Potential Transfer Pricing Pitfalls Multinational Corporations Can Avoid – Part 3

Learning Centre • Potential Transfer Pricing Pitfalls Multinational Corporations Can Avoid – Part 3

Potential Transfer Pricing Pitfalls Multinational Corporations Can Avoid – Part 3

As businesses leap over geographical and economic barriers, how do they manage their international tax obligations? Different countries have different tax laws.

We highlight critical transfer pricing issues multinational companies can avoid by maintaining transfer pricing policies.

Not reviewing your transfer pricing policies over time

The dynamic market landscape is fast-evolving, and businesses are pivoting to stay ahead of the competition. The transfer pricing policies of MNEs should ultimately be in line with their market realities and their business value chain. A comprehensive MNE structure review should be conducted periodically, to ensure that controlled transactions are in line with the arm’s length principles.

The arm’s length standards vary from country to country, but any deviation from the standard must be amended, and the reasons for the amendments must be documented in the transfer pricing study report. Also, follow the necessary procedures for updating economic analysis to retain an asset management company’s margin structure in line with the industry changes.

A Quick Checklist for MNEs looking to Avoid the Pitfalls of Transfer Pricing Compliance

Make sure you explain the nature of your operations clearly in your contractual arrangements.
Map your business model and determine the implications on tax and transfer pricing before implementing any major changes.
Ensure intercompany transactions stay within the boundaries of arm's length transactions
Gather all relevant inputs from local personnel to further document the inter-company transaction and business activities.
Align and exchange the reports with the other local reporting requirements.
Review and adapt transfer pricing policies annually in response to market and business needs.

While the article provides an insightful analysis of some of the most common transfer pricing pitfalls, remember that these will differ from business to business. A business should transform these insights into a customized approach to transfer pricing, taking into consideration the facts and circumstances applicable to their business. The sooner MNEs start preparing their transfer pricing policies, the easier it is for them to implement equitable transfer pricing schemes and achieve tax certainty.

We're here to help you navigate the complex world of transfer pricing compliant to MNE regulations.

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