Global transfer pricing tax authority survey
This year’s Global transfer pricing tax authority survey reviews transfer pricing (TP) practices and attitudes of tax authorities in 50 jurisdictions across the Americas, Asia-Pacific and Europe.1 Topics highlighted include transactions and industries of focus, penalties, dispute resolution options, influences on local developments and approaches to comparables benchmarking.
What our survey trends indicate for you
Our survey highlights the fact that TP will continue to be “front of mind” for both tax authorities and multinationals. Tracking trends, obtaining timely information on the TP environment and being ready to respond to an inquiry will be critical to effective risk management.
|Key survey trends include:|
|There has been a clear spike in TP resources, leading to a general increase in the number of tax inquiries and audits.|
|Business restructurings are now increasingly a driver of tax authority scrutiny.|
|The OECD’s BEPS agenda is a key underlying influence on the methods being adopted by tax authorities when performing inquiries and audits. This includes the nature of information being requested, the use of profit and risk-based assessments when selecting cases and focusing on the returns derived from intangibles.|
|On a global scale, industries that have attracted attention from tax authorities include pharmaceuticals, automotive, financial services in Europe and natural resources in territories that extract or trade these.|
|Tax authorities continue to call for the use of for local country comparables with respect to benchmarking, although wider regional analyses are typically accepted if sufficient local comparables cannot be identified.|
|Transfer pricing penalties are becoming more commonplace, but they can be reduced should taxpayers maintain local transfer pricing documentation.|
|Formal Advance Pricing Arrangement programs are available in a wider number of territories, although the take up in new markets has typically been low to date.|
|While the Mutual Agreement Procedure program is used widely in most mature TP jurisdictions, its use and effectiveness is limited in many emerging territories.|
|The determination of importation prices separately by transfer pricing and customs valuations teams within Governmental bodies is still the norm. While there is some informal sharing and integrated audits, this is not common.|
Actions recommended for businesses:
Corporate taxpayers face more transfer pricing challenges from empowered authorities, not only because of increased resourcing, but also from a wider range of tools outlined within the BEPS Action Plans. In order to meet the increased level of activity from tax authorities, we recommend that companies more effectively manage their transfer pricing risk profile in the following ways:
- Get ready. Be proactive in identifying areas of risk by actively assessing if your transactions may attract special attention from authorities
- Examine your business. Understand business changes, what the TP impacts could be, and monitor if existing TP models can continue to be applied or if they need to be adapted.
- Respond. As transparency demands will increase, put in place strategies and documentation platforms to be able to respond to enquiries as they arise.
- Focus. The performance of multi-sided analyses, including a focus on the returns on intangibles, is becoming a clear requirement to be adopted.
- Engage. You can enhance your pre-emptive defense strategies in key markets by engaging with local tax authorities where available, such as through APAs or other rulings.
1 Due to the current speed of regulatory change from a transfer pricing perspective in Africa, a separate publication will be released on this topic for Africa at a later date.