United States – Transfer Pricing (2025)

Legal framework and scope

The US transfer pricing framework is embodied primarily in the Treasury Regulations that interpret section 482 of the Internal Revenue Code (IRC). The key provisions are contained in Treas. Reg. §§1.482-1 through 1.482-9. These regulations implement the arm’s length principle for controlled transactions and set out substantive, procedural and documentation rules that govern the allocation of income among related taxpayers (Treas. Reg. §§1.482-1 through 1.482-9). The country profile does not provide additional domestic guidance beyond the cited regulations for certain procedural specifics.

Arm’s Length Principle and the role of the OECD Transfer Pricing Guidelines

US Treasury Regulations are consistent with the OECD Transfer Pricing Guidelines; however, neither the domestic statute nor the regulations explicitly reference the OECD Guidelines (US transfer pricing regulations are consistent with the TPG. Neither the domestic legislation nor the regulations mention the TPG). The arm’s length principle is applied in accordance with Treas. Reg. §§1.482-1 to -9, and the US approach incorporates concepts and techniques broadly aligned with the OECD guidance, particularly in comparability analysis and selection of the most appropriate method (Treas. Reg. §1.482-1(c)).

Definition of related parties (thresholds, control, kinship, PEs)

The regulations define “controlled taxpayer” in terms of common ownership or control. Treas. Reg. §1.482-1(i)(5) states: “Controlled taxpayer means any one of two or more taxpayers owned or controlled directly or indirectly by the same interests, and includes the taxpayer that owns or controls the other taxpayers.” Treas. Reg. §1.482-1(i)(4) clarifies that the determination of control is a facts-and-circumstances analysis and that “any kind of control, direct or indirect, whether legally enforceable or not, and however exercisable or exercised, including control resulting from the actions of two or more taxpayers acting in concert or with a common goal or purpose.” There are no fixed numerical thresholds for control; the assessment is case-specific. The profile does not provide additional domestic rules on kinship or specific treatment of permanent establishments beyond treaty-related provisions discussed elsewhere.

Methods and application criteria

US regulations expressly provide for a range of transfer pricing methods, including the Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), and Profit Split, along with other variations and alternative approaches such as income-based, market capitalization and acquisition price methods. These are set out in Treas. Reg. §§1.482-3(a), -4(a), -7(g)(1), and -9(a). The selection of the transfer pricing method follows the “best method” rule: Treas. Reg. §1.482-1(c) requires selecting the method that provides the most reliable measure of what an uncontrolled taxpayer would have earned in comparable circumstances.

Comparability and use of ranges

US regulations emphasize conducting a comparability analysis consistent with Chapter III of the OECD Guidelines (Treas. Reg. §§ 1.482-1(c)(2) and (d); -3(b)(2), (c)(3), and (d)(3); -4(c)(2); -5(c); -6(c)(2)(ii) and (3)(ii); and 1.482-9(c)(2), (d)(3), (e)(3), and (f)(2)(iii)). There is no general preference for domestic comparables over foreign comparables (Treas. Reg. §§1.482-1(c) and (d)). The tax administration does not use secret comparables according to the profile. The regulations permit the use of arm’s length ranges and other statistical measures to enhance result reliability (Treas. Reg. §§1.482-1(e) and 1.482-7(g)(2)(ix)). Comparability adjustments are required when they improve the reliability of the analysis for material differences between comparables (Treas. Reg. §1.482-1(d)(2)).

Documentation and reporting (Master, Local, CbC, thresholds, language, timing, forms)

With respect to documentation, the United States does not generally require a Master file or Local file consistent with Annexes I and II of Chapter V of the OECD Guidelines. The United States does require a Country-by-Country Report consistent with Annex III of Chapter V where applicable; the ultimate parent entity of a US multinational group is not required to file a CbC report if consolidated annual revenues for the preceding reporting period were less than USD 850 million (Treas. Reg. §1.6038-4(h)). Certain documentation requirements are voluntary but necessary to obtain penalty protection; in specific instances, particular documentation is required to access regulatory protections. In addition, information relevant to controlled transactions must be reported on Form 5472 and provided upon request.

For penalty protection, documentation must be in existence at the time the tax return is filed and must be provided to the IRS within 30 days after being requested (Treas. Reg. §1.6662-6(d)(2)(iii)(A)). The profile does not specify detailed language requirements for documentation beyond general procedural rules. For detailed guidance on the content and structure of Master and Local files, reference to the OECD Guidelines is recommended.

Safe harbours / exemptions / materiality

There are targeted simplification mechanisms. For certain intercompany loans, the regulations provide a “safe haven” interest rate equal to 100% to 130% of the Applicable Federal Rate (AFR) when the conditions in Treas. Reg. §1.482-2(a)(2)(iii) are satisfied. For low value-adding intra-group services, the Services Cost Method (SCM) is a specified transfer pricing method permitting taxpayers under certain circumstances to charge such services at cost (Treas. Reg. §1.482-9(b)). The profile does not identify other simplification measures.

APAs and MAP; procedures and timing where specified

The United States offers administrative mechanisms to prevent and resolve transfer pricing disputes. The IRS operates enhanced engagement programs and administers Advance Pricing Agreements (APAs), including unilateral, bilateral and multilateral APAs under Rev. Procs. 2015-40 and 2015-41. The US also participates in Mutual Agreement Procedures (MAP) and engages with the OECD ICAP program. The country’s OECD MAP Profile provides further detail on MAP and APA procedures. The profile itself does not enumerate specific statutory time limits beyond those included in the cited administrative procedures.

Penalties and other considerations (secondary adjustments, recharacterization, year-end adjustments, PEs)

Penalties for valuation misstatements are set out in IRC §6662: generally, a 20% penalty for substantial valuation misstatements and a 40% penalty for gross valuation misstatements. Proper transfer pricing documentation that satisfies certain requirements may reduce or eliminate these penalties (IRC §6662(e) and (h); Treas. Reg. §1.6662-6(d)(2)(iii)(A)).

Year-end adjustments are permitted subject to the limitation set forth in Treas. Reg. §1.482-1(a)(3). Regarding secondary adjustments, Treas. Reg. §1.482-1(g)(3) provides that conforming adjustments may be treated as a dividend or capital contribution, as appropriate, and Rev. Proc. 99-32 provides an elective approach to treat a conforming adjustment as a loan. The profile does not provide additional domestic guidance on recharacterization beyond these rules.

On the attribution of profits to permanent establishments, the United States has adopted the Authorised OECD Approach (AOA) in seven treaties in force as of January 2021: Belgium, Bulgaria, Canada, Germany, Iceland, Japan and the United Kingdom. The United States does not consider the AOA applicable to treaties that retain the older version of Article 7; for its remaining 57 treaties, the US attributes profits based on the business profits article in the applicable treaty. The US model treaty follows the AOA and it is the preferred US position in negotiating new treaties.

Conclusion

US transfer pricing rules are comprehensive and are set out in Treasury Regulations interpreting IRC §482. The rules apply the best-method doctrine, require comparability analyses consistent with OECD practice, provide for documentation and penalties tied to valuation accuracy, and offer administrative tools such as APAs and MAP to address disputes. Targeted simplifications exist for certain intercompany loans and low value services. For areas not fully developed in the country profile—such as detailed Master and Local file contents or documentary languages—the OECD Transfer Pricing Guidelines are the natural reference.

References

For further information and access to the full OECD country profile, see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html