There are many aspects of transfer pricing that require the attention by Multinational Companies (MNC):
Given the importance of transfer pricing and the impact to MNCs, how can tax and accounting professionals ensure that your clients are receiving correct transfer pricing advice?
It is worth taking the time to reflect on your clients’ transfer pricing needs and ensure their businesses are aligned with the best transfer pricing practices. Effective transfer pricing planning can benefit MNCs by allowing them to optimise the allocation of their profit within their related group.
Ineffective transfer pricing planning and non-compliance can lead to expensive consequences for businesses such as double taxation and disputes with tax authorities that can further lead to litigation and substantial penalties.
Every year, we help our clients to manage their transfer pricing risks, solve their transfer pricing problems and provide sound recommendations when needed.
We share a few cases that we have successfully handled and helped companies and accounting firm with their transfer pricing challenges.
Case Study #1 // What happens when you provide the wrong advice to your clients?
The MNC engaged their tax advisor to perform a transfer pricing review on the company and provide advice on the most appropriate transfer pricing structure for the company.
When the model was presented to the Board, there were concerns from Board members on the ‘cookie-cutter’ advice provided. The client was of the view that the advisor, despite charging a significant fee, did not take the time to understand their business.
The CFO contacted our firm on a referral from another accounting firm. The brief was to repair and revise the advice provided by the other firm.
We never assume two businesses are the same. Our firm takes the time to understand the business fully.
We performed extensive functional analysis interviews, and most importantly, for this client, an extensive DEMPE analysis. This was the turning point. The DEMPE analysis showed that their previous advice was not appropriate.
The MNE were so impressed with our work that they have now engaged us as their preferred transfer pricing adviser. This has resulted in a significant amount of work and recognition of our expertise in this area.
Effective Transfer Pricing Advisory
Transfer Pricing advisory requires vast experience in a broad range of industries, business models and transactions as the ‘theory’ is very different to the real issues faced by MNCs. With expertise, MNCs can benefit from effective advisory that can assist in identifying and addressing transfer pricing exposures and opportunities, in developing and help to implement commercial and tax-efficient transfer pricing policies and adapt them as circumstances change. When an advisor has little to no experience in transfer pricing, the risk to the MNC is to implement strategies that may not be ideal for their business operation which can then lead to higher tax liability. The consequences of providing incorrect advice can be costly to both your clients and your firm as it can compromise your reputation.
Case Study #2 // What happens when there are new developments introduced by the tax authorities?
In 2019, the Inland Revenue Authority of Singapore (IRAS) had published its transfer pricing guidelines on
commodity marketing/trading activities. As a result, we have been engaged by several large commodity traders with global operations in
Singapore and the Region, which required assistance to price-related party transactions involving commodities.
The projects involved preparing transfer pricing documentation for several large commodity traders.
The pricing of commodities is influenced by many factors which include the type and quality of the commodity, shipping terms, country of origin of commodity and pricing formula and market index used.
These transactions are unique and require thinking outside of the box to adapt the TP rules to this
We were able to delineate the transactions clearly and concisely to ensure the TP documentation can be
We identified the weakness in our client's current TP policies.
We proposed clear and practical solutions to mitigate future transfer pricing risk.
Additionally, we were able to respond on the tax authority on behalf of the clients given our relationship with IRAS and our understanding of their expectations.
When we say we want to help you save your time and money, we certainly mean it!
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"Our company had a tax review by a foreign authority who was questioning our benchmarking financial results. TPS went through the comparability factors of our benchmarking comparable companies, and the tax authority proposed comparable companies.TPS challenged the tax authorities position and was able to successfully defend our benchmarking range. The result; no adjustments."
Large multinational company
We're ready to talk about your clients' TP needs.
Singapore / Malaysia / Asia Director