The IRS Checks in on Airbnb15th March 2022
Hey, we’re not saying, “Never legitimately shift IP between entities in your group.” Just make sure you explain IP on-the-move in your transfer pricing documentation—and, of course, have supporting documentation to back it up. After all, Coca-Cola’s recent tangle with the IRS left the tax agency $3.3 billion richer—and that case wasn’t just bad news for the beverage giant, it has implications for all multinational groups. Given the victory for the IRS, the agency now has the case law—and the confidence—to go after other multinational companies shifting IP. It’s a worry for many taxpayers, but especially for Airbnb, who is officially on the hook for a $1.3 billion transfer pricing adjustment (plus penalties and interest) over a 2013 IP sale from a U.S. company to a cross-border subsidiary. The IRS proposed the adjustment in December 2020, though the company tried to protest the adjustment, they were denied a year later, in December 2021. If the IRS collects, it will directly impact Airbnb’s cash flow, as the hospitality disruptor doesn’t have the reserves for such a huge tax bill. And as it goes, if you’re in trouble with a tax authority for one year, chances are the agency will review documentation from other years, too: Case in point: the IRS is reviewing Airbnb’s tax returns for 2013, 2016, 2017, and 2018. Add to that the fact that the company restructured in 2020, moved IP back to the U.S., and engaged in complicated intercompany arrangements across various jurisdictions, and the IRS could end up being the least of Airbnb’s problems.