Transfer Pricing
Transfer pricing refers to the pricing policies adopted by
groups of companies for transactions between companies in the
group, such as the sale of goods, the provision of services, or the
licensing and use of technology and intangible assets.
With corporate tax rates varying considerably from country to
country, tax authorities are aware of the potential for
multinational groups to reduce their global tax charge by
manipulating the prices charged on intra-group transactions. As a
result, around 50 countries now have transfer pricing legislation
empowering their tax authorities to impute additional taxable
profits to companies if they consider they have been charged too
much or have charged too little on intra-group transactions.
As such, transfer pricing has become the single most important
issue in the field of international taxes. All groups trading
internationally can expect to be the subject of transfer pricing
enquiries in one or more countries, however reasonable they
consider their intra-group prices to be. For a group company to
have to pay more taxes as a result of an enquiry can be a disaster;
often it is not possible for group companies in other jurisdictions
to obtain corresponding tax relief resulting in double
taxation.
Baker Tilly International worldwide transfer pricing specialists
work together to deliver global solutions for clients that protect
against the threats posed by transfer pricing legislation. There
are four ways in which Baker Tilly International member firms can
help:
- Advising on prices for intra-group transactions, using proven
economic databases to recommend prices which maximise legitimate
tax savings whilst minimising the risk of successful challenges by
national tax authorities
- Advising on the documentation of a group's transfer pricing
policies. Most countries which have transfer pricing legislation
give their tax authorities the power to demand to see such
documentation and to impose heavy financial penalties if it does
not exist or if it is perceived to be inadequate
- Defending a group's transfer pricing policies when they come
under attack by a national tax authority
- Where appropriate, negotiating Advance Pricing Agreements
(APAs) with tax authorities. Some countries offer an APA facility,
under which a group's transfer pricing policies are voluntarily
disclosed to the authority and discussions ensue as to whether they
are fair. In some circumstances this can be the right way to
proceed.
For more information download our brochure, Transfer Pricing - Effective Global
Solutions.