Welcome To the Tax Intelligence Report!
The June 2011 issue of the Tax Intelligence Report highlights the professional career track of Brian Andreoli, Tax Partner with Squires, Sanders & Dempsey LLP, New York, NY. Brian Andreoli's perspective on transfer pricing provides us with a glimpse of the important issues facing multinationals today. There are many demands on multinationals including transfer pricing which requires constant review by Tax Advisors. Anyone who has been fortunate enough to work with Brian Andreoli will discover that he is a truly honorable, reliable and trustworthy Tax Advisor. Brian is also an extraordinarily personable and approachable man who easily extends himself to help others!
All the best,
Kathleen Jennings
Editor, The Tax Intelligence Report
President
ET Search, Inc.
Kathleen@etsearch.com
www.etsearch.com
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Brian Andreoli is Tax Partner with the international law practice of Squires, Sanders & Dempsey LLP in New York, NY where he focuses his practice on transfer pricing, international tax matters, and state tax matters. Brian Andreoli has successfully defended numerous multinational clients on sophisticated tax structuring and audit defense issues. Prior to joining Squires, Sanders & Dempsey LLP, Brian Andreoli was Tax Partner with DLA Piper LLP, an international law practice in New York, NY. Brian also held tax roles at Duane Morris LLP, Boerhinger Ingelheim Pharmaceuticals and Big Four public accounting firms. Brian is a frequent speaker on international tax issues and transfer pricing matters in the United States, the United Kingdom, and Canada. Brian Andreoli is listed in the 2008 Guide to the World's Leading Transfer Pricing Advisors and is supported by a team of Tax Attorneys including the Economist, Theodor vanStephoudt.
Brian Andreoli earned his BA in Government at Franklin and Marshall College, Lancaster, Pennsylvania; an MBA at NYU Graduate School of Business, New York, New York; a JD at Fordham University School of Law, New York, New York; an LLM at Quinnipiac University of Law, Hamden, Connecticut and his CPA in New York State. He is licensed to practice in the United States Tax Court, Second Circuit Court of Appeals, the United States Supreme Court, and the Federal District Courts of the District of Columbia, Connecticut, Massachusetts, and New York(Southern and Eastern). He is admitted before the bars in Connecticut, New York, Massachusetts and the District of Columbia, and is a Certified Public Accountant.
KJ- As an International Tax Lawyer, what trends in international tax do you believe organizations need to be aware of right now?
BA-There are two things that companies need to be aware of; one is the changing international business environment where there is currently a great need to restructure existing business units to meet the business environment; and two would be to ensure that companies are in compliance with the current tax rules and regulations.
KJ- Many of my multinational clients are discussing their need to restructure their foreign operations. Why is there increased emphasis on international restructuring?
BA-Business is responding to the need to deliver better, faster, higher quality products and processes for a competitive price to their customers. This means breaking down some of the traditional structures, centralizing certain functions and to not have those functions duplicated in every jurisdiction. Traditionally, there was the pyramid corporate structure along with various tax laws that encouraged corporations to have a full complement of functions in each country in order to avoid the imposition of a higher tax on businesses. This led to excess capacity and duplication of functions. Accordingly, corporations are reorganizing to more effectively deploy its assets.
KJ- What countries are more welcoming from a tax perspective to companies these days?
BA-First, corporations should avoid locating a business purely based on tax considerations. Certain countries are appealing due to the general business attributes. The tax rates of certain jurisdictions can enhance the end result . Countries such as Ireland, Netherlands, Switzerland, Hong King are the more obvious choices based on the attributes of the business along with a favorable tax climate.
KJ- What is the climate for countries outside the U.S. who want to do business here?
BA-If you are asking if corporations headquartered outside the U.S. want to set up business operations in the U.S. I would say that this business is picking up again. One reason for this upward trend in activity is that the U.S. is the freest market economy. Second, with the U.S.dollar in a weak position, an investment in the U.S. makes sense in terms of the cost and the potential upswing when the dollar recovers.
KJ- What tax rules and regulations are coming out of Washington DC these days?
BA-As a broad overview, people are waiting to see what a revised tax code may look like, particularly aimed at the current budget deficit where there will certainly be more tax rules and regulations that will limit the amount of deferral the U.S. corporations can effectively do or increase the reporting requirements on what type of business and where the business is being conducted. A prime target issue is transfer pricing and does the income and expense really belong. The Obama administration is questioning the current transfer pricing rules when it comes to transfers of intangibles.
KJ- What are the issues people need to be aware of regarding transfer pricing?
BA-Even though transfer pricing technically goes back to almost the beginning of the I.R.S. Code, 1968 was the first year that the U.S. actually wrote regulations and that regulation did not address intangible property. In 1994, we finalized the regulation on intangible property and intercompany services. Since that time, the OECD has been particularly active in promulgating positions and regulations and proposed rules for the world to adopt in regards to transfer pricing. The days of ignoring transfer pricing are over so at a base level transfer compliance is a given; otherwise you expose your corporation to substantial penalties. However, transfer pricing is a technique to effectively do tax planning consistent with your business objectives; and at the same time a properly developed transfer pricing analysis provides the background for a rationalization where a company is and where it may want to be in terms of its actual business.
KJ- What can you tell me about transfer pricing audits?
BA-The former Chief Counsel of the IRS identified transfer pricing as its number one issue. There has been a definite upward trend in intercompany transfer pricing audits including audits that involve the business purposes of restructuring and transactions. This is not just limited to the U.S. as it is also occurring the other way and coming from other countries around the world. There are now over 40 countries with rules or regulations.
KJ- How would you advise a Lead Tax Executive preparing for a transfer pricing audit?
BA-Transfer pricing is in essence, a business process mapping! In order to properly prepare for the onslaught of transfer pricing audits, one should look at the entire system to properly determine the functions and risks that are allocated throughout the corporation's economic system. Then determine what documentation has been prepared to justify the audit years. We tend to recommend a Master File approach in order to reconcile and document the transfer pricing. There is no substitute for contemporaneous documentation. Credibility levels drop for transfer pricing analysis done years after the fact.
KJ- Companies are addressing Customs issues more these days, any comments?
BA-In terms of both customs and VAT, most people miss this one! Customs is intertwined with transfer pricing, and under the Patriot Act there are provisions that actually coordinated activities between customs and income tax in various countries. We are now seeing joint audits or situations where audits start on customs versus income tax. Remember, customs is a flat percentage and similar to VAT that is not subject to a deductions and it is a gross revenue tax. Where appropriate, I recommend corporations consider seeking an Advance Pricing Agreement (APA). Before seeking an APA, there are several key factors to consider such as, the cost, the commitment and the exposure.
KJ- Brian, I want to personally thank you for your time in answering our questions. Your experience and perspective is valuable and genuinely appreciated.
Kathleen Jennings (KJ)
Editor, The Tax Intelligence Report
Kathleen@etsearch.com
www.etsearch.com
Brian Andreoli (BA)
Tax Partner
Squires, Sanders & Dempsey LLP
brian.andreoli@ssd.com
212.872.9816
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