USA Law and Practice Contributed by: Kevin Spencer, Kim Marie Boylan, Nicholas Wilkins and Christina Culver, White & Case LLP
9.6 Entities Bearing the Risk of Another Entity’s Operations One entity in an intercompany transaction can bear the risk of another related entity’s operations by guar - anteeing the other entity a return, so long as the enti - ty bearing the risk is compensated appropriately for that risk. Provided there is economic substance in the underlying transactions, the IRS will respect contrac - tual risk allocation. 9.7 Allocation of Profits to Permanent Establishments (PEs) The attribution of profits to permanent establishments (PEs) for taxation in the USA is governed by the par - ticular treaty relevant to the transaction. The 2006 and 2016 US model treaties use a separate enterprise (arm’s length) approach aligned with the Authorised OECD Approach. 10. Relevance of the United Nations Practical Manual on Transfer Pricing 10.1 Impact of UN Practical Manual on Transfer Pricing The United Nations Practical Manual on Transfer Pric - ing does not significantly impact US transfer pricing practice or enforcement. Transfer pricing laws in the USA are derived from the Code ‒ specifically, Section 482 – and the regulations promulgated thereunder, IRS administrative guidance (eg, revenue rulings and revenue procedures) and case law. 11. Safe Harbours or Other Unique Rules 11.1 Transfer Pricing Safe Harbours US transfer pricing rules contain a few safe harbours applicable in certain specific situations. For instance, Treasury Regulation Section 1.482-2 (a)(2)(iii) con - tains a “safe haven interest rate” for certain loans and advances between members of a group of controlled entities, so long as the rate is not less than 100% of the applicable federal rate and not more than 130% of the applicable federal rate.
where the rules provide some flexibility to minimally deviate from a strict arm’s length standard. These exceptions include certain safe harbours, which are discussed in 11. Safe Harbours or Other Unique Rules . Another example is in the context of CSAs, which are provided for in Treasury Regulation Section 1.482-7. The regulation provides specific guidelines and, so long as the entities’ CSA is within the confines of the regulation guidelines, the arrangement will be considered arm’s length. 9.3 Impact of the Base Erosion and Profit Shifting (BEPS) Project As mentioned in 9.1 Alignment and Differences , the USA views its Section 482 transfer pricing rules as consistent with the OECD Transfer Pricing Guidelines. Tax practitioners are not universally in agreement. Dif - ferences in domestic and foreign transfer pricing land - scapes are generally resolved in proceedings with the APMA. 9.4 Impact of BEPS 2.0 As of April 2025, the USA’s perspective on the OECD’s BEPS 2.0 initiative, including Pillar One and Pillar Two, was in flux. Prior to the administration change in January 2025, BEPS 2.0 was supported by President Biden’s administration but not by Congress. Currently, neither President Trump’s administration nor Con - gress support BEPS 2.0. Shortly after taking office, the Trump administration issued a statement that the OECD global tax deal has “no force or effect within the United States absent an act by the Congress adopting the relevant provisions of the Global Tax Deal”. The long-term impact of BEPS 2.0 in the USA remains to be seen. 9.5 Pillar One Amount B The United States Treasury and the IRS have issued a notice to taxpayers that they intend to propose regula - tions implementing Amount B using the simplified and streamlined approach (SSA). The notice indicates that the USA will implement at least the taxpayer-voluntary option and is considering whether to implement regu - lations permitting the IRS to apply the SSA even if the taxpayer does not elect to do so. While the proposed regulations have not yet been issued, the notice per - mits taxpayers to rely on the SSA for tax years begin - ning on or after 1 January 2025.
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