The transfer pricing issue is a complex one that is constantly changing. Businesses need to have fast and easy access to up-to-date and accurate information. Read on to learn more about the six ways businesses can manage transfer pricing issues appropriately.
1. Focus on a variety of issues
Companies should take a more holistic approach to transfer pricing documentation, especially with the transfer pricing tax risk rapidly rising. It is reported that three out of four companies do not have complete transfer pricing documentation in every country where they do business. Instead, they focus on scenarios with higher tax risks.
2. Take responsibility for your transparency
Base Erosion and Profit Shifting (BEPS) refers to the standard practices used by multinational companies to lower their taxes. BEPS has led to greater disclosure, which means more data is available for tax authorities now than ever before. The tax authorities may also share information with tax administrations in the countries where a company operates, so the data collected should accurately reflect its story.
3. Make your documentation efforts more extensive
A well-conceptualized and consistent transfer pricing structure across global borders is essential to reducing global tax risks for companies doing business. A company’s transfer pricing documentation must be accurate if they want to own its transparency. A company can demonstrate to authorities that they’ve put effort into issues and used a consistent methodology when they have their documentation ready.
4. Take advantage of technology
Text documents and spreadsheets are still the primary tools used by most companies. Integrating technologies for transfer pricing documentation is only deployed by a quarter of businesses. Digitalisation is essential for core business functions like finance, taxation, and support. It is possible to improve one’s knowledge of transfer pricing through technology to plan ahead more accurately and effectively.
5. Stay on top of legislative changes
Draft reports and documents should be reviewed as soon as they are available, especially by businesses with complex or digital models. That information will enable them to better prepare for tax changes and anticipate their implications.
6. Don’t leave it all to tax
It is prudent and necessary for companies to review their global transfer pricing policies amid so many changes. Companies can create a more efficient and consistent approach by collaborating across finance, operations, and other executive functions.
As a result, the company can provide a comprehensive explanation to tax authorities worldwide, reducing the risk of tax evasion.
Overall, companies must have a holistic approach to transfer pricing that integrates practical and achievable steps. Companies need to be very careful with providing accurate and quickly accessible information to stay on top of transfer pricing issues.
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*The above represents our views and opinions and does not necessarily reflect the position of any entities mentioned.