How North American Policies Shape Transfer Pricing for Digital Services

Abstract

The digital economy has become a focal point of international tax policy due to the complexities associated with the intangible nature of digital services and the growing reliance on cross-border operations. Transfer pricing the pricing of transactions between related entities within multinational enterprises (MNEs) — is critical in ensuring that profits are fairly allocated across jurisdictions. In North America, the tax regimes of the United States, Canada, and Mexico have established robust frameworks to regulate transfer pricing, particularly for digital services. These regulations, while rooted in international guidelines like the OECD's Base Erosion and Profit Shifting (BEPS) framework, are influenced by each country’s unique economic, legal, and political landscape. This paper explores how North American policies impact the determination of transfer pricing for digital services, addressing issues like intangibles, data-driven value creation, and profit allocation. Keywords: transfer pricing, digital services, North America, OECD, tax policy, intangibles, BEPS.