Transfer pricing and geographical challenges
Another tax challenge is the effect of 3D printing on transfer pricing within multinational companies. Every time a company changes its supply chain, it needs to change how it shares costs related to taxable functions. If a local distributor begins printing replacement parts, it could be considered a factory, so the related transfer pricing would change. Under current tax laws, it is unclear how or by how much.
“We’re entering a new world, and there are few comparables in the current world of manufacturing,” says Al Paul, International Tax Services, Operating Model Effectiveness, EY.
Ask yourself: How would 3D printing change the global footprint of your functions, risks and assets?
Beware of double taxation
As production costs fall, 3D printing could also affect the percentage of a product’s value that resides in any given manufacturing location. So when tax authorities in different geographical locations ask where the base of a product’s profit is located and who gets the right to tax it, they could come up with very different answers, setting the stage for double taxation.
As a digital blueprint defines more of a product’s value, 3D printing could also change the cross-border tax equation for the value of raw materials and components. If the value of raw materials declines in relation to parts or products, it could in turn affect customs duties.
Ask yourself: What structure could your company use to safeguard against double taxation?