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Given the interconnected nature of the modern global economy and the emergence of a number of ubiquitous global brands such as Google, Amazon and Starbucks, transfer pricing has become a hot, often controversial, topic. Though it is important to note that transfer pricing is not, by any means, a new phenomenon, it has assumed a greater significance in recent years, moving up the corporate agenda.

UNITED STATES

Perry Urken

Economics Partners, LLC

“Most tax directors of medium to large sized US-based firms have a clear recognition of the central importance of transfer pricing to their planning and compliance responsibilities. However, their ability to devote sufficient resources to thoroughly maintain and support their transfer pricing policies is often hampered by budgetary limitations. As a result, a reasonable approach, which many US companies have adopted, is to take steps to achieve compliance with the annual Section 6662 regulations as efficiently as possible while maximising the application of resources to the strategic and risk management aspects of transfer pricing.”

CHILE

Tyriak Bruzual

EY

“Most tax managers understand transfer pricing only as a tax compliance activity, limited to preparing a transfer pricing report and submitting a sworn statement on time. Fortunately, more complex concepts such as business restructuring, BEPS and transfer pricing policies are increasingly important in the everyday conversations of tax decision makers.”

UNITED KINGDOM

Ruth Steedman

FTI Consulting

“The trend, driven by increasingly complex business models, is for companies to need to dedicate more resources to documenting their transfer pricing appropriately. SMEs, in our experience, are aware of their transfer pricing requirements and generally take at least some measures to ensure their transfer pricing is appropriate. Larger groups of course spend proportionately more time documenting and preparing economic analysis to support their intercompany pricing. Paradoxically, to date, in the UK, we have seen only one transfer pricing case litigated by HMRC. Having said that, we have been directly involved in a number of other high value cases where litigation was contemplated, but the cases ultimately settled.”

NETHERLANDS

Sjoerd Haringman

BDO

“The attention a company pays to transfer pricing very much depends on its risk appetite. Many companies know about the relevance of being compliant with transfer pricing regulations and have proper transfer pricing documentation in place. They want to be in control and consider transfer pricing as a planning opportunity. Others choose to wait until tax authorities raise questions, which limits the possibility of adjusting transfer prices for previous years, and increases the risk of adjustments, penalties and double taxation issues. As today’s environment is continuously changing, companies have to adapt their structures and organisations in order to stay in control and remain competitive.”

BELGIUM

Frederik De Graeve

Grant Thornton Tax & Legal

“Large multinational enterprises often do have transfer pricing policies and documentation, although this documentation may not cover all intercompany transactions, or may not be up-to-date. SMEs are usually not sufficiently familiar with the requirement of arm’s length transactions and of maintaining transfer pricing documentation. Most frequent deficiencies in transfer pricing are inconsistencies between, on the one hand, the actual intercompany transactions undertaken or the pricing as applied in practice and, on the other hand, the transfer pricing documentation available.”

LUXEMBOURG

Loek de Preter

PwC Luxembourg

“Companies have generally increased the focus on transfer pricing in recent years and have made additional efforts to align their policies for related party transactions to the operational business reality. With the increased complexity of the global economy and market pressures to constantly explore possibilities for operational improvement, such alignment becomes a challenge. As transfer pricing has an impact on the allocation of the system-wide profit to the functions, assets and risks in all locations in which companies operate, an increasing number of internal stakeholders have an interest to ‘get it right’.”

SPAIN

Juan Ignacio De Molina

Deloitte

“Since 2009, Spain has specific transfer pricing rules that oblige companies to file contemporary transfer pricing documentation. This documentation requirement follows the master file and local file approach. In 2015, Spain introduced country-by-country reporting as a third level of documentation. These requirements, together with the increase in tax controversy, has led companies to pay serious attention to setting proper transfer pricing policies.”

SWITZERLAND

Thomas Kaufmann

BDO

“We see among companies an increasing awareness of the issues related to transfer pricing based on the quickly changing tax environment, especially BEPS, even in the SME sector. We have definitely reached a point where transfer pricing is one of the key topics in the tax area. Clients are approaching us with a mix of awareness and uncertainty. In the past, Swiss companies were often on the safe side, with the argument that they definitely did not want to shift the tax burden to other jurisdictions based on the fact that our CIT rates are still very favourable. However, transfer pricing is now on the hit list of the Swiss tax authorities as the country has an increasing need for money.”

ITALY

Davide Bergami

EY

“Multinational companies with well-established global operations are paying more attention to transfer pricing and related aspects. Multinationals operating in Italy understand the importance of monitoring their transfer pricing policies and complying with documentation requirements. Considering the Italian rules on transfer pricing documentation that allow companies to benefit from protection against administrative penalties in the event of a tax audit and adjustment, multinationals are increasingly willing to maintain and update their transfer pricing documentation and benchmarking studies on a regular basis.”

AUSTRALIA

James Nethersole

Nexia Australia

“To a certain extent, it’s fair to say transfer pricing is still seen as an issue for the ‘big end of town’. Whilst this may have been true some time ago, in today’s global economy with ever-increasing trade in intangibles, the concept of transfer pricing is often critical to even the smallest of entrepreneurial businesses. Whilst the issue is usually one of taxpayer awareness rather than any profit-shifting motive, unfortunately the rules don’t require any such motive to take effect – although the already onerous transfer pricing penalties are significantly higher if there is.”

SOUTH AFRICA

Karen Miller

Deloitte

“It is not a question of having a policy, but rather the purpose of the policy and the documentation, as well as implementation. More and more countries are introducing statutory documentation requirements, and until recently, guidance on preparing documentation was limited. Country tax authorities are perhaps approaching the issue incorrectly. By enforcing documentation requirements and certain disclosure requirements through the annual filing process, it drives a behaviour which focuses on compiling transfer pricing documentation on an ex-post basis. Thus, compliance requirements are met and a positive disclosure enabled.”

CONTRIBUTORS

BDO

Deloitte

EY

FTI Consulting

Grant Thornton Tax & Legal

Nexia Australia

PwC Luxembourg