Transfer Pricing Tax Hit on the Horizon

Medtronic ruling might make transfer pricing—and other techniques that price transactions to lower taxes—impossible.

By Lynnley Browning & Sony Kassam | Updated on August 20, 2018

Last week, Medtronic Plc suffered a legal setback in its bid to avoid a $1.4 billion U.S. tax bill—a ruling that may have costly implications for other multinationals battling the Internal Revenue Service over the use of overseas payments to lower their taxes.

Companies including Facebook Inc. and Coca-Cola Co. have been fighting the IRS for years over strategies related to so-called transfer pricing—a way that some companies cut their tax liabilities by assigning lower prices for things like intellectual property that they shift to subsidiaries in low-tax jurisdictions such as Ireland or the Cayman Islands.

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