Regulation Section 1.482-4. As men - tioned in 3.1 Transfer Pricing Methods , the following methods are used for transfer pricing of intangibles: • CUT method; • CPM; Section 482 of the Code also provides that income from a transfer or licence must be commensurate with the income attributable to the intangible property. 4.2 Hard-to-Value Intangibles The USA applies the “commensurate with income” rules to all intangibles, including hard-to-value intan - 4. Intangibles 4.1 Notable Rules • profit split method; and • unspecified methods.
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