The Ultimate Journal Of Transfer Pricing Myths

Learning Centre • The Ultimate Journal Of Transfer Pricing Myths

The Ultimate Journal of Transfer Pricing Myths

Transfer pricing is one of the most crucial issues in international tax. It has become critical with the OECD developing transfer pricing guidelines and is starting to bring to light the problems of companies evading taxes by shifting profits to low-tax jurisdictions. There are many misconceptions and myths with regards to transfer pricing practices around the world. It is important to understand the basics and also how other countries approach transfer pricing for corporations across the globe.

We've busted some myths around transfer pricing to give your clients an understanding of what's required.

Myth 1: Small businesses are exempt from transfer pricing regulations

Transfer pricing regulations apply to companies that are related parties regardless of their size. These companies can range from large multinationals to SMEs.

In several instances, entrepreneurs, start-ups and small and medium enterprises (SMEs) are the focus of the Tax Authority due to high-profile cases of multinationals in the digital marketing space.

Myth 2: Transfer pricing strategies are irrelevant

Transfer pricing strategy is the foundation of managing transfer pricing risks. Without a strategy in place, companies can only reactively manage transfer pricing risks, which only increases the tax liability and penalties.

It’s no surprise that tax authorities worldwide are imposing improved transfer pricing requirements on companies looking to reduce their tax bill. Failing to comply can result in significant penalties and it’s important to get it right from the beginning than to be liable for a big tax bill with incorrect pricing.

Myth 3: Transfer pricing advisory is only needed when transfer pricing raises compliance concerns

Setting a related party transaction is important but critical. When related party transactions are set during the setting process, it can impact the price significantly. This can impact companies tax risk on a long term relationship.

Careful design and planning is crucial for an effective transfer pricing implementation as it ensures the transfer price is in line with any agreed long term corporate goals and tax planning objectives and that an efficient tax group structure has been formed.

Myth 4: Big 4's company can undertake this work and is very expensive

As one of the biggest names in the tax and transfer pricing advisory field, our team understands the nuances of the transfer pricing laws and offers practical, proactive and cost-effective transfer pricing advisory to draft the proper documentation.

As a specialist firm, we are able to identify and address transfer pricing exposures and opportunities to help you develop and actively implement commercial, and tax-efficient transfer pricing strategies, and importantly, adapt them with the changing market circumstances.

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