Preventing transfer pricing pitfalls

KEY POINTS

• Transfer pricing and its associated risks are increasingly relevant to smaller businesses.
• Rather than tax avoidance or evasion the transfer pricing rules represent a compliance financial and reputational risk.
• Tax advisers should ensure that relevant agreements are in place to minimise transfer pricing risks.
• A practical checklist can be used for reviewing new existing or updated agreements.
• Failing to implement intercompany agreements is usually a false economy.

Transfer pricing is widely regarded as one of the most significant and complex areas of tax risk affecting multinational groups. It is also a major focus for local tax administrations and supranational bodies. With the barriers to transacting business in foreign markets declining more small and medium-sized enterprises (SMEs) are exposed to transfer pricing risks. However unlike...