Following the Organisation for Economic Cooperation and Development's (OECD) base erosion and profit shifting (BEPS) initiative, tax authorities worldwide are seeking effective methods to identify and attribute profits to their jurisdiction correctly.
Furthermore, various U.S. tax reform provisions in the Biden Administration FY22 budget, and the Treasury Department Greenbook explanation of Biden's tax proposals, could create adverse tax consequences for certain related-party transactions. Conversely, they may now present planning opportunities. Given the exponential rise of comprehensive tax policies and globalization demand for tax-related transparency in the transfer pricing landscape, here are the top transfer pricing issues that multinationals should consider.
Is Your Transfer Pricing Policy Tax-Effective?
Many transfer pricing rules can be complex, and are subject to many documentation and reporting requirements. However, these rules present significant opportunities for taxpayers to minimize their tax burden. In many cases, an economic study will unearth opportunities to adjust transfer pricing practices in a way that reduces a company's overall global tax burden. To help you identify the best fit for your organization, our transfer pricing advisors can assist you with the following:
If a transfer pricing arrangement is not feasible, then you must develop
a substance-based tax strategy to communicate your tax treatment
to tax authorities.
It's important that your business ensure that related-party transactions are compliant with the arm's length principle. It's recommended
that you analyze all related-party transactions contemporaneously and provide documentation justifying the target or final prices, and
demonstrate that such prices comply with arm's length price.
One useful strategy for enabling more effective transfer pricing operations is to leverage internal technology platforms (e.g., ERP systems) to effectively streamline data flows, increase process efficiency, and develop automated solutions for a more profitable and efficient transfer pricing lifecycle.
We aim to address transfer pricing disputes through transfer pricing examinations, appeals, and alternative processes, provisional measures and reconciliation processes, advance pricing agreements, the competent authority process, and arbitration.