Q: How do I price a US-made product offered through a joint venture in a foreign country? Also, could you please direct me to a few web- based publications where I can read more about the topic.

A: Section 482 of the Internal Revenue Code and Transfer Pricing Guidelines For Multinational Enterprises And Tax Administrations published by the Organization for Economic Cooperation and Development (OECD) provide guidance on the appropriate allocation of income between controlled parties and hence, the appropriate pricing of transactions involving the transfer of goods and services between related or controlled parties.

Generally, in controlled transactions, the allocation of income between two or more parties is based on an examination as to the functions performed and risks assumed by each party to the transaction.

Under U.S. rules, where one party owns a controlling interest (50 percent or more) in another party, transactions between the two parties are considered controlled transactions. In those instances in which the interest in a joint venture is less than 50 percent, determination as to whether a transaction is a controlled transaction is based on the facts and circumstances of the case.

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–Joe Murphy, partner, global transfer pricing practice PricewaterhouseCoopers LLP

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