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Mike Heimert, Managing Director and Global Head of Duff & Phelps' transfer pricing practice, was quoted in an article for Transfer Pricing Week (TP Week). The article discusses the Tax Cuts and Jobs Act unveiled by House Republicans on November 2, 2017, outlining a comprehensive overhaul of the U.S.'s tax code.
As the bill stands, there are several proposed changes to transfer pricing as the government tries to curb base erosion and profit shifting ("BEPS"). Some provisions bring changes to intellectual property ("IP") and many companies are likely to start hedging their bets and look at other options for where to house their IP.
Heimert commented, "Some companies may forego their cost-sharing arrangements or look to move their IP into different jurisdictions. The U.S. [corporate tax] rate will drop to 20%, while also imposing a tax for 'high return amounts' of controlled foreign companies, [and] the tax benefit U.S. companies can obtain by shifting intangibles to low tax jurisdictions is now significantly reduced. Coupled with the DEMPE requirements being imposed by many countries on the heels of BEPS, which raises the cost and risk of maintaining entities that principally possess only intangible property, it means that many companies, particularly small and mid-sized multinationals, will see the cost of defending their structures and complying with tightened rules outweighing the potential tax benefits, and they will reevaluate where they want their IP to reside."
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