Transfer pricing is at the heart of the OECD/G20 Base Erosion and Profit Shifting Action Plan. With new transfer pricing documentation, country by country reporting and an ever changing landscape, this makes transfer pricing one of the most fundamental tax issues facing multinational companies today.
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 the new OECD approach, transfer pricing models must be in line with value creation and ensure that transactions are at arm’s length.
With corporate tax rates varying considerably from location to location, 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, many 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.
With all the constant changes in response to the OECD/G20 Base Erosion and Profit Shifting Action Plan, 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.
Our worldwide transfer pricing specialists work together to deliver global solutions for clients that protect against the threats posed by transfer pricing legislation in the post-BEPS era. At a glance, here is how our member firms can help you:
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