Grant Thornton has released a new guide to help international entrepreneurs navigate transfer pricing regulations in different countries.

International taxation and related regulations are undergoing a period of change. The changes are among the most significant and radical seen in years. The main impetus for countries becoming more exacting in their approach to taxation of international transactions came from the OCED’s BEPS action plan to combat base erosion and profit shifting. The action plan is already being implemented by over 100 tax jurisdictions.

Transactions between related persons under scrutiny

BEPS means increasingly frequent exchange of information between the tax authorities of different countries and a more detailed burden of proof and documentation and reporting requirements for multinationals concerning transactions between related persons. The aim of BEPS is to identify cases where entrepreneurs try to artificially shift profit and optimise taxes. The fact that there is much leeway in implementing and interpreting the principles laid down by the OECD and different countries may have additional special rules or requirements makes the situation even more complicated for the taxpayer.

The cornerstone of the regulations developed in the context of BEPS is the principle that the pricing of transactions between related persons must adequately reflect the actual economic substance of the transaction and value creation in the value chain (market value). At the heart of the analysis are the questions of which of the related persons performs critically important functions and assumes material operating risks and where the main assets are from the principle of value generation, including human resources and decision-making power.

A good overview of the requirements in different countries

Grant Thornton’s global overview of transfer pricing regulations helps companies keep up with the above-described changes. The overview is downloadable here [ 2165 kb ]. Grant Thornton’s specialists are ready to provide additional information and help you in matters related to transfer pricing.

• Analysis of transfer pricing – determining the market value of prices of transactions between related persons and/or defending the prices before the tax authority (including providing evidence based on independent comparison data, using special databases).

• Documentation – compliance with transfer pricing documentation requirements in different tax jurisdictions in which the client operates. We proceed from local knowledge and well as Grant Thornton’s worldwide network.

• Planning – growth or restructuring of companies with international operations provides an opportunity to review and correct intragroup transfer pricing policies.

• Redesigning the supply chain – critically analysing and redesigning the group’s supply chain is a step toward achieving business efficiency.