5 minute read 26 Mar 2020
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Six ways to manage risk around transfer pricing

5 minute read 26 Mar 2020

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  • How profound change transparency and controversy are reshaping a critical business function (pdf)

With transfer pricing in constant flux, companies need a holistic response that integrates practical, achievable steps to take today.

Transfer pricing is a complex issue that is in constant flux. Our 2019 Transfer Pricing and International Tax Survey reports that tax risk is by far the most critical issue driving transfer pricing strategies.

Given the risks, it’s never been more important for businesses to have accurate, up-to-date information that’s fast and easy to access. Here are six practical steps companies can take to keep pace with transfer pricing issues in all relevant jurisdictions.

1. Adopt a wide focus

Only a third of executives report their companies have fully compliant transfer pricing documentation in every country in which they operate, choosing instead to focus on scenarios viewed as having higher tax risk. That’s understandable, but with overall levels of transfer pricing tax risk rising rapidly, it’s time to take a more holistic approach.

2. Own your transparency

Base erosion and profit shifting (BEPS) introduced greater disclosure, meaning tax authorities now have far more data than before. Country-by-country reports, for instance, include not only your information but also information from dozens of companies in the industry in which you operate. Authorities are also likely to share information with tax administrations where your company conducts business. Be sure that the data you collect and release reflects your story accurately.

3. Expand your documentation efforts

A key part of owning your transparency is getting your transfer pricing documentation right. Companies doing business across borders recognize that contemporaneous documentation of a well-conceptualized and consistent across-the-globe transfer pricing structure is essential in reducing tax risk. By having your documentation ready, it signals to authorities that you’ve put your time in on the issues and have used a consistent framework.

4. Embrace technology

Many companies still rely on text documents and spreadsheets as primary tools. Only a quarter of businesses have deployed more integrated technologies for transfer pricing documentation. It’s important to work towards digitalization at core business and support functions, including finance and taxation. Technology presents an opportunity to improve your transfer pricing knowledge, so you can plan ahead more effectively and accurately.

5. Monitor legislative changes

The constant flow of tax changes — particularly OECD global tax reform, where at least 130 jurisdictions are participating in discussions — creates a tricky landscape to navigate. Businesses, especially those with complex or digital business models with significant intellectual property, should review draft reports and documents as they become available. That will put them in a better position to understand the implications of tax change and build contingencies.

6. Don’t leave it all to tax

Amid so much change, a strategic review of your worldwide transfer pricing policies is necessary and prudent. By working closely across finance, operations and other executive functions, companies can better understand their situation and create an optimized, consistent approach. This will produce a clear and well-documented explanation to share with global tax authorities, potentially reducing tax risks.

Show resources

  • Download the 2019 Transfer Pricing and International Tax Survey report


With overall levels of transfer pricing risk rising, companies need to broaden their focus. This includes building tax transparency, including contemporaneous documentation, and deploying targeted technology to achieve it. Cross-function integration beyond tax, including finance and operations, is also critical to create an optimized, consistent approach.

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