Transfer Pricing Audit Defence
Transfer pricing review and audit activity by various tax authorities is now commonplace as those tax authorities develop and meet their internal compliance program requirements.
Effective transfer pricing dispute and risk management begins long before a revenue authority decides to review or audit a taxpayer’s transfer pricing practices. Proactive transfer pricing risk management should be a prerequisite for all multinationals, not only from a tax perspective but also from a corporate governance and regulatory perspective. This means that you should be constantly reviewing and updating your transfer pricing policies and practices, and documentation.
Once a taxpayer receives notification that a review or audit will take place, our approach is as follows:
- We will work with you (and where appropriate your parent entity) to formulate an effective strategy to deal with the review or audit, based on your desired outcome. This may include considerations as to the use of an Advanced Pricing Agreement (“APA”);
- We will meet with the tax authority to discuss the review or audit, its process, and the matters in dispute;
- We will review your existing transfer pricing documentation and supporting materials and agree with you what materials are required to be or should be provided to the tax authorities;
- We will identify and quantify any potential transfer pricing exposures or adjustments and work with you to develop appropriate strategies for dealing with those exposures;
- We will negotiate with the tax authority to ensure that any potential transfer pricing adjustment, interest charges and compliance penalties are either eliminated or minimised; and
- If a transfer pricing adjustment does result, we will consider with you taking the issue to litigation and / or getting competent authority involvement in order to avoid any double taxation impact.
In our experience, working in a cooperative manner with the tax authorities will produce the most efficient outcome to any review or audit situation.