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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.

RSM's approach to managing risk

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.

RSM 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
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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.

"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."
Transfer Pricing Soundbites – Royalties in a world of COVID-19

Cashflow is an ongoing issue for many businesses, as COVID-19 continues to create economic uncertainty – causing middle-market leaders to ask if they can suspend royalty payments to avoid creating a local loss. In this Transfer Pricing Soundbite, RSM UK's Duncan Nott, considers the following:

  • What is the impact of the royalty?
  • What are the facts and circumstances - is the licensed intangible still driving value?
  • What are the expectations in intercompany agreements?

Transfer pricing – A new application for an old principle

The OECD’s Base Erosion and Profits Shifting (BEPS) Action Plan kickstarted great change in terms of how tax authorities assess transfer pricing, sparking governments and tax authorities around the world to introduce a number of recommendations, included in the BEPS Action Plan, into domestic legislation. Whilst the arm’s length principle itself is not new, it now needs to be applied in a BEPS-compliant way. With global uptake not yet comprehensive, multinational enterprises are currently faced with challenges in relation to current and future tax obligations, as this article explains.

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Primer on Transfer Pricing for CFOs

Many multinational businesses view transfer pricing as no more than a compliance headache due to the fact that rules around it vary from country to country. As a result, transfer pricing can be treated as an afterthought by senior management which can have significant consequences. Whilst transfer pricing may be critical from a compliance perspective, it can also have an impact on an organisation's operations and financial position. In this soundbite, RSM US’s Western Transfer Pricing Leader, Jon Jenni looks at the role of the transfer pricing study and at (TP) as a management function, so that it can be included in corporate planning.

Transfer Pricing - Soundbites - Covid-19 Considerations

With many businesses still responding to the implications of COVID-19, transfer pricing may not have been a major consideration up until now, especially when survival remains the ultimate current focus. However, history shows that businesses will eventually be required to turn their attention to this issue and, for many, it has already begun to become more of a priority. In this Transfer Pricing Soundbite, International Tax and Transfer Pricing Leader, Liam Delahunty will discuss potential transfer pricing responses – in particular:

  • Revising policies
  • Renegotiating terms
  • Changing methodologies and categorisations

RSM's approach to managing risk

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.

RSM 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
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