In today’s global business environment, it is commonplace for multinational enterprise (MNE) groups to provide a wide array of intra-group services for various strategic reasons. These services may range from routine administrative services to other specialised services such as financial, marketing, technical or research and development (R&D) services. As one of the most common related-party transactions carried out by MNE groups, intra-group service transactions are regularly scrutinised by tax authorities, and increasingly so in the post-Base Erosion and Profit Shifting (BEPS) era.
To mitigate transfer pricing risks associated with intra-group service transactions, Adriana Calderon, Director, Transfer Pricing Solutions Asia, recommended a five-step process that MNEs could adopt at the recent Tax Excellence Decoded (TED) session organised by the Singapore Institute of Accredited Tax Professionals (SIATP). These steps are designed to ensure that the service charges are defensible in the event of a transfer pricing review or audit by the tax authorities.