Transfer Pricing refers to the allocation of profits between related entities. It relates to numerous types of transactions, including but not limited to:
- The performance of services between parties
- The loans between parties
- The sales of tangible property between parties
- The transfers of intangible property between parties
- The lease of real or tangible personal property between parties
As discussed at all recent G-20 conferences, Transfer Pricing continues to gain increasing attention from taxing authorities from all around the world, with some taxing authorities viewing these strategies as tax shelters and levying criminal charges on individuals and companies alike. Countries have continued to revise and/or introduce new legislation with detailed requirements for taxpayers to adhere to and, more importantly, document on a contemporaneous basis that their intercompany pricing agreements are at arm’s length. This mitigates the ability of companies to shift income from high-tax rate jurisdictions to low-tax rate jurisdictions.
Other areas of risk that need to be mitigated during a transfer pricing analysis include, but are not limited to:
- Hefty local tax reassessments with significant penalties and interest on overdue tax
- Double taxation where income has already been taxed elsewhere, and relief under bi-lateral income tax treaties are not available
- Secondary tax consequences, such as carry-forward of unfavorable revenue determinations creating additional future liabilities
- Uncertainty as to your worldwide tax responsibilities leading to the risk of financial statement earnings restatements and possible lawsuits from investors and underwriters
- Damage to a company’s business reputation and brand if seen as an unethical corporate citizen
At PM Business Advisors, we have expertise in transfer pricing. We can utilize our knowledge as an opportunity to optimize profits, increase cash flows, and mitigate taxes while adhering to localized requirements on a country by country basis.
The PM Business Advisors team will work with you to develop transfer pricing policies that are defensible, flexible and in-line with your company’s overall strategic tax plan and objectives so that you can focus on other operational business goals.