Eight challenges to consider in transfer pricing risk

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2 minute read 3 Oct 2019
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EY Global

Multidisciplinary professional services organization

2 minute read 3 Oct 2019

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In the post-BEPS environment, transfer pricing risk is changing in areas ranging from intellectual property to deductibility of costs.

Transfer pricing has been likened to string art, in which tightly pulled colored thread connects pins to form geometric shapes. Each connection is critical to crafting the final image. Over time, these patterns can become more elaborate and complicated, but in the end, they should form a working system.

Ultimately, the network depends on the string remaining taut. Snip anywhere, and the entire picture can unravel.

In addition to intellectual property and deductibility of costs, high-value services transactions and inter-company financing transactions are among the other risks to consider in transfer pricing. Watch our video to learn more about all eight key risks:

  1. Intellectual property
  2. High-value services transactions
  3. Headquarter and management services transactions
  4. Intercompany financing transactions
  5. Procurement structures
  6. Limited-risk entity structures
  7. The two-sided nature of pricing a transaction
  8. Limitation of deductibility of costs based on domestic rules

This article was originally published in Tax Insights on 16 Oct 2018

Summary

Transfer pricing has entered an era of heightened tax risk and controversy, driven by an exponential increase in the demand for tax-related transparency. Tax rules are continuing to be designed and implemented globally in a more comprehensive manner, a shift in which the Organisation for Economic Co-operation and Development’s base erosion and profit shifting (BEPS) initiative plays an integral role.

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By

EY Global

Multidisciplinary professional services organization