When transfer pricing rules are adopted, tax authorities can adjust the prices of most cross-border intragroup transactions, including the transfer of tangible or intangible goods, services and loans.   For example, a tax authority may increase a company`s taxable income by reducing the price of goods purchased by a related foreign producer or by increasing the royalties that the company must charge its foreign subsidiaries for rights to use proprietary technology or a trademark.  These adjustments are generally calculated on the basis of one or more of the transfer pricing methods set out in the OECD guidelines and are subject to judicial review or other dispute resolution mechanisms.  In the areas of taxation and accounting, transfer pricing refers to the rules and methods of pricing transactions within and other companies that are jointly owned or controlled. Because of the ability of cross-border controlled transactions to distort taxable income, tax authorities in many countries can adjust intragroup transfer prices that are different from those allegedly charged by independent companies that act on arm length (arm length principle).   The OECD and the World Bank recommend intragroup pricing rules based on the „arms and lengths“ principle, and 19 of the 20 G20 members have adopted similar measures through bilateral treaties and national legislation, regulations or administrative practices.    Countries with transfer pricing laws generally comply with OECD transfer pricing guidelines for multinational companies and tax administrations on most issues, although their rules may differ in some important details.  In another highly deployed case, the IRS Facebook Inc. (FB) accuses of transferring $6.5 billion of intangible assets to Ireland in 2010, significantly reducing their tax burden. If the IRS wins, Facebook may be forced to pay up to $5 billion in addition to interest and penalties.
The trial, which was scheduled for August 2019 in the U.S. Tax Court, was delayed, allowing Facebook to reach an agreement with the IRS. An important consideration in a CSA or CCA is what development or acquisition costs should depend on the agreement. This can be defined as part of the agreement, but it is also subject to the regulation of tax authorities.  Written agreements tend to demonstrate compliance with trading conditions, if only in their legal form. Although a transaction with close parties often does not have a direct market relationship, the ability to describe the terms of a transaction with related parties in the known form of an agreement argues that the transaction with related parties is not manifestly inappropriate. The 2015 draft introduced a revised three-step standardized approach to transfer pricing documentation. Levels vary in the content of the documentation and include the master file, the local file and the country report.
The project also requires companies involved in service transactions with related parties, cost-sharing agreements or thin capitalization to submit a „special file.“  Since countries impose different corporate tax rates, a company that aims to reduce the total taxes payable will set transfer prices to allocate more global profits to countries with lower taxes. Many countries try to impose sanctions on companies when they feel they are tax-free on taxable profits.