Managing a transfer pricing dispute: global perspectives

October 2025  |  SPECIAL REPORT: CORPORATE TAX

Financier Worldwide Magazine

October 2025 Issue

As multinational enterprises continue to expand, cross-border transactions between related parties have become increasingly complex. Tax authorities around the world have intensified their scrutiny of transfer pricing (TP) practices, viewing them as high-risk areas for non-compliance.

Despite the existence of international guidelines – most notably the Organisation for Economic Co-operation and Development’s ‘Transfer Pricing Guidelines’ – determining an arm’s length price remains a subjective exercise, often leading to disputes.

This article outlines the options typically available to taxpayers when facing a TP adjustment, and the strategic considerations that guide the choice between administrative resolution and litigation.

Dispute resolution pathways

When a tax authority issues a TP adjustment, it often results in double taxation – income taxed in one jurisdiction that has already been reported in another.

To address this, taxpayers typically generally consider two main avenues: administrative appeals and a mutual agreement procedure (MAP). Each path has its own procedural and strategic implications on a country by country basis. Ultimately, the choice depends on the taxpayer’s priorities, risk profile and the jurisdictions involved.

Administrative appeals. Most jurisdictions allow taxpayers to challenge reassessments through an administrative appeals process. This typically involves filing a formal objection, engaging in discussions with the tax authority, and potentially escalating to judicial review or tax court proceedings.

However, administrative appeals may not resolve double taxation unless the adjustment is fully overturned. This limitation often leads taxpayers to consider MAP as a parallel or alternative strategy.

MAP. A MAP is a treaty-based mechanism that enables competent authorities from two jurisdictions to negotiate relief from double taxation. While procedures vary by country, the core principles are consistent: taxpayers submit a request, and tax authorities from both governments work to resolve the issue in accordance with treaty provisions and international guidelines.

MAP negotiations can result in correlative adjustments in the foreign jurisdiction, reductions or withdrawals of the original adjustment, and refunds or relief that mitigate the financial impact. However, MAP outcomes depend on the willingness and capacity of both authorities to compromise, and relief is not guaranteed.

Strategic considerations – appeals as opposed to MAP

When choosing between administrative appeals and MAP, taxpayers should weigh up the issues outlined below.

First, treaty coverage. Is the counterparty jurisdiction covered by a tax treaty with MAP provisions?

Second, the tax position of the foreign entity. Loss positions or low-tax jurisdictions may reduce the benefit of correlative relief.

Third, is negotiation dynamics. MAP requires compromise; outcomes may be less favorable than domestic appeals.

Fourth, authority expertise. Some jurisdictions have more experienced competent authorities, with an impact on negotiation strength against the counterparty.

Lastly, legal versus economic substance. Appeals may prioritise legal form and technical application of the law, while competent authorities may emphasise economic functions.

Seeking relief through the courts

Litigation remains a viable, though less common, avenue for resolving TP disputes in many jurisdictions. While administrative and treaty-based mechanisms are typically preferred due to their efficiency and collaborative nature, judicial proceedings may be pursued when other options fail or when the taxpayer seeks a definitive legal interpretation. We note, however, that litigation can be costly and time consuming.

Conclusion

TP disputes are inherently complex and strategic. Whether through administrative appeals, MAP or litigation, taxpayers must carefully assess procedural, financial and jurisdictional factors before choosing a path forward.

Importantly, taxpayers should consult with a qualified local practitioner to evaluate the pros and cons of each dispute resolution option in light of the specific facts, applicable laws and treaty provisions in their jurisdiction. Tailored advice is essential to navigating the nuances of TP enforcement and achieving a successful outcome.

 

André Bergeron is a partner at Gowling WLG. He can be contacted on +1 (613) 786 0043 or by email: andre.bergeron@gowlingwlg.com.

© Financier Worldwide

BY

André Bergeron

Gowling WLG

©2001-2025 Financier Worldwide Ltd. All rights reserved. Any statements expressed on this website are understood to be general opinions and should not be relied upon as legal, financial or any other form of professional advice. Opinions expressed do not necessarily represent the views of the authors’ current or previous employers, or clients. The publisher, authors and authors' firms are not responsible for any loss third parties may suffer in connection with information or materials presented on this website, or use of any such information or materials by any third parties.