When releasing an issues paper on multinational profit shifting on 3 May, Assistant Treasurer, David Bradbury, expressed the view that multinational companies should not be able to use aggressive tax practices. However, notwithstanding this increased scrutiny, businesses remain under continuous pressure to restructure their value chain in order to maximise shareholder value and remain competitive.
Given this, senior executives of businesses increasingly need to be confident that their transfer pricing structure is sufficiently robust, both at a technical and practical level.
Among other things, for transfer pricing purposes, it is critical that the legal and economic substance of related party transactions are properly aligned. This can pose a challenge to companies when changes in their commercial operations are not properly addressed by updated transfer pricing policies and legal agreements.
A transfer pricing health check can assist companies with a review and risk assessment of their current and proposed transfer pricing structure. The initial focus of a health check should be on transfer pricing policies and legal agreements in relation to significant related party dealings, complex financing structures and business restructurings.