Global transfer pricing developments
Global trade has significantly increased, creating an unprecedented level of integration in recent years. Globalisation and the rapid growth of international trade results in intercompany pricing becoming an everyday necessity. This, combined with a focus on perceived tax avoidance, national treasury deficits and documentation obligations (BEPS13), has left multinational enterprises (‘MNEs’) in the eye of a veritable perfect storm. As such, transfer pricing continues to be the most important global tax issue today and it’s clear that the transfer pricing environment for MNEs has changed forever.
The current transfer pricing landscape
Countries across the world are applying greater scrutiny and are calling for stricter regulations on transfer pricing. Moreover, tax administrations are increasingly expecting transparency from companies. This makes it more important than ever for businesses to ensure they have a sustainable transfer pricing methodology and supporting documentation, highlighting substance of the arrangements in place, to articulate the alignment between value creation and jurisdictions where profits are taxed.
Failure to do so can lead to:
- Local tax audits and assessments, with potentially additional penalties and interest
- Double taxation, when income is taxed in multiple territories without relief available under tax treaties
- Costly and time-consuming disputes with tax authorities
- Reputational damage to brand and business.
Despite companies facing an increasingly uncertain landscape, the many complexities of transfer pricing provide a variety of opportunities to optimise profits, increase cash flow and moderate taxes in a supportable manner.
About 500 BDO professionals active in the field of transfer pricing
BDO can help you develop and implement transfer pricing policies in line with commercial objectives and adapt them as new rules emerge or circumstances change. We can support you with the articulation of your value chain, Advance Pricing Agreements (APA’s) and transfer pricing risk assessments as well as efficient dispute resolution.
We believe in the importance of building and maintaining a close relationship with you. Understanding your business enables us to not only provide you with bespoke solutions, but to proactively identify opportunities and areas to focus on as well.
Within the BDO network, our transfer pricing specialists meet regularly to share knowledge on the latest trends by tax authorities, providing the highest service standards for our clients. We use all key transfer pricing databases used by the local Tax Authorities to benchmark transactions including royalties, services and financing. Our expertise is gained through our involvement with our global clients across many industry sectors, providing us with in-depth knowledge of the key transfer pricing issues that impact your business.
Internationally, our ability to operate as one team means we are able to work closely and swiftly with trusted colleagues across the globe to provide a coordinated offering that can be
tailored to your needs. By working together globally on projects, BDO can provide holistic solutions and highlight potential transfer pricing and tax/legal issues such as share of location savings, thin capitalisation, withholding taxes and exchange controls.
BDO’s transfer pricing services
Our transfer pricing service offerings can be split into six key areas:
1. Transfer pricing advisory and value chain optimisation with specific focus on supporting the substance of arrangements
Risk Assessment, including high-level review of intercompany business model and pricing arrangements to ensure alignment with transfer pricing requirements.
Value Chain Optimisation and Business Restructuring is often an ongoing activity within
a global business. It may involve centralisation of procurement, moving production to lower cost countries, relocating senior management or integrating acquisitions. Aligning transfer
pricing outcomes with business changes and commercial imperatives is essential.
2. Documentation and BEPS / CbCR Compliance
Documentation Support, assist in the preparation of transfer pricing documentation to mitigate against penalties and comply with local regulations across multiple jurisdictions.
Complying with BEPS requirements, including CbCR, is a necessary compliance burden which requires careful management and navigation from a global perspective. Global businesses may be required to prepare CbCR, master file, local file, specific country reports and notifications. In addition, businesses should carefully review, assess and address the risks and opportunities highlighted from these various transparency measures.
3. Financing and Debt pricing
Financing and Debt Structures, including preparation of supporting documentation which can be used to support group positions in the face of challenge from tax authorities.
4. Transfer pricing implementation & compliance management systems
Governance and Risk Management, to ensure systems and processes are in place to manage transfer pricing risk and to demonstrate good governance frameworks expected by tax authorities and Boards.
5. Dispute resolution & APAs
Dispute Resolution, including audit defense, representation before tax authorities, mutual agreement procedures and negotiating outcomes.
Advance Pricing Agreements (APAs), assist in negotiation of unilateral or bi/multi-lateral APAs to increase tax certainty.
6. Innovation Income Deduction
Innovation Income Deduction, support in compiling a file with regards to the Innovation Income Deduction (incl. preparation and attendance of pre-filing meetings, drafting and filing of ruling requests, assistance with additional questions from the SAD, etc.)