Transfer pricing

Tax

Relevance of Transfer Pricing

Transfer Pricing is typically one of the most significant tax issues for multinational groups, given its subjectivity and the increasing concern of tax authorities worldwide to ensure profits are not inappropriately shifted through non-arm’s length pricing. In many jurisdictions, this has been exemplified by tax authority scrutiny of a number of arrangements, including particularly intellectual property, financing, procurement/marketing hub arrangements, and a continued general focus to ensure that they are not missing out on their ‘fair share’ of the overall value chain's profits.

However, Transfer Pricing risks cannot be considered simply from the perspective of one jurisdiction: adopting a conservative position in one jurisdiction will put pressure on transfer pricing risks in other jurisdictions. As such, a holistic and balanced approach is required - as well as the exercise of sound professional judgment and expertise. However, Transfer Pricing risks cannot be considered simply from the perspective of one jurisdiction: adopting a conservative position in one jurisdiction will put pressure on transfer pricing risks in other jurisdictions.

RSM's approach to managing risk

As such, a holistic and balanced approach is required - as well as the exercise of sound professional judgment and expertise.

"RSM’s approach seeks to identify the optimal way to achieve these objectives, whilst ensuring an appropriate balance between managing transfer pricing risks and incurring costs to do so."

In light of this context, RSM's approach is to assist multinationals in establishing a transfer pricing policy that is ‘fit for purpose’, so the global value chain is remunerated appropriately and the support for this is appropriately documented. This has four key benefits:

Reducing or potentially eliminating the exposure to penalties from an adverse transfer pricing adjustment
Providing a basis upon which groups can demonstrate they have complied with accounting standards relating to ‘uncertain tax positions’, particularly IFRIC 23 and FIN48
Significantly reducing the internal work that would otherwise be required, in the event of tax authority audit if no documentation was available
Evidencing sound corporate governance

COVID-19 considerations

With specific regard to the impact of COVID-19, we are also equipped to advise clients as to how they can legitimately vary their intra-group arrangements in order to share the impact of any disruption in financial performance, and to facilitate the preservation of cash.

Capabilities

Our global Transfer Pricing capabilities include:

Conducting risk assessments of existing Transfer Pricing arrangements
Advising on different Operating Models and their effectiveness/appropriateness
Preparing Transfer Pricing policy frameworks
Transfer Pricing policy implementation support services, including cost allocation studies
Preparing Transfer Pricing documentation
Managing Country-by-Country Reporting compliance obligations
Preparing Business Restructuring ‘support files’ to substantiate restructurings
Reviewing legal agreements to ensure legal form aligns with economic substance, including cost sharing agreements
Assisting in seeking Advance Pricing Arrangements with tax authorities
Assisting in responding to tax authority reviews