Transfer pricing: A Major Concern for International Groups
The wrong decisions when setting intra-group prices can significantly increase tax liabilities
Transfer pricing has become the key issue in the field of international taxes
All businesses which trade internationally and have cross border transactions between group companies are likely to face transfer pricing issues. These issues include enquiries from the tax authorities in one or more countries.
The result of adopting incorrect transfer prices is that a business could be found to have:
- Been overcharged for purchases of goods or services from associated companies abroad;
- Undercharged for its sales of goods or services to its foreign affiliates.
The result of such over or under charging is that a tax authority will seek additional taxes and often interest plus penalties as well.
For the international trading group which has budgeted diligently for its worldwide tax liabilities, this can be a harmful blow to its finances.
A significant number of countries now have transfer pricing legislation in place. Accordingly, businesses which trade internationally need coordinated advice and protection if they are to achieve their commercial aims.
The transfer pricing legislation in some countries also covers domestic transactions. In such cases, transactions between businesses within the same country would need to be reviewed in detail from a transfer pricing perspective to ensure all transfer pricing obligations are adhered to.
We work together with the transfer pricing specialists within the Baker Tilly International network to provide a tailored service to international businesses.
Here are the main ways transfer pricing specialists can help:
- Advising on prices for intra-group transactions
- Consulting on restructuring business functions
- Assisting with documenting intra-group prices
- Defending a group’s transfer pricing policies
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