Facebook’s Transfer Pricing Troubles26th October 2021
Fake news, political organizing, and now, transfer pricing. Facebook is never without its fair share of drama. In terms of transfer pricing, the latest is its continuing court battle, which began last year, paused due to COVID, and resumed this month. The issue is the value of intangible assets that were licensed to an Irish subsidiary in 2010. A quick recap: Facebook valued marketing and other intangibles at $6.5 billion, but the IRS claimed the value was actually $21 billion—a discrepancy that greatly reduced taxes owed to the U.S. Back in 2010, however, the company’s advertising business had not taken off and Facebook said the risk the Ireland entity assumed justified the $6.5 billion valuation. Depending on what the courts decide, the dispute can cost the company between $5 and $9 billion in a combination of back taxes, penalties, and interest. While the courts will have to deliberate on how much value should be attributed to the Ireland entity versus the U.S. headquarters, we have another question in mind: What will land Facebook in the news next?