Multi-national corporations have a variety of options to price goods and services that are sold between the various countries in which they operate. Each method has its pros and cons, but in addition to internal cost transfer considerations, these multi-national corporations also have to make the tax authorities in those countries happy, since the pricing mechanism chosen impacts the profit in each country and the subsequent taxes that country collects.

In the U.S., the IRS offers these companies an Advanced Pricing Agreement (APA) option so that the risk of a subsequent dispute is eliminated. The problem is that the IRS is way behind on approving these APAs.

An article at CFO.com picks up on the challenges the IRS and companies face:

Senior finance and tax executives may well be wondering whether their companies should work with the Internal Revenue Service on transfer-pricing agreements after learning about the agency’s latest progress report. Last week the IRS revealed that it processed fewer Advance Pricing Agreements (APAs) last year, and the average time the IRS takes to process such deals rose to 40.7 months last year from the 37.2 months reported in 2010.

The article goes on to cite several causes, including a need to coordinate with other countries' tax authorities and the need to resolve complex cases that can provide guidance for simplier cases.

The issue of Transfer Pricing continues to be a hot button issue as tax authorities around the world take a hard look at tax revenue.

You can read the full article at: IRS Holding Up Transfer-Pricing Deals for Years.