Discuss the U.S transfer pricing regulations, including advance pricing agreements, arm’s length standard, and methods allowed to determine comparable prices.

U.S. transfer pricing regulations aim to make sure that related companies pay fair prices and prevent any tax avoidance by manipulating these transactions. The arm’s length standard is the benchmark used by the Internal Revenue Service (IRS) to determine what constitutes a fair transaction – this means that any transfer pricing should reflect what an unrelated party would pay for similar items under similar circumstances.

Advance Pricing Agreements allow companies to outline their transfer pricing strategy in advance, and then receive an IRS agreement on the tax and other implications of these transactions. Methods like the Comparable Uncontrolled Price Method (CUP), Resale Price Method RPM, Cost Plus Method and Profit Split Method are used to compare prices between different markets or countries.

These rules are designed to provide a structure for companies that will allow them to comply with U.S. transfer pricing regulations and avoid future issues with the IRS.