Transfer pricing: Overview

Fast-moving changes and significant regulatory developments

Transfer pricing continues to be a burning issue on multiple, converging fronts.

While globalisation and the continued growth of international trade have made inter-company pricing an everyday necessity for many businesses, the drumbeat of new regulations, audits, enforcement actions - and sharply higher penalties - continues to grow louder.

In an era of fiscal shortfalls, tax authorities see transfer pricing as a soft target, and more and more countries are implementing new transfer pricing documentation requirements. At the same time, transfer pricing strategies are increasingly the subject of unwanted controversy — with the phrase ‘transfer pricing’ frequently used in the same sentence as ‘tax shelters’ or ‘tax evasion’ on the business pages of newspapers.

The stakes are high

Although many of the drivers of this intensified scrutiny are based on factors beyond the control of most companies, the risks to your organisation are nonetheless very real. They include:

  • very large local tax reassessments, with significant penalties and interest on overdue tax;
  • double taxation, where income has already been taxed elsewhere and relief under tax treaties is not available;
  • secondary tax consequences, such as carry-forward of unfavourable revenue determinations, creating additional future liabilities;
  • uncertainty as to your worldwide tax burden, leading to the risk of earnings
restatements and investor lawsuits;
  • expensive and time-consuming conflicts with regulatory authorities and
  • damage to reputation and corporate brand if seen as a bad corporate citizen.

The impact of this dramatically increased focus on transfer pricing has created a highly uncertain operating environment for businesses, many of whom are already struggling with intensified global competition, escalating operating costs and the threat of recession.

Innovative, tax-efficient solutions, rapid response, and a global presence

PwC’s leading Global Transfer Pricing network* is here to help. With over 3,100 transfer pricing professionals — many hailing from academia, industry, and prominent positions within governments — deployed across 93 countries, we are well positioned to advise you on developing compliant, tax-efficient structures that help advance your business goals.

*These results are based on an independent survey of 2,561 primary buyers of transfer pricing tax services globally, conducted by research agency Jigsaw Research (Q1-Q4 2015).