The transfer pricing world is constantly evolving. The pace of change in the transfer pricing world appears to be accelerating because of commercial globalization and the OECD’s Base Erosion and Profit Sharing (BEPS) initiative. There are also growing resource challenges in the transfer pricing field stemming from the increased volume of work and the relatively limited number of qualified transfer pricing professionals.
Against this backdrop there are several trends emerging. Some of the most notable trends include:
Technology is playing an increasingly important role in transfer pricing, as businesses look to automate and streamline their processes. Data analytics is also being used to gain more insights into intercompany transactions and the value created by MNE groups. With all the data available to companies, Data analytics is becoming increasingly important in transfer pricing, as it can be used to gain insights into intercompany transactions, benchmarking data, and tax positions. Products mainly focus on keeping records and files efficiently, and even these solutions take a substantial number of human work hours to implement and integrate with firms’ existing ERP systems.
AI & Digitalization
Technology solutions are advancing quickly to solve complex transfer pricing compliance problems. The digital economy is having a major impact on transfer pricing, as businesses look to adapt their pricing policies to reflect the new ways in which value is created and captured. This is leading to a greater focus on the use of intangibles, data, and other digital assets in transfer pricing analysis. Digital TP platforms are evolving rapidly, with a number of available options including TP Genie, Aibidia, InsightSoftware, and TP qube. These platforms use algorithms and automation to help firms create a consistent global TP approach, collect and analyze data, and produce reports. AI is also being used in transfer pricing to automate and streamline tasks, and to analyze data and identify risks.
Tax authorities are increasingly scrutinizing the way multinational enterprises (MNEs) allocate profits between different jurisdictions. They are particularly focused on the value created by MNEs, and how this value is reflected in the prices charged for intra-group transactions. This is leading to a greater focus on the use of profit split methods and other methods that take into account the value created by different functions and assets. In addition, there is a trend towards global coordination and centralization of transfer pricing functions. This is because MNEs need to ensure that their transfer pricing policies and practices are consistent across all jurisdictions. This can help to reduce the risk of tax disputes and improve compliance.
The transfer pricing landscape is becoming increasingly complex, with new regulations and enforcement efforts being introduced around the world. This is driving businesses to focus on transfer pricing risk management, which includes developing robust documentation, conducting regular reviews, and being prepared to defend their positions in the event of an audit. Governments are also increasing their focus on tax transparency, which is making it more difficult to hide profits from tax authorities. Additionally, tax authorities are increasingly cooperating with each other to combat tax avoidance and evasion, which is leading to a greater focus on cross-border transfer pricing issues.
APAs and MAPs
APAs (Advance Pricing Agreements) and MAPs (Mutual Agreement Procedures) are two traditional tools that businesses can use to resolve transfer pricing disputes. APAs are agreements between a business and a tax authority that set out the transfer prices that will be used for future transactions. MAPs are processes that allow businesses to challenge transfer pricing assessments made by tax authorities. APAs and MAPs are becoming more popular due to the growing complexity of transfer pricing issues. APAs and MAPs can be useful tools for resolving transfer pricing disputes. The eligibility requirements for MAPs can be complex and the implementation of MAP outcomes can be challenging. It is important to consult with a transfer pricing expert before using APAs or MAPs.
As countries adopt Pillar Two into domestic legislation, multinational and domestic top-up tax rules are coming into effect for accounting periods commencing on or after 31 December 2023. Pillar Two of the BEPS 2.0 plan, also known as the global minimum tax (GloBE), is a set of rules designed to ensure that multinational enterprises (MNEs) pay a minimum effective tax rate of 15% on their profits. The GloBE rules will have a significant impact on transfer pricing, requiring MNEs to price transactions between related entities in accordance with the arm’s length principle, even if this results in higher profits being allocated to high-tax jurisdictions. MNEs will also need to be more transparent about their transfer pricing policies and practices and may need to make changes to their organizational structure in order to comply with the GloBE rules.
Staying in the game with TPGenie
Intra Pricing Solutions is a leading company in the transfer pricing market, providing innovative software solutions and expert advice to help businesses of all sizes comply with complex tax regulations and optimize their global tax positions. The flagship product, TPGenie, is a comprehensive transfer pricing documentation software solution that helps businesses to create and maintain OECD-compliant transfer pricing documentation, including Master Files, Local Files, Country-by-Country Reporting, Intercompany Agreements, and Benchmarks. TPGenie also includes a powerful Value Chain Analysis (VCA) module that helps businesses to identify and analyse the value-creating activities within their multinational enterprise group.
TP Genie covers all aspects of transfer pricing, including documentation, planning, risk management, and control. It also includes benchmarking databases to help multinationals establish arm’s length prices for their intra-group transactions. TP Genie offers a variety of features to help users to automate their transfer pricing workflows and save time. TP Genie is furthermore a flexible solution that can be adapted to meet the specific needs of each multinational. It can be used to create and manage transfer pricing documentation for any type of intra-group transaction, regardless of the industry or size of the multinational.
The Intra Pricing Solutions team of experienced transfer pricing experts provides a wide range of services to help businesses with their transfer pricing needs, including:
- Transfer pricing planning and documentation
- Transfer pricing risk management and control
- Transfer pricing dispute resolution
- Transfer pricing training and education
Intra Pricing Solutions solid position in the transfer pricing market is built on its deep expertise, innovative technology, and commitment to helping businesses succeed.