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Transfer Pricing Controversy

What are Transfer Pricing disputes and how can they be resolved or prevented?

Hear from our experts on what transfer pricing controversy is, and what you need to know

It is widely acknowledged that disputes arise as to the correct amount of tax payable in an area such as transfer pricing. Transfer pricing disputes – referred to as enquiries or audits – arise between tax authorities and businesses and involve tax authorities checking the ‘arm’s length’ nature of the transfer pricing applied between the different entities/permanent establishments of a multinational business.

The enquiry process involves tax authorities gathering information in order to determine whether the transfer pricing applied results in the local entity earning an ‘arm’s length’ amount of profits. In the enquiry, if a business cannot successfully defend their pricing, this can lead to transfer pricing adjustments which increase the amount of profits taxed in that country – resulting in double taxation, if those profits have been taxed elsewhere.

The resolution of double taxation disputes forms a large part of transfer pricing controversy. This includes eliminating double tax resulting from adjustments made as a result of an audit or enquiry by using Mutual Agreement Procedures (MAPs). MAPs can involve binding transfer pricing arbitration if the tax administrations in the relevant countries cannot reach agreement. Transfer pricing controversy also includes preventing double tax arising by seeking up front agreement with tax authorities through Advance Pricing Agreements (APAs).

What is transfer pricing controversy?

What is transfer pricing controversy? Eddie Morris, Tax Partner, discusses transfer pricing controversy and how it isn’t as controversial as you might think.

Key trends in transfer pricing enquiries

What are the key trends we are seeing in transfer pricing controversy? Significant changes in the international tax environment in recent years have increased the number of tax disputes, in particular transfer pricing disputes.

Using Advance Pricing Agreements (APAs) to avoid transfer pricing disputes

What is an Advance Pricing Agreement (APA)? And how can they be used to prevent transfer pricing disputes?

Using Mutual Agreement Procedures (MAPs) to resolve double taxation

How can Mutual Agreement Procedures (MAPs) be used to resolve double taxation? Rochelle Baptiste, Tax Consultant, discusses this in our latest Transfer Pricing Controversy video.

Profit Diversion Compliance Facility

The Profit Diversion Compliance Facility (PDCF) was launched by HMRC in early 2019. In a PDCF, the business effectively conducts their own investigation into transfer pricing disputes.

The International Compliance Assurance Programme

Want to know more about the International Compliance Assurance Programme (ICAP), and simultaneous and joint audits?