Key Considerations For Multinational Companies When Transferring Assets In Different Countries - PART 1

Key Considerations For Multinational Companies When Transferring Assets In Different Countries - PART 1

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.

Have You Properly Assessed Transfer Pricing Risk?

There are certain factors that can affect how susceptible your company is to transfer pricing risk. Understanding your transfer pricing risk is the best way to mobilize resources so that you can manage and transfer your risk more effectively. Some factors to consider may include (but are not limited to):

• Transaction size: Transactions of $1 million are likely going to draw more regulatory attention than $100,000 transactions.
• The tax authorities will perceive a greater potential for abuse when transactions involve the sale of intangible assets.
• Entities that consistently report significant losses are likely to be considered tax optimizers, and less attractive candidates to tax authorities as compared to entities that consistently report a profit.
• Jurisdictions that take a more aggressive approach to enforcing transfer pricing regulations than others are affected by the diverted profits tax.

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