Article
Brochure
Executive Resource
Insight Hub
Video
Ext. PublicationTransfer Pricing, Tariffs and Royalties | Podcast
Never miss a thing.
Sign up to receive our Tax News Brief newsletter.
In this episode of Weaver: Beyond the Numbers, Josh Finfrock discusses unbundling royalties from import prices in transfer pricing, emphasizing the need to comply with both customs and IRS regulations, ensure arm’s length transactions and consider withholding tax implications.
For information or assistance, contact us. We are here to help.
©2026
Detailed Description of Transfer Pricing, Tariffs and Royalties
00:00:00
Josh: Hi. I’m Josh Finfrock with Weaver. I’m a director in our transfer pricing group, and I’m here today to talk about transfer pricing topics and how they affect your business.
00:00:09
Josh: Our topic for today is the most prominent question I’m receiving around tariffs and transfer pricing, which relates to the notion of unbundling a royalty from an import price.
00:00:21
Josh: So, the common fact pattern is dealing with a foreign multinational importing through the U.S. subsidiary into the United States. Where there’s intangible value embedded in the price of that good, we want to evaluate if that value can be separately charged as a royalty.
00:00:41
Josh: There are several ways we can look at this, and we need multiple different angles to make sure we get this correct. We have to comply with customs rules and regulations. We have to comply with IRS rules and regulations.
00:00:56
Josh: So, the first thing we need to do is evaluate if that royalty can be paid and considered separate of the dutiable value. And one of the main key considerations is whether that’s a condition of sale.
00:01:11
Josh: If it’s a condition of sale, it’s going to be added back to the price of the good for dutiable value considerations. Therefore, separating it out doesn’t do very much for us in terms of saving us duties on the amount of the royalty.
00:01:26
Josh: If we look at that and the facts and circumstances support that this is not a condition of sale and can be separately charged, then we need to consider the arm’s length standard.
00:01:38
Josh: So, from an IRS perspective, the IRS wants to look at its rules and regulations and understand, is this payment to a related party arm’s length? Can we support the value of the royalty for this IP?
So, we need to do the analysis to support that royalty as arm’s length and that the transaction for the imported goods is arm’s length.
00:01:58
Josh: Lastly, now that we’ve considered a royalty in our structure, we also need to have some withholding tax analysis done. We need to analyze the sourcing of that royalty.
00:02:08
Josh: We need to analyze what the other country is of the receiving party so we can consider if there’s any treaty benefits or lack of treaty benefits. And then, are there any withholding tax reporting that need to be made in the United States?
00:02:24
Josh: So that’s a wrap for our topic. And if you want to follow more topics like this, look for us on LinkedIn. Thanks.
